Railways Reap the Benefits of Trucking Woes

For the first time since World War II, some lines experience a capacity shortage

THE railroad industry is chugging along at a pace unmatched since the 1920s. And if you look closely at a passing train you can see a difference: There's one car missing at the end of every train traversing the railways today.

Along with changes in the booming railroad industry, the little red caboose has been replaced by an ``end of train device'' - a small metal box that rides the last car and monitors brake pressure for the engineer. The new technology eliminates the need for a $50,000 caboose accompanied by a human brakeman at the end of the train.

``Ten years ago they usually had five men on every train,'' says Susan Chapman, a railroad analyst with Forbes, Walsh, Kelly & Co., a New York investment firm. Today's freight train crews include two or three people at most.

Railroads more efficient

After 1980 when Congress passed the Staggers Rail Act deregulating the industry, railroads achieved significant efficiencies. Railroad company management began scheduling trains and setting freight rates independently, and a new focus on customer service swept the industry. The results were dramatic: Railroad productivity shot up 157 percent between 1983 and 1992.

``Right now we're moving more freight than we did in the 1980s but we're doing it with not even half as many employees and 30 percent less track and freight equipment,'' says Tom White of the Association of American Railroads (AAR) in Washington.

Much of the railroad industry's growth results from the woes of a former archrival: the trucking industry. ``Since the advent of the automobile, railroads have seen a long, steady decline in their market share vis-a-vis alternative forms of transportation. And the classic one has been the trucking industry,'' says Scott Flower, a railroad analyst with Kidder, Peabody & Co. in New York.

But a nationwide shortage of long-haul truck drivers and rapidly rising trucking costs have multiplied agreements between trucking companies and railroads. Through ``intermodal shipping,'' truck trailers or containers are carried long distances by train and then transferred to trucks for local delivery. This popular method of railway-to-highway transportation accounts for much of the increased rail traffic. ``The rail industry was kind of led to the water by the need of the trucking industry,'' says Stephen FitzGerald of the Brotherhood of Locomotive Engineers in Cleveland, which represents 52,000 rail employees.

Rail shipment has always been a more economical method of transporting materials long distances. ``The big problem has been service,'' Mr. Flower says. ``And the railroads have now done much to address that, so they are taking share back from the highway. This is a rather novel phenomenon for an industry that has been used to downsizing and finding ways to cut headcount and reduce track.''

``The trucking industry has become one of our best customers,'' says Mr. White of the AAR. Intermodal traffic has reached record levels for 12 consecutive years, according to association reports. ``This year our volume is up another 13.5 percent so we're almost guaranteed our 13th straight record,'' White adds.

In 1981, the industry moved 3.1 million containers across the rails. Last year, intermodal shipments rose 7.9 percent to 7.1 million containers; this year the number is expected to jump to 8 million containers.

Delays and bottlenecks

For the first time since World War II, a shortage of capacity is showing up in some areas. Locomotives are in short supply and bottlenecks are cropping up at overburdened train terminals. Big shippers, such as Ford Motor Company and Bethlehem Steel Corporation, are complaining of delays. Railroad companies are now buying new locomotives and hiring employees. Orders for new freight cars and locomotives are at the highest level in 14 years.

Earlier this month, Santa Fe Pacific Corporation, a pioneer in intermodal transport, agreed to merge with Burlington Northern Inc., a leader in bulk commodity shipments. The agreement, which still must be approved by the Interstate Commerce Commission, would create a 33,000-mile rail system stretching from Canada to Mexico. ``You're looking at a potential powerhouse that could further exploit growth in intermodal shipping,'' Mr. FitzGerald says.

Santa Fe Pacific spent $100 million this year to build the Southwest's largest intermodal shipping center in Alliance, Texas. ``The railroads are spending capital where necessary to alleviate pinch points,'' Flower says. ``But what they don't want to do is spend so much money that they've got overcapacity once again.''

``There had been an excess of labor on the railroads for many years,'' Chapman says. But for the first time in more than a decade, railroads are beginning to hire new employees.

The industry's growth has presented a combination of opportunities and challenges for rail employees, FitzGerald says. As a shortage of locomotive engineers has developed, ``employees are having to balance their own needs with the demands of employers,'' he says. Under the federal Hours of Service Act, rail employees can work up to 107 hours a week. But FitzGerald says some engineers are deciding not to show up for work after long periods without sleep. ``They feel it would be unsafe to themselves and the public,'' he says. Though this shortage could have been predicted three years ago, according to the Brotherhood of Locomotive Engineers, the industry is only now beginning to respond.

Many railroad executives who have spent the past 15 years cutting personnel, shedding track, and reducing equipment welcome today's problems. ``For years, this industry didn't have to worry about growth,'' White says. ``So it's refreshing to have to deal with problems of growth rather than how to manage decline.''

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