Railway Age January 2019

J a n u a r y 2 01 9

w w w. r a i lwaya g e .c o m

AILWAY GE S e r v i n g t h e r a i lway i n d u s t r y s i n c e 1 8 5 6

Railroader of the Year

Cn’s JJ Ruest Focused On Long-Term, Sustainable Growth

NJT MULTILEVEL III

An EMU Innovation

PASSENGER RAILCAR MARKET AT-A-GLANCE Orders, deliveries, backlogs

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August 2017 // Railway Age 1

The Look of Listening

We’ve had our ear to the rail for a long time…listening. Since 1901, in fact.

Listening to our customers about their challenges and how we can better serve them today and tomorrow. Listening to our employees to better build teams and products. And all this listening and learning has inspired us to invest in people and technology, in excellence and America.

That commitment is found in every railcar and every relationship we build.

The last century of listening and learning will lead us into our next, together.

Listen, learn, then lead. That’s the FreightCar America way. freightcaramerica.com

AILWAY GE

JUNE 20182019 JANUARY

18 FEATURES

18

Railroader of the Year

41

Passenger Rail Tech

46

JJ Ruest, CN President, CEO

Multilevel IIIs a game-changer

Passenger Car Market The exclusive Railway Age report

DEPARTMENTS 4 6 8 48 48 48 49 50 51 51

Industry Indicators Industry Outlook Market People 100 Years Ago Meetings

NEWS/COLUMNS 2 10 16 52

From the Editor Update Watching Washington Financial Edge

Products Advertising Index Professional Directory Classified

On the Cover: 2019 Railroader of the Year Jean-Jacques “JJ” Ruest.

Photo: CN

Railway Age, USPS 449-130, is published monthly by the Simmons-Boardman Publishing Corporation, 55 Broad St., 26th Fl., New York, NY 10004. Tel. (212) 620-7200; FAX (212) 633-1863. Vol. 220, No. 1. Subscriptions: Railway Age is sent without obligation to professionals working in the railroad industry in the United States, Canada, and Mexico. However, the publisher reserves the right to limit the number of copies. Subscriptions should be requested on company letterhead. Subscription pricing to others for Print and/or Digital versions: $100.00 per year/$151.00 for two years in the U.S., Canada, and Mexico; $139.00 per year/$197.00 for two years, foreign. Single Copies: $36.00 per copy in the U.S., Canada, and Mexico/$128.00 foreign All subscriptions payable in advance. COPYRIGHT© 2016 Simmons-Boardman Publishing Corporation. All rights reserved. Contents may not be reproduced without permission. For reprint information contact PARS International Corp., 102 W. 38th Street, 6th floor, New York, N.Y. 10018, Tel.: 212-221-9595; Fax: 212221-9195. Periodicals postage paid at New York, NY, and additional mailing offices. Canada Post Cust.#7204564; Agreement #41094515. Bleuchip Int’l, PO Box 25542, London, ON N6C 6B2. Address all subscriptions, change of address forms and correspondence concerning subscriptions to Subscription Dept., Railway Age, PO Box 1407 Cedar Rapids, IA. 52406-1407, Or call toll free (US Only) 1-800-553-8878 (CANADA/INTL) 1-319-364-6167. Printed at Cummings Printing, Hooksett, N.H. ISSN 0033-8826 (print); 2161-511X (digital).

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January 2019 // Railway Age 1

FROM THE EDITOR

AILWAY GE Subscriptions: 800-895-4389

Baseball or Hockey?

R

ailroading has many similarities to team sports. While individual performance does play an important role in an organization’s ultimate success, it’s teamwork that matters most.

New York Yankees pitcher Don Larsen may have thrown the only perfect game to date in World Series history—Oct. 8, 1956, against the Brooklyn Dodgers, retiring 27 batters on only 97 pitches—but would he have achieved this without the likes of catcher Yogi Berra, shortstop Gil McDougald, second baseman Billy Martin or centerfielder Mickey Mantle, all of whom made key defensive plays to prevent any “Dem Bums” hitter from reaching first base?

Our 2019 Railroader of the Year, CN President and CEO JJ Ruest, is a fan of team sports, two in particular, both to which he referred extensively during our interview for this issue’s cover story. As an “honorary Canadian” (I spent a lot of time in Canada before my wife received U.S. Permanaent Resident status and joined me in New Jersey), I was thinking, perhaps a bit smugly, “Of course, he’ll start talking about hockey.”

Wrong! Turns out, JJ played baseball as a youth, and was a Montréal Expos fan until the team relocated to Washington, D.C. in 2005 and became the Washington Nationals. (That’s sort of like the Dodgers moving to Los Angeles in 1958, though I’m sure without the deep emotional impact

Brooklyn loyalists suffered when their beloved team pulled up stakes at Ebbets Field and ventured west, the same year crosstown rival New York Giants relocated to San Francisco.)

“You win together, and you lose together,” JJ says in his baseball analogy.

“You’re at the plate, the ball comes in, and it’s either in the strike zone or it’s not. If it’s in the strike zone and you don’t swing at it, that’s a mistake. If the ball keeps coming in the strike zone and you strike out because you haven’t swung at it, that’s bad ... When the ball of opportunity or the ball of risk comes into the strike zone, you have to give it at least a shot, to swing at it, to try to make something out of it ... Protect the plate, but don’t let it go through and let your team and yourself down. Often, in large corporations, people sometimes look at the ball coming in, and they know it’s a strike. But they don’t swing at it. They hesitate and procrastinate.”

JJ did follow his baseball analogy with hockey (the Montréal Canadiens—who else?), which he agrees is more about finesse than brute force, at least the way it’s played in Canada. Our Railroader of the Year and his CN team strive to run their railroad with finesse—precision—while growing the franchise and protecting the plate with capital investment. See p. 18.

WILLIAM C. VANTUONO Editor-in-Chief

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55 Broad Street, 26th Fl. New York, NY 10004 212-620-7200; Fax: 212-633-1863 Website: www.railwayage.com ARTHUR J. McGINNIS, Jr. President and Chairman JONATHAN CHALON Publisher jchalon@sbpub.com WILLIAM C. VANTUONO Editor-in-Chief wvantuono@sbpub.com STUART CHIRLS Senior Editor schirls@sbpub.com PAUL CONLEY Engineering Editor pconley@sbpub.com Contributing Editors: Roy H. Blanchard, Jim Blaze, Alfred E. Fazio, Bruce E. Kelly, Ron Lindsey, Ryan McWilliams, David Nahass, Jason H. Seidl, David Thomas, John Thompson, Frank N. Wilner Art Director: Nicole D’Antona Graphic Designer: Aleza Leinwand Corporate Production Director: Mary Conyers Digital Ad Operations Associate: Kevin Fuhrmann Production Director: Eduardo Castaner Marketing Director: Erica Hayes Conference Director: Michelle Zolkos Circulation Director: Maureen Cooney Western Offices 20 South Clark Street, Suite 1910, Chicago, IL 60603 312-683-0130; Fax: 312-683-0131 Managing Editor, Railway Track & Structures Kyra Senese ksenese@sbpub.com International Offices 46 Killigrew Street, Falmouth, Cornwall TR11 3PP, United Kingdom Telephone: 011-44-1326-313945 Fax: 011-44-1326-211576 International Editors David Briginshaw, db@railjournal.co.uk Keith Barrow, kb@railjournal.co.uk Kevin Smith, ks@railjournal.co.uk David Burroughs, dburroughs@railjournal.co.uk Customer Service: 800-895-4389 Reprints: PARS International Corp.

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Industry Indicators No Buy Opportunity When It Comes to Freight Rail The wise pundit will tell you, despite loud protestations from other corners, that stock markets with their bull runs, bear retreats, and frequent fluctuations simply aren’t the economy. In the search for more reliable signposts, the economists at the Association of American Railroads recommend a clear-eyed assessment of the latest freight rail data. For November, they point to continued weakness in frac sand shipments, as well as the first declines in months for grain mill products, food, and non-ferrous waste, as an ominous harbinger of “the start of something more.” Stay tuned.

Railroad employment, Class I linehaul carriers, NOV. 2018 (% change from NOV. 2017)

TRAFFIC ORIGINATED CARLOADS

MAJOR U.S. RAILROADS

by Commodity

Total employees: 148,981 % change from NOV. 2017: 2.07%

Transportation (train and engine) 63,280 (4.94%)

Grain Farm Products ex. Grain Grain Mill Products Food products Chemicals Petroleum & Petroleum Products Coal Primary Forest Products Lumber and Wood Products Pulp and Paper Products Metallic Ores Coke Primary Metal Products Iron & Steel Scrap Motor Vehicles & Parts Crushed Stone, Sand, & Gravel Nonmetallic Minerals Stone, Clay & Glass Products Waste & Nonferrous Scrap All Other Carloads Total U.S. CarLoadS

Executives, Officials, and Staff Assistants 8,290 (0.96%)

CANADIAN RAILROADS

Professional and Administrative 11,827 (-2.91%)

COMBINED U.S./CANADA RR

Maintenance-of-Way and Structures 32,389 (-2.02%) Maintenance of Equipment and Stores 27,495 (3.14%) Transportation (other than train & engine) 5,700 (0.52%) Source: Surface Transportation Board

boots on the ground, moving freight Ahead of full implementation of Precision Scheduled Railroading by Union Pacific and Norfolk Southern in 2019, the U.S. Class I carriers are learning a simple fact: It takes more than cars and locomotives to haul freight. That’s why data for Train & Engine crews showed an increase that actually outpaced total commodity and intermodal volume gains through November. As difficult as railroads and trucking have found the market for recruiting new employees, that didn’t stop monthly employment from rising by better than 2%.

4 Railway Age // January 2019

FOUR WEEKS ENDING dec. 1, 2018

total carloads

Intermodal

NOV. ’18

NOV. ’17

% CHANGE

87,475 3,728 35,469 24,028 126,080 51,903 340,821 4,229 12,470 23,453 26,643 16,248 35,914 14,398 64,170 82,721 14,868 28,358 14,882 24,209

89,193 3,986 37,139 24,239 124,211 40,229 343,661 4,396 12,242 22,945 24,279 17,924 33,278 12,989 67,874 94,811 14,325 30,294 15,181 21,289

-1.9% -6.5% -4.5% -0.9% 1.5% 29.0% -0.8% -3.8% 1.9% 2.2% 9.7% -9.4% 7.9% 10.8% -5.5% -12.8% 3.8% -6.4% -2.0% 13.7%

1,032,067

1,034,485

-0.2%

347,672

323,498

7.5%

1,379,739

1,357,983

1.6%

fOUR WEEKS ENDING DEC. 1, 2018

MAJOR U.S. RAILROADS

by Commodity

NOV ’18

NOV. ’17

% CHANGE

106,013 994,802 1,100,815

101,338 972,335 1,073,673

4.6% 2.3% 2.5%

0 281,020 281,020

4,299 272,000 276,299

-100.0% 3.3% 1.7%

Trailers Containers

106,013 1,275,822

105,637 1,244,335

0.4% 2.5%

TOTAL COMBINED UNITS

1,381,835

1,349,972

2.4%

Trailers Containers TOTAL UNITS

CANADIAN RAILROADS Trailers Containers TOTAL UNITS

COMBINED U.S./CANADA RR

Source: Rail Time Indicators, Association of American Railroads

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TOTAL U.S./CANADIAN CARLOADS, nov. 2018 VS. nov. 2017

1,379,739 NOVEMBER 2018

AILWAY GE

1,357,983 NOVEMBER 2017

Short Line And Regional Traffic Index CARLOADS

by Commodity

ORIGINATED NOV. ’18

ORIGINATED NOV. ’17

% CHANGE

50,316 17,971 24,698 11,967 27,682 7,413 8,934 2,650 16,816 8,749 2,289 2,081 17,672 13,008 48,941 9,282 75,038

44,828 24,902 28,590 11,823 25,477 6,055 9,242 2,089 15,453 9,273 1,792 2,328 16,203 13,266 41,217 9,277 82,963

17.7% -27.8% -13.6% 1.2% 8.7% 22.4% -3.3% 26.9% 8.8% -5.7% 27.7% -10.6% 9.1% -1.9% 18.7% -0.1% -9.6%

Chemicals Coal Crushed Stone, Sand & Gravel Food and Kindred Products Grain Grain Mill Products Lumber and Wood Products Metallic Ores Metals and Products Motor Vehicles and Equipment Nonmetallic Minerals Petroleum Products Pulp, Paper and Allied Products Stone, Clay and Glass Products Trailers / Containers Waste and Scrap Materials All Other Carloads

Copyright © 2018 All rights reserved.

average weekly U.S. Rail Carloads: all commodities (not seasonally adjusted) 280,000 2018

270,000 260,000

ARE YOU A RAILROAD OR SUPPLIER SEARCHING FOR JOB CANDIDATES?

250,000 2017

240,000

2016

230,000 220,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Data are average weekly originations for each month, are not seasonally adjusted, do not include intermodal, and do not include the U.S. operations of CN and CP. Source: AAR

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Visit http://bit.ly/railjobs To place a job posting, contact: Jeanine Acquart 212-620-7211 jacquart@sbpub.com

January 2019 // Railway Age 5 RA_JobBoard_1/3Vertical.indd 1

8/17/17 10:59 AM

Industry Outlook OmniTRAX, G-P Team on Georgia Plant

UP, NS: Interline Intermodal Changes Under Way On Feb. 11, Norfolk Southern and Union Pacific—both of which are rolling out their own versions of Precision Scheduled Railroading—will deploy new, jointly developed routing protocols for domestic and international intermodal interline services.

Norfolk Southern, in a Dec. 7 bulletin to customers, called the changes, which apply to westbound traffic, “part of our ongoing efforts to improve our interline services.”

NS’s changes affect nearly 260 interchange points involving more than 20 NS origin terminals. Only 26 domestic interchange points will retain interline service; no international interline service will be available.

Customers have the option of providing their own truck drayage and rebilling. Any traffic in-gated on or after 12:01 AM, Feb. 11 will be handled in accordance with the new routing protocols, NS said. Traffic in-gated before midnight on Feb. 10 will be handled according to the current plan.

Union Pacific issued its guidelines for eastbound traffic on Dec. 6. In a letter to customers, UP Executive Vice President Marketing and Sales Kenny Rocker said the railroad’s performance metrics “are showing improvement compared to where we stood 6 Railway Age // January 2019

prior to the launch of the new operating plan,” UP (Unified Plan) 2020.

Since September, Rocker noted, on-time delivery of cars increased by 5%, car velocity (daily miles per car) increased by 7%, and dwell times have been reduced by 10%.

“In mid-November, we began the planning for the next phase of implementation on our two rail corridors between Los Angeles and Chicago,” Rocker said. “Because of the steady progress, we are adjusting the Unified Plan 2020 rollout to be completed in three phases rather than four. Planning for the third and final phase is scheduled to begin in early 2019 and will encompass the Pacific Northwest, Northern California and I-5 corridors. we now expect full implementation by mid-2019 rather than our previously announced target date of year-end 2019.”

“Overall operating inventory has been reduced by 10% since September, and we are moving your freight at a faster pace,” Rocker noted. “Your support to achieve our mutual goal of ‘right sizing’ both system and private car fleets has helped to drive this progress.

We appreciate your cooperation as these initiatives are critical to improving overall service and reliability.”

Denver, Colo.-based short line operator OmniTRAX is partnering with forest products giant GeorgiaPacific on transportation services for the latter’s new plant in Albany, Ga. As part of the project, GeorgiaPacific will connect track from its facility, which will produce lumber and wood chips, to the main line of OmniTRAX affiliate Georgia & Florida Railway (GFRR) in the adjacent Albany-Dougherty Industrial Park.

Construction of the new rail line and related crossing and communications upgrades was expected to begin this past December and be completed this year. Construction on the $150 million, 320,000 square-foot GeorgiaPacific facility was also scheduled to begin in 2018, with an anticipated startup in late 2019.

Once in production, the new Georgia-Pacific facility expects to produce approximately 300 million board-feet of lumber a year, or 1,250 railcars of building materials and wood chips transported on the GFRR in that time.

The GFRR operates a network of 222 miles of track between Albany and northwestern Florida, interchanging with CSX in Foley, Fla. and Thomasville, Ga., and with Norfolk Southern in Adel and Albany, Ga. The short line’s customers include Miller Brewing, Flint Hills Resources and Procter & Gamble, and the carrier transports liquid and dry bulk, pipe, plastics, construction products and more.

“Georgia-Pacific is a great partner for OmniTRAX and the GFRR, and the new plant will allow us to show case our customer service expertise. We also appreciate the support of the local, state and federal governments to make this project happen in Southwest Georgia and to be a part economic growth in the region,” said OmniTRAX Chief Executive Kevin Shuba. railwayage.com

OKONITE The Premier Manufacturer of Vital Circuit Signal Cables For over 140 years Okonite had been the leader in the design and production of vital circuit signal cables, which are an essential component of the uncompromising safety, security and integrity of a railroad’s signal system.

Okonite, along with its Okoguard EPR insulation for power cables, was also the first to innovateEPR vital circuit EPR signal cables. With its 50 years of outstanding service record, Okonite's signal cables ensure unmatched characteristics, excellence in quality and reliability and an assurance of railroad security and safety operations.

Over the years others have tried to match Okonite’s trusted reliability, but only Okonite signal cables can keep you on track to meet the most discriminating and essential test requirements — the tests of long-term and trouble-free time and service in railroad cable installations of all types.

Okonite’s dedicated commitment is to re-invest in our business, provide the highest and most advanced facilities, keeping us at the forefront in cable product and manufacturing superiority.

Only Okonite has demonstrated the expertise to provide concurrently the necessary response and capacity to effectively process high levels of cable requirements associated with other important railroad programs such as Positive Train Control.

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Market VIA Taps Siemens for Trainsets VIA Rail Canada awarded Siemens Canada a C$741 million contract to supply 32 intercity trainsets for the Quebec City–Toronto–Windsor corridor. The fleet will enter service in 2022, replacing life-expired equipment and significantly increasing capacity on VIA Rail’s flagship route, providing a total of 9,100 seats. Each trainset will consist of single-level push-pull coaches and a locomotive based on Siemens’ Charger diesel-electric locomotive, which is compliant with U.S. EPA Tier 4 emissions standards. The Charger uses a 4,000-hp QSK95 16-cylinder diesel engine from Cummins. The fleet will be maintained at VIA Rail depots in Montreal and Toronto with service support from Siemens.

WORLDWIDE Luxembourg Railways (CFL) has awarded Alstom a contract worth around 360 million euros to supply 34 Coradia regional EMUs. CFL is ordering new regional trains to cope with a significant increase in traffic and to enable the withdrawal of its fleet of 22 class 2000 EMUs, which were introduced in 1990. Assembly will take place at Alstom’s Santa Perpetua plant near Barcelona, with deliveries due to start in December 2021. The 100-mph trainsets will be configured for operation on the French and Belgian networks and equipped with ETCS

Level 2 Baseline 3 and TBL1+. CFL has ordered two variants, an 80-meter-long version seating 334 passengers, and a 160meter version seating 692.

NORTH AMERICA SCI Rail Holdings LLC has acquired Savage Fueling Corp., the locomotive fueling and mechanical services subsidiary of Savage Services Corp.

Savage Fueling is a national provider of direct-to-locomotive fueling with operations across 25 states and more than 60 customer sites. Following the acquisition through SCI subsidiary A. Stucki Co., the operations of Savage will remain unchanged and will operate under the name Velocity Rail Solutions, under the existing management team.

The company will continue to operate out of its current customer sites, with corporate offices in Salt Lake City.

Caltrain is acquiring 37 additional Stadler double-deck EMU cars for the San Francisco-San Jose electrification project. Caltrain is exercising an option in the original 2016 contract with Stadler that will enable it to lengthen the 16 trainsets on

8 Railway Age // January 2019

order from six to seven cars and add three more seven-car trainsets to the fleet. Under the 2016 deal, Caltrain can purchase the extra vehicles at the original price of $174.6 million, provided the option is exercised by the end of 2018. Caltrain says it needs additional rolling stock to meet projected increases in travel demand in the San Francisco Bay Area. The operator’s business plan envisages potential weekday ridership of more than 240,000 by 2040, compared with around 65,000 at present. Production of the initial order of vehicles is under way at the Stadler Rail USA plant in Salt Lake City, with delivery of the first complete trainet scheduled for late 2019.

The Oregon international port of coos bay was awarded a $20 million federal grant to rehabilitate 15 bridges along its coos bay rail line. Spending for the Coos Bay Rail Line Rehabilitation Project in Coos, Douglas, and Lane counties will total $25 million from a Better Utilizing Investments to Leverage Development (BUILD) grant, and $5 million from the Port. Coos Bay links Coquille, Ore., and the national railway network with the Union Pacific interchange yard in Eugene. railwayage.com

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Update

Amtrak buying

A

mtrak will acquire 75 new Siemens Charger diesel-electric locomotives for $850 million to replace aging power in its National Network locomotive fleet.

The initial-order contract covers the Tier 4 locomotives and associated services, to be deployed principally on Amtrak’s longdistance train services, with options to purchase more for use on some statesupported routes and for future growth.

The new locomotives generate 4,400 hp through a 16-cylinder Cummins QSK95 diesel engine, and are geared for a top speed of 125 mph. The AC electrical propulsion system is paired with the latest Tier 4 emissions technology, reducing oxides of nitrogen (NOX) by more than 89% and particulate matter by 95%, and providing an average of 10% savings in diesel fuel consumption. The units will come equipped with Positive Train Control safety technology.

The Chargers are set to displace GE Transportation Genesis P40 and P42 locomotives on the Amtrak roster, some up to 25 years old. A total of 321 units were built for Amtrak, MTA Metro-North Railroad and VIA Rail of Canada. The Siemens locomotives have the same 2,200-gallon fuel capacity 10 Railway Age // January 2019

as the Genesis fleet.

Delivery will begin in summer 2021, with revenue passenger service beginning in fall 2021, powering the AutoTrain, California Zephyr, Capitol Limited, Cardinal, City of New Orleans, Coast Starlight, Crescent, Empire Builder, Lake Shore Limited, Palmetto, Silver Meteor, Silver Star, Southwest Chief, Sunset Limited, and Texas Eagle.

All locomotives are expected to be in service by 2024.

Maintenance activities across the network will be supported by a supplemental multiyear Technical Support Spares Supply Agreement (TSSSA).

Amtrak said it is paying for the new locomotives through available funds and will comply with Buy American provisions. The fleet will be built at Siemens Mobility’s manufacturing plant in Sacramento, Calif.

Chargers are currently operating in several state-supported Amtrak routes in California, Illinois, Wisconsin, Missouri, Michigan, and Washington. A version of the Charger also is pulling trains for the former Brightline, now Virgin Rail USA, the private operator in South Florida.

“These new locomotives will offer increased reliability, more hauling power, improved safety features and lower

emissions,” said Amtrak President and Chief Executive Officer Richard Anderson.

“Siemens Mobility is honored and grateful for this opportunity to assist Amtrak in its mission to provide safe, world-class, environmentally conscious technology for long-distance services,” said Michael Cahill, president of Siemens Mobility’s North America rolling stock business.

Amtrak, which has sparked recent criticism of downgrades to its long-distance service, in the announcement noted that the Chargers “are part of Amtrak’s long-term planned series of improvements for fleet, infrastructure and stations.”

THESE LOCOMOTIVES ARE PART OF AMTRAK’S LONG-TERM IMPROVEMENTS.” railwayage.com

Amtrak

75 SIEMENS Chargers

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Update

Contract Awarded for Cotton Belt Project Dallas Area Rapid Transit (DART) has awarded a joint venture of Archer Western Construction and Herzog Contracting a

$783 million design-build contract for the 26-mile Cotton Belt regional/commuter rail line in Texas.

DART has also awarded WSP USA a contract to provide design review and construction management services for the $1.1 billion project, include coordination and oversight of the design-build joint venture.

The double-track line from Dallas/Fort Worth International Airport and Shiloh Road in Plano will connect the northern suburbs of Tarrant, Dallas and Collin counties along Interstate-635, one of Texas’ most congested road corridors.

The new system will serve 10 stations in the cities of Grapevine, Coppell, Dallas, Carrollton, Addison, Richardson and Plano, including interchanges with the DART light rail Orange, Green and Red lines, the TEXRail commuter line to Fort Worth, and local bus services.

Services will be operated by a fleet of at least seven DMUs, which will be maintained at a purpose-built facility.

Construction is scheduled to begin this year, with the line scheduled for completion

by December 2022.

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12 Railway Age // January 2019

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Update FTA Awards $16.6M for Transit Access The Federal Transit Administration has awarded $16.6 million to 20 agencies nationwide to support planning projects that aim to enhance access to public transportation, through the Pilot Program for Transit-Oriented Development (TOD) Planning, which aids communities developing new or expanded transit systems.

Grant recipients include: • The Hillsborough Area Regional Transit Authority in Florida will receive $800,000 for a planning study along a proposed fixed guideway transit corridor between downtown Tampa and the University of South Florida.

• Florida’s Jacksonville Transportation Authority will receive $1,015,280 to plan for TOD along the proposed Ultimate Urban Circulator, which is expected to modernize the existing Skyway monorail system in Jacksonville into an autonomous circulator.

• The Chicago Transit Authority will receive $1.48 million to plan TOD along a proposed

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5.3-mile southern extension of the Red Line.

• The Maryland Department of Transportation will receive $2 million to plan for TOD along the Maryland Purple Line, a 16.2mile light rail project under construction that is set to link Montgomery and Prince George’s counties.

• Missouri’s Kansas City Area Transportation Authority is set to receive $250,000 to plan for TOD along the Rock Island Railroad Corridor, a 17.7-mile corridor where a fixed-guideway project is planned to connect three major cities.

• Charlotte, N.C., will receive $920,000 to plan for development along the proposed LYNX, a light-rail extension from Gaston County to the local airport, Uptown Charlotte, Mathews and Union County.

• Winston-Salem, N.C., is set to receive $1 million in funding to develop a plan for a proposed streetcar connecting colleges, workplaces and the city’s downtown area, a 5.4-mile corridor along the North-South

Urban Circulator.

• The Regional Transportation Commission of Southern Nevada will receive $300,000 to develop a TOD plan for an 8.7-mile fixed guideway project proposed to run along Maryland Parkway into downtown Las Vegas.

• New York’s Niagara Frontier Transportation Authority is set to receive $777,943 to zone for mixed-use development along the Amherst-Buffalo Corridor Light Rail Extension project, a proposed extension of the area’s light-rail system.

• Metro in Portland, Ore., will receive $1.1 million to work with the city of Portland to identify affordable housing, economic development and business stabilization opportunities along a proposed 2.3-mile streetcar extension to Montgomery Park.

• Capital Metropolitan Transportation Authority in Texas will receive $600,000 to support TOD planning along the MetroRail Green Line, a proposed 15-mile commuter rail service between the cities of Austin and Manor.

January 2019 // Railway Age 13

Update It’s Official: Norfolk Southern to Move HQ to Atlanta

Norfolk Southern Corp. last month officially announced plans to relocate its headquarters from Norfolk, Va., to Atlanta, Ga., lured by a multi-million-dollar bond issue to help pay for a new downtown office tower, and ending weeks of speculation.

“Alignment, collaboration, and accountability are the hallmarks of Norfolk Southern’s plan to transform this company and its culture. Our new headquarters in Atlanta advances these key elements of success,” Jim Squires, Chairman, President

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Midtown Alliance Atlanta

Artist’s rendering of NS’s new Altanta headquarters building.

and CEO told employees when the relocation was announced. “Our potential has always been great and now is greater still, as we bring together all of our headquarters functions into a single, integrated team.”

Norfolk Southern plans to build a $575 million, 750,000-square-foot headquarters complex after the city approved a $600 million bond offer to redevelop companyowned property in the Gulch neighborhood. The city’s development arm, Invest Atlanta, also approved $23.6 million in tax breaks for the campus in Midtown at West Peachtree Street and Ponce de Leon Avenue.

State tax credits for new jobs and other extras could increase the value of the incentive package by millions more. Norfolk Southern has said it plans to relocate or create 850 jobs and retain more than 2,000 jobs currently located in Midtown at the new Network Operations Center at its David R. Goode Building in Atlanta.

Update Progressive Rail Picks Up BNSF Washington State Lines Progressive Rail, Inc., is poised to take control of 83 miles of railroad owned by BNSF Railway in northwest Washington State.

The transaction was revealed in a filing by Progressive with the Surface Transportation Board and published in the Federal Register December 7.

In the filing, Lakeville, Minn.-based Progressive Rail says it will take control of the newly-formed St. Paul & Pacific Northwest Railroad Company, which in a concurrent filing proposes to assume operations from the Kettle Falls International Railway over approximately 83 miles of rail line owned by BNSF Railway and operated

by OmniTRAX that extends north from Chewelah, Wash., to Kettle Falls, Wash., where the line branches; the West Branch northwest to West Kettle Falls, and the East Branch northeast across the United StatesCanada border and on to Columbia Gardens, British Columbia.

The SPN is a new entity established by Progressive Rail to lease and operate those lines. Pending an exemption approval, Progressive Rail expected to commence operations Jan. 1, 2019 Progressive Rail operates 11 other Class III

railroads in California, Illinois, Missouri, Oregon, Minnesota, Iowa, Wisconsin and North Carolina. The company was established in 1996 to serve the Airlake Industrial Park in Lakeville. It also operates a logistics services subsidiary.

Maplewood, NJ 07040 Phone: (800) 21RAILS Email: gburwell@railsco.com Web: www.railsco.com railwayage.com

January 2019 // Railway Age 15

Watching Washington

STB Waiting Too Long For Godot

P

rominently on Harry Truman’s Oval Office desk was a sign, “The buck stops here.” Newly confirmed members of the Surface Transportation Board (STB) may wish to reflect on that acknowledgment of accountability as they wade through a troubling backlog of unfinished rulemakings— some disregarded for years.

Whatever the reason for such fecklessness—perhaps timidity in dealing with contentious policy issues, or preferring vacant seats first be filled—justice is delayed and denied for captive shippers lacking effective alternatives to rail, and for whom residual regulatory protection was retained

by Congress following partial economic deregulation in 1980.

While some railroads and investors with short-term outlooks encourage the status quo versus timely resolution of thorny matters, delay breeds its own risk. Administrations, which nominate STB members, change, and there is threat of congressional backlash fueled by shipper discontent.

Economic efficiency also is a victim of regulatory delay. Uncertainty undermines longrange capital spending decisions, impedes efficient strategic planning and can sour commercial dealings with customers.

Especially exasperating to captive shippers are disregarded STB promises to simplify and make more efficient and less costly maximum freight-rate-review methodologies; develop standards for imposing fuel surcharges; revise how revenue adequacy is determined, and its relationship to maximum reasonable rates; and establish

FIVE BILLION CSX is buying back

in shares

16 Railway Age // January 2019

regulations allowing captive shippers access to a second railroad.

Given the level of shipper frustration with the delay, it is surprising none has sued in federal court to force the STB to cease impersonating a regulatory agency and perform the uncomfortable functions ignored.

Shipper disquiet is especially loud over an unfulfilled promise from December 2013, when then-Chairman Dan Elliott, current Chairman Ann Begeman and then-board member Frank Mulvey initiated a new proceeding (what became Ex Parte No. 722) to evaluate the impact of railroad revenue adequacy on maximum freight rates. The STB held a two-day public hearing on the subject in 2015. However, four years later, the STB has not even issued a proposed change, much less adopted any.

When revenue adequacy was first defined

by Congress in 1976—when the rail industry was on financial skid row, with prospects equally bleak—the intent was to assist railroads in achieving a level of earnings sufficient to allow a carrier to meet all of its expenses, retire a reasonable amount of debt, recover the costs of depreciation and earn a sufficient return on investment to attract new capital.

In 1985, with railroads in recovery mode following 1980 partial deregulation and favorable 1981 tax legislation, STB predecessor Interstate Commerce Commission ruled that when a railroad becomes revenue adequate, it must demonstrate “with particularity” its need for higher revenue, the harm it would suffer if it could not collect higher revenue and why a captive shipper should pay higher rates.

Captive shippers say most railroads became revenue adequate by the 1990s, citing Burlington Northern’s $4.1 billion acquisition of Santa Fe; Union Pacific’s (UP) $4 billion purchase of Southern Pacific, and CSX and Norfolk Southern (NS) acquiring Conrail for $10 billion. In 2009, Berkshire Hathaway paid $34 billion to acquire BNSF—a 31% premium over market value.

Subsequently, the STB declared BNSF and UP revenue adequate for eight consecutive years (2010-2017); NS in five of eight years, and CSX within a single percentage

PSR is further pounding down already-recordlow ops ratios.” point of revenue adequacy in six of eight years. No major railroad tells its shareholders it is revenue inadequate.

Moreover, Precision Scheduled Railroading is further pounding down alreadyrecord-low operating ratios; UP completed $10 billion in stock buybacks; CSX is buying back $5 billion of its shares, and NS has repurchased $12 billion of its stock since 2006.

For sure, each side has strong arguments as to whether and how a revenue adequacy constraint on rates should be applied. Shippers consider the attainment of revenue adequacy a trigger for rate caps, while railroads say it is an “aspirational goal” and not an event to establish new “wide-ranging price controls.” The Supreme Court has called the determination of maximum reasonable rates an “embarrassing question,” but one for the regulator to answer.

While some further process may be unavoidable, an STB continuing to wait for Godot—more or different colleagues, another task force report, or more data—is contrary to the public interest. Stakeholders deserve a final decision by year’s end, and timely final STB action on other longdelayed rulemakings.

FRANK N. WILNER Contributing Editor railwayage.com

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Railroader of the Year

Jj RUEST

T

he 56th annual recipient of Railway Age’s Railroader of The Year award is CN President and Chief Executive Jean-Jacques “JJ” Ruest, leader of one of North America’s bestperforming Class I railroads.

Ruest took a railroad plagued with service problems and serious network capacity shortages and implemented

18 Railway Age // January 2019

aggressive capital investment and service quality programs. These efforts have produced outstanding results, in terms of traffic growth and profitability. For example, CN’s engineering team completed more than 80% of expansion projects while the network was under heavy traffic. And in Ruest’s first few months as chief executive, CN hired hundreds of new line employees in train and engine service, laying a strong

foundation for the railroad’s continued success. Ruest sees strong growth opportunities ahead, across multiple commodities and new supply chain services.

Ruest was appointed CN President and CEO in July 2018, after having served as Interim President and CEO since March 2018. He was previously Executive Vice President and Chief Marketing Officer since January 2010, with responsibility for railwayage.com

CN

RAILROADER OF THE YEAR

Railroader of the Year From applied chemistry to railroading, CN’s chief executive has always put the customer first.

Ruest holds a Masters in Business Administration in Marketing from HEC Montréal (Université de Montréal) and a Bachelor of Science degree in Applied Chemistry from Université de Sherbrooke.

He also completed the executive program of the University of Michigan Business School, and CN’s Railroad MBA program.

For this article, I spoke with Ruest at CN headquarters in Montréal.

RAILWAY AGE: I would like to congratulate you on being selected our 2019 Railroader of the Year. This award goes back to 1964, and at CN of course you have predecessors—John Cann, Paul Tellier and Hunter Harrison. So, congratulations.

RUEST: Thank you. I’m extremely proud on behalf of the CN team. I know there’s a lot there, because I remember when Paul Tellier was Railroader of the Year after what were my early days at CN at that time, and I was quite impressed that somebody like Paul, who came from outside of the industry, could be the Railroader of the Year, and then was even more proud when Hunter, shortly after we had the merger of 1998-1999, also became Railroader of the Year. It was a huge endorsement at that time of the transformation we were going through. We’re again going through a transformation. We had a challenge last winter and we’re getting back on our feet, but also we are on the verge of having a transformation of what is Precision Scheduled Railroading at CN. So for all these good reasons, but especially on behalf of the 25,000 employees at CN, I’m extremely proud that I was selected.

By WILLIAM C. VANTUONO, EDITOR-IN-CHIEF

providing strategic direction and leadership for CN’s Sales, Marketing and CN Supply Chain Solutions groups. Ruest joined CN in 1996 as Vice President Petroleum and Chemicals. He was appointed Vice President Industrial Products in 2003, Vice President Marketing in 2004, and Senior Vice President Marketing in June 2006. Prior to this, Ruest worked for 16 years at a major international chemical company. railwayage.com

RA: I’d like to talk about your background a bit, your family, where you are from, your interests growing up.

RUEST: I’m a Canadian from a small town called Drummondville. Back in the day, it was a big industrial town with a few large companies. My father was a bluecollar worker. He was a union man too, very involved in the union at that time. It’s a town that has some railway history. It’s on the CN main line between Montréal and Quebec City. This is where I was born, and raised for the first 16 years of my life.

RA: You have an extensive background in applied chemistry.

RUEST: That’s right. As a kid, I was

encouraged to go to school and do different things, and it was a toss-up between being an engineer or an architect. I then went toward the science side of engineering, but the love was really about chemistry, so I earned a degree in applied chemistry, which got me into the chemical industry. I worked for two chemical companies, one of them for two years and one for 16 years. So my background is definitely heavy manufacturing, with products that tend to be hazardous, where safety is a high concern.

I worked in a factory for two years, and after that customer service, sales, marketing, research and development, business development, and starting up product lines for businesses toward the end of the supply chain. I was doing purchasing of raw materials, the logistics of the finished product, and all of the planning of how much we made, how much we sold and who we sold it to. We were using all modes—water, truck, rail, with a lot of exchange. This is where I got to know, during my last two years, the railroad industry—Conrail quite a bit, CN, and up to a point the Illinois Central, because my company had a plant in Eastern Canada, but also in Louisiana. It was a large chemical company called Imperial Chemicals Industries, ICI. In Canada, it was known as CIL, and in the U.S., Geismar.

I joined CN because of Paul Tellier.

When you join a company, you always look at who is its leader, and you look at where it’s going. I was very impressed with Paul Tellier’s leadership at that time, with who he was and what he was going to do with CN. I was a believer in the strategy that CN had at that time. Privatizing a Crown Corporation, overnight, to be 100% private was very risky, but at the same time it was very, very appealing. So, what some viewed as a risk, I viewed as a huge potential upside.

These two reasons are what brought me to this, being a chemist in the chemical industry to wanting to become a railroader at a time the company was going to go from fully governmental to private, and under the leadership of somebody that had a very strong vision for the company at that time, Paul Tellier.

RA: So you worked in the latter part of your time at the chemical company quite a bit with the railroads: Conrail, Illinois Central, CN? January 2019 // Railway Age 19

Railroader of the Year private equipment. Also, we’ve converted the currency we used. It was neither Canadian funds nor U.S. funds; it was what I think was called “rail currency” at that time. We eliminated that, so now we always do business in real currency as opposed to rail currency. When you were shipping in the U.S., you had a choice between a U.S. rate and a Canadian rate, or another rate, which was a combination with a currency surcharge that was adjusted every two weeks. But why bother with a currency surcharge when you can just use the U.S. exchange rate and make it simple?

RUEST: Yes, and CSX. We were making products that were traded between Canada and the U.S., north to south. We were not shipping very much west; we were shipping mostly south, and along the East Coast by water. Trucks went in a radius around these plants, and then rail went for long distances all the way north-south—basically from plants in eastern Canada all the way down to Louisiana, Florida and anywhere in between, using all the modes.

I decided to learn about the rail network. The complexity at that time of doing business with the rail industry was huge. Coming from the chemical industry, I was quite amazed how complicated it was from a customer’s point of view— and I like the word customers, not shippers—to use a railroad.

When I joined the railroad, there were 20 Railway Age // January 2019

a lot of things we did under Hunter Harrison and Jim Foote that really were meant to simplify transactions. We eliminated rebates and mileage payment on railcars, and we went to a per-car rate, the most simplistic unit, so that when you bought the services, you understood your cost without necessarily having to go through a series of add-ons and deductions.

As a railroad customer back in the day, one of my frustrations was, OK, there are all these different elements, so what really are my costs? How was I to do the railroading side inside CN in a way that we would be a better service provider according to what my frustrations were when I was a customer? And under Hunter and Jim, we did a lot of those things. Today, it’s common to have everything on a per car-basis, with no mileage payments for

RA: Getting back to your coming to CN, who made the first move? Did you approach CN or did they approach you?

RUEST: It was a combination of both. I would say it was somewhat CN, but the time was ripe. At ICI, we were going through major restructuring. A lot of the business had been sold. The management team and my mentor at that time, Norm Torgunsen, made an attempt to buy out the business unit. We actually made an offer to do a leveraged buyout of our business unit, to take it private and run it ourselves. We believed in what we had, but the leveraged buyout did not proceed. Rather than stay at ICI, I began looking to do something else, somewhere else, and at the same time CN was being readied to be privatized. This was in November 1995. railwayage.com

CN

RA: So, dealing with being a railroad customer at the time was rather intense?

Would you say it was complicated, with currency surcharges and other financials?

RUEST: Yes. Even back in those days, and I’m going back to being with CN for 23 years, it was so much easier to do business with a barge company or an ocean-going company or a trucking company than it was doing business with a railroad, especially if it was going to be an interline movement.

This was the case for many manufacturers, where most of what you do is interline. For us, it was, how do we grow business in a way that we make it more conducive to do business with the railroads, CN in particular?

Then, over time, we can maintain and grow shares and be profitable, and also present ourselves in a way that you don’t need to be a railroad guru to understand the railroad and do business with it.

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Railroader of the Year “It was difficult to go from a Crown Corporation losing money to 100% privatized, overnight.

22 Railway Age // January 2019

RA: So CN was really the first to do Precision Scheduled Railroading? It had been applied on a smaller scale at Illinois Central, but now it’s a much larger network, and it crosses a border.

RUEST: It was applied on the Illinois Central, which was a smaller network, but when we did the merger there was one year between the time the merger was announced to the time it was approved by the STB. During that year, we did a lot of outreach with our U.S. customers, with the IC business train. I remember a trip specifically between Jackson [Miss.] and New Orleans where we stopped in every station and brought customers on board, doing a presentation about the merger and explaining to them the benefits of the merger.

In between these meetings, I was with some of the IC executives, and we were learning about each other’s culture. So, I’m coming from Canada they’re coming from the South. They understand how Hunter works, and I understand partially how CN works, because I’ve been at CN for two years. So in between meetings where we were explaining the merger to customers, we were explaining to each other how we were doing business. This is where I got to learn about Hunter’s model and what sort of scheduled railroading was on the IC, and how they went through a phase of some challenges on the operations side and on the customer side.

History has repeated itself a number

of times, but I think the first time history was made was on the IC. Those customers remember the early days as a little bit challenging for them at the time.

RA: Hunter has passed into history, and I guess you can call him a legend. What was it like working with him? There are the stories—the exaggerated stories, the tall tales, the true tales. What was he really like, from your perspective?

RUEST: It depended on the day. You’re right: There are stories, there are tales, and everything gets bigger, especially five, 10, 15 years later. Stories are repeated with more humor or more sadness. But it was a time of learning the basics of railroading. The experience we had with Paul Tellier we also had with Jim Foote about leadership, and how you get a lot of people to do the things that need to get done. That may or may not be easy, but it needs to be understood and it needs to be done, otherwise we’re going to start slipping and go backward. It’s all about leadership and resolve. And that’s what I’ve been trying to do, especially since last spring—creating a sense of purpose, a sense of urgency, and then making decisions and move forward, without getting stuck in bureaucracy.

When you look at large companies like all the very big railroads in North America, there comes a point where, because you’re large and you think you have time, you start to waste the most valuable part, which railwayage.com

CN

I was in a field where the shareholders were losing interest. As a management team, we tried to became shareholders, but could not get it done. So I was looking for a company that had a vision of growing and getting things done, as opposed to withdrawing from the marketplace. And CN at that time was looking for talent from outside.

You have to remember that, today, people look at Precision Scheduled Railroading the way it’s applied on any of the railroads, and how difficult it is. You can imagine how difficult it was to go from a Crown Corporation losing money to becoming 100% privatized overnight, and be totally on your own.

We went from 33,000 people to 22,000, 100% privatized, cutting the link between the company and the government. That was very challenging, and there were a lot of people at that time who were naysayers. My view was that the potential was huge, and even though the risk was significant, it was most likely to work, and that this was the place to be.

Two years later, when Hunter came in through the merger, it was another huge success and learning experience in my career. When you buy a company, you should look at the talent in that company as much as the assets of the company. We tend to look at a company as the map, the territory, the equipment it has, but also we should look very closely at the talent. In the case of Illinois Central, all the talent stayed with CN. There was another part of a fairly major transformation that was also quite difficult at that time, in hindsight. Today, people look at Precision Scheduled Railroading as something that can be done, but at that time there were a lot of naysayers who said it was going to fail.

Congratulations

JEAN-JACQUES “JJ” RUEST President & Chief Executive Officer of Canadian National Railway

2019 Railroader of the Year

Real Rail Solutions At GREX, we’re working tirelessly to apply new technologies to common rail challenges so you can work safer and more efficiently than ever before.

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Railroader of the Year

is time. You use more time than what you should. And you hesitate for longer than what you should, and you can do that for a period of time just because you’re big and you can survive these things. But in the long run, these are some of the huge mistakes.

Coming back from where we were and what we learned the past 20 years to what we had to do last spring, is getting back to basics. Don’t procrastinate. Get the bureaucracy out of the system. You know the business, and you know what you need to do. Make decisions, move with a sense of urgency and get people to act as one.

Everybody has his own style. Hunter had his own style; Paul Tellier had his own style. Jim has his own style. I have my own style. But I believe that, for any large team on a railroad, if you don’t play as one, it doesn’t matter how many assets you have, 24 Railway Age // January 2019

or how much capital you have. You won’t be as successful. You have to get to the point where there’s a common cause, a common focus. For those who don’t want that, you have to get them off the train and replace them with those that want to be on the train. If they don’t quite know how to do it, you have to teach them how. When it’s not quite clear where we should go, you should at least make sure you give people a common direction, and not leave them to making decisions as to what is required.

RA: So what is JJ Ruest’s style? How would you describe it?

RUEST: My style is to make a decision, to analyze, but not more than I have to. I ask my people, for example, when we have meetings, to really have a meeting. Whatever document you’re going to bring in,

RA: Montréal Expos fan?

RUEST: They didn’t stay in Montréal long enough, but I was an Expos fan. I’m a fan of all team sports. A lot of what I do, and who I am, has to do with that. It’s so much more fun to do a team sport as opposed to an individual sport, because as a team there’s motivation. Baseball is one of those sports. I was never great at baseball, but I love the fact that it’s a team sport. You win together, and you lose together. My example of baseball: You’re at the plate—this goes back to my point about making a decision— the ball comes in, and it’s either in the strike zone or it’s not. If it’s in the strike zone and you don’t swing at it, that’s a mistake. If the ball keeps coming in the strike zone and you don’t swing at it, and strike out because you haven’t swung at it, that’s bad.

As a kid, I felt bad if I struck out. I felt bad walking back to the bench, because I let my team down. As an adult I say the same thing. When the ball of opportunity or the ball of risk comes into the strike zone, you have to give it at least a shot, to swing at it, to try to make something out of it—a single, a foul ball. Protect the plate, make something railwayage.com

CN

bring a smaller document, if you can put it in fewer words. Less is better than more.

Leave time for discussion, and when the discussion is over, make a decision. We don’t leave the room saying we’re going to analyze this again. Most meetings have to end with a decision, or an action plan that will quickly lead to a decision. If we go from decision to decision, we can move on to the next thing. Otherwise, we’re just going to accumulate a bunch of issues that eventually will become extremely heavy, like we ended up having last winter. Go with what you know, be a student of the marketplace, learn from others, learn from leaders.

I do a lot of listening, but not because I’m indecisive. I listen because before I make up my mind, I want to hear from those who have something to say. When the discussion is over, we decide, we move forward, and that’s it. Once a decision is made, there has to be somebody who’s in charge of the outcome. There may be a team of people, but there’s only one leader for each project or each decision, one person accountable One expression I use a lot is baseball.

I often use examples of when I was a kid, when I played baseball.

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Railroader of the Year “People need to remember that they have to earn their spot on the team.” out of it, but don’t let it go through and let your team down and let yourself down.

Often, in large corporations, sometimes people look at the ball coming in, and they know it’s a strike. But they don’t swing at it. They hesitate and procrastinate. That’s where bureaucracy is really bad, and needs to be taken out of most large companies.

26 Railway Age // January 2019

on that team. That right is earned. It’s not God-given.

RA: With hockey, there’s the perception that, oh, it’s guys banging into each other, checking and roughing up the other players.

But hockey is really a finesse sport that requires a lot of precision, a lot of coordination—like providing good service.

RUEST: All these things mesh together.

The challenge of our industry: Focus on the operating ratio, focus on cost, focus on growth, focus on safety, focus on asset utilization. How do we do that in a way that there’s finesse, and a balance among our objectives, so that we don’t fall into playing mostly defense or mostly offense?

That we have a balance such that we can win more often than not, and that we can last a whole season and go in the playoffs?

Because it’s not about having one good quarterly result. It’s about having a good solid year, and then, even better, creating a dynasty year after year.

An example that links to hockey is the dressing room of the Montréal Canadiens.

We had a town hall meeting at CN back in June following our tough winter where we brought all the top 200 CN employees into one of the hotels here in downtown Montréal. In one of the big convention rooms, we had all four walls decorated as if we were sitting in the dressing room of a big sports team. At the top of each wall we had a phrase that is actually in the Montréal

Canadiens’ dressing room, which is about building a dynasty and carrying the torch from one captain to another captain, from one general manager to another GM. I think this is very much about the culture of CN—we cannot fail and we will keep it going, but in a way that is suited for what we are right now. Specifically, it’s a lot of focus on customer service and on growth, and also, up to a point, on acquisitions outside of rail, as long as they feed into rail.

RA: Tell me about that tough winter.

What happened, what led to the problems, and what did you do and your team do to get things back on track?

RUEST: In simple terms, we entered the winter of 2017-2018 with not enough capacity in Western Canada. In the months leading to winter, we were already capacity-constrained on our Western network, mostly from Edmonton to Winnipeg and Winnipeg to Chicago. Capacity was already tight from the point of view of basic track capacity, qualified crews and locomotives.

Winter always consumes power capacity because of harsh winter conditions and low temperatures. So coming into the winter with tight capacity made things worse. It was very difficult to recover because we needed better weather and more capacity.

We had neither.

As the winter wound down, things were a little better, but during that time it became important to have the team act as one, to railwayage.com

William Beecher

RA: You’re a Canadian. Do you have any hockey analogies?

RUEST: We have an initiative right now on talent, and where we want to use it. We want to exploit talent the same way we exploit capital investments. How we deploy talent is as important as how we deploy capital. Talent is like having a hockey team.

You can only have so many players on the team, just like in baseball, and everybody that’s on the team needs to earn a spot on the team. Just because you’ve been on the team many years doesn’t mean you’ll always be on it. Every year you have to earn your spot. The beginning of a hockey season is in the summer; baseball is in the spring.

There’s a spring training camp not just to warm you up, but basically to make the team again.

When we do a job reduction or a restructuring, people need to remember that you have to earn your spot on the team. If you still have the talent but you lost your drive, you can’t keep your spot on the team. If you look left and right on the bench, you’ll realize eventually that your team players also resent the fact that you’re no longer putting in the effort. Therefore, as the coach, I have an obligation to get your spirit back or get you off the team. It’s not about how long you’ve been with us. It’s about whether those who play with you feel you’re contributing and not dragging them down.

The coach’s job is making sure the people on the team have earned the right to be

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Railroader of the Year to be done in the summer. We had a shot of getting everything done during the summer and fall, and be ready for the winter. It was about acting as one, quickly, making decisions when there was still time left to really get ready for this winter. And when you look at our second-quarter results, they were mostly about using the assets we had on hand. Our third-quarter started to show the results of some of the assets we’ve been buying and deploying.

actually do the best that we could with what we had at that time. So the first call to action, back in March, was, how do we make the best out of that and survive into the spring and early summer? Let’s convince the board to give us the extra capital so we can make quick decisions on investments. We didn’t need more time to analyze or agonize; we

knew what we needed to do.

We were able to convince the board as to what we needed to do, and got the signoff to get the funds. In the following two to three weeks, we quickly acted on our decisions with vendors and engineering to get things approved. We put out purchase orders for equipment, and for construction

RA: The current capital program has been among the largest chunks invested by CN, at least in recent years?

RUEST: Yes. This year we’re at 25% of our revenue reinvested back in capex.

But you know, that’s one way to look at it. Another way to look at it is return on invested capital, and our ROI is above 15%.

We have Precision Scheduled Railroading, and we’ve had a good operating ratio for a long time. Now, it’s time for us to also focus on ROI and talk to our shareholders and the people that support us about ROI and the OR. If you have a good ROI, why would you not invest more capital if there is business out there?

The rail industry is always talking bigtime about growth, and for good reason.

We’re always saying that we have a product that should be able to compete with the highway because we’re more fuel efficient, and we’re cheaper. But we’re still somewhat difficult to do business with, and sometimes

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Railroader of the Year we don’t have the assets or the capacity required to actually meet demand, but the demand is there. We need to invest so that we grow organically with the business, and address our pinch points with capital. So this year, we will also be spending probably in the range of 25% of our revenue back into capex. A large amount of that will be in Western Canada, where capacity is under the most pressure.

RA: You’ve said that coal and crude oil are cyclical. Where are the growth opportunities, outside of the bulk commodities the railroad has traditionally hauled, like grain, which is heavily regulated .

RUEST: There are really three buckets: Natural resources, which will always be the world of rail and barges—grain, potash, coal, iron ore. Manufactured products, where I came from in the chemical industry—rail-friendly because of large volume, and large rail-served facilities. Then there’s the real growth of the future, which has to do with consumers: 70%-plus of North

30 Railway Age // January 2019

American GDP is tied to consumers. The 70% will become 75% and 78%. I know Mr. Trump and Mr. Trudeau are trying to revive or protect the manufacturing sector, but growth in the economy comes from consumers, who generate a lot of freight.

That kind of freight is today mostly on the road. It requires better and different service than for natural resources, where we use mostly unit trains, or manufacturing, where we use mostly carloads, origin to destination. Most consumer goods are not rail-serviced at origin or destination, and in many cases they don’t involve a full carload.

RA: Are we talking intermodal or lessthan-carload boxcar traffic? What about the “Amazon Economy,” where people are buying things online that require shipping—FedEx, UPS, local trucking companies? Where do you see the railroads fitting in? How do you improve that?

RUEST: Railroads definitely fit in, and the product that makes the railroad the most relevant is the container, whether it’s

the 40-foot ocean container or the 53-foot domestic container. So we basically need to be the supply chain partner of choice to do the long-haul part, but do it in a way that the first-mile and last-mile service, which is over the road, through a warehouse or through a FedEx, is able to successfully deliver against what is promised. Most of what Amazon delivers to your door is a single box. What’s in that box in many cases is not manufactured in North America.

So it does come a long distance, in bulk, most likely in a container. The container gets cross-docked somewhere, broken up into small pieces that are aggregated with other pieces that go to another warehouse.

For that, you need scheduled railroading, terminals focused on units, and a level of customer services that is more leading-edge than what we have.

That’s why we bought a company called Transec, which some people say is a trucking firm. To us to, it’s not a trucking firm. It’s a company closer to the consumer end market. It provides a lot

railwayage.com

Railroader of the Year of temperature-controlled services. So as consumers buy a house or build a house, and fill it with white goods and furniture, and eat well year-round, these products are container services. It’s time for the rail industry to create the supply chains or to be part of a supply chain that always uses “the beast,” the rail network. We are a player in that supply chain, but we must be relevant to those that ultimately only buy small quantities or have service expectations higher than your typical natural resource or manufactured-goods customer.

RA: We are really talking about information and infrastructure?

RUEST: Investment in ports, or in systems that make us play well with the ports. Investment in intermodal yards.

Investment in systems or partners to do the last-mile delivery over the road. Investment in or partnership with people who aggregate and disaggregate in warehouses from full containers to a truck that goes to a store as its destination. And doing this always in

a way that our strength is the power of rail’s cost. In every solution, you want to fit in the rail solution for the long-haul, where you’re moving a full load.

“It’s time for the industry to create or be a part of supply chains that always use ‘the beast,’ rail.”

RA: How do short lines fit in? Like all Class I’s, you interface with a lot of them.

RUEST: Short lines fit; here are two examples: The Indiana Rail Road, which has a container terminal in Indianapolis

that to us is like a CN terminal. Think of it as a container terminal owned and operated

by CN like a corporate store, or a container terminal on a short line or a private owner or a franchisee, but in both cases part of the same group. Most CN container terminals are corporate storefronts we own and we operate ourselves. But we also have container terminals I will call franchises.

One is in Indianapolis on the INRD, and one in Regina (Saskatchewan) that is also a private ramp. It’s owned by another company, but they market it through us to overseas and domestic customers. This terminal has the same field services as our corporate stores or CN container terminals.

But it allows the INRD to be connected to the West Coast. INRD can participate in world trade via CN, and CN can participate in business in and around Indianapolis. We can actually market to all CN customers.

Typically, short lines have been viewed as an extension of Class I’s, mostly for carload merchandise service, but there are places where it has been proven that you can also

Kansas City Southern Would Like to Join Railway Age And Railroaders Across North America In Congratulating CN President and CEO Jean-Jacques “JJ” Ruest On Being Named Railroader of the Year

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January 2019 // Railway Age 31

Railroader of the Year do that with intermodal as long as there’s a willingness to actually be what I would call the franchisee of a storefront in a Class I network. These things come together better if it’s done from a brownfield site, where you take an existing underutilized merchandise carload yard and, using the same tracks and land, convert half into a container terminal.

We did that on CN when we bought the Elgin, Joliet & Eastern in Chicago. We had a yard in Joliet, Ill., for manufacturingrelated merchandise. Some of that business was not growing as in the past, so we took about one-third of that yard and turned it into a container terminal. It’s now twothirds container. A short line can do the same thing. It’s a question of partnering with a Class I, and being part of its network as a franchisee store, with access to the same growth potential of long-haul economics.

RA: Where is CN going with technology?

RUEST: Under Precision Scheduled Railroading, we’ve done a lot of the things that people know about—closing hump

yards, selling lines, reducing headcount, parking locomotives, parking cars, etc. But there comes a point where you can only do so much of that, unless you decide you’re just going to shrink and stop your growth and just drive the operating ratio down. But basically, you are going to give up return on investment and potential profitable business. I would call this Precision Scheduled Railroading 2.0, where you grow, applying technology in ways that reduce operating costs. What we have right now are a number of initiatives that we are deploying across the network in 2019. One example of that is automation of train inspection. We are building portals—four in Winnipeg, two in Memphis and one in Chicago—where the train goes through the portal at track speed.

It’s basically a roll-by inspection.

RA: Machine vision?

RUEST: That’s right. Instead of having a person inspecting a train as it rolls by, it goes through the portal at whatever the track speed is on that segment. High

definition cameras take pictures of the train as it goes by, and all the images go to a software program—artificial intelligence— where the software “learns” from what it sees, finds a defect, attaches that defect to the car number and sends out a work order for a carman to perform an inspection and repair. Over time, we will have a better car inspection program.

We’re doing the same thing with track inspection. We will be equipping seven or eight boxcars with internal track inspection equipment, put them on the merchandise network and give them a schedule so they run around the network non-stop on regular trains, inspecting the rail bed and the rails, sending information on what needs to be fixed. Over time, we’ll have more preventive maintenance, less lastminute maintenance, and probably a safer network. Eventually we’ll use our skilled labor to fix things as opposed to inspecting them. All of that will also eventually give us a better, more reliable product and better service, because we’ll have less unplanned

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Railroader of the Year maintenance that needs to be dealt with.

These are just a couple of examples.

RA: What you’re talking about is Big Data: gathering massive amounts of data and putting it to good use.

RUEST: Big Data, and software that learns by looking at this data and looking for defects. Over time, all inspection can be done by machine, so we can concentrate our skilled labor on fixing things as opposed to looking for defects.

RA: Fix it before it breaks, right?

RUEST: We have a new Vice President of Mechanical, Jim Sokol, who comes from the airlines. When we merged with the IC, we had a large influx of skill coming from another railroad. In the past two years, we’ve had an influx of talent coming from other industries. We have a new chief of mechanical, a new chief of engineering, a new CIO, a new chief of safety. Some come from BP Amoco, Southwest Airlines, FedEx. We’re bringing in skill from other

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industries that are somewhat like us so we can learn some of their best practices.

In the airline world, where Jim is from, preventive maintenance on an aircraft engine is quite different than doing preventive maintenance on a locomotive. Aircraft engines can’t fail on line because that would be quite detrimental! Jim comes from an industry where it’s all about preventive maintenance. In the rail industry, it’s not quite enough about preventive maintenance. When a locomotive comes into a shop, what is it that we need to do so that by the time it leaves the shop it will actually be in service longer, and the chance of an on line failure is reduced? A big part of this is transforming our mechanical program in such a way that we are increasing the level of locomotive predictability and reliability, at the same time reducing the numbers of on line failures, which are very detrimental to service and cost and asset utilization.

Right now, some railroads are talking about how many locomotives they’re parking. We have roughly 1,500

high-horsepower locomotives, and we are not going to be parking 300 or 400 because our fleet is already quite slim. It is extremely important for us with a fleet of our size that the fleet is actually in active service and fit for duty at all times.

RA: On the railroad, if you have a catastrophic locomotive failure, you might clog up the entire system for hours, at least, or days or whatever, and it has a cascading effect.

RUEST: That’s right. We saw some of that last winter. Our network, say from Halifax to Chicago, has excess capacity. If you have a locomotive that fails on line, it probably will not have an excessive amount of impact on other business because some of the network is double-track in the East. But when you go west and the network is already at capacity and under stress, and you have a failure on line, the cost of that ripple effect is quite significant. When you’re running close to capacity like CN, and you’re doing a capital program to add capacity, the capacity that you have now is very valuable. It’s very

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Railroader of the Year important that we make good use of that— namely, the rarity of the asset. That part of the network has to have a much higher up time, otherwise the cost of unplanned failures is more significant.

RA: So, a lot of work has been done on the western part of your network under heavy traffic. What’s left to do?

RUEST: Pretty much all the [2018] work on the main line is done. We still have some yard work in Edmonton to complete before the winter is over. There’s more work coming up this year, which will be another very busy year of adding capacity out west—more sections of double-track, probably more sidings and maybe some yard work. It’s pretty much the same amount of work on the network as what we did last year to build capacity for the business we see coming at us, and also to build resiliency so we have the ways and means to deal with when the network is under stress, like in winter time or when business is strong.

One example of that is crude by

rail—from Edmonton going to the United States, going east, going to Superior, Wisc., going to the Union Pacific, BNSF or via the CN all the way to Louisiana, to Geismar and/or Baton Rouge. We weren’t expecting that the pipeline industry would have so many challenges to get things done, and right now the only safety valves it has left are cutting back production or shipping as much as possible by rail, or both. In order to use rail, you need the railcars, but you need the network. You need the doubletrack and sidings and the crews and the locomotives. The investment we’re doing out west will have an early, quick payback because the business in Western Canada is quite strong.

RA: Many Canadians say, you don’t know what cold is until you come to Canada. I don’t think Canadians believe that anything higher than 20 degrees below zero centigrade is cold, but the last winter hit pretty hard.

Has the winter weather been getting worse?

Do you notice anything like that?

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RUEST: I think it’s like the southern U.S. You get the impression it’s not getting colder or hotter; it’s just getting more extreme. If you’re going to have a flood or a tornado, it seems to be more extreme. If it’s going to be hot, it may be hot for longer, and much hotter. The winter we may have in Canada this year might be a normal winter, but when we get to these extremes, it will be colder, and for longer. We deal pretty well with snow, because the grades we have in the Canadian Rockies are fairly flat. Typically, snow is not a big issue for our network, but sometimes it’s even tougher in Wisconsin, Minnesota and Chicago than on the Canadian network.

But we’re more susceptible to very cold temperatures and also to how many days and sometimes weeks of cold we have, because it has an impact on train length.

Winter comes every year, but it’s become more and more unpredictable. More of our locomotives work as Distributed Power because they actually allow us to be able to keep running longer trains.

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Railroader of the Year We also have 60-foot boxcars we call “air repeater cars”—basically a boxcar with an air compressor we put on the merchandise trains in the winter. Just like a DP locomotive, they help us maintain train length.

People may still criticize our railroad for winter service problems, but what we do in the winter today is a whole lot better than what we did 10, 20, 30 years ago. These trains are longer than they were in prior winters, and we move a whole lot more gross ton-miles than in any other past winter.

But let’s face it. Being a conductor at minus 35 degrees centigrade is not an easy job. And in wintertime, there’s less daylight and more nighttime—two shifts out of three when it’s dark. And when it’s dark in the Prairies, it’s typically colder. The wind just picks up and it’s a challenging environment, no question. Our employees had quite a challenge last winter working long nights, and with re-crews, maximum hours and maximum overtime, it was still not quite enough to get it all done.

RA: The future, in terms of talent, attracting young people to the industry— not so much attracting them but retaining them. How difficult is that for CN? RUEST: We all compete for the skilled labor force, and we compete even harder when unemployment is as low as today— which we are not complaining about because it makes for good business. The economy is good, unemployment is low, so the labor pool is smaller. But at the same time, we have the good fortune to have more freight that wants to come to us, so it’s up to us to make ourselves more appealing to young men and women to come and work for the railroad, either in operations, mechanical, engineering or in the different functions that we have at headquarters.

It’s about getting out the message that rail is a great industry, financially robust, with good benefits. We’re not going to go anywhere. We’re not closing factories. What we have is unique, so when you join the railroad you can actually make a career of it, whether you join the blue collar force or

the white collar force. We provide relevant services, and as we work harder on our internal product, they’re even more relevant. We are built to last, and we will last into the next century. It’s up to us make that happen, and it is possible.

Young people like to have the same technology they have at home, and we have to provide them with that technology, not just for us to lower our costs and be more efficient, but to actually retain the younger generation. I’ll give you two examples.

Right now, we are deploying mobile devices for our crews and carmen. So if you’re a carman, you’re getting a tablet computer where, as you do your work, you report all your work. You actually enter that work on your pad, and at some point you might be using that pad to take pictures of the stuff that you’ve done so that you can archive it.

That is what we do our AAR billing from.

If you’re a crewperson, you’ll also be given a mobile device. It’s almost like FedEx, where you get your work order and report your work. Over time, we will use more and

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more of these devices through our “digital factory.” We will create more applications for these devices.

We give you a $3 million locomotive, and then we give you a piece of paper and a pencil? That doesn’t work anymore. We have to deploy technology and digitize processes in a way that not only helps us bring down the operating ratio and makes the railroad more reliable, but also is more appealing for the workers of today and to how they want to work, as opposed to being stuck in the 1970s and 1980s.

RA: You give people a paper form and a pencil, and they think, what’s this? The mindset is smartphones, tablets, computers, wi-fi, connectivity, information, and accuracy, too.

RUEST: Yes, accuracy. For carmen, we have it deployed in four yards. You just mentioned, for example wi-fi. We have to deploy enough wi-fi signal in each yard or shop so there is wi-fi anywhere they might be doing their work. That becomes powerful. You enable people to do different things wherever they are. Eventually, we should be able to create more applications that will make work more interesting. That’s the next frontier of Precision Scheduled Railroading: applying technology that gives the new generation a working environment more like what they want, and a better chance of us retaining that talent.

RA: Passenger rail: CN interfaces a lot with Metrolinx, AMT and VIA Rail, and Amtrak in the U.S. How would you describe your relationship with passenger carriers?

RUEST: It is a challenge to have freight co-exist with passenger service because, especially in commuter service, it consumes a lot of capacity in a very short time, especially during peak hours in the morning and at night. It is difficult to co-exist, and it’s something that we need to get better at. But we own the rail lines; our first mandate is freight, and the capacity we deploy is for freight. There needs to be a recognition that capacity for passenger service has to be created by the user, with the funding required. Don’t force it. The people using freight service are citizens just like those using service.

They’re people that work in factories trying to get their products to market, or in warehouses to which we deliver their product. I would describe each freight railcar that goes by as jobs or services in manufacturing or natural resources, and a passenger train as people trying to get to their jobs. There needs to be a recognition that both need to exist. There have to be some concessions from time to time, but it does require capacity, and an understanding that as you give capacity to passenger service, you take it away from the freight sector. You have to do that in a way where everybody gets what they need, but it’s not first-come, first-served.

RA: This is an opportunity for you to speak directly to your vendors. Do you have a message for them?

RUEST: My message to them is, please help us to improve as an industry so we can gain more business. I’m not saying, “Give us your lowest price.” I’m saying, “Help us to lower our costs.”

When I was Chief Marketing Officer at CN, I was always talking to my customers in terms of, “What we do can help you have lower costs and better service, but don’t always ask us to do it at a lowest price. Same thing with our vendors who support us: How can you help us gain more business and be more relevant to the world of

36 Railway Age // January 2019

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Railroader of the Year transportation, such that, as a result, you gain more business from us, and we continue to buy services and deploy capital?

Sell to us in a way that we can be lower cost, and provide service that’s reliable and safe. Every time you do that, you create more business for yourself. You increase the size of the pie in which all vendors can participate. It’s especially true in the world of non-traditional suppliers to the rail industry from the technology side. So if you’re a newer supplier to the rail industry, and you’ve been a supplier to, say, the mining industry and taught it how to do preventive maintenance on those big trucks, how would some of those things apply to a locomotive or a big rail network? What are those technologies that we could apply to our industry so that we can catch up with the times? My sense is that, from a technology deployment point of view, as an industry we’re slightly behind other industries. It’s not too late for us to catch up, but time is of the essence for us to figure out how to use technology smartly. Suppliers can help us to do that.

We always like lowest price, but we are really interested in lower costs and solutions that are innovative in more ways than one.

RA: You’ve been in the CEO role now for a relatively short time, but you’ve been with the company a long time. What was it like being thrust into the role?

RUEST: Coming from the commercial side, I understand some of the regulatory space, the customer side, the logistics side, the supply chain within and outside North America. I’m now discovering new stakeholders, meaning a lot of involvement with regulators and politicians, and a lot more engagement when it comes to safety.

How we use technology is something I really enjoy.

We’re a very large company in North America. CN has a much bigger role in the economy than one might think. In Canada, we have the fourth-largest market cap—$80 billion-plus—with three Canadian banks in front of us. We matter to the Canadian economy, and when that economy has issues, sometimes we get dragged right into the middle, whether it’s issues with the lumber trade into the United States, with NAFTA, or crude by rail and pipelines, or grain.

We’re a corporate citizen that matters. We’re either central to or a large part of these issues. That’s the part I’m discovering, and I’m enjoying it. But at the same time, we cannot always have the solutions people are looking for immediately. We are not always on stand-by with all the goods and services to step in and fix something that should have been fixed a long time ago.

I want to thank all of our employees at CN for their constant support, especially last spring and last winter. We had a really tough winter to get through. We came out again as a team. The message to the team: Hang in there. We’re investing. We are giving ourselves the tools to be successful, and we will be successful. That’s the commitment we have to our customers, our shareholders, government regulators, and more important, to ourselves. We’ve earned the right to be successful. Thank you everybody for your support to keep on going down that path. And thank you to Railway Age to give this recognition to CN and to me. I want to thank my mentors from the past—Paul Tellier, Hunter Harrison, Jim Foote, Claude Mongeau, and Norm Torgunsen from my days in the chemical industry, and to my father, for all the teaching they provided over the years. Now it’s up to me to give that same teaching and coaching back to the people that work for me and around me. railwayage.com

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FREIGHT RAIL

Beyond Track. Beyond Trains.

WHERE IS THE GROWTH IN FREIGHT RAIL?

Opening Session

MATT ROSE BNSF

DISCUSSIONS INCLUDE:

EXECUTIVE CHAIRMAN

• How digital access is transforming the supply chain

A New Strategy For Freight Rail

• Class I’s: Investing in industrial development is good for business

LEE CLAIR

MANAGING PARTNER

Transportation and Logistics Advisors

• Blockchain & the future of freight rail • First & last mile: Short lines show the way on freight • Intermodal & the container port arms race

SPONSORED BY:

REGISTER NOW www.railwayage.com/ngfr | 212.620.7205 | conferences@sbpub.com

#NGFR19 #NGFR19

Equipment Leasing and The Key To Class I Growth

JEFF LYTLE

PRESIDENT, RAIL

CIT Group, Inc.

Closing Remarks

JJ RUEST

PRESIDENT & CEO

CN and Railway Age 2019 Railroader of the Year

EXHIBITS & SPONSORSHIPS AVAILABLE 212.620.7224 Jchalon@sbpub.com

MAR. 12, 2019

Union League Club of Chicago

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PASSENGER passenger RAIL rail

For NJT, a flex plan A step-change from traditional electric multiple-units, NJ Transit’s forthcoming Multilevel IIIs will move the agency to a standard fleet.

All illustrations courtesy NJ Transit

B

By WILLIAM C. VANTUONO, EDITOR-IN-CHIEF

y 2026, provided the procurement is fully funded and all options are exercised, New Jersey Transit—empowered by an infusion of muchneeded funding by Governor Phil Murphy following a starvation diet imposed by his predecessor, Chris Christie—will have replaced its entire fleet of aging single-level cars with nearly 650 new Multilevels, many of which will be powered electric vehicles, and the first of their type in North America.

On Dec. 12, 2018, NJT, as part of its Fiscal Year 2018 budget, awarded Bombardier Transportation a $669.1 million contract for 113 Multilevel III regional/commuter railcars: 58 powered cars with electric propulsion (AC catenary), and 55 nonpowered cars—33 cab cars and 22 trailer

railwayage.com

cars, 6 of those with ADA-compliant restrooms. With all options exercised—886 additional cars, including 636 for NJT and 250 for SEPTA in a joint procurement—the total value of the contract for Bombardier is $3.6 billion.

Bombardier, which has supplied 421 Multilevel railcars plus a fleet of ALP-45DP dual-power (AC electric/diesel) and ALP-46 electric locomotives in recent years, won the Multilevel III contract over China’s CRRC, the only other bidder.

LTK Engineering Services, NJT’s primary vehicle design, engineering and manufacturing consultant, was awarded a $42 million contract ($36.7 million plus 5% for contingencies) for the Multilevel III build.

The new vehicles are scheduled to begin testing in the third quarter of 2022 and are

expected to enter revenue service during the second quarter of 2023.

The order for 113 Multilevel IIIs, NJT’s largest railcar order in recent years, will allow the agency to begin replacing the oldest equipment in its fleet, starting with the remaining 160 Arrow III EMU (electric multiple-unit) cars—which date to the 1970s and were rebuilt by ABB Traction in 1993—continuing with the Comet II, III, IV and V single-level cars.

“This historic purchase is a perfect example of how NJ Transit is reclaiming its position as a national leader in transportation,’’ said Executive Director Kevin Corbett. “The new [powered] Multilevel III cars break new ground in railroad technology, and we’re proud that NJ Transit is leading the way. With this investment, we’ll January 2019 // Railway Age 41

passenger rail Each powered Multilevel III can haul up to two Multilevel trailer cars or cab cars.

Numerous train configurations are possible. be able to retire the oldest railcars in our fleet, while increasing reliability, efficiency and customer comfort.’’

The groundbreaking aspect of this order is the 58 powered cars that, when combined with non-powered trailers and cab cars, will create “Hybrid EMU” bi-directional

42 Railway Age // January 2019

trainsets, with a cab car at each end. Each powered car, equipped with a single pantograph for AC current collection (from multiple voltage sources ranging from 11,000 to 25,000 volts AC at 25 and 60 Hz) and two propulsion packages (transformer plus powered two-axle trucks with

AC traction motors, one set at each end of the car), can haul up to two trailers/cabs.

Thus, a 12-car Hybrid EMU trainset would consist of 4 powered cars, 6 trailers and two cabs. The maximum-size trainset NJT envisions, based on available platform length, not propulsion power, is 14 cars.

railwayage.com

passenger rail

Since each powered car is equipped with two propulsion packages, there is no single point of failure, unlike locomotive-hauled consists. These units will feature regenerative braking that puts AC electricity back into the catenary power grid, and RDS (remote diagnostics systems). They will also feature FRA-mandated 180-day inspection cycles, as opposed to the 92-day Arrow III cycles. And once the NJT fleet is fully builtout, it will be far more operationally flexible than what exists today.

Like NJT’s 52 ALP-45DP locomotives (35 in service; 17 on order), the Multilevel IIIs will be the first of their type in North America. They are of course not the first EMUs in North America, but they are the first to combine current collection from AC catenary with AC traction motors and regenerative braking, and operate as a standalone vehicle (not in “married pairs”). They are also the first so-equipped multi-levels, with three seating levels (upper, lower and mid-level, at the car ends), as opposed to, for example, the gallery-style cars used by Chicago’s Metra Electric service. As well, they can be mixed and matched in various configurations with non-powered trailers and cab cars, providing a great deal of trainset configuration flexibility. They increase railwayage.com

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January 2019 // Railway Age 43

passenger rail

seating capacity compared to the Arrow IIIs, for example, from 1,380 seats on a 12-car Arrow III trainset to 1,552 seats on a new 12-car Multilevel III trainset. They will feature the roomier and popular two-bytwo seating, introduced on the Multilevel I and II fleets, as opposed to the uncomfortable and cramped three-two bench seats on all the single-level cars. Other customer amenities include USB charging ports and

new, onboard information displays.

“This purchase is allowing NJ TRANSIT to take a step toward the goal of having the overall average age of all rail vehicles under 30 years old, making for a more modern fleet that supports enhanced comfort, reliability and efficiency,” NJT said. “The benefits of the Multilevel IIIs include reduced operating costs, higher acceleration [rates] and an 11% increase in seating capacity.

The Multilevels also have a higher Mean Distance Between Failure (MDBF): 370,575 miles, compared to 40,046 miles for the Arrow IIIs, based on October 2018 data.”

As well, the Arrow III fleet is certified for an MOS (maximum operating speed) of 80 mph. The Multilevels, whether in self-powered Hybrid EMU or locomotivepowered push-pull trainsets, have an MOS of 110 mph.

www.ltk.com

Connecting people for more than 90 years.

Rail Vehicle Engineering 44 Railway Age // January 2019

Rail Systems Engineering

Revenue Systems and Technology

Operations Planning and Simulation railwayage.com

We’re current, are you? FRA Regulations Mechanical Department Regulations

FRA News:

A combined reprint of the Federal Regulations that apply specifically to the Mechanical Department. Spiral bound.

Part Title 210 Railroad Noise Emission Compliance Regulations 215 Freight Car Safety Standards Updated 11-27-18.

216 Emergency Order Procedures: Railroad Track, Locomotive and Equipment Updated 11-27-18.

217 Railroad Operating Rules Updated 11-27-18.

218 Railroad Operating Practices - Blue Flag Rule Updated 11-27-18.

221 Rear End Marking Device-passenger, commuter/freight trains Updated 11-27-18.

223 Safety Glazing Standards Updated 11-27-18.

225 Railroad Accidents/Incidents Updated 11-27-18.

229 Locomotive Safety Standards Updated 11-27-18.

231 Safety Appliance Standards Updated 11-27-18.

232 Brake System Safety Standards Updated 11-27-18.

DATES: Final rule was effective November 27, 2018.

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Update effective

11-27-18 7-20-09 11-27-18 11-27-18 11-27-18 11-27-18 11-27-18 11-27-18 11-27-18 11-27-18

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BKCONDC 242 11-27-18

RR Communications Rear End Marking Device, Passenger, Commuter & Freight Trains Use of Locomotive Horns Reflectorization of Rail Freight Rolling Stock Hours of Service Locomotive Safety Standards Steam Locomotive Inspection RR Safety Appliance Standards Bridge Safety Standards Qualification and Certification of Locomotive Conductor Certification

232 11-27-18 Brake System Safety Standards

BKBSS

BKCAD

RR Safety Enforcement Procedures & Rules of Practice Track Safety Standards (Subpart A-F) Track Safety Standards (Subpart G) RR Workplace Safety RR Freight Car Safety Standards RR Operating Rules and Practices

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Part 240–Qualification and Certification of Locomotive Engineers This rule clarifies the decertification process; when certified locomotive engineers are required to operate service vehicles; and address the concern that some designated supervisors of locomotive engineers are insufficiently qualified to properly supervise, train, or test locomotive engineers.

162 pages. Spiral bound. Updated 11-27-18.

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Part 242: Conductor Certification The Conductor Certification rule (49 CFR 242) outlines details for implementing a Conductor Certification Program. The FRA implemented this rule in an effort to ensure that only those persons who meet minimum Federal safety standards serve as conductors, to reduce the rate and number of accidents and incidents, and to improve railroad safety. Softcover. Spiral bound. 124 pages.Updated 11-27-18.

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Use of Locomotive Horns at Public Highway-Rail Grade Crossings 49 CFR 222. This regulation provides for safety at public highway-rail grade crossings by requiring locomotive horn use at public highway-rail grade crossings except in quiet zones established and maintained in accordance with this part. 172 pages. Softcover, spiral bound. Updated 11-27-18.

BKHORN

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Use of Loco. Horns at Public Hwy-Rail Grade Crossings

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Compliance Manuals BKINFRA18

Federal Railroad Administration 49 CFR Part 209, 213, 214, 215, 216, 217, 218, 219, 220, 221, 222, 223, 224, 225, 227, 228, 229, 230, 231, 232, 233, 234, 235, 236, 237, 238, 239, 240, 241, 242, 243, 244, and 272: Revisions to Civil Penalty Amounts. In accordance with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, this final rule provides the 2018 inflation adjustment to civil penalty amounts that may be imposed for violations of certain DOT regulations. This rule also finalizes the National Highway Traffic Safety Administration's and the Office of the Secretary's catch-up inflation adjustment interim final rules required by the same Act.

38.00 49.95

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The Railway Educational Bureau 1809 Capitol Ave., Omaha NE, 68102 I (800) 228-9670 I (402) 346-4300 www.RailwayEducationalBureau.com

Add Shipping & Handling if your merchandise subtotal is: U.S.A. CAN U.S.A. CAN UP TO $10.00 $4.50 $8.75 25.01 - 50.00 10.78 16.80 10.01 - 25.00 7.92 12.65 50.01 - 75.00 11.99 21.20

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PASSENGER CAR MARKET ORDERS LIKELY TO DEVELOP IN 2019 Purchaser

# of Cars

Type

Atlanta (MARTA)

254-354

Rapid Transit

Toronto (Metrolinx)

101

Bilevel Commuter

New York (Long Island Rail Road)

244

EMU Commuter

New York (NYC Transit)

220-1030

Rebuilt Rapid Transit

Portland (TriMet)

26

Light Rail

San Bernardino (SBCTA)

1

DMU

San Francisco (BART)

120

Rapid Transit

Seattle-Tacoma

3

Commuter

NEW CAR DELIVERIES BY MODE, 11-YEAR TRACKING Year

Regional/intercity

Rapid Transit

LRT/Streetcar

Total

2008

227

272

97

596

2009

187

752

202

1,141

2010

199

782

148

1,129

2011

235

113

149

497

2012

343

243

59

645

2013

531

337

166

1,034

2014

251

484

116

851

2015

251

462

258

971

2016

94

424

188

706

2017

34

34

140

169

2018

373

220

98

691

THE FIVE-YEAR (2020-2024) OUTLOOK Purchaser

# of Cars

Type

Amtrak

252

HSR Intercity

Amtrak

46

Intercity

Atlanta (MARTA)

46

Rapid Transit

Baltimore

78

Rapid Transit

Boston (MBTA)

428

Rapid Transit

Boston (MBTA)

24

Light Rail

California (DOT)

49

Intercity

California (Orange County)

10

Light Rail

Chicago (Metra)

200-400

Commuter

North Carolina (CATS)

6

Light Rail

Illinois (DOT)

88

Intercity

Indiana (NICTD)

26

EMU commuter

Texas (DART)

7

DMU commuter

Texas (TEXRail)

8

DMU commuter

Texas Central

TBD

HSR Intercity

Kansas City

9

Light Rail

Los Angeles (LAX)

44

People Mover

Los Angeles (LACTMA)

218

Rapid Transit

Maryland (Purple Line)

26

Light Rail

Montreal (STM)

153

MPM-10

Newark (NJ Transit)

100-260

EMU commuter

New York (LIRR)

536

EMU commuter

New York (NYC Transit)

1,980-2,500

Rapid Transit

New York (Staten Island Railway)

75

Rapid Transit

Phoenix (Valley Metro)

67

Light Rail

Portland (TriMet)

60

Light Rail

San Francisco (BART)

775-1,081

Rapid Transit

Seattle-Tacoma (Sound Transit)

11

Commuter

Seattle-Tacoma

5

Streetcar

46 Railway Age // January 2019

railwayage.com

PASSENGER CAR MARKET THE FIVE-YEAR (2020-2024) OUTLOOK CONTINUED Purchaser

# of Cars

Type

Seattle-Tacoma

152

Light Rail

Seattle DOT

10

Light Rail

Texas Central

8

DMU

VIA Rail

32

Intercity trainsets

Washington (WMATA)

256-800

Rapid Transit

WORK PROGRESSES ON THIS UNDELIVERED BACKLOG Purchaser

# of Cars

Type

Builder

Amtrak

168

HSR Intercity

Alstom

Amtrak

10

Intercity

CAF USA

Boston (MBTA)

2

Rapid Transit

CRRC

Buffalo (NFTA)

8

Light Rebuilt

Hitachi

Caltrain

37

Bilevel EMU

Stadler

Chicago (METRA)

7

Bilevel commuter

Nippon Sharyo

Hawaii (HART)

16

LRV

Hitachi

Kansas City

2

Light Rail

CAF USA

Los Angeles (LACMTA)

64

Rapid Transit

CRRC

Los Angeles (LACMTA)

71

Light Rail

Kinkisharyo

Toronto (Metrolinx)

29

Light Rail

Bombardier

Minneapolis/St. Paul

27

Light Rail

Siemens

Montreal (STM)

180

Commuter

Bombardier

New York (LIRR)

202

Commuter EMU

Kawasaki

New York (Metro-North)

66

Commuter EMU

Kawasaki

New York (NYC Transit)

160

Rapid Transit

Bombardier

Newark (NJ Transit)

113

EMU Commuter

Bombardier

Oklahoma City (Embark)

2

Streetcar

Brookville

Orange County

8

Light Rail

Siemens

Philadelphia (SEPTA)

45

Multilevel Commuter

CRRC

Phoenix (Valley Metro)

11

Light Rail

Siemens

Rocky Mountaineer

10

Tourist coach

Stadler

Rocky Mountaineer

2

Rebuilt coach

Alstom

San Bernardino (SANBAG)

3

DMU

Stadler

San Diego (MTS)

44

Light Rail

Siemens

St. Louis

1

Vintage Trolley

Brookville

THESE NEW AND REBUILT CARS WERE DELIVERED IN 2018

railwayage.com

Purchaser Brightline (Florida)

# of Cars 12

Type

Builder

Intercity

Siemens

Boston/MBTA

2

Rapid Transit

CRRC

Chicago (METRA)

39

Commuter

Siemens

Connecticut (DOT)

16

Commuter

MBTA lease

Detroit (Q Line)

3

Streetcar

Brookville

Honolulu

3

Automated Metro

Hitachi

Los Angeles (LACTMA)

52

Light Rail

Kinkisharyo

Toronto (Metrolinx)

29

Light Rail

Bombardier

Toronto (GO Transit)

102

Bilevel Commuter

Bombardier

Milwaukee

5

Streetcar

Brookville

Montreal (STM)

198

Commuter

Bombardier

New York (NYC Transit)

158

Rapid Transit

Bombardier

Oklahoma City

4

Streetcar

Brookville

San Diego

1

Light Rail

Siemens

San Francisco (BART)

60

Rapid Transit

Bombardier

Seattle-Tacoma

2

Commuter

Bombardier

St. Louis

1

Vintage Trolley

Brookville

Sonoma-Marin (SMART)

4

DMU Commuter

Nippon Sharyo January 2019 // Railway Age 47

People / 100 years / Events january 22-24, 2019

PETE TOMLIN

AAR 31ST QUALITY ASSURANCE AUDITOR CONFERENCE

New York City Transit High profile: Long-time colleagues and fellow Englishmen

Andy Byford and Pete Tomlin, who worked together on the London Underground and Toronto Transit Commission, have again joined forces, this time at MTA New York City Transit. Byford, who joined NYCT as President in January 2018, has pulled Tomlin, an internationally renowned signaling and train control expert, from the TTC to lead the comprehensive evolution to CBTC (communications-based train control) of NYCT’s subway signal system. Tomlin will join NYCT as the head of the agency’s systemwide resignaling efforts in January 2019. He brings more than 21 years of international experience in the complex discipline of upgrading signal systems on new and existing subway systems, most recently in Toronto but before that in London and Hong Kong. An electrical engineer by training, Tomlin specializes in leading installation of modern signal systems on new and existing subway lines.

New Orleans, La. https://www.railwayage.com/event/ aars-31th-quality-assurance-auditorand-industry-conference/

JANUARY 24-25, 2019

15TH ANNUAL SOUTHWESTERN RAIL CONFERENCE Magnolia Hotel – Park Cities/SMU Dallas, Tex. http://ctr.utk.edu/CTRrailcourses/ railclass.php?id=513&loc=1

MARCH 12, 2019

C

IT Group Inc. named Robert Rubino President of CIT Bank, N.A., the banking subsidiary of CIT, and head of Commercial Banking, effective Feb. 25.

Rubino will oversee CIT’s commercial banking divisions, including railcar, commercial, real estate and equipment financing, and commercial services. He will join the company’s Executive Management Committee and report to Chairwoman and Chief Executive Ellen R. Alemany.

LTK Engineering Services promoted four staff members to senior-level positions, three of them with new regional responsibilities. Ernest Chance is Vice President Southeast Region, Washington D.C. Previously Vice President South Atlantic Region, he has more than four decades of experience in the transit/railroad industry. Winston Simmonds is Vice President of the DC Metropolitan Region. Previously a Senior

Systems Consultant, he has more than 28 years of project, engineering and construction management experience in the transportation and public transit industry. David Diaz is Vice President Middle Atlantic Region. Previously Vice President Special Projects, he has more than 30 years of experience as an engineering project leader with diverse areas of expertise covering all segments of railroad and transit disciplines.

Raymond Carini is Senior Vice President.

Previously Vice President Middle Atlantic Region, he has been with LTK for 38 years.

He will take on a more national customerfacing role, providing guidance on complicated vehicle procurement programs.

Northern Plains Rail Companies appointed Dan Mack Executive Vice President, Finance, Marketing and Sales.

Urban Engineers named Peter Fedun Deputy Practice Leader for Rail and Transit.

100 years ago in railway age jANUARY 1919 A Year of Government Operation A momentous change in mental attitude among railroad men and the public has marked the 1918 year of railroad operation under the direction of the government Railroad Administration. This change of mental attitude is far more important as having an effect on the future than are the physical changes which have taken place, important as these are when viewed in detail. The fact that more miles of railroad have been torn up than have been built … is small when compared to the change in point of view of the public and the two million men actually engaged in railroad operation.

48 Railway Age // January 2019

NEXT-GEN FREIGHT RAIL, PRESENTED BY RAILWAY AGE Union League Club, Chicago, Ill. https://www.railwayage.com/ngfr/

APRIL 24-25, 2019

LIGHT RAIL, PRESENTED BY RAILWAY AGE AND RT&S Le Méridien Delfina Santa Monica, Santa Monica, Calif. https://www.railwayage.com/ lightrail/

june 5-6, 2019

RAIL INSIGHTS 2019, PRESENTED BY RAILWAY AGE Union League Club, Chicago, Ill. https://www.railwayage.com/ insights/

SEPTEMBER 22-25, 2019

RAILWAY INTERCHANGE 2019, PRESENTED BY RSI, REMSA, RSSI, AREMA, and the Coordinated Mechanical Associations (CMA).

Minneapolis, Minn. https://railwayinterchange.org/ info@railwayinterchange.org. exhibitionsponsorships@ railwayinterchange.org. aremaconferencesponsorships@ railwayinterchange.org. mediainquiries@railwayinterchange.org. railwayage.com

Products SpikeEase: Did You Say BatteryOperated?

SpikeEase, from Focused Technology Solutions, Inc., (A Marmon/Berkshire Hathaway Company), is the world’s first portable battery-operated spike removal tool.

SpikeEase is a better, environmentally safer alternative solution to hydraulic spike removal tools and claw bars. It eliminates the need for gas-powered generators, long hydraulic hoses, hazardous fluids, and dangerous claw bars that can cause Rule 22 violations and/or adjacent track violations. Lightweight at only 25.8 pounds, it remove a spike in three to seven seconds, increasing productivity and reducing injury potential. Focused Technology Solutions values how equipment, production and operations affect safety and workers’ lives. Put your trust and value in Focused Technology Solutions and the SpikeEase. “They said it couldn’t be done. I guess we never got that memo.” Information: Peter Bartek, (862) 2511490; peterbartek@railserve.biz.

The Railway Educational Bureau

Railroad Resources

The Double-Stack Container Car Manual

Development and Operation of New York's IRT and BMT

With intermodal container freight increasing, keeping double-stack container cars operating safely and efficiently is a growing concern to railroads-keeping customers and manufacturers happy with service is a large part of that concern.

History does repeat itself. Many of these issues are brought to life by exploring examples learned from mitigating various issues and tactics used when the NYCTA assumed control of the BMT and IRT lines.

BKDOUBLE

BKFCAB

Double-Stack Containert Car Manual

$19.50

Guide to Locomotive Electrical Maintenance - SD and GP Locomotives

Guide to Freight Car Air Brakes presents a wealth of information pertaining to air brake maintenance. The procedures and methods presented in this book are designed to keep your freight car air brake systems in top condition.

Covers traction motors; main and auxiliary generators; fan contactors; MU and snowplow receptacles; dynamic braking components; miscellaneous running work components such as control panels; and more.

$74.50

Guide to North American Steam Locomotives

Guide to North American Steam Locomotives

$46.75

Locomotive Electrical Mech. Maint.

Second Edition

$24.99

The Railway Educational Bureau 1809 Capitol Ave., Omaha NE, 68102 www.RailwayEducationalBureau.com

BKGLEM

All About Railroading -

The fascinating history and development of steam locomotives in North America. Tells the stories behind the locomotives, includes rosters, and explains wheel arrangements, streamlining, and more.

railwayage.com

$59.95

Dev. & Op. of NY’s IRT and BMT

Guide to Freight Car Air Brakes

Guide to Freight Car Air Brakes

BKGNASL

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All About Railroading-Second Edition is the book for anyone who wants to learn the basics of today’s fascinating, high-tech railway industry.

BKAARR All About Railroading

$35.95

800-228-9670

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January 2019 // Railway Age 49

equipment Sale/Leasing

RECRUITMENT EDNA A. RICE, EXECUTIVE RECRUITER, INC.

Available for Lease

The world’s most accomplished executive search firm specializing in the rail and transportation industries. With 31 years’ experience, we possess the industry-specific knowledge and expertise needed to consistently deliver the exceptional results one would expect for both our clients and our candidates.

3000 cu ft Covered Hopper Cars 4650 cu ft Covered Hopper Cars 4300 cu ft Aluminum Rotary Open Top Gons 65 ft, 100-ton log spine cars equipped with six (6) log bunks 60 ft, 100 ton Plate F box cars, cushioned underframe and 10 ft plug doors 50 ft, 100 ton Plate C box cars, cushioned underframe and 10 ft plug doors 26,671 Gallon, 263k GRL, NC/NI Tank Cars

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Contact: Tom Monroe: 415-616-3472 Email: tmonroe@atel.com

(713) 667-0406 www.ednarice.com info@ednarice.com

PROFESSIONAL DIRECTORY

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RFP Notices

Metro-North Railroad

214RR HEAVY USAGE STARTING

REQUEST FOR PROPOSALS RFP No. 244941 - Design, Manufacture, Test, and Deliver New Dual Mode Locomotives – Phase 1- Qualification

FOR MORE INFORMATION VISIT

E

R

IC

A

www.STARTPAC.com M

A

D

E

IN

A

M

OR CALL TOLL FREE 844.901.9987

RAILWAY AGE A4.indd 1

MARKETPLACE SALES Contact: Jeanine Acquart Ph: 212/620-7211 Fax: 212/633-1165 Email: jacquart@sbpub.com

07/07/2017 09:15

MNR is seeking initial qualifying proposals from firms to design, manufacture, test, and deliver new dual mode locomotives as described in the Request for Proposal (RFP). This is the first phase of a planned two-phase Request For Proposal (“RFP”) process. Interested firms may obtain a copy of this RFP from Metro-North's Procurement and Material Management Department by contacting Mr. Anthony Holmes, Contract Manager - Procurement and Material Management via email at Holmes@mnr.org.

RFP No. 244941 is a re-issue of the earlier issued MNR RFP No. 227776 - Design, Manufacture, Test and Deliver New Dual Mode Locomotives which was canceled due to changes in the funding source. RFP No. 244941 is a FTA-assisted transit vehicle procurement. Only eligible Transit Vehicle Manufacturers (TVMs) may bid on FTA-assisted transit vehicle procurements.

Deadline for submitting proposals is no later than 4:00 PM EST on January 22, 2019.

ALL MAJOR CREDIT CARDS ACCEPTED 50 Railway Age // January 2019

railwayage.com

Ad Index Company

Phone #

Fax #

URL/Email Address

Page #

312-922-4516

312-922-4597

kskibinski@amstedrail.com

21

205-424-7245

205-424-7436

bhamrail@aol.com

34

CUSTOM TRUCK

816-241-4888

816-241-3710

bboehm@customtruck.com

28

DANELLA RENTAL SYSTEMS

561-743-7373

561-743-1973

SBolte@danella.com

12

DIXIE PRECAST

770-944-1930

770-944-9136

fbrown142@aol.com

15

ENCORE

303-956-3736

gs@encorers.com

C3

FREIGHTCAR AMERICA

312-928-0850

312-928-0890

tbaun@freightcar.net

C2

GEORGETOWN RAIL EQUIPMENT

512-869-1542

512-863-0405

bachman@georgetownrail.com

23

HARSCO RAIL

803 822-9160

803 822-8107

railinfo@harsco.com

11

HERZOG RAILROAD SERVICES

816-385-8233

jhansen@hrsi.com

33

rgehl@hollandco.com

32

dcarlson@kcsouthern.com

31

AMSTED RAIL GROUP Birmingham Rail & Locomotive

HOLLAND LP KANSAS CITY SOUTHERN

708-672-2300

708-672-0119

816-983-1372

Light rail

212-620-7205

212-633-1165

conferences@sbpub.com

9

LORAM Maintenance of way

763-478-6014

763-478-2221

sales@loram.com

25

ltk engineering services

215-641-8826

215-542-7676

tfurmaniak@ltk.com

44

630-232-3000

630-232-3055

sales@minerent.com

3

NEXT-GEN FREIGHT RAIL

212-620-7205

212-633-1165

conferences@sbpub.com

38-39

nordco

414-766-2180

414-766-2379

cnielsen@nordco.com

36

okonite company

201-825-0300

201-825-3524

info@okonite.com

7

plasser american corp

757-543-3526

757-494-7186

plasseramerican@plausa.com

27

Progress Rail A Caterpiller Co

256-505-6402

256-505-6051

info@progressrail.com

29

rail insight

212-620-7205

212-633-1165

conferences@sbpub.com

17

railquip inc

770-458-4157

770-458-5365

sales@railquip.com

42

rails company

800-21-RAILS

973-763-2585

gburwell@railsco.com

15

railwayinterchange.org

30

Miner Enterprises

railway interchange 2019 rce equipment solutions, inc.

866-472-4510

630-355-7173

dennishanke@rcequip.com

37

railway educational bureau

402-346-4300

402-346-1783

bbrundige@sb-reb.com

35,45,49

star headlight & lantern

585-226-9500

585-226-2029

chrisjacobs@star1889.com

13

stv group

212-777-4400

212-529-5237

info@stvinc.com

43

trainyard Tech

724-443-8881

cra2@zooninternet.net

14

western cullen-hayes

773-254-9600

773-254-1110

cp@wch.com

34

wi-tronix, LLC

888-948-7664

630-679-9954

sales@wi-tronix.com

C4

The Advertisers Index is an editorial feature maintained for the convenience of readers. It is not part of the advertiser contract and Railway Age assumes no responsibility for the correctness.

railwayage.com

January 2019 // Railway Age 51

Financial Edge

The Ghosts of A Railroad Christmas Story

A

lthough this column will not reach you in print until January (Happy New Year to you all!), it is the week before Christmas, and TV is rife with the more than 50 versions of A Christmas Carol made as movies or for television (Mr. Magoo’s version is a fave). The real gaping hole in the sub-genre is that, to date no one has produced a version of the Dickens classic centered on the railroad industry.

Never fear! “Financial Edge” is here to help!

The Ghost of Christmas Past is E. Hunter Harrison tenured at the Canadian Pacific (circa 2011). Although Harrison was implementing the Precision Scheduled Railroad (PSR) strategy in his time at both the Illinois Central and CN, it was not until he arrived at CP that PSR grabbed attention and headlines.

Harrison came out of “retirement” for Bill Ackman’s Pershing Square Capital. At CP, Harrison shed assets, decreased personnel and pushed down the operating ratio.

The theory of PSR is that “reducing fleet size actually enables a railroad to move more volume. By running fewer and heavier trains, faster and on schedule, assets can be utilized far more productively and can yield significant savings.” What was the “net/ net” of Harrison’s tenure at CP? Its stock as much as tripled in value.

The ghost of Christmas Present is Harrison and the haunting his brief period at CSX continues to cause. Harrison was a polarizing figure. However, as an executive, he tapped into fundamental ideologies about

csx’s stock float is about

822 million

shares 52 Railway Age // January 2019

railroad service that have made an impact for more than 30 years.

What has that led to? A CSX vs. CSX lawsuit, where three CSX shareholders are suing the CSX board of directors for hiring Harrison while withholding health-related information about him during the hiring process.

The lawsuit is a twist on the class action lawsuit whereby CSX stock price more or less doubled as a result of rumors related to and following his hiring. The equity price rose quickly and continued to rise, even as Harrison’s CSX PSR strategies evoked outrage from customers and led to federal hearings and town hall meetings on CSX’s service drop-offs.

The suit alleges that the $84 million promised to Harrison was “lost and wasted” as a result of his poor health and death. CSX’s stock float is about 822 million shares. Hiring Harrison cost roughly 10 cents per share. This is versus the $30 increase in share value (roughly $24 billion in market cap) that occurred.

It’s hard not to feel that the issue here is not Harrison at all, but that the increasing share price economically enabled the Plaintiffs to have the opportunity to file such a lawsuit. Rewind the tape and offer the Plaintiff the two alternatives: Reject hiring Harrison and see the share price languish in the same range, or offer the increase with, as they portray it, a short time with Harrison in ill health, and see which one they pick.

The ghost of Christmas Future is, surprise: Harrison. He again gets the lead in the third segment of the program.

In the Dickens original, the ghost points to a lonely tombstone and beckons Scrooge to an early grave before a reverie leads Scrooge to change his ways. In the railroad version, railroad CEOs of publicly traded companies are the ones to whom Harrison beckons and the changing of ways is an embracing of the PSR strategy that they had been routinely dismissing for so many years. The early grave? Losing one’s job to a PSR-oriented CEO. The ghost of Christmas Future mocks the power of Wall Street to steer changes in railroad operations by requiring

Hiring E. hunter harrison at CSX cost about ten cents per share.” implementation of the PSR model. However, the PSR strategy shift is more about selfpreservation than about fundamental business success.

The Street has promulgated the thinking that by shrinking the business and reducing expenses (and operating ratio), there is an optimal point at which a railroad can be more profitable on core business and eschew growth that is not pro rata accretive. Railroad CEOs have no choice but to subscribe.

The business of moving freight on rail is a complicated one, but as one industry veteran put it, shrinking the business to get more profitable is at its core unsustainable.

It is certainly easier to manufacture precision if you are moving less freight on the same track.

As an industry, we need a bright future open to profitable growth and expansion.

The PSR trend—contraction and reduction—seems incongruent with what the industry needs right now.

Rail Equipment Finance 2019 planning is under way. Matt Rose (Executive Chairman, BNSF) and economist Sergio Rebelo, Ph.D (Northwestern University) are confirmed speakers. Don’t miss it!

DAVID NAHASS President Railroad Financial Corp. railwayage.com

Congratulations

“JJ” RUEST

& everyone at CN on being named “Railroader of the Year”

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