Railroads Ready to Compete With Trucking
November 6, 2000
Several major railroads are gearing up to offer new freight services specifically designed to win business from the trucking industry.
According to a recent article in the Wall Street Journal, Burlington Northern Santa Fe Corp., with its Ice Cold Express, is reviving refrigerated trains for carrying fruits and vegetables east from California, and Union Pacific Corp. is planning fast shuttle trains from one shipping dock to another. Even Amtrak, the nation's passenger railroad, is hauling express cargo shipments on its long-distance trains.
Though they are updated with modern technology, the article said that some of the new services borrow from concepts that were around when railroads still dominated the freight market after World War II.
The moves are part of the railroads' attempt to boost revenue, which has been sluggish in recent years.
“Particularly with the economy slowing, the rails need to provide better service offerings to stimulate revenue growth,” said Jill Evans, an analyst at J.P. Morgan Securities.
Railroads say they now are in a position to improve service because they have spent billions of dollars in recent years to remove bottlenecks, and can now reap the benefits of mergers, such as Union Pacific's takeover of Southern Pacific Rail Corp.
Union Pacific officials launched their Express Lane service earlier this year to haul perishables from the West Coast bound for East Coast cities. The move put Union Pacific back in the transport of fresh fruits and vegetables, a business that had for the most part gone to trucks, according to the article.
The railroads are also seeing opportunities for business growth because trucking competitors are struggling driver shortages, record-high fuel prices and high interest costs.
However, Mike Russell, spokesman for the American Trucking Associations, told the Journal, “we don't anticipate that railroads will take a lot of business away from the trucking industry. No matter what they try, they can't match the efficiencies and customized service we provide.”
The railroads’ track record of freight congestion, delivery delays, and erratic services, says the article, gives rail customers reasons to be skeptical.
However, Burlington Northern Santa Fe, Fort Worth, Texas, is offering money-back guarantees if shipments fail to arrive on time or in good condition. The company is also spending about $100 million for 700 new refrigerated cars that are nearly twice the size of previous models and equipped with satellite tracking devices to warn of mechanical failures or temperature fluctuations that endanger perishable shipments. And it has boosted car deliveries to 90% on time across its 33,500-mile network, compared with 79% two years ago, the article said.
"The world has shifted to a much faster-paced economy,” said Chuck Schultz, Burlington Northern Santa Fe’s chief marketing officer. “And we have to line up with that."