UTU News Digest - Tuesday, December 7, 1999

UTU Daily News Digest

Information of interest to operating railroad and transportation employees

Tuesday, December 7, 1999

MAINE: Tiny railroad seeks gold in new Northwest Passage

AUBURN, Maine -- Could one tiny Maine railroad change the face of the region's freight transportation industry?

Rail-industry consultants think so. After a series of track purchases and marketing agreements with a major Canadian railroad, St. Lawrence & Atlantic Railroad Co. of Auburn has created a new competitive route to move goods in and out of New England.

The link could shake up the region's two major rail competitors, CSX Corp. of Richmond, Va., and Guilford Rail Systems of North Billerica, Mass. If successful, the challenge could force more competitive rail rates and eventually lower costs for consumers. "It's an opportunity for some pretty dramatic changes," says Christopher Hall, a partner at transportation consulting firm Stafford Business Advisors Inc. in Portland, Maine.

By partnering with Canadian National Railway Co., based in Montreal, St. Lawrence has created a new route to New England using Canadian tracks and ports and bypassing the U.S. St. Lawrence owns and operates 275 miles of track from Auburn north to Canadian National's line in Montreal.

What are the benefits? For one, Canadian fees are often lower and their ports are less congested than those in the U.S. Immediately, the partnership will likely reduce rates for goods from Asia to the railroad's facility in Auburn, where shipments are then loaded from rail to trucks and sent all over New England. Down the road, the railroad says it wants to attract more goods from Europe to Canadian National's other rail connection on the East Coast in Halifax, Nova Scotia.

The long haul and many stops coming from Asia add a lot of extra costs for goods headed this way. Traditionally, major steamship companies cross the Pacific to Los Angeles, where goods are unloaded and put onto trains. Then, rail cars are often reloaded onto a different railroad line in Chicago before heading into central Massachusetts for distribution by trucks. This system is costly, says Mr. Hall, and simple geography explains why St. Lawrence has an advantage.

Instead of a stopover in Chicago, which adds extra fees and several days, St. Lawrence has ships stop in Vancouver, where goods are then loaded onto Canadian National bound for points east. "From the rail connection, it's a single main line all the way across" the continent, Mr. Hall says.

After its first month, St. Lawrence has attracted one major steamship line, Zim Israel Navigation Co. of Haifa, Israel, and about 10 customers. The railroad expects to bring in 12,000 rail cars by the year's end. In 2000, St. Lawrence expects to do at least 30,000. "This is either going to take off right away or not at all," says Matt Jacobson, president of St. Lawrence, a subsidiary of Emons Transportation Group Inc., York, Pa.

In order to make the plan work, Mr. Jacobson says, first the company needs to get the world's largest steamship lines to commit to calling on Vancouver. But clearly, he's bullish. Sitting in his two-story office in Auburn's industrial park, Mr. Jacobson says: "We're going to change the world. Really."

Maybe not right away, says Steve Nieman, a rail consultant at Tioga Group, Philadelphia. He says it might take a year to see the full ripple effect because many shippers and steamship companies already have annual contracts with railroads. But Mr. Nieman says Mr. Jacobson already is shaking things up, especially for Guilford, a closely held transportation company that owns the most track in New England.

"St. Lawrence & Atlantic is the biggest pain in the side of Guilford that ever came along," Mr. Nieman says.

David Fink, executive vice president of Guilford, acknowledges St. Lawrence's aggressiveness but says his company isn't changing its strategy.

"The folks at St. Lawrence & Atlantic put together a package, and we'll see how the market will handle that," says Mr. Fink. "May the best railroad win."

The time is ripe for change, Mr. Nieman says, because Guilford and CSX are scrambling over shipping delays and losses related to the breakup of Conrail Inc. "Shippers are irritated with the service," Mr. Nieman says, so "more shippers are more willing to talk to anyone who can connect to them."

Through previous partnerships with Canadian National, St. Lawrence already has chipped away at Guilford's core business: Maine's paper mills. One St. Lawrence customer, Safe Handling Inc. of Auburn, which manages rail and truck transportation of hazardous materials for many mills, says it has already lured many mill suppliers. FMC Corp., a Chicago chemical company, says it saves 5% to 7% and usually a day's time with St. Lawrence. After doing business with Guilford for at least 20 years, the company changed railroads when it saw competitors doing the same. "Their freight rates are lower and their location, in relationship to our customer base, is very close," says Tony DeCarlo, supply chain coordinator for FMC's chemical group.

Looking for more customers, St. Lawrence and Canadian National have talked to steamship lines and more than 300 companies in Europe and Asia to see whether they'll switch. If the Asia service takes off, St. Lawrence hopes it can do something extra: bring loaded boxes into and out of the state.

Railroads traditionally haven't had much success shipping loaded rail cars out of New England, because it imports much more than it exports, with the exception of Maine's pulp, paper and wood products. The extra cost of shipping back empty containers is one reason goods in New England often are more expensive.

Now, St. Lawrence hopes that by using trucks to bring boxes to its Auburn station, it can move freight both ways. "We can take those empties and put them back in the system," says Mr. Jacobson, "so everyone gets paid all around."

ILLINOIS: Santa delivering railroad safety tips

CHICAGO -- No, the sled isn't in the shop. Santa is riding the rails to bring a message of safety to all the boys and girls along Metra's Union Pacific Northwest line.

On Sunday, families can join Santa and his helpers on a special Safety Train journey featuring music, magic and valuable Operation Lifesaver safety presentations. In addition to raffles and prizes, children will receive goody bags filled with toys, crayons, coloring books and candy.

Metra spokeswoman Audrey Renteria said this is Santa's last train ride of the season, as he needs to get back to the North Pole and begin Christmas preparations.

"It really is educational," said Renteria, adding that many parents have contacted her to say their children remember the safety tips.

Participants board the train in their hometown and travel to the downtown terminal and back for $3. Tickets must be purchased in advance. Call Metra Passenger Services at 312-322-6777 or see a ticket agent.

MASSACHUSETTS: Stone & Webster awarded $55+million Amtrak contract

BOSTON -- Stone & Webster, Incorporated (NYSE: SW) announced in a press release that its subsidiary, Stone & Webster Engineering Company has received a contract in excess of $55 million from the National Railroad Passenger Corporation (Amtrak) to design and construct an electric power facility to support Amtrak's new high speed rail service between New York and Washington, D.C.

Under the contract, Stone & Webster will engineer, procure, construct and commission a 180-megawatt static frequency converter plant to convert 60-cycle power to 25-cycle traction power. The facility will be situated at PECO Energy Company's Richmond Station in Philadelphia, adjacent to the existing Amtrak transmission system and will contain five 36-megawatt DC link converters to be supplied by Siemens under a separate contract. During development of the project, Stone & Webster performed preliminary engineering, including system analysis, site evaluation and development of the converter procurement specification.

"We are pleased with this award and its demonstration of Amtrak's confidence in our ability to execute this major transportation project," said H. Kerner Smith, Stone & Webster's chairman and chief executive officer. "We have been working with Amtrak for the last five years on ways to improve electric power capacity for the rail system in the Northeast Corridor. The new state-of-the-art power system will enhance service and reliability along the route."

In addition to the main plant, the project will include gas insulated substations, static frequency converter building and supporting systems and a six-circuit, 138kV cable interconnection with the existing Amtrak system. The project will be completed by 2002.

The Amtrak contract is the latest in Stone & Webster's transportation initiative. The Company is committed to applying its engineering, procurement and construction capabilities to a range of transportation projects.

Stone & Webster is a global leader in engineering, construction and consulting for power, process, environmental, infrastructure and industrial markets.

TEXAS: RailTex, Inc. reports carloadings for November 1999

SAN ANTONIO -- RailTex, Inc. (Nasdaq: RTEX) today announced in a press release that carloadings for November 1999 increased by 4% to 51,873 from 49,745 in November 1998. The Company experienced strong traffic gains in railroad equipment and lumber and forest products.

On a "Same Railroad" basis, carloadings increased by 6% to 51,873 in November 1999 from 48,796 in November 1998. The traffic gains were primarily a result of railroad equipment moves in Ohio and Indiana, and on the Missouri & Northern Arkansas Railroad. Strong lumber growth in the Northwest United States also contributed to the increase.

Total carloadings include the North Dallas Lines, while carloadings for the prior year also include the recently divested Northeast Kansas & Missouri Railroad, New Orleans Lower Coast Railroad, and Salt Lake City Southern.

"Same Railroad" carloadings include the Guelph Line which is operated as part of the Company's Goderich-Exeter Railway and the North Dallas Lines which are operated as part of the Company's Dallas, Garland and Northeastern Railroad.

Historically, the Company has found that carloading information may be indicative of freight revenues on its railroads, but may not be indicative of total revenues, operating expenses, operating income or net income.

With approximately 4,100 miles of track, RailTex is North America's leading short line railroad organization. Its holdings include short line railroads concentrated in the Southeastern, Great Lakes region, New England and Central United States as well as Eastern Canada.

Copies of the Company's recent news releases may be obtained via fax by calling "Company News On Call" at 1-800-758-5804 and entering RailTex's six digit code, 119020. RailTex financial information can also be obtained through its web site, http://www.railtex.com.

ROMANIA: Rail workers vow to continue strike

BUCHAREST -- Striking Romanian rail workers disrupted rail traffic for the second day as the transport ministry used aircraft and buses to shuttle passengers stranded in stations, a trade union leader said on Tuesday.

"We are determined to fight to the bitter end, as our pay demands are legitimate. The administration is defying us so we have to respond in kind,'' Dumitru Sandel, a rail trade union leader told Reuters.

The railmen launched a nationwide strike on Monday demanding a 70 percent wage increase. The stoppage disrupted both local and international rail traffic, with hundreds of passengers waiting in stations across the country.

The railways are now operating at some 30 percent of capacity, as required by the law in case of a strike.

Reports in the local media said Transport Minister Traian Basescu had asked the state-run Tarom airline and several bus companies to carry the passengers to their destination.

Sandel slammed Basescu's move saying it was "a costly gesture paid from public money.''

Wage talks between the unions and the transport ministry were deadlocked on Tuesday as Basescu had remained firm on his offer of only a 20 percent pay increase, Sandel said.

Basescu said a 70 percent pay rise would boost rail fares by up to 40 percent.

Sandel also said Basescu had turned down a suggestion by the trade unions to get the necessary funds for the wage increase by cutting operational costs in the sector.

"Romania has some 6,000 km of double-track lines. Having in mind that traffic on them is very low due to the poor state of the economy they could be easily turned into single-track lines, with less expenditure for their maintenance,'' Sandel said.