Remote Control Is a Failure for Railroads

[Zeb]

by seekingalpha.com

CSX (CSX) and the Norfolk Southern Railroad (NSC) released their 2009 first quarter earnings. CSX reported that it had “a better-than-expected first-quarter net profit, due in part to continued strong pricing”, while the NS said it was “aggressively cutting costs in order to offset the drop in freight volumes”. Better than expected, according to CSX, is a 23% drop from 2008. (I would hate to see what it thought a bad quarter would be.) Today, BNSF (BNI) and the Union Pacific Railroad (UNP) will release their first quarter earnings, but will Wall Street continue to celebrate their lackluster performance?

It is apparent that the Class 1 railroad network had a dismal first quarter, however who is really to blame for their sluggish start? The Union Pacific, CSX, BNSF, and the NS rolled the dice a few years ago in an attempt to eliminate what they saw as a drain on their budget — their manpower. They used investors' money in an experiment that has failed miserably over the past 3 to 5 years. They threw billions of dollars in the Remote Control Locomotives industry that not only slowed their car count to a crawl, but also spent more in technology than they did in a human being with full benefits.

The theory of the Remote Control Locomotive (RCO) was good, but the execution and reality was a complete failure. The railroads wanted to eliminate the cost of a locomotive engineer by eliminating the cost of a benefit package, as well as the threat of personal injury lawsuits. However, the investment to eliminate those costs proved to be grossly underestimated.

To eliminate the human factor, the railroads poured money into satellites, receivers, on board computers, radio repeaters, RCL boxes (GE, Cattron and Canac), speed pucks, stop pucks, new timetables, switching zones, retro-fitted safety equipment, and countless hours of specialized training. This investment resulted in the estimated cost of $6-8 million per locomotive and had a life span of only 5 to 6 years. When you did the math, the human being that was replaced was actually much cheaper than the sluggish remote control project.

Another problem with the RCL project is that the bean counters failed to realize that reducing the size of a crew would actually result in fewer car counts. CSX, the first Class 1 railroad to release its 2009 first quarter results, stated that its volume was down across all segments, as construction and consumer-related markets remained weak. We expect that BNSF and the Union Pacific Railroad will say the same. The railroads have become reactive by furloughing employees and taking locomotives out of service. As of today, there is no definite word on the Remote Control Locomotive experiment and the billions of dollars wasted on the failed project.

The first quarter of 2009 is dismal, but Wall Street still doesn’t understand that the problem with the railroad industry is the poor decision making from the executive offices. When the executives finally realized that there are customers who would like to ship via rail, the car counts will increase. When they invest in their workers instead of trying to replace them with a failed RCL program, then their productivity will increase. The executive bean counters need to be replaced by people who actually know how to run a railroad.

[TFB]

Of course the question follows, do you actually think they will ever go back to an engineer? I would doubt it but who knows.

[Iron Bender]

That reads like a BLE press release.

I'm sure car counts are down strictly because of RCO and the economy has absolutely nothing to do with it.

[Rico Suave]

Originally Posted by Iron Bender

That reads like a BLE press release.

I'm sure car counts are down strictly because of RCO and the economy has absolutely nothing to do with it.

What was addressed was the total expenditure vs the return on that investment.

It was money poorly spent no matter how you look at it.

Rico

[Hog&Tow]

we all know first hand of the arrogance of the carriers. they will never admit the RC program was a failure. they have invested billions in it & their attitude is "by God we will make it work." it's a good thing they did it during a booming economy...they made record profits in spite of themselves.

[Iron Bender]

Originally Posted by Rico Suave

What was addressed was the total expenditure vs the return on that investment.

It was money poorly spent no matter how you look at it.

Rico

The author of the blog post also subsequently admits that he inflated the costs of RCO implementation by about 3,000%.

RCO is certainly not the ultimate end all, be all way to increased efficiency that the carriers want it to be, but it does have it's applications.

You are not saying that we should never try out new technologies, are you?

[Hog&Tow]

Originally Posted by Iron Bender

The author of the blog post also subsequently admits that he inflated the costs of RCO implementation by about 3,000%.

RCO is certainly not the ultimate end all, be all way to increased efficiency that the carriers want it to be, but it does have it's applications.

You are not saying that we should never try out new technologies, are you?

in my terminal it's commonly agreed by the workers & the management [that are truthful] that the only RC application that makes sense is the hump. the rest of the jobs only do a fraction of the work we used to do with a full crew.it's a numbers game,like everything else. everyone passes the buck & juggles the figures to make their department look good.common sense takes a back seat to these type of practices.the end result is bad [overall] for the company.

[TFB]

Originally Posted by Iron Bender

The author of the blog post also subsequently admits that he inflated the costs of RCO implementation by about 3,000%.

RCO is certainly not the ultimate end all, be all way to increased efficiency that the carriers want it to be, but it does have it's applications.

You are not saying that we should never try out new technologies, are you?

I think it would be a huge gain in our yard if they went back to conventional crews for our pullouts. So much more time could be saved that way because you have the hogger up front controlling the move and then one guy working the switches and making joints up front while the rear guy could be doing the same working back up.

[Lunger]

In our yard we've found the more business there is the less remote jobs we seem to have. Everybody who knows how to switch realizes the value of having an engineer on the job. The remote creates a situation where you are always out of position, hence the lack of efficiency that everybody talks about. That's not even considering all the mechanical problems or so called error messages that seem to bind up every RCO operation. We waste all kinds of time because of comm loss or the damn boxes go offline. So once the car counts come back the carriers will have to face the music. In the end money talks and bull shit walks.

[Shep]

here is the link to the actual article as it was printed:

Q1 Railroad Earnings: CSX, Norfolk Southern Down; Fate of Union Pacific, BNSF to Come

I would agree, that the only job in the yard that benefits from RCL is the Hump job.