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Friday, February 7, 2025
Logistics

STB chair remains frustrated over Class I railroads’ lack of growth

SCHAUMBURG, Ill. — Approaching the likely end of his tenure as chairman of the Surface Transportation Board, Robert Primus made it clear: The hearing the board held last fall on growth in the rail industry did not ease his concerns about Class I efforts to increase volume.

In a rare address Thursday at the Midwest Association of Rail Shippers Winter Meeting — the same day he issued a statement concerning retaliation by railroads against those who bring matters to the board or participate in its proceedings — Primus expressed abundant frustration over railroads’ continuing loss of market share.

“We are the largest, safest, most cost-efficient and energy-conscious freight rail system in the world,” Primus said, “and yet we struggle to grow, even when growth opportunities exist. For the past year, we have continually lost market share to our chief competitor who has seen better days, while all six Class Is are enjoying a period of strong, if not record profits, and the ability to provide billions in stock buybacks to their respective shareholders. … From 2003 to 2023, freight rail has experienced negative growth among most business segments.” Among the data he cited: Intermodal tonnage hauled by truck was up by 35% between 2003 and 2023, while intermodal tonnage by rail declined by 16%.

“Why are we hemorrhaging market share to truck?” he asked. “Why can’t we have sustained long-term growth at the Class I level?” Those September growth hearings [see “Hearing focuses on turning around …,” Trains News Wire, Sept. 16, 2024, and “Regulators scrutinize trends …,” Trains News Wire, Sept. 17, 2024] illustrated reasons, he said, listing five:

Shippers have left rail because of inconsistent and unreliable service.

High rates are not commensurate with the level of service.

The Class I railroads fail to provide accurate information on service and schedules, particularly when measured against what trucking provides.

Railroads have inadequate employment levels to handle growth.

Short-term gains are prioritized at the expense of expanding network capacity.

“This all adds up,” Primus said. “What we have, in the words of former President Jimmy Carter, is a crisis of confidence. Far too many shippers have simply lost confidence in our freight rail network. It’s why a 2020 Oliver Wyman survey found 100% of large shippers polled believed truck to be superior to rail on key attributes of the customer experience. It’s why freight rail lines have declined by 28% over the last decade.”

If Class I railroads want to address many of these issues, they have a model to look to that is close at hand.

“The network must have an adequate labor force and be better resilient, and we need to shift our focus from short-term profits to long-term sustainable growth. I know this sounds impossible, right? Well, what I just described is exactly what’s happening within our nation’s short lines, and they are seeing double-digit volume growth.

“It can be done because it is done.”

And, he said, railroads have been hurt by slow adoption of the kind of tracking technology available from trucks or from consumer enterprises such as Amazon. He did, however, offer some optimism on that score.

“I’m a huge supporter of RailPulse,” he said, referring to the digital car-tracking enterprise, “and this is for two reasons. No. 1 is the first real collaborative between Class Is, short lines, shippers, car manufacturers, car lessors and others to develop a universal telematics platform that can be used by the entire network. … If we get this right, it can be a real game changer. My only gripe is that only four of the six Class Is are participating. To me that’s unacceptable and a reminder that the stove-pipe mentality still exists within the network. Neither BNSF nor CN could give you good reason why they’re not on board. I hope they figure it out soon, and shortly.”

Concerns over retaliation

Earlier, Primus recounted accomplishments of the board during his time as chairman but also noted issues he would have liked to address if he had more time as chairman. (While Primus will remain on the board through 2027, President-elect Donald Trump will have the opportunity to name a new chair, as well as fill the STB’s one vacant seat.) These, he said, included competition, matters involving private railcars, and commodity exemptions, as well as the need for reauthorization of the STB by Congress: “I would have liked to lead that effort,” he said.

But he also was “truly disappointed” that the board had not addressed what he called the “pervasiveness of retaliation and intimidation” against those — be they shippers, labor, or short lines — who have brought matters to the attention of the board.” This was also the subject of the statement Primus issued Wednesday, which among other details asks those who feel they have been the targets of such actions to contact the STB’s Rail Customer and Public Assistance program.

“While I do not believe the leadership under Class Is promote or even tolerate this behavior, it nonetheless continues to permeate through the ranks,” Primus said at MARS, “and its impact has directly affected the board’s ability to do its work,” he said. “Quite simply, it’s wrong and it must be addressed. … Moving forward, I hope the board finds the courage to confront this troubling issue soon.”

The post STB chair remains frustrated over Class I railroads’ lack of growth appeared first on FreightWaves.

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