Association of American Railroads Ad - "If the railroads are so good, why aren't they rich" The Saturday Evening Post - date unknown
The final paragraph sums it up nicely, but it wasn't until the Staggers Act more than 40 years later that Railroads received some relief.
Yes, prior to Staggers, many roads didn't earn enough to surpass their cost of capital. I worry greatly about the loss of coal tonnage. Railroading is a capital-intensive business with high maintenance costs and these costs don't decline much in times of economic weakness. Utility coal was a commodity that helped to pay the bills in good times and bad and with it on the decline, it will be tougher for rails to invest and support a high standard of maintenance.
I wonder just how much "Class 1" companies have hurt themselves, with spinning off lines, abandoning, etc, thus eliminating a large portion of their non-bulk commodity traffic? Seems like some could easily be too reliant upon coal, oil, grain, etc.
Unfortunately that's what happens when the boards of directors allow the finance department, esp. the MBA's, to cloud their better judgement and experience. They end up making short term financial decisions that the marketing and operating departments have to live with, consequently losing customers.
That's very true. No doubt the bean counters have made many a poor decision when it comes to divestments. But by the same token, Class One roads have extra burdens heaped on their shoulders by the government. A busy main line can support these expenses, mile by mile. But if the road is classified One, they can't drop below those standards on even one inch of road. They can't pay less tax on this mile than they pay on that mile. And the liability is the same, with just as much to lose. So, if a certain route can't support that level of expense, a class one can't help but lose money on it. But if it's sold to a class two, then maybe...
Yes, this is true and I do know it. I was just pondering what they could do, to replace the slowing shipments of other items. And how they'd eliminated some potential resources. Survival.... It's like taking matches along out into the wilds, but soaking them in water first. The question arises: "now what will you do?" If you do survive...
Good post triggering interesting discussion, Roger. Hmm, you and I were born about the time that was printed in the Saturday Evening Post.
