Investments in new equipment and technology are also helping railroads compete against the trucking sector.
“We’re seeing a lot of new technologies on the rail side,” says Howland, “especially with the locomotive fleet. They’re much more fuel efficient and there’s a lot more computerization available to operate the locomotives; they’re also more powerful. On the terminal side, there’s a movement from diesel-powered equipment to electric-powered cranes and equipment. They are more efficient and they operate at a lower cost. Of course, they also emit fewer emissions, which is very important in key markets like California.”
According to Howland, manufacturers are also building better chassis, which not only last longer, but are heavier, too. “For a while, the industry was building chassis that would last 10 years; now they’re building them to last for 15 years,” he says. “That’s a significant value for the owner, because you get much more life out of the equipment for a couple thousand dollars more investment.”
There is a downside to the better built—and heavier—chassis, however. “You’ve now added a lot of the weight to the unit, and that tends to limit the commodities you can transport when it comes to the road portion,” says Howland. “If you think about it, a customer has to take one full pallet of freight off the container to ship it intermodally, and a lot of customers don’t want to do that. That’s one of the biggest challenges for intermodal shipments: the highway weight differential.”
To their credit, railroads have done a better job at designing different services and different trains for 40-foot international equipment and 53-foot domestic equipment; running dedicated double-stack trains to accommodate each, continues Howland.
“That may not sound like much, but every time you put a 40-foot container in a 53-foot car, you’ve just wasted 13 feet of train space,” he says. “Compound that loss over the length of a 7,000-foot train and it begins to add up.”
Despite the commendable progress on the part of railroads to better compete against the trucking sector it’s not exactly a slam-dunk when it comes to head-to-head competition, Howland cautions.
“The trucking industry is moving towards more regional trucking and relay operations, and if they figure this out to a greater degree, then they could definitely win back more market share from the railroads,” he says. Moreover, if the truck driver profession becomes more attractive to young people with incentives such as better training and pay, it could open up the field to more drivers, says Howland. “Add to that the technology that’s being developed for natural gas, which is much cheaper than diesel fuel, and now you really have a new and much more competitive game.”
Turning the discussion back to rail opportunities, just like Schneider National’s Van Kirk, Howland also sees plenty of potential south of the border.
“In the past 18 to 24 months, we’ve seen a huge expansion in the services between the U.S. and Mexico. The Kansas City Southern Railway has really invested in that market with new main line construction, siding extensions, and five brand-new intermodal terminals,” he says, compared to the limited Chicago-to-Mexico and Los Angeles-to-Mexico services that existed just three years ago.
Opportunities in food and beverage
Evidence of the railroads’ ability to attract what would otherwise be truckload shipments is strong in the food and beverage sector.
California is home to a mass of food and beverage producers, including dairies and fruit and vegetable growers in the San Joaquin Valley along with world famous wineries to the north.
RailAmerica, a leading short line and regional carrier operating in 28 states and three Canadian provinces, has been steadily racking up food and beverage shippers in its portfolio and it’s showing no signs of slowing down. (In late July, Genesee & Wyoming announced plans to acquire RailAmerica for $1.4 billion).