Railway Age June 2022

JUNE 2022

W W W. R A I LWAYA G E .C O M

AILWAY GE S E R V I N G T H E R A I LWAY I N D U S T R Y S I N C E 1 8 5 6

VOLATILE MIX,

CONVOLUTED ROAD Railcar Lessors, Lessees Navigate Uncertain Times

TECH FOCUS – M/W

Track Geometry, Rail Flaw Detection

TIMEOUT FOR TECH

Managing Failure Risk railwayage.com

August 2017 // Railway Age 1

AILWAY GE

February JUNE 2022 2020

24 FEATURES 10

Guide to Equipment Leasing

24

Tech Focus – M/W

30

Timeout For Tech

Railcars Join the Sports Car Set

Health Trackers

Sixth in a Series With Gary Fry

DEPARTMENTS 4 6 7 36 38 38 39

Industry Indicators Industry Outlook Market People Professional Directory

COMMENTARY 2 8 40

From the Editor Watching Washington ASLRRA Perspective

Classified Advertising Index

COVER PHOTO

Herzog

Hazmat tank cars at Marshall, Wash.

Bruce Kelly photo.

Railway Age, USPS 449-130, is published monthly by the Simmons-Boardman Publishing Corporation, 88 Pine St., 23rd Fl., New York, NY 10005-1809. Tel. (212) 620-7200; FAX (212) 633-1863. Vol. 223, No. 6. Subscriptions: Railway Age is sent without obligation to professionals working in the railroad industry in the United States, Canada, and Mexico. However, the publisher reserves the right to limit the number of copies. Subscriptions should be requested on company letterhead. Subscription pricing to others for Print and/or Digital versions: $100.00 per year/$151.00 for two years in the U.S., Canada, and Mexico; $139.00 per year/$197.00 for two years, foreign. Single Copies: $36.00 per copy in the U.S., Canada, and Mexico/$128.00 foreign All subscriptions payable in advance. COPYRIGHT© 2022 Simmons-Boardman Publishing Corporation. All rights reserved. Contents may not be reproduced without permission. For reprint information contact PARS International Corp., 102 W. 38th Street, 6th floor, New York, N.Y. 10018, Tel.: 212-221-9595; Fax: 212-221-9195. Periodicals postage paid at New York, NY, and additional mailing offices. Canada Post Cust.#7204564; Agreement #41094515. Bleuchip Int’l, PO Box 25542, London, ON N6C 6B2. Address all subscriptions, change of address forms and correspondence concerning subscriptions to Subscription Dept., Railway Age, PO Box 239 Lincolnshire IL 60069-0239 USA, Or call +1 (402) 346-4740, FAX +1 (847) 291-4816. Printed at Cummings Printing, Hooksett, N.H. ISSN 0033-8826 (print); 2161-511X (digital).

railwayage.com

June 2022 // Railway Age 1

FROM THE EDITOR

AILWAY GE

‘Railroading 101’

R

ailroads have always been under a magnifying glass. Now they’re under a microscope—a subject on which we’ve consistently been reporting and commenting, with varied opinions from various “stakeholders,” in recent months.

“Stakeholders” is one of those all-inclusive terms. Applied to the rail industry, it means “a person with an interest or concern in something, especially a business” (Oxford Language Dictionary). There is even “stakeholder theory,” described in Wikipedia as “a theory of organizational management and business ethics that accounts for multiple constituencies impacted by business entities like employees, suppliers, local communities, creditors and others. It addresses morals and values in managing an organization, such as those related to corporate social responsibility, market economy and social contract theory.”

Stakeholder has another meaning. It comes from folklore and horror movies: someone carrying a sharp wooden stick and a sledgehammer who goes around in daylight opening coffins and slaying vampires by driving said stake through the heart. Some rail industry stakeholders are comparing the big rail carriers to vampires.

Honestly, that’s nonsense, fueled in large part by the current freight transportation service problems, adversarial national union contract negotiations, a clogged supply chain with which everyone—not just the rail industry—is coping, labor shortages, inflation, war, and politics.

The reality, folks, is that the truth is somewhere in the grey matter. In the human

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brain, its those regions involved in muscle control, sensory perception such as seeing and hearing, memory, emotions, speech, decision making and self-control.

One railroader with highly refined grey matter is Mike Haverty, now an elder statesman and Major League Baseball stakeholder (Kansas City Royals). A past Railway Age Railroader of the Year, Mike’s vision led to creation of the NAFTA Railroad more than 20 years ago—and which, with Canadian Pacific, has led to CPKC (Canadian Pacific Kansas City), North America’s first (with STB approval) transnational railroad.

Mike, who brought a lot of good to this industry, looks at current railroad problems in a very sound, basic way. Here’s his commentary on the current state of the industry: “Long trains on single track with short sidings certainly does not fit my idea of Railroading 101 that was pounded into me in my early days of management training and serving as a front line operations manager (assistant trainmaster and trainmaster) on Missouri Pacific: Move a customer’s product from origin to destination on schedule, on trains running on time, and handling the product the minimal number of times en route to keep costs at a minimum.”

Fairly simple, right? Doesn’t need a multisyllable, easily twisted, frequently misconstrued term like “Precision Scheduled Railroading” (shortened to “PSR,” everyone’s favorite acronym after “PTC”), don’t you think?

To me, it means take care of people and customers first. Business will grow. The financial rewards will follow. You can take that to the bank.

WILLIAM C. VANTUONO Editor-in-Chief

Railway Age, descended from the American Rail-Road Journal (1832) and the Western Railroad Gazette (1856) and published under its present name since 1876, is indexed by the Business Periodicals Index and the Engineering Index Service. Name registered in U.S. Patent Office and Trade Mark Office in Canada. Now indexed in ABI/Inform.

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Industry Indicators ‘APRIL 2022 A BOX OF ASSORTED CHOCOLATES: SOMETHING FOR EVERYONE’ “U.S. rail traffic in April 2022 was like a box of assorted chocolates: It had something for everyone,” the Association of American Railroads reported last month. “Optimists can point to several commodities that had solid traffic gains. For example, April 2022 was the third best month ever for carloads of chemicals, with carloads up 3.4% over last year. April’s carloads of iron and steel scrap were the highest since August 2013, while carloads of autos and auto parts were up 12.0% over last year. Carloads of food products and crushed stone and sand were also up. Pessimists can point to several traffic categories with lower volumes in April. For example, carloads of grain in April were the fewest in seven months, coal carloads were the lowest in more than a year, and carloads of petroleum products were their second lowest since September 2017.”

Railroad employment, Class I linehaul carriers, april 2022 (% change from april 2021)

TOTAL EMPLOYEES: 114,986 % CHANGE FROM APRIL 2021: -0.43%

Transportation (train and engine) 47,992 (+2.22%)

Executives, Officials and Staff Assistants 7,366 (+1.38%)

TRAFFIC ORIGINATED CARLOADS

FOUR WEEKS ENDING April 30, 2022

MAJOR U.S. RAILROADS

BY COMMODITY

APR. ’22

APR. ’21

% CHANGE

Grain Farm Products excl. Grain Grain Mill Products Food Products Chemicals Petroleum & Petroleum Products Coal Primary Forest Products Lumber & Wood Products Pulp & Paper Products Metallic Ores Coke Primary Metal Products Iron & Steel Scrap Motor Vehicles & Parts Crushed Stone, Sand & Gravel Nonmetallic Minerals Stone, Clay & Glass Products Waste & Nonferrous Scrap All Other Carloads

88,331 2,836 36,743 25,816 137,567 36,687 248,338 4,633 13,609 20,967 18,816 13,327 35,521 18,317 52,886 81,813 15,146 30,791 15,722 21,837

104,148 3,877 36,103 24,184 133,104 44,357 250,938 4,089 14,559 21,348 27,886 13,418 37,729 16,840 47,237 80,552 16,283 32,902 14,529 27,549

-15.2% -26.9% 1.8% 6.7% 3.4% -17.3% -1.0% 13.3% -6.5% -1.8% -32.5% -0.7% -5.9% 8.8% 12.0% 1.6% -7.0% -6.4% 8.2% -20.7%

TOTAL U.S. CARLOADS

919,703

951,632

-3.4%

308,547

320,121

-3.6%

1,228,250

1,271,753

-3.4%

CANADIAN RAILROADS TOTAL CANADIAN CARLOADS

COMBINED U.S./CANADA RR

Professional and Administrative 9,390 (-7.27%)

Maintenance-of-Way and Structures 28,186 (-1.21%)

Maintenance of Equipment and Stores 17,385 (-2.85%)

Transportation (other than train & engine)

Intermodal

FOUR WEEKS ENDING april 30, 2022

MAJOR U.S. RAILROADS

BY COMMODITY

APR. ’22

APR. ’21

% CHANGE

Trailers Containers TOTAL UNITS

66,992 1,016,159

88,926

1,083,151

1,085,094 1,174,020

-24.7% -6.4% -7.7%

0 296,923 296,923

0 288,417 288,417

— 2.9% 2.9%

66,992 1,313,082

88,926 1,373,511

-24.7% -4.4%

1,380,074

1,462,437

-5.6%

CANADIAN RAILROADS Trailers Containers TOTAL UNITS

4,667 (-1.02%)

COMBINED U.S./CANADA RR

Source: Surface Transportation Board

Trailers Containers

TOTAL COMBINED UNITS

Source: Rail Time Indicators, Association of American Railroads

4 Railway Age // June 2022

railwayage.com

TOTAL U.S./Canadian CARLOADS, April 2022 VS. april 2021

1,228,250

1,271,753

APRIL 2022

APRIL 2021

Short Line And Regional Traffic Index CARLOADS

BY COMMODITY Chemicals Coal Crushed Stone, Sand & Gravel Food & Kindred Products Grain Grain Mill Products Lumber & Wood Products Metallic Ores Metals & Products Motor Vehicles & Equipment Nonmetallic Minerals Petroleum Products Pulp, Paper & Allied Products Stone, Clay & Glass Products Trailers / Containers Waste & Scrap Materials All Other Carloads

ORIGINATED APRIL ’22

ORIGINATED APRIL ’21

% CHANGE

49,726 20,174 26,035 12,441 30,701 8,931 10,347 2,927 20,472 8,628 2,522 2,322 18,940 14,349 47,124 12,014 74,140

52,740 18,329 24,183 11,156 28,605 8,308 10,305 3,085 17,447 9,850 2,251 2,002 18,187 14,201 48,483 11,007 75,735

-5.7% 10.1% 7.7% 11.5% 7.3% 7.5% 0.4% -5.1% 17.3% -12.4% 12.0% 16.0% 4.1% 1.0% -2.8% 9.1% -2.1%

Copyright © 2022 All rights reserved.

TOTAL U.S. Carloads and intermodal units, 2013-2022 (in millions, year-to-date through APRIL 2022, SIX-WEEK MOVING AVERAGE)

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railwayage.com

June 2022 // Railway Age 5

Industry Outlook

‘Big 4’ Submit Service Recovery Plans to STB BNSF, CSX, NORFOLK SOUTHERN (NS) AND UNION PACIFIC (UP) ANSWERED THE SURFACE TRANSPORTATION BOARD’S (STB) CALL TO SUBMIT SERVICE RECOVERY PLANS—identifying the steps they will take to clear congestion and improve service plus the metrics they will use to evaluate progress during the next six months.

On May 5—a little more than a week after its April 26-27 “Urgent Issues in Freight Rail Service” hearing—the STB, voting unanimously, issued updated, morecomprehensive rules for reporting performance and employment metrics. The eight-part regulations, which mostly affect the “Big 4”—BNSF, CSX, NS and UP— included filing of service recovery plans by May 20, followed by frequent progress reports and biweekly conference calls with STB staff.

“The Board is requiring service recovery plans and progress reports from the four largest U.S. rail carriers and is directing those carriers to participate in biweekly conference calls to further explain efforts to correct service deficiencies,” STB 6 Railway Age // June 2022

summarized on May 5. “The Board is also requiring all Class I rail carriers to report more comprehensive and customercentric performance metrics and employment data for a six-month period [starting June 3]. In response to concerns raised at the recent hearing and related communications, the Board is taking this action to inform its assessment of further actions that may be warranted to address the acute service issues facing the rail industry and to promote industry-wide transparency, accountability, and improvements in rail service.”

“BNSF’s recent service difficulties were caused by a number of factors, but principally due to a sharp increase in volumes in 2021 that was far in excess of what BNSF and our customers had forecasted,” the Class I railroad wrote in its May 20 filing to the STB. “While BNSF includes a buffer in the resource planning processes that we described for the Board last month [at the “Urgent Issues in Freight Rail Service” hearing], the accelerated demand experienced beginning in 2021 outpaced our ability to quickly flex up resources to handle the volume surge. The congestion that resulted

from this volume was magnified by an increase in car inventory as our customers brought additional cars online to attempt to mitigate the effects of our reduced fluidity as well as a series of external events throughout Fall 2021 and Winter 2021-22.”

CSX provided STB with information on four service performance indicators: (1) Trip Plan Compliance, placement within 24 hours of the original estimated time of arrival). (2) First-Mile/Last-Mile, the percentage of scheduled spots and pulls that were fulfilled. (3) System Velocity. (4) System Dwell. CSX also addressed labor and power.

The labor shortage has compelled the railroad “to be more creative and determined in its approach to recruiting, staffing and engaging employees.”

NS reported to the STB that it is “highly motivated” to restore service and handle higher volumes: “Recovering our service is Norfolk Southern’s highest priority.” To inform that recovery, it identified four key service performance indicators—system velocity, terminal dwell, local operating plan adherence, and on-time delivery—that together with the railroad’s “progress toward increasing its qualified Train and Engine (T&E) headcount, [will] provide an accurate snapshot to the Board and to our customers of the overall health of the Norfolk Southern network and our progress toward service recovery.”

“Until recently, congestion continued to build as our cars per carload rate increased from 7.6 in January 2022 to 8.9 by the middle of April 2022,” UP reported. “This congestion resulted in resources becoming more constrained as demand remained strong across the network, including in our Central Corridor and into Northern California and the Pacific Northwest.” The railroad noted that its focus on increasing and redistributing crews, locomotives and railcars has “paid off.” Performance has improved since mid-April 2022: “Operating inventory has decreased by approximately 11,000 cars, cars per carload has decreased from 8.9 to 8.6, and there has been a 4% to 8% improvement in train velocity and car dwell. These changes have caused car velocity to increase from 177 miles per day to 189 miles per day. We anticipate that our focus on crews, locomotives and freight cars will result in continued, steady improvement over the next six months.” railwayage.com

Market Hitachi Rail’s Digital Debut Hitachi Rail has launched a new PTC onboard system and digital railcar telematics, and introduced enhancements to its current C&S product line. The PTC system is “an Interoperable Train Control (ITC) solution with multiprocessor architecture for vital (SIL-4) and non-vital applications.” Hitachi Rail has teamed with Dutch supplier Intermodal Telematics on digital telematics products. They complement those from Perpetuum, which Hitachi acquired in 2021.

NORTH AMERICA

KNORR-BREMSE concluded a strategic cooperation and investment agreement with NEXXIOT of Switzerland that will see the latter’s sensor technology deployed to improve performance of Knorr-Bremse equipment. The partnership has seen Knorr-Bremse invest E$60 million in Nexxiot. Knorr-Bremse will initially offer customers the option of retrofitting Nexxiot’s data-gathering sensor technology to existing vehicle subsystems and connecting them to Nexxiot’s cloud-based system.

RAILINC will develop, maintain and operate the RAILPULSE telematics technology platform for monitoring railcar location, condition and health under a 10-year agreement. Established in late 2020, RailPulse is working not only to give “shippers visibility into the status, location and condition of rail equipment and the commodities being transported,” but also to use “key data to provide real-time performance information, including safety data, on railcars to shippers, railcar owners and railroads.” This will ultimately “advance rail safety, increase telematics adoption [and] drive growth in freight rail utilization,” according to RailPulse, a coalition comprising NORFOLK SOUTHERN; GATX CORPORATION; GENESEE & WYOMING INC.; WATCO; THE GREENBRIER COMPANIES; and TRINITYRAIL, which on May 26 acquired QUASAR PLATFORM INC. from CANDO RAIL & TERMINALS LTD. “Railinc’s expertise in managing vast volumes of data across the North American freight rail industry, coupled with its experience providing superior 24-hour customer support, will be key value for RailPulse and its users,” RailPulse said. “Railinc will also

Hitachi Rail

WORLDWIDE

railwayage.com

help to implement data management protocols, including data security, as well as integrate railcar telematics device data into RailPulse’s backend systems. Lastly, future data-sharing arrangements with Railinc for RailPulse access to car location message (CLM), waybill, and Umler data will allow RailPulse to enhance its telematics data, including the ability to map telematics data to all parties in a given waybill route.” The first step for Railinc: development of a “‘pilot’ iteration of RailPulse’s platform for demonstration to interested industry parties targeted toward the end of 2022.” Trinity’s acquisition of Quasar, “an end-to-end rail logistics software platform providing a realtime data universe to freight rail shippers and operators,” will enhance its digital product portfolio, including Trinsight™, by adding “capabilities like yard management, activity-based costing and new data visualization tools.” Launched in early 2021, Trinsight provides shippers with real-time railcar and cargo location, condition and status information. Trinity is retaining all Quasar employees. PricewaterhouseCoopers Corporate Finance Inc. was Quasar’s financial advisor.

June 2022 // Railway Age 7

Watching Washington

STB Opts for Transparency Over Fiat

A

t a late April Surface Transportation Board (STB) hearing, up bobbed aggrieved shipper witnesses, one following another as hammers in a pianoforte, much as Charles Dickens (Bleak House) amusingly described the successive appearances in chancery of 18 attorneys.

Rail service failures, shippers said, are adversely affecting the nation’s chemical, food and energy supplies and contributing to retail price inf lation. Blame was laid on too-aggressive implementation of Precision Scheduled Railroading (PSR)—an operating strategy critics view as a zerosum game benefiting carrier bottom lines and driven by Wall Street demands that railroads eviscerate costs to drive operating ratios (operating expenses divided by operating revenue) lower.

PSR, it was alleged, is responsible for ill-conceived head-count and freight car reductions, mothballing of locomotives, closing of hump yards, and failure to switch cars into and out of customer facilities as requested—all threatening plant shutdowns.

The American Farm Bureau Federation reported unfilled grain car orders up 47%.

The Fertilizer Institute said a railroad told customers to “curtail” shipments, menacing maximum crop yields owing to a short window for fertilizer application.

Ranchers said they are “depopulating” herds owing to feed shortages. Increases in dwell time (cars not moving), said a witness, elevates storage fees even when the customer has “no control” over the delay. A municipality said its water supply system is dangerously short of chlorine. A shipper said a car destined for Galesburg, Ill., was detoured to Nashville to alleviate carrier congestion, arriving in Galesburg 33 days late.

STB Chairperson Martin J. Oberman scolded Class I railroads for cutting their workforce by some 30% over the past six years. Pointing to the six to nine months it takes to train new train crews, he chastised carriers for failure to foresee a post-pandemic surge in freight shipping demand.

8 Railway Age // June 2022

Although railroads acknowledged service failures—“We have struggled; we have underperformed,” said CSX CEO James M. Foote—a Tef lon coating was applied to the mea culpa. Rather than being an evil Mr. Hyde focused on share buybacks, dividend increases and stock share price as alleged, railroads characterized themselves as an unfortunate Dr. Jekyll—humbled by a global pandemic; extreme weather; unprecedented shipping demand; unceasing supply chain disruptions; and disgruntled employees shouting, “Take this job and shove it because I have better lifestyle options.”

What are the rail regulators to do?

Nothing radical, it appears for now, with actions so far following the advice of entrepreneur Mike Bloomberg—“In God we trust. All others bring data. You can’t manage what you can’t measure.”

Shippers sought more, but none offered a 30-day silver bullet to unravel the chaos.

Its eye on greater reliability through transparency, the STB ordered extensive new data reporting to include anticipated recovery timelines. This bathing of rail operations in disinfecting sunlight is in expectation of voluntary service improvements depending on railroad angst that shareholders will punish recalcitrant recidivists. “Carriers are best-positioned to identify and implement steps to improve service. The new measures promote industry-wide transparency, communication and accountability,” says STB member Patrick J. Fuchs.

The STB ordered railroads to provide a service recovery plan and communicate strategies for new hiring, bringing back furloughed employees, returning to service stored locomotives and freight cars, and adjusting PSR to share benefits with shippers.

Emphasis is to be on first-mile/lastmile metrics. To be revealed over the next six months are deviations from benchmarks—by railroad, region and even locality—providing real-time tracking as to car-trip compliance, switches performed, local train cancellations, car-miles, car velocity and

Although railroads acknowledged service failures, a Teflon coating was applied to the mea culpa.” terminal dwell times.

The STB is prepared to add sharper teeth and stronger jaws, such as a final rule on whether and when to create two-railroad competition at sole-served facilities (reciprocal switching) and by strengthening the definition of the common carrier obligation—the duty of railroads to provide transportation or service on a reasonable request. The STB already has statutory authority to impose civil fines of $8,736 for each violation, per delayed car, per day.

“I believe in letting markets decide,” Oberman said, “but there has to be a market,” portending—to borrow from Shakespeare’s Macbeth—“something wicked this way comes” should voluntary actions not suffice.

FRANK N. WILNER Contributing Editor railwayage.com

2022 GUIDE TO EQUIPMENT LEASING

RAILCARS

JOIN THE SPORTS CAR SET S

BY DAVID NAHASS, FINANCIAL EDITOR

Ferrari SF90 or stainless steel tank car? Each costs roughly $400,000.

C

ar shopping has become one of the more unpleasant pandemic chores. It was, frankly, bad enough when inventories were high. But now, in year three (or three thousand—frankly, it’s pretty damn difficult to remember what life was like before anyone ever heard of Severe Acute Respiratory Syndrome Coronavirus 2, a.k.a.

SARS CoV-2) of the COVID-19 pandemic, it’s downright absurd. It is worse still for those blessed with the means to purchase automobiles at the higher end of the spectrum. Imagine the tension of having to decide whether to buy a 2022 Ferrari SF90 Stradale (0-60 in 2 seconds), a similar but slightly more expensive Spider convertible, or alternatively having to take that cool near-half mill and use it to buy a 2022 $400,000 stainless steel tank railcar (50-year interchange life). No, no typos here—not today! Elitism has taken on a 10 Railway Age // June 2022

railwayage.com

GETTING YOUR

SCRAP METAL TO T H E M I L L DOESN’T HAVE TO BE

A GAMBLE

With over 135 years of financial strength and stability, DJJ is also known for our creative transportation solutions. Contact us today to discuss private fleet or leasing options.

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new target: railcar pricing.

It is a convoluted road that has led to dramatic increases in the price of railcars and the lease rates that go along with it. Russia’s invasion of Ukraine has impacted energy prices, steel prices, scrap prices and—you guessed it—the price of stainless steel. The continued supply chain disruptions (given a booster charge by the recent COVID-related shutdowns in China) impact components and domestic availability of raw materials. The disconnected labor market upends stable pricing models that have been reliable for decades. All of this mixes together to create one volatile cocktail.

Not crazy enough? Add into the mix the service-related problems impacting all of North American rail. And because insult always loves to join forces with injury, add what seems like an incredible ambivalence by the largest seven railroads in North America about the overwhelming need to grow their franchises and increase traffic.

Average velocity in 2022 continues a declining trend. In 2020, Class I railroad average system velocity was 26.1 mph; in 2021 it was 24.3 mph. In the first five months of 2022, velocity has decreased to 23.3 mph. Meanwhile, total railcar and intermodal loadings are 3.5% lower yearover-year (YOY) through the week of May 12 Railway Age // June 2022

14. The number of railcars in storage has continued to decline to below 300,000 from a 2020 pandemic peak of more than 550,000. Some of that decline may be attributable to scrap prices, which peaked north of $500 after the war started. Slower trains moving the same number of loads is never good.

What is happening in North American rail right now is a volatile mix: There is a need for additional railcars to handle service and velocity problems. Interest rates, fed by the Federal Reserve’s need to combat inflation, have been on the rise, increasing borrowing costs for shippers and lessors alike. Add to that new railcar pricing at historically high levels. This has led to an increase in lease rates across just about every car class, even for cars whose rebound in price and demand was expected to be years away or even nonexistent. For the first time in more than a decade, lease rates are on the rise, demand is outpacing supply and the advantage is with the car owner. As one lessor recently said, “It’s finally our time.”

Railcar leasing has always been a tough business and a war of attrition. So it is not surprising that railcar lessors often benefit from following the teachings of The Art of War, Sun Tzu’s military treatise from the

5th century B.C.: “In the midst of chaos, there is also opportunity.” More recently, friends of the late Tony Kruglinski, my predecessor in this space, may often recall his predisposition to referring to Tony Curtis’ famous line in the movie Operation Petticoat: “In confusion there is profit!”

There probably should be some flower bouquets or fruit baskets making their way from the lessor community to Class I executive offices (wink wink).

The next obvious question: Where do we go from here? Will lease rates and car prices stay at these lofty levels if interest rates do not come down? Will car prices respond to changes in commodity prices?

What about if car supply increases? The obviousness of the question is obscured only by the difficulty of coming up with an obvious answer. The difficulty, in part, is based on the plethora of perspectives from the players in the drama of railcar leasing.

Let’s break it down: Railroads: As covered in last month’s Financial Edge and throughout Railway Age, Class I railroad executives are under intense scrutiny at the moment. And they’re not laying down either: Watch CSX’s Jim Foote bristle at the Surface Transportation Board (STB) during the April 26 hearing (it starts at eight minutes railwayage.com

Bruce Kelly

2022 GUIDE TO EQUIPMENT LEASING

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into the ninth hour). There is mad empathy for the logistical challenges of running a finite system of interconnected rail track that spans a continent. As a nation, we are happy to complain from a distance, but from surveying the available perspectives from the customer to the consultant, it is difficult to follow the C-suite playbook here. Industry observers are waiting to see whether the industry pivots to growth or if the STB forces the railroads to make concessions to increase loadings and competition. Meanwhile, having your railroad manage your business by controlling car supply continues to be the least preferred version of railroad roulette.

So ask yourself, with velocity down and loadings stagnant/decreasing what do the railroads want from car supply today?

Railroad problems extend beyond issues of railcar cost. So other than the absurdity of something such as railcars for free forever, it is vexing to be unable to easily answer that question.

Railcar Owners: In its April earnings release, GATX Corp. reported fleet-wide utilization (ex. boxcars) of 99.3% and an increase in renewal lease rates of 9.3%.

Bazinga! That is the turnaround and price 14 Railway Age // June 2022

improvement that makes owning a railcar over a long period of years exciting and economically attractive. Alas, while the improvement is a great reward for car owners that have suffered through a lean period of low rates and intense competi-

with velocity down and loadings stagnant or decreasing, what do railroads want from car supply? tion, the stability of the upward trajectory in lease rates is destabilized by the tepid loadings growth. For the car owner, increases in interest rates increase capital costs. Passing through those additional costs to a lessee works in the market today,

but will it work in the market of tomorrow?

Ditto for the cost of new cars. If new car prices have increased by 20%-25% LTM, how will today’s new cars compete in the lease market against yesterday’s used cars?

What the railcar owners and the railcar manufacturers want today is to see a sustainable increase in total traffic volumes that will continue to support a need for investment in a newer railcar fleet and lease rates that support investment in a rising interest rate environment. Right now, that’s a tall order.

Shippers: What do the shippers want?

Many would say consistency. When prices spike and service is disrupted, supply chains are thrown into disarray. When a railroad tells you to lay down cars (a.k.a. move less product) or won’t allow a shipper to bring cars on line, it is disruptive. When velocity decreases and increasing dwell times require car users to add more assets, it is frustrating. When truck prices are otherworldly and railroad service failures require a pivot from rails to road (the opposite of what traffic flow should be), it is economically detrimental. When lease rates increase by as much as a 2x multiple YOY, it is the great sucking sound of profit being taken railwayage.com

Bruce Kelly

2022 GUIDE TO EQUIPMENT LEASING

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2022 GUIDE TO EQUIPMENT LEASING

from your company’s balance sheet to pay the high price of expenses gone wild.

Generally, when these moves happen quickly, a shipper cannot adjust commodity pricing to reflect the rapid pace of increases in the cost of transportation and has to eat the change in cost. So while in some cases price increases for an item like fuel might be able to be passed through to a customer, when it comes to lease rates or an increase in the cost of moving your product by truck over rail, those costs cannot be passed on and the owner of the product eats the loss.

Furthermore, many shippers work in thin margin businesses (think plastics and paper products). Abrupt changes in lease rates combined with the already preexisting service-related supply chain stress can erode those margins quickly, making rail even less attractive.

So the typical tension builds. The answer to the question of where do we go from here is the ongoing unknown: Will interest rates continue to rise or fall? Will inflation go from above 8% (mostly driven by food and energy costs) back to the prepandemic 2%? Will there be a recession?

Want the situation to be a little more unsettling? More than a few people across all segments of the industry are starting to 16 Railway Age // June 2022

wonder if now is the time to start pulling back in advance of the recession that almost seems inevitable right now. So when you turn to the “Around The Market” segment of the broadcast, put it in this context: On balance, if the shippers start to balk at the

Many shippers work with thin margins. abrupt Lease rate changes erode those margins quickly. mix of term and rate and think they could “get by,” the peak of the market might be just around the corner.

AROUND THE MARKET If you have the time, compare this section to the rates in the 2021 version report and be enraged (or illuminated) by the fact that

hindsight is always 20/20.

The lease market has exploded and rates are up on just about every segment. But it’s not just rates. Car owners, sensing the market advantage and after years of fighting for table scrap lease rates, are pressing the advantage in rate and in term length. Here’s what is happening around the market: Grain Covered Hoppers: Wow, just WOW! Who could have imagined an almost doubling of these lease rates from over a year ago. Jumbo hoppers greater than 5,100cf are leasing for high-$600s full service (FS) with term lengths of greater than five years (and some industry sources suggest that is not the top of the market).

Want to economize both in size and cost?

Try again: 4,750cf hoppers are in the mid$400s FS for three to five years.

Sand and Cement Covered Hoppers: If you didn’t believe in resurrection before, the change in this market just might change your mind. Rates on small-cube hoppers have tripled up into the mid- to high-$200s FS. The rates can go higher depending on who is footing the freight (as most of these cars are coming out of storage). There is some term being achieved here as well.

Kudos to those who locked in at sub-$80 net rates. That number may return, but with $100-plus per bbl. Oil, don’t go railwayage.com

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June 2021 // Railway Age 17

2022 GUIDE TO EQUIPMENT LEASING banking on it anytime soon.

Plastics Covered Hoppers: Inventory on these cars has dwindled to the bare minimum, especially on 6,200cf jumbo cars. Rates on new cars are being quoted above $700 FS but can be found for less. However, the real piece of information here is that new cars are north of $120,000. Inventory on the smaller 5,800cf cars is also slim, with rates in the mid-$400s FS. PD Hoppers: This market generally doesn’t get overbuilt, so when service slows, rates tend to increase. For the smaller 5,125cf car, expect rates in the mid-$600s, and for the jumbo, more modern 5,660cf car, think high-$700s possibly turning into $800s. Most of these cars are leased FS. Mill Gondolas: This market had been ambling along and then recently exploded with newer 286K GRL six-foot-side gons jumping up to the mid- to high-$600s FS for five years. Older 263K GRL cars are in the mid-$400s. Scrap is coming back to earth, so some relief may be in sight.

Boxcars: 50- and 60-foot plate F boxcars are in demand, and rates have remained at

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18 Railway Age // June 2022

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The Right Cars.

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2022 GUIDE TO EQUIPMENT LEASING high levels. Expect numbers in the high$600s FS for both sizes and limited availability of cars for lease. On the new side, look for rates in the $800s. Relatively speaking, the value is there as new cars are being quoted at $140,000 per car.

Coal Cars: File this market not under resurrection per se but maybe under the level of Lazarus. In spite of the set management skills of Class I railroads, coal cars have been moving into service and rates have been on the rise, reaching their highest levels since 2012.

Want some gondola cars? You’ll be paying more than $525 FS for a three-year term. Want some rapid discharge hoppers? Expect the same result as the gons. If you’ll take them for longer term, you might see a slight discount.

Don’t expect relief here anytime soon. High natural gas and oil prices are supporting the increasing coal burn, and some utilities are slowing down plans to decommission plants as they wait for additional renewable capacity to come on line. Through the first five months of 2022, coal loadings are up 6% YOY and that is on top of a robust 2021.

Infinity

Transportation

Tank Cars: Always divergent and interesting, tanks have picked up strongly but also have some markets, mostly due to regula-

file the coal car market not under resurrection per se, but maybe under the level of lazarus. tory issues, that continue to flounder. Food grade tanks around the 20,000-gallon range are in the mid-$800s FS depending on age with term. In general, the 20,000-gallon tank market is in short supply. Pressure

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cars for propane and butane (112J340s) are in the low- to mid-$700s with term and are heading higher as inventory there is limited.

117J 23,000- and 25,000-gallon tanks are also in short supply and rates are in the $800s as well. Tanks for crude oil have also been active with limited availability and rates in the midto high-$700s for used cars. For new cars, don’t expect anything that starts lower than $900. In the retrofit market, FS lease rates are have risen to just over $700. Plain vanilla DOT111As in ethanol service will be obsolete in a year, and that oversupply and threat of obsolescence is hurting that market with lease rates in the high-$200s.

Aggregate Cars: Another market that has just continued to maintain strength and stability through the pandemic. Ag hoppers that are 286K GRL have moved up into the mid-$600s FS; I expect that will be the case for near-to-medium term.

Got questions? Set them free at dnahass@railfin.com.

Equipment Leasing Guide Profile Directory follows on p. 22.

WE SIFT THROUGH THE NEWS SO YOU DON’T HAVE TO

Infinity delivers: • A large rail fleet comprising an extensive range in car types • Exceptional customer service and flexibility with leases and modifications • An unwavering commitment to finding the transaction and equipment that meets each customer’s specific needs • A team that delivers over 90 years of combined transportation equipment management experience To learn how quickly Infinity Transportation can meet your rail needs, contact: Lee Martini VP of Sales & Marketing Brian Ottinger VP of Sales & Marketing Ken Johnson VP of Sales & Marketing

lee.martini@gafg.com (678) 904-6315 brian.ottinger@gafg.com (312) 731-2763 ken.johnson@gafg.com (859) 640-0362

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LEASING RESOURCE

DIRECTORY American Industrial Transport, Inc. is a leading railcar service provider with solutions across leasing, repair, and railcar data. AITX’s broad and diverse railcar leasing fleet has scaled to over 65,000 railcars across AITX and its affiliates, which offers customers shipping flexibility and a portfolio of financing options. AITX’s best-in-class railcar repair network spans across North America with 17 locations including robust capabilities across full-service repair, mobile operations, onsite partnerships, and railcar storage.

Moving Ahead.

For more information, please visit www.aitx.com.

Contact: Sean Hankinson Chief Commercial Officer 814-242-614 shankinsion@aitx.com

The 2022 Guide to Equipment Leasing (pages 10 through 21) is supported by companies that provide equipment leasing and financial services and products to the rail industry. All of these firms have advertisements elsewhere in this section or have used paid profile space to present their background and capabilities.

Union Tank Car Company is a leading designer, builder and full-service lessor of railroad tank cars and other specialized railcars. Together with its Canadian affiliate Procor, UTLX owns a fleet of approximately 125,000 railcars for lease to customers in chemical, petrochemical, energy and a g r i c u l t u ra l /fo o d i n d u s t r i e s . U T L X manufactures tank cars in the U.S. and performs railcar maintenance services at more than 100 locations across North America. UTLX is part of Marmon Holdings, Inc., a Berkshire Hathaway company.

Union Tank Car Company 175 W. Jackson Blvd., Suite 2100, Chicago, Illinois 60604 312-431-3111 leasinginquiry@utlx.com https://www.utlx.com

The David J. Joseph Company a NUCOR® company

Our Rail division offers a full suite of leasing and financing solutions to rail shippers and carriers across North America. We’re a top lessor of highcapacity railcars and offer flexible lease terms, a diverse fleet and dedicated customer service that’s fo c u s e d o n b u i l d i n g l o n g - t e r m relationships. Our turnkey-ready cars a re ava i l a b l e t o s u p p o r t yo u r increasing demand, free up capital for growth and minimize out-ofservice time.

Let’s explore how our full suite of services can help support your operating priorities and power your growth. cit.com/rail

22 Railway Age // June 2022

The David J. Joseph Company’s Rail Group provides a broad range of transportation services throughout North America: single investor, freight cars, portfolio evaluation, purchases and sales of portfolios, and private fleet management. Other services include freight car inspections and engineering services from design of new cars to complete ISL extended life, modifications and analysis; in addition to railcar dismantling for scrapping and parts reclamation.

You have product to move. We have the cars to do it. PNW Railcars’ fleet is among the youngest in the industry, and continuously expanding, to handle and transport whatever you need to move dependably: agriculture, automotive, aggregates, chemicals, energy, forest products, plastics, and steel. Thanks to our ongoing investment and supply relationships, we can also accommodate any configuration requirements you may have.

Give us a call and see how we can help you.

PNW Railcars, Inc. 121 SW Morrison Street Suite 1525 Portland, OR 97204 Tel.: 503-208-9295 Email: sales@pnwrailcars.com

Infinity is a private lessor of a variety of railcar rolling stock.

Infinity prides itself on exceptional customer service and flexibility with regard to leases and railcar modifications to find the transaction and equipment to best serve our customers. Lease packages are tailored to meet customer needs, including a variety of short-term operating leases and longterm leveraged leases, as well as other assignment and deployment arrangements.

Larry Smith, Vice-President-Equipment Sales (678) 296-9709 • lsmith@infinityrail.com

The David J. Joseph Company Rail Group a NUCOR® company

Lee Martini, Vice President of Sales & Marketing (678) 904-6315 • lmartini@infinityrail.com

300 Pike Street • Cincinnati, OH 45202 Tel.: 513-419-6200 • Fax: 513-419-6221 Contact: info@djj.com

James Weaver, Vice President of Sales & Marketing 251-654-2166 • James.weaver@gafg.com

www.djj.com

CORPORATE OFFICES 1355 Peachtree Street • Suite 750 South Tower Atlanta, GA 30309 • www.infinityrail.com

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Railroad Equipment Leasing And Maintenance (RELAM) Inc. has facilities located outside Cleveland, OH, St. Louis, MO and Sacramento, CA. RELAM provides railway equipment for short- or long-term leasing and have equipment for all your railway needs. We strive to provide excellent quality equipment at the best possible prices. Our name has become synonymous with quality service that delivers top of the line products, and this caliber of overall service has helped us grow our customer base. Our professionals will develop customized, knowledge-based solutions to fit your current and future needs.

No off-the-shelf solutions, no standardized approaches. Tell us the equipment you want and let us do the rest. Our experts evaluate your requirements and deliver a program that works for you.

The Greenbrier Companies is a leading supplier of marine and rail transportation equipment and services, powering the movement of products around the world. We understand that owning and maintaining your own railcar fleet can be expensive, daunting and time consuming. At Greenbrier, we manage the details of fleet ownership so you can focus on your business.

Learn more at www.gbrx.com. info@gbrx.com

Available is an owned and managed fleet of approximately 136,000 railcars as well as fleet management solutions, administrative services and dedicated customer support. Access is also provided to TrinityRail’s extensive engineering and manufacturing platform, maintenance, parts, and on-site field support for operational assistance and training.

More information is available at www.trinityrail.com.

Brian Madison, EVP, Service Operations 14221 N. Dallas Parkway, Suite 1100 Dallas, TX 75254 800-631-4420

Request a more information at quotes@relaminc.com or call 800-962-2902

GET THE INSIDE SCOOP ON & OFF THE TRACK

TrinityRail® provides our customers with comprehensive rail transportation products and services designed to provide value by optimizing the ownership and usage of railcars.

www.trinityrail.com

STAY IN GEAR WITH RAIL GROUP NEWS

SMBC Rail Services is committed to providing innovative railcar leasing solutions to the North American rail industry. We are a full-service lessor of l o n g - l i ve d ro l l i n g s t o c k , o f fe r i n g comprehensive rail leasing and finance solutions. Our fleet of railcars is one of the youngest and most diversified in North America, consisting of more than 52,000 railcars. Our leasing experts can w o r k w i t h yo u t o f i n d t h e r i g h t transportation solution for your rail operations. For more information, please contact sales@smbcrail.com.

Tina Beckberger Senior Vice President Leasing SMBC Rail Services LLC 300 S. Riverside Plaza, Suite 1925 Chicago, IL 60606

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TECH FOCUS — M/W

HEALTH

Herzog continues to automate its audit process for rail flaw detection.

TRACKERS

Track geometry and rail flaw detection product overview and market outlook. o ensure infrastructure can safety withstand today’s traffic demands, suppliers are helping freight and passenger railroads to assess rail alignment and health—and to take action before failures and service disruptions can occur. Following is Railway Age’s roundup of their latest offerings, from equipment to services, plus a look at the research and development under way and potential market changes now that the Infrastructure Investment and Jobs Act has passed.

ENSCO RAIL, INC. Traditional rail flaw detection methods of stop-and-verify continue to be preferred by many railroads, Division Manager Matthew Dick reports, but as Class I’s introduce more continuous testing, the market is shifting toward ultrasonic technologies that facilitate it. Customers seek further automation, he explains, so they can “achieve more accurate testing cost effectively.”

24 Railway Age // June 2022

On the track geometry side, autonomous rail-bound vehicles outnumber manned railbound vehicles in North America, Dick adds.

ENSCO recently deployed its first autonomous joint bar imaging systems on two Class I’s. These systems, in combination with autonomous track geometry measurement systems, inspect for defects such as cracked bars.

Dick tells Railway Age that “with infrastructure improvements made from federal funding and the resulting increases in capacity, continued growth of ultrasonic rail flaw testing and autonomous track inspection will need to accompany it,” which will ultimately drive down derailments and service failures.

HERZOG Herzog continues to streamline and automate its audit process for rail flaw detection. Its newest technology, Smartprobe, is designed “to improve the signal-to-noise ratio of received information from internal anomalies and further enhance pattern recognition

for its artificial intelligence (AI) engines,” the supplier reports. “The neural network capabilities within Herzog’s continuous testing software expedites flaw detection and allows analysts to concentrate on areas of the highest priority. Herzog’s machine learning algorithms use vast historical data from previous runs as input values to predict, analyze and compare suspect indications on new datasets against historical data. Ultimately, the AI engine reduces human error and lessens the amount of time that verifiers spend inspecting potential flaws in the field.”

In addition to ultrasonic rail testing, light geometry and joint bar detection, Herzog’s freight and transit customers can expand their inspection dataset to collect millions of data points along the entire right-of-way using the supplier’s “advanced LiDAR platform.”

The LiDAR applications can provide outputs for ballast profiling, asset identification and clearance analysis during a single survey.

“Our collection platforms are robust, and railwayage.com

Herzog

T

BY MARYBETH LUCZAK, EXECUTIVE EDITOR

TECH FOCUS — M/W our machine learning technologies help us to quickly analyze data, identify trends and catch any anomalies so they can be addressed immediately,” Senior Vice President of Quality Assurance and Rail Detection Innovation Troy Elbert reports. “We are able to provide clients with valuable insights from the comprehensive data we provide.”

HOLLAND LP “The track geometry market continues to trend toward increased automation, integration and self-performance,” Russ Newberg, Director of Operations, Rail Measurement Systems and Services, tells Railway Age. “Customers are eager to demonstrate to the Federal Railroad Administration, and the broader rail ecosystem, that track inspection can be done at scale both efficiently and effectively, leveraging large datasets to make informed maintenance and safety decisions in near real time. For self-performance-based solutions, portable inspection systems like our Track Inspector complement traditional TrackSTAR GRMS geometry collection in settings like yards and branch lines.”

Holland is working with a number of Class I, short line and transit customers to determine the appropriate applications for them, depending on operating model, regulatory environment and strategic asset management goals. Not only are customers looking for “increasingly integrated, automated, and economical track inspection and testing technologies,” Newberg says, but also for data

management and machine learning tools, like Holland’s “that help distill their exponentially growing datasets into actionable insights while serving as sentinels for potential safety or network fluidity issues.” Also, “improved forecasting tools and software solutions that integrate technologies like LiDAR, network mapping, data alignment, asset identification and management allow railroads to quickly take action around maintenance and future planning for a safer railway,” he says.

Holland’s product team remains committed to delivering a “best-in-class geometry and rail wear measurement system in Argus,” Newberg says, and is now at work on the next generation. Argus 2.0 will offer the latest hardware technologies that will enhance computing capabilities to provide results in real time, as well as seamlessly integrating other inspection technologies and operating autonomously at high speeds, according to Sabri Cakdi, Director of Product Development, Rail Measurement Systems and Services.

KAWASAKI TRACK TECHNOLOGIES Kawasaki has been providing trackmonitoring devices in Japan for more than 25 years. The company recently completed a multi-year pilot of its locomotivemounted autonomous track geometry monitoring system with a Class I, and in 2021, installed production units.

Customers are focused on two primary areas: automation and prediction, Program Manager Ryoji Negi reports. “By automating

inspection activities and providing more predictive data, our customers have the opportunity to reduce the impact of track inspections and maintenance on revenue freight,” he explains. “In addition, by moving toward predictive maintenance, our customers will have the ability to reduce their overall track maintenance spend.”

Negi says the outlook for automated geometry products is promising. Kawasaki’s Class I pilot “has proven that the system is safer and more reliable than manual inspections and much more cost effective per mile compared to manual and boxcar systems,” he points out.

“As the Class I waivers are resolved with the FRA, we believe the demand will continue to increase for automated, reliable geometry monitoring systems.”

What’s next for Kawasaki? To provide an automated fastener inspection system. The project’s first phase is slated to begin this summer with the installation of an autonomous data collection system to help develop machine learning algorithms. The company aims to provide a prototype in 2023. On the R&D side, Kawasaki is investing in machine learning and data platforms. The push for automation will require more advanced algorithms, Negi says.

The company will also leverage the R&D activities of parent Kawasaki Heavy Industries, Ltd., when applicable, to the North American rail maintenance marketplace.

MERMEC INC., AN ANGEL COMPANY “Class I railroad and mass transit customers

Track Geometry • Rail Profile • Track Gauge Strength • LiDAR

hollandco.com #HollandLP railwayage.com

June 2022 // Railway Age 25

TECH FOCUS — M/W

Holland is working on its next-generation geometry and rail wear measurement system, Argus 2.0.

are investing heavily in maintaining their infrastructure, and looking to companies like us to provide them with the technology that can prevent system failures,” says Dr. Alan E. Calegari, President, CEO Director and Chairman of the Board of MERMEC, which offers a portfolio of track inspection and measuring

technologies. He tells Railway Age that customers today are looking to suppliers for: • Ways to introduce artificial intelligence into the inspection process to help eliminate potential human error.

• Solutions that operate at track speed since congestion reduces work/testing windows.

Kawasaki Track Technologies

• More technology to fill the gaps—linked to the need for U/X and supportive secondary technology—due to workforce attrition, especially at the experienced level.

• Diagnostic technologies focusing on special trackwork (particularly switch locations).

• Technologies that can be attached to existing revenue platforms. Interest “has always been there,” Calegari says, “however, lately there is a greater interest in locomotives-mounted solutions.”

• Increased data and system security.

Among the company’s latest offerings are a portable rail-production monitoring unit for steel mills and an automated switch inspection system. MERMEC also recently finished the Diamante 2.0, “a complete data traveling laboratory” for the Freccia Rossa High Speed program in Italy, Calegari says, and is slated to complete this summer a ROGER 800 series diagnostic vehicle for San Francisco Bay Area Rapid Transit District, for example.

On the R&D side, “we are looking right now about 10 years ahead,” says Calegari.

“Our normal approach is in five years, the

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Innovative Track Technology Solutions Locomotive mounted autonomous track inspection systems for geometry measurements and fastener conditions Data analytics Maintenance platform

Holland

www.kawasaki-track.com

26 Railway Age // June 2022

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TECH FOCUS — M/W Kawasaki piloted its locomotive-mounted autonomous track geometry monitoring system with a Class I, and in 2021 installed production units.

NORDCO, A WABTEC COMPANY “Class I’s continue to view RFD [rail fault detection] as an important safety aspect in their railroad operations and look to expand and make the inspection processes more efficient,” Vice President Bruce Boczkiewicz reports. They are also “focused on faster

testing speeds to take advantage of smaller work windows while looking to add additional inspection services on the same equipment,” he explains. “Reducing cost and manpower are key focus areas.” On the transit side, Nordco customers are looking to purchase their own equipment as an alternative to

Kawasaki

enhancement of current applications, and in the next five years, the replacement of current applications, with consecutive but also continuous improvement on all the functionality that we have currently. ... We are also looking at various technologies.

MERMEC as a group, we have another division in Europe that is very much involved in aerospace, particularly supporting the space program with the International Space Station. We have a satellite application that we see potentially of great value to enhance the ability to do diagnostic applications for rail as well.” (He acknowledges the complexity of using that technology in tunneling and other challenging landscapes, for example.)

Before satellites, Calegari says Columbia, S.C.-based MERMEC is considering drone technology through a partnership with the University of South Carolina. “All of these things are part of our engineering effort so we can understand how we can simplify but yet enhance our precision in terms of detecting deterioration and improving the state of health of the rail network,” he says.

railwayage.com

June 2022 // Railway Age 27

TECH FOCUS — M/W relying on inspection service providers.

Among the company’s latest offerings are the RB560 system—part of a complete inspection vehicle—and the OnePass walkbehind system. “RB560 continues to be enhanced with expanded connections to third-party operating systems, remote access, ease of maintenance, and auxiliary systems such as paint marking,” Boczkiewicz says. The OnePass system with “continuous software enhancements and defect detection capabilities,” has also been upgraded in terms of weight, ease of use and deployment.

PLASSER AMERICAN CORP. (PAC) In the U.S., the current administration’s efforts to upgrade infrastructure will have positive impact on railroad industry, PAC tells Railway Age. “The construction of new high-speed railroads both on the East and West Coasts as well as the major expansion and rehabilitation of Amtrak’s network will create a lot of opportunities for companies like PAC, which is in a unique position of having state-of-the-art products both in

maintenance-of-way and measuring systems,” the supplier says. “We expect, throughout this year and next, steady growth in the measuring systems market in North America, especially in software and integration … with products focusing on details like the wheel-rail interface. PAC has been providing equivalent conicity calculations to its customers for many years. … We also believe 2022 and 2023 will be the years that both transit authorities and Class I’s start to look more closely into what can be done with their gathered data and how it can be utilized for smart maintenance of the track and cost-saving measures by implementing predictive analytics.”

What’s in the project pipeline? Upgrading track geometry system software and hardware for Class I’s as well as deploying cloud solutions to link their measuring car data with their tampers; modernizing and rebuilding multiple transit geometry cars; and exploring “new system deployment on Class I’s, such as specialized turnout measuring systems and switch tamping assistant systems.”

RAILWORKS Customers of RailWorks, which offers track geometry services via its Maintenance of Way division, have been increasing testing frequency to monitor asset conditions, Vice President RT Swindall reports. They also want accurate real-time results. “When our geometry vehicle crosses a curve that’s out of tolerance, for example, they want to know immediately,” he says. “We’re able to stop, verify and make a call.” Swindall adds that RailWorks’ equipment also provides flexibility to take a more “precision” look at particular locations. “The customer can say, ‘Let’s move from Flagstaff, Ariz., over to Billings, Mont., and instead of having to wait three to four days [when testing is tied to a train and the car has to be rerouted], our guys can drive from one location to the next, set on the rail, and test the next section.” The company’s use of a physical contact gauge for measurements is also a benefit.

What’s next? Swindall says that the company is looking into rail flaw detection and eddy current testing.

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28 Railway Age // June 2022

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Railway Age, Railway Track & Structures and International Railway Journal have teamed to offer our Rail Group On Air podcast series. The podcasts, available on Apple Music, Google Play and SoundCloud, tackle the latest issues and important projects in the rail industry. Listen to the railway leaders who make the news.

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TIMEOUT FOR TECH

MANAGING FAILURE

RISK

When should a component be repaired or replaced?

BY GARY T. FRY, PH.D., P.E., VICE PRESIDENT, FRY TECHNICAL SERVICES, INC.

W

elcome to “Timeout for Tech with Gary T. Fry, Ph.D., P.E.” Before we begin, I want to highlight an upcoming RT&S virtual technical conference that will convene on July 14, 2022. The conference theme is Track Geometry and Friction Management.

I will be participating and presenting on the “Benefits of Geometry Measurement Automation and Trending.” The full conference program and registration details are available online at https:// w w w.railwayage.com/track-geometry/.

30 Railway Age // June 2022

I hope you will join us!

Each month in this ongoing series, we examine a technology topic that professionals in the railway industry have asked to learn more about. This month, we discuss strategies to manage risk of failure. Obviously, this topic is very broad and has applications in every kind of business endeavor and in our everyday lives as well. Narrowing things down a bit, we will focus on the performance of aging engineered systems and specifically on managing the risk of failure of load-bearing components, such as steel rails and steel wheels, that are nearing the end of their intended service lives.

To get started, let’s consider a simple example of a system that exhibits wear and tear and deterioration with use. Figure 1 is a photograph of two steel-toed work boots—one unused and the other clearly near the end of its useful life. If the boot manufacturer follows a strict quality control program, we would expect that the unused boot is representative of the general population of new boots of that model. We hold this expectation because we assume the quality control program results in a narrow bandwidth of variability among a large population of new boots.

What about the boot near the end of railwayage.com

TIMEOUT FOR TECH Figure 1. Photograph of two boots illustrating a new system vs. an old system nearing the end of its useful service life.

(Courtesy of Gary T. Fry.)

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TIMEOUT FOR TECH LEADER®

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FIGURE 2. Plot of functions representing the distributions of capacity and demand for an engineered system after increasing years of service. (Courtesy of Gary T. Fry.)

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Beyond LEADER’s real-time, in-cab simulations and our innovative contribution to the world’s first autonomous train operation – LEADER also comes with robust support. Whether we’re hosting a LEADER Users Conference. Providing 24/7 technical expertise. Helping you leverage your investment in PTC or other global train protection technology. Or innovating futureproof feature sets and functionalities.

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FIGURE 3. Plot of functions representing the distributions of capacity and demand for an engineered system after increasing years of service. The variability of capacity is controlled through inspection and maintenance to remain constant. (Courtesy of Gary T. Fry.)

its life in Figure 1? If we were to inspect a large sample of boots of the same age as the used boot, it is likely that we would observe wide variability in condition.

Some might be like-new and barely used at all, while others might be in worse shape than the used boot in the photo.

Because of this variability, a used boot selected to be in average condition for the age group would not be reasonably representative of either the best boots or the worst boots.

We encounter this same type of problem when assessing load-bearing components of engineered systems. When the components

are new, the variability of critical properties has been controlled during manufacture to fall within an acceptably small range among a large population of components. But once the systems have been in use, the variability in properties increases.

The main concern with aging loadbearing components is the potential that they have become weaker after prolonged exposure to repetitive loads and to their surrounding environments. Some of the components might become weaker because of corrosion that reduces the amount of material available to resist load.

Some of the components might become railwayage.com

TIMEOUT FOR TECH weaker because they have developed fatigue cracks that give rise to the potential for sudden fracture under load. It is also possible that some of the components are minimally weakened. Essentially then, the effect of time-in-use has been to increase the uncertainty of the capacity of the components.

Figure 2 (opposite, top) is a plot of frequency distributions for capacity and demand of load-bearing components in an engineered system. One demand curve is shown and is assumed representative over the 40 years of evaluation of the systems. Five capacity curves are shown representing a new system and a system after increasing years of service exposure: 10 years, 20 years, 30 years and 40 years.

After each decade of service, we observe a slight decline in average capacity: average capacity values shift to the left. However, the average capacity value, even after 40 years, remains well above the average demand value—by a factor of more than 2.5. Of more concern is the notable increase in variability about the average: The capacity curves become wider.

Now, let’s look at what has happened to the probability of failure of these systems after each decade. Table 1 (p. 34) lists the probabilities of failure for each of the five capacity curves. When the systems are new, the probability of failure is roughly 1 in 10,000.

After 40 years, the probability of failure has increased to 1%, that is, by a factor of 100.

Now, let’s look at the effect of managing these systems differently. Specifically, imagine that we introduce inspection and maintenance policies designed to keep the variability of the capacity of the systems roughly constant over time and nearly the same as when they were first installed. We will not attempt to control the average values of the capacities, allowing them to shift lower as observed in Figure 3 (opposite, bottom). To accomplish this strategy, we remove components from service that are assessed as falling below a threshold capacity, and repair them or replace them.

Figure 3 shows a plot of the frequency distributions that result from our proposed inspection and maintenance strategy. We observe the same reductions in average values with each decade of service as before, but now the variability is constant.

Table 2 (p. 34) shows the effect of this approach on probability of failure of the systems. As before, the probability of failure of new systems is roughly 1 in 10,000. But now the probability of failure after 40 years is 1 in 1,000, which is improved by a factor of 10 compared with the previous case.

To manage the risk of failure of load-bearing components in engineered systems, we must inspect the components, assess their capacity, and repair or replace them according to a defined policy.

As straightforward as this sounds, there remains a challenging question: When should a component be repaired or replaced?

A logical end goal is to ensure that the probability of system failure always remains acceptably low. One very effective management strategy for this is to control the variabilities of demand and capacity statistics.

Dr. Fry is Vice President of Fry Technical Services, Inc. (https:// www.frytechservices.com/). He has 30 years of experience in research and consulting on the fatigue and fracture behavior of structural metals and weldments. His research results have been incorporated into international codes of practice used in the design of structural components and systems including structural welds, railway and

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June 2022 // Railway Age 33

railwayage.com RailwayAge_USA_InnoTrans2022_87x254_en_Jubi.indd 1

18.05.2022 12:30:26

TIMEOUT FOR TECH

TABLE 1. Probability of failure calculation results for each capacity curve over 40 years of service. (Courtesy of Gary T. Fry.)

Gary T. Fry

TABLE 2. Probability of failure calculation results for each capacity curve over 40 years of service with controlled variability. (Courtesy of Gary T. Fry.)

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highway bridges, and high-rise commercial buildings in seismic risk zones. He has extensive experience performing in situ testing of railway bridges under live loading of trains, including high-speed passenger trains and heavy-axle-load freight trains.

His research, publications and consulting have advanced the state of the art in structural health monitoring and structural impairment detection.

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People MERRITT BECKER NRE

HIGH PROFILE: NRE (National Railway Equipment

Company) appointed Merritt Becker CEO, effective June 1. NRE has been led by its Board of Directors since 2020. Steven L. Beal ran the Mt. Vernon, Ill.-based rail, marine and power industries company from 2010 until his untimely death on July 11, 2020. Beal’s father, Lawrence, founded NRE in 1984; he died in 2010. Becker joins NRE from global engine and power generation company Cummins Inc. He has spent the past 12 years serving Cummins and its affiliates in the U.S. and abroad, most recently as President and Managing Director of Cummins DKSH in Thailand. Becker also spent more than 12 years with diesel engine and truck manufacturer Navistar Inc. At NRE, Becker “will be charged with serving OEM and aftermarket customers in the rail and inland waterway sectors, and creatively addressing the challenges the company’s customers face as the industry moves toward new technologies,” NRE said.

“This is an exciting day for NRE,” NRE Board of Directors Chair John Miscione said.

“We have not been immune to the challenges facing our industry in recent years, which were exacerbated by the global pandemic and Steven’s passing. In the face of those obstacles, we have spent the past several years streamlining and stabilizing our operations to prepare the company for a successful future. Merritt’s appointment is a major piece of that strategy, and we are confident he is the leader who can take NRE forward in a rapidly changing industry.”

“I could not be prouder or more excited to join NRE and continue the wonderful legacy that the Beal family has nurtured for so many years,” Becker said. “The Board has worked diligently over the past few years to quietly develop and execute a strategy of streamlining and stabilization. This work has brought NRE to what I consider to be an ideal ‘fighting weight,’ and ready to make some noise in the industry.”

“While Merritt certainly has the professional qualifications we sought in a new CEO, what also drew us to him was his emphasis on community and his embodiment of the culture and values that make NRE such a special place,” said NRE Director Susan Frangella, the daughter of Lawrence Beal. “So much of our culture is tied to the communities in which we operate, and from our very first meeting, Merritt eagerly embraced our family culture, our history, and above all else, our unwavering commitment to finding innovative ways to address our customers’ business challenges.”

T

he White House and the U.S. Department of Transportation (USDOT) have appointed retired Gen. Stephen R. Lyons as Port and Supply Chain Envoy to the Biden Administration’s Supply Chain Disruptions Task Force. Lyons, who served as the 13th Commander of the U.S. Transportation Command until retiring last fall, succeeds John D. Porcari. Porcari has held the Port and Supply Chain Envoy role since August 2021. With 36 years of military service, Lyons will work with the USDOT, the White House National Economic Council (NEC), ports, railroads, trucking and other private companies to continue

36 Railway Age // June 2022

addressing supply chain bottlenecks and speeding the movement of goods, the USDOT reported May 27. Transportation Secretary Pete Buttigieg leads the Task Force focus on ports and trucking issues, among others. The Task Force’s leadership also includes Agriculture Secretary Tom Vilsack on food and agriculture, and Commerce Secretary Gina Raimondo on homebuilding and semiconductors.

Capital Metro (CapMetro) of Austin, Tex., named Dottie Watkins interim CEO. Watkins will take over when President and CEO Randy Clarke departs this summer. Clarke in May signed on with Washington Metropolitan Area Transit

Authority to serve as General Manager/ CEO. Watkins currently serves as CapMetro’s Deputy CEO. She started work at the agency in 1994 as a part-time bus operator and has risen through the ranks holding multiple leadership positions, including Vice President, Bus Operations and Maintenance and Chief Customer Officer/Chief Operating Officer.

Greater Cleveland (Ohio) Regional Transit Authority elevated Janet Burney to Deputy General Manager, Legal Affairs/General Counsel. Burney will begin her new role July 31, following a decade of service as Deputy General Counsel. With more than 40 years of legal experience, she served previously as a judge with the Cuyahoga County Court of Common Pleas-Juvenile Division, in private practice, and as Chief Assistant Director of Law with the city of Cleveland.

Additionally, Burney has healthcare experience as a hospital administrator and registered nurse.

Urban Engineers appointed Daniel Comorre as Senior Project Manager in the firm’s Project Management Oversight Department in Los Angeles, Calif. Most recently, he held the position of Deputy Executive Officer for the Los Angeles County Metropolitan Transportation Authority. He also spent time as a Senior Civil Engineer for the city of Los Angeles’s Bureau of Engineering. Comorre has worked on project management for the Westside Purple Line Extension Sections 2 and 3 Projects and Regional Connector Transit Project as well as advanced planning for the Northeast Interceptor Sewer Phase 2 & Glendale Burbank Interceptor Sewer.

Jeff Stevens has been promoted to President of ENSCO, Inc., succeeding Boris Nejikovsky, who will retire after 30 years of service. A 23-year ENSCO veteran, he has served as Senior Vice President for the Surface Transportation Group since 2014, and “led the successful capture of the $571 million Department of Transportation, Federal Railroad Administration, Transportation Technology Center (TTC) program, which will allow the company to expand further into the surface transportation market,” ENSCO said. Stevens has also held the positions of Rail Engineer, Program Manager, Deputy Division Manager and Division Vice President. railwayage.com

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Ad Index COMPANY AITX

PHONE #

PAGE #

URL/EMAIL ADDRESS

800-489-9888

AITX.com

C2

CIT

212-461-5781

James.Spencer@cit.com

21

COMET INDUSTRIES

816-245-9415

tjfrancis@cometind.com

5

DANELLA RENTAL SYSTEMS, INC

561-743-7373

SBolte@danella.com

34

DAVID J JOSEPH COMPANY

513-419-6200

txs@djj.com

11

ENSCO RAIL INC

703-321-4515

dick.matthews@ensco.com

28

GREENBRIER COMPANIES THE

800-343-7188

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17

HERZOG

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amcclain@hrsi.com

27

HOLLAND LP

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25

INFINITY TRANSPORTATION

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20

KAWASAKI MARMON RAIL LEASING/RAILSERVE

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MESSE BERLIN GMBH

33

NEW YORK AIR BRAKE

315-786-5431

PANDROL USA, L.P

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PLASSER AMERICAN CORP

757-543-3526

Janice.Pfeil@nyab.com

32 31

plasseramerican@plausa.com

PNW RAILCARS RAILWAY EDUCATIONAL BUREAU

9

3 19

402-346-4300

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37,C3

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TRINITY RAIL

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C4

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15

UNION TANK/UTLX

The Advertisers Index is an editorial feature maintained for the convenience of readers. It is not part of the advertiser contract and Railway Age assumes no responsibility for the correctness.

AILWAY GE railwayage.com

June 2022 // Railway Age 39

Perspective: ASLRRA

Getting Things Done Is What We’re All About

T

he Short Line and Regional Railroad Association 2022 Annual Conference and Exhibition came roaring back in May with participation and enthusiasm returning to pre-pandemic levels.

More than 1,400 individuals attended; the exhibit hall was packed with nearly 200 suppliers and contractors showcasing their wares; and senior officials from the Federal Railroad Administration (FR A) provided insight into the many new and fully funded infrastructure grant programs available for short line railroad projects. Rep. Rodney Davis (R-Ill.), a senior Member of the House Transportation and Infrastructure Committee, provided a thoughtful and entertaining keynote address that focused on the need for Congress to prioritize getting things done over getting on cable television and sounding off on Twitter.

Getting things done is what short lines are working hard at during a time of difficult supply chain issues, both within the U.S. rail industry specifically and throughout the global logistics network more broadly, exacerbated by ongoing COVID-19 convulsions. These supply chain challenges and frustrating rail service problems dominated the conversations at this year’s meeting. These problems are not easily solved, but we did coalesce around some messaging to our four most important partners.

To our customers: We pledge to double down on what we have always done, which is bending over backward to “get to yes” on your needs. We’ll switch you multiple times a day if necessary; we’ll store your extra cars; we’ll pick up the phone 24/7; we’ll work with you on creative moves; we’ll integrate with the rest of your supply chain. We will continue to invest heavily in our infrastructure so we can move your traffic as efficiently and safely as possible.

We’ll make it so our success is dependent on your success, and you’ll know you got the best price possible to move freight over land and world-class responsive service.

To our Class I railroad partners: We 40 Railway Age // June 2022

take our first mile/last mile responsibility seriously and we pledge to work as closely as possible with you to turn assets efficiently, interchange effectively, and serve our mutual customers with the highest standards. We will continue to develop new carload traffic and move it onto the railroad network in a way that benefits the customer, the short line, and the Class I. We know service under today’s conditions is a challenge and there are no simple solutions. But short lines are ready, willing and able to partner creatively to ease the pressure wherever possible and do as much as we can to make the whole network function better than it does today. Where short lines can be integrated into your operations, we tend to serve as “shock absorbers” in the system, and the result is happier customers and more efficient railroad operations.

To the Surface Transportation Board (STB): We understand your concerns regarding service and appreciate that you have a responsibility to address these concerns in the public interest.

To that end, your recent work on new data reporting requirements has been well done. We are optimistic that this increased public transparency and focus on customer-centric metrics will correlate with meaningful improvements in freight rail service over the coming months.

Beyond the data reporting, we urge you to work carefully, as we are confident you will. You have the power to significantly impact the economic health of the railroad industry, and the risks of the Law of Unintended Consequences are significant with potential regulations such as reciprocal switching and reverse demurrage.

We applaud your recognition of the unique short line story and the role that short lines play in providing rail service.

As National Industrial Transportation League Chairman Bruce Ridley recently testified before the STB: “Short lines have done their very best to help the customers work through these issues. And I commend them for that.

The short lines are as constrained as the shippers in that they’re dependent on the Class I’s for service. But where customers have short lines in their firstmile/last-mile has made up for an awful lot of hassle. So, I commend the short lines, and their association, for their commitment to customers.”

To the FRA/U.S. Department of Transportation: The short line industry applauds the emphasis the Biden Administration has placed on infrastructure, and short lines are excited to work with you on CRISI, RAISE, INFRA, PIDP and grade separation grants. Investing in short line railroad infrastructure is a highly effective way to improve service and safety across the railroad network. And with rail being the most environmentally friendly way to move freight, these grants will help to put more freight on the rails and help to achieve the Administration’s pollution reduction goals.

At the same time, we urge restraint on unnecessary operating regulations such as a potential crew size mandate that would hamper the industry’s ability to innovate and compete in the future while providing no corresponding safety benefit.

As Rep. Davis would say, none of this will be highlighted on MSNBC or Fox News or spark a viral Twitter thread, but in the real world these are things that really matter, and this is where the short line and regional railroad industry will continue to concentrate its effort and energy.

CHUCK BAKER President ASLRRA

railwayage.com

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Amtrak America’s Railroad

Transportation’s Orphan and It’s Struggle for Survival

by Geoffrey H. Doughty, Jeffrey T. Darbee and Eugene E. Harmon Discover the story of Amtrak, America's Railroad, 50 years in the making. In 1971, in an effort to rescue essential freight railroads, the US government founded Amtrak. In the post–World War II era, aviation and highway development had become the focus of government policy in America. history. Amtrak, America's Railroad is essential reading for those who hope to see another fifty years of America's railroad passenger service. Hard cover, 256 pages.

BKAMARR

$40.00*

The Only Game In Town:

The LOCOTROL Story

by Fergus Moffat Fergus Moffat takes us through the development of remotecontrolled railroad distributed motive power. Distributing locomotive power throughout the length of a long, heavy train and controlling those dispersed locomotives remotely, shares the motive force throughout the train rather than concentrating it all conventionally at the headend. Originally known by various names before receiving the proprietary name LOCOTROL, this was the first distributed power scheme to be proven in regular service and for 40 years was the only practical application of this technology. Softcover.

302 pages.

BKGAME

$69.99*

Your Guide to Railway Signals

by Frederick J. Aubertin Your Guide to Railway Signals is an excellent guide for training signal personnel especially railway cross-function managers, supervisors, and support personnel. High-quality graphics and diagrams have been used throughout this book.

Complies with all standards and commonly used practices. includes chapters on Track Circuits, Basic Crossings, Gate Crossings, Microprocessor-Based Crossings, Switch Circuit Controller (SCC) and Electric Locks, Switch Machines, Relay-Based and Processor-Based CTC, and Testing Locking Circuits Soft cover, 370 pages.

BKYGRS

$99.95

General

Freight Car

Track

Railroader: The Unfiltered Genius and Controversy of Four-Time CEO Hunter Harrison • BKHUNTER • $27.99*

The Double Stack Container Car Manual • BKDOUBLE • $19.50

Basic Principles of Track Maintenance • BKTMB • $140.00

Diesel-Electric Locmotives • by Walter Simpson • BKDIESEL • $45.00

Mechanical Department Regulations • (Parts 210, 215, 216, 217, 218, 221, 223, 224, 225, 229, 231, & 232) • BKMFR • $32.95 Train Wreck: The Forensics of Rail Disasters • Soft Cover • BKTW • $24.95* American Steam Locomotives, Design and Development, 1880-1960 • BKASL • $40.00* The Railroad: What It Is, What It Does 5th Edition • BKRRNN • $46.95 Emergency Responder's Guide to Railroad Incidents • BKERGRAIL • $33.00* The Great Railroad War: United States Railway Operations During World War I • BKWAR • 25.00* Operations Managing Railroad Transportation • BKMRT • 39.95* Railway Operations and Control - Third Edition • BKROC • $39.95* Railroad Operations and Railway Signaling • BKRORS • $28.00

The Basics of Railroad Wheels • BKWHEEL • $25.75 Guide to Freight Car Couplers and Draft Gear Systems • BKCDG • $67.95

Doorway to Safety With Boxcar Doors • BKBD • $23.50 Freight Cars: Lettering and Marking • BKK2CBK • $26.50

Guide to Freight Car Trucks • BKFCT • $89.95

Locomotive Guide to Locomotive Mechanical Maintenance - SD & GP Locomotives • BKGLMM • $37.50 Guide Locomotive Electrical Maintenances • BKGLEM • $46.75 Fuel Saving Techniques for Railroads - The Railroader's Guide to Fuel Conservation • BKFUEL2 • $29.50 Guide to North American Diesel Locomotives • BKGNADL • $27.99* Reference and Dictionaries Dictionary of Railway Track Terms • BKRTT • $35.00 Railway Age's Comprehensive Railroad Dictionary - Second Edition • BKRD • $35.95

The Art and Science of Rail Grinding • BKGRIND • $145.00 Railway Geotechnics • BKGEOTECH • $220.00* Transit Development and Operation of New York's IRT and BMT • by Al Fazio • BKNYIRT • $59.95 Urban Transit: Operations, Planning, & Economics • by Vukan R. Vuchic • BKUTOPE • $155.00*

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U.S.A. CAN $5.25 $10.15 9.70 16.90 13.20 22.06 14.85 27.55 17.65 35.95 20.10 46.75 23.55 62.45 28.60 77.45

U.S.A. CAN 300.01 - 400.00 33.60 93.12 400.01 - 500.00 38.75 108.45 500.01 - 600.00 44.20 123.50 600.01 - 700.00 49.60 141.95 700.01 & up (Appropriate charges applied)

To order, call

1-800-228-9670 or visit www.transalert.com The Railway Educational Bureau 1809 Capitol Ave., Omaha NE, 68102 (800) 228-9670 I (402) 346-4300 www.RailwayEducationalBureau.com

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