WSOR insulated from downturn

John Barnhill Feb 18, 2009

  1. John Barnhill

    John Barnhill TrainBoard Member

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    SUN., FEB 15, 2009 - 7:07 AM
    The state of freight: Diversification of customer base has insulated rail carrier Wisconsin & Southern during downturn
    Marv Balousek
    608-252-6135
    mbalousek@madison.com
    Bill Gardner, president and chief executive of the Wisconsin & Southern Railroad, wonders when farmers will decide to ship the rest of their grain from last fall's harvest. He's hoping his railroad will see a boost in freight volume.
    "They think corn is going back up to $6 a bushel, so they're keeping it on the farm," he said. By comparison, corn for March delivery was trading at about $3.70 this past week. "When spring comes and they have to buy seed, diesel and fertilizer, we'll probably see an influx of corn pushing through" on the railroad, he said.
    Despite the stalled grain shipments, flooding last summer that closed rail lines for weeks, a midyear peak in diesel fuel prices and the national recession, the regional railroad that serves southern Wisconsin managed to make a profit in 2008, Gardner said. The railroad would not provide specific profit numbers.
    He said the Milwaukee-based railroad, which has 270 employees, added nearly 20 new jobs last year and hasn't considered layoffs, even though business has slowed for some of its customers. Last year's revenue was nearly $50 million, which was about the same as 2007 but up from $25 million in 2004.
    Wisconsin & Southern, which is privately owned by Gardner and his family, is the dominant carrier in south-central Wisconsin.
    Union Pacific serves Janesville and some customers along its line to Rockford, Ill., while Canadian Pacific serves some customers on its line between Madison and Portage.
    Agricultural products are a major piece of Wisconsin & Southern's business, but the railroad has managed to diversify its customer base to protect against downturns in specific sectors, said Ron Adams, chief of the state Department of Transportation's railroad and harbors bureau.
    "Because they're focused on Wisconsin, they can do more marketing and reach out to companies that are here and still shipping product," he said.
    Last year, the railroad hauled more than 55 million bushels of grain, which made up about 40 percent of its shipments.
    Besides grain, Wisconsin & Southern also hauls chemicals, coal, canned goods, lumber, scrap iron and steel, aggregates and paper. The railroad operates on 700 miles of track through more than 1,400 communities.
    When track near Reedsburg, Watertown and Wauzeka washed out last summer due to flooding, the railroad paid a $1.7 million bill for repairs and still is seeking compensation from the Federal Emergency Management Agency (FEMA) and insurance companies.

    Record-high diesel fuel prices in mid-2008 increased the railroad's operating costs and resulted in a fuel surcharge for customers that peaked last September at 62 cents per mile before diesel prices eased last fall. The surcharge for this March is 15 cents per mile.

    Some customers aren't faring as well as the railroad in this economy.
    The construction slowdown has hurt business at Roberts & Dybdahl, a lumber and building materials wholesaler with headquarters in Des Moines, Iowa.
    Bill Johnson, who supervises operations at the company's Sun Prairie distribution center, said many of his customers are family-owned lumberyards.
    "I've never had so many conversations where the person is so depressed," he said. "They're losing money."
    Johnson praised Wisconsin & Southern as a "very, very well-run railroad from a customer standpoint." He said rates are reasonable and railroad officials are responsive to his concerns.
    A focus on recruiting new customers and serving them well is the biggest difference between larger railroads and Wisconsin & Southern, Gardner said.
    "They don't go out and market their railroad," he said. "They just wait for the phone to ring. You have to talk to people and show them how you can save them money by giving them good service at favorable rates."

    Wisconsin & Southern has added 32 customers over the past five years, representing $1.6 million in property taxes and 920 new jobs, based on data from those businesses.
    One of those is Dick Sharratt, co-owner with his wife, Dianne, of High Track, a food distribution warehouse in McFarland. Sharratt, who started the business in 2005, said freight costs are the main reason he prefers rail shipments over trucks.
    "There's a significant cost savings to shippers to put three or four truckloads of product into a rail car," he said.
    Sharratt, who said his company ships about 400 rail cars a year, said cars with frozen vegetables or dairy products are monitored by satellite, which tracks the train's exact location, fuel status and the temperature inside the refrigerated car.
    Wisconsin & Southern operates on former Milwaukee Road and Chicago & Northwestern tracks that escaped being torn up for bike trails during the railroad industry decline of the late 1970s and early 1980s.
    Most of the track now is state-owned and the railroad has leases with local transit commissions to use it.
    Founded in 1980, Wisconsin & Southern moved into southern Wisconsin after several companies failed to establish successful freight rail service.
    "A big measure of the success has been Bill Gardner and the fact they were adequately capitalized," said Adams of the DOT. "They have worked extremely hard to find customers."
    For 2009, Gardner said he expects more revenue and higher rail car counts than last year just as soon as the farmers finally decide to send their grain to market.
     

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