Greetings;
Two virtual conferences on the same day: Wednesday 5/26 - Progressive Railroading magazine – my partners in RailTrends, of course – are holding their second big RR/Tech summit of 2021 this Wednesday (agenda, speaker Bios attached – some big guns, including the CIOs of both BNSF and CN and the SVP/Sales of CSX, the irrepressible Mr. Arthur Adams….I will be toggling back and forth with the Wolfe Transport Conference (which will feature CNI, CP, the STB, and even – surprisingly, KSU – in the latest chapter, or battle, in the KSU “War of the Words”!), catching up on some presentations from both via replay….but there by the end, for sure! Just another busy day on trains (Another Busy Day On The Trains | Thomas the Tank Engine Wikia | Fandom )! In addition, today, but available on replay was another of the great Northwestern University Sand House Gang railroad lectures – this one on: “The U.S. Railroads and COVID-19: Keeping Supply Chains Moving” The Impacts of COVID-19 on the freight industry, the performance of the logistics system in general and railroads in particular, and views of causes, effects, and future outlooks for rail, with two distinguished professors plus the AAR’s estimable John Gray and Union Pacific’s SVP Technology & Strategy Jon Panzer; I will be catching up on that….it’s almost an embarrassment of railroad riches!
So, since there has been a temporary truce in the KSU battle (at least until brekkie tomorrow), a few things to quickly discuss:
- SPACs coming to the rails….is this like Joe Kennedy’s shoe-shine in 1929 https://www.marketwatch.com/story/integrated-rail-and-resources-acquisition-corp-files-foripo-271621634293 we note that the advisors include the well-respected Rollin Bredenburg, exBNSF….
- The Class One Rails can be trendy too – not to be left out of the new with-it investment themes: Norfolk Southern issues $500 million of green bonds to fund sustainable business initiatives (Which they note makes them the) First major North American railroad to launch green bond funding.
- We await the news from CSX on their use of Bitcoin for Capex payouts….
- Speaking of Progressive Railroading (and Capex, for that matter) their annual Maintenance of Way (MoW) survey of the Class One’s shows 3 rails projecting (slight) declines, 3 flat and one TBD (the CP).
- And speaking of RailTrends 2021, it’s now official that our 2021 Railroad Innovator of the Year is Canadian National’s CEO, JJ Ruest. We chose JJ, of course, before the KSU saga had even begun….and this is what I told Progressive Railroading’s editor, Pat Foran, about JJ:
- JJ is both the calming, “I have seen it all before” presence and part of the chain
that took CN from the government to private, from SR (PSR) and EHH to PSR 2.0 and,
now, DSR! As a leader, he has helped face (and face down) trade wars and
unstable border alliances, blockades, strikes, polar weather extreme even for the
great white north, and even “rich people’s problems” such as volume
opportunities so great out of Prince Rupert (etc) that they once seemed to be on
the verge of swamping the good ship CN. But beyond the calm demeanor is the
persona of the new breed of railroader – market-driven and tech-savvy. CN can
be the first to proselytize for the Digitally Scheduled Railroad because of the
leadership position in rail tech that CN has aggressively seized, bringing in
outside talent mixed (“embedded”) with grizzled PSR veterans to help reassure
CN’s (and the industry’s) stakeholders, that this ancient industry facing radically
changing technological threats (and opportunity), still has “game”.
- JJ is both the calming, “I have seen it all before” presence and part of the chain
- STB – Stuff & Nonsense? I used some notes from the presentation at a Street/analyst conference from last week by two members of the STB (whilst wondering why Reg-FD didn’t apply to them), but subsequently, I have received more from the talking points from the STB Commissioner Martin Oberman, a man I like and more to the point respect, but with whom I have some fundamental disagreement….to wit:
- (The Chairman) had concerns about staffing levels on the Class I railroads in light
of the 25% decline in employment over the past few years. He also said he was
concerned about Wall Street pressure on the Class I railroads for ever-lower
operating ratios (NOTE – the Investment theme has passed that by, to
Growth/Tech/ESG) and for large stock buybacks that have in some cases been
funded through borrowing. “Those forces are of concern to me in terms of what
they mean for the long-term health of the freight industry and whether we’re
going to have an industry staffed enough to fully serve and with enough
incentive ... to keep spending money on greatly needed capital improvements in
infrastructure,” Oberman said. - My reply when asked to comment: The first part doesn’t jibe with reality – it is a
false narrative – as Capex by RRs is off the carts intensive versus other (shipper)
industries, and on the network it has stayed very steady (see above, noting
there’s been a phase-down in PTC and of course less on locos & rolling stock due
to PSR and to leasing companies taking up the baton). That is why the 2021
ASCE report card gave RRs the highest US infrastructure grade (B) versus Coverall (and highways a D) – and that B was held down by passenger
railroads. In addition, absent M&A, all of the railroads are investment grade! - Keep all this in mind when listening tomorrow (today/Wednesday) to the
Chairman at the WTC or in contemplating the future STB decisions….
- (The Chairman) had concerns about staffing levels on the Class I railroads in light
Anthony B. Hatch
abh consulting
http://www.abhatchconsulting.com
abh18@mindspring.com
Twitter @ABHatch18