Rail breakdown ties up lumber industry

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delayed, misrouted or completely lost, rail service in much of the West and Gulf Coast region has all but collapsed.

For lumber companies and other angry shippers, rail service seems an oxymoron. Gemini Forest Products, Los Alamitos, Ca., recently asked the railroad's tracing service to track nine lost cars, and received erroneous information on seven of them. "We didn't realize six months ago when they were so bad how good they were compared with today," says Gemini's Ted Pollard. "Today is like no service."

The breakdown began several months ago, as the nation's largest railroad, Union Pacific Corp., started to implement a $3.9 billion merger with Southern Pacific Rail Corp. UP cut back on workers and equipment, then discovered that the two railroads' computer systems and dispatching methods were practically incompatible. And, among the combined work force of 52,000, workers from one railroad did not take easily to the other railroad's computers and operations. The tracing system was thrown into disarray. Railcars began not being picked up, sitting at random points along their route, ending up in the wrong destination, or disappearing from the system entirely.

Such delays leave fewer empty cars to pick up materials. "It's taking twice the time to get a car, so you're already in a hole once it ships, and then it's taking two to three times as long to ship," says Bill Lovick, Temple-Inland Inc., Diboll, Tx.

Some mills, unable to get railcars to ship out fast-accumulating inventories, are considering cutting back or temporarily curtailing production. "I think we are probably better off than most," says Dave Benson, director of transportation, Hampton Lumber Sales Inc., Portland, Or. "We have 563 of our own private cars, which typically are adequate for our needs. But transit times have doubled, which has basically cut our fleet in half. We need about 50Vo more cars." much better, because BN shares some of UP's most congested tracks in the Gulf Coast and the two rivals disagree on how to unclog them.

Adds Benson: "Our biggest problem is we sell lumber at a given price, and during the delays, prices have fallen-a lot depending on type, grade and species of lumber. There have been reductions ofas great as $100 per thousand, so customers are canceling orders or demanding reductions in price to meet the going rate."

Finally, shippers began scrambling for trucks, which are now in equally short supply.

Retailers, too, are upset. After receivirlg 52 complaints from its members regarding railroad problems, the Lumber Association of California & Nevada confronted UP-SP executives. LACN executive director Jan Hansen met with Wayne Horiuchi, UP's regional government affairs and community relations representative, and had a conference call with Brian McDonald, asst. v.p. of forest products, and Richard Gonzales, manager of public projects and engineering.

To keep customers happy, after the railroad has lost the original shipment, Temple-Inland has been forced to ship duplicate orders.

Wholesalers are equally vulnerable. "For a company like us that lives and dies on low margins and fast turns, this is devastating," bemoans John Cole, cedar products sales manager, American International Forest Products, Beaverton, Or.

"We have 48 traders in here. and they all have a horror story," he explains. "I've had a car on the UP from Winlock, Wa., to Houston sitting for 32 days in Houston, and I can't get it unloaded. We call every day, but there's nothing we can do."

Shipments are so backed up that in late October one transportation manager was telling customers: "If it didn't ship in August, don't come see me about it."

To help relieve the congestion, UP has sent some of its business to competitors such as Burlington Northern Santa Fe Corp., the country's second largest railroad. But lumber companies sav BN's service hasn't been

UP admitted it had received 2,000 shipper complaints. The main problems included the lack of available cars, level of service, switches not being made on a timely basis, false/inaccurate billing, and cars getting lost (especially in Houston, Tx., and Colton, Ca., where UP and SP meet).

The rail executives promised that it would be hiring 1,500 more employees over the last quarter of 1997 and purchasing 327 more locomotive engines. Employees are currently working24 hours a day to get loads out on their 30,000 cars. Things should also run smoother when improvements are completed at the Colton hub, construction is finished at the Roseville. Ca., hub, and UP and SP go on the same computer system early next year.

Forecasts Temple-Inland's Lovick: "They hope to resolve (the situation) by the end ofthe year, but I see it lasting well into first quarter."

Still, more than 2,000 dissatisfied rail customers are urging federal regulators to temporarily allow UP's competitors to use parts of its western rail network.

Vented an exasperated salesman at All-Coast Forest Products, Chino, Ca.: "(The railroads) are just completely screwed up!"