SCHAUMBURG, Ill. — Approaching the likely end of his tenure as chairman of the Surface Transportation Board, Robert Primus made it clear: the hearing the board held last fall on growth in the rail industry did not ease his concerns about Class I efforts to increase volume.
In a rare address today (Jan. 16, 2025) at the Midwest Association of Rail Shippers Winter Meeting — and on the same day he issued a statement concerning retaliation by railroads against those who bring matters to the board or participate in its proceedings — Primus expressed abundant frustration over railroads’ continuing loss of market share.
“We are the largest, safest, most cost-efficient and energy-conscious freight rail system in the world,” Primus said, “and yet we struggle to grow, even even when growth opportunities exist. For the past year, we have continually lost market share to our chief competitor who has seen better days, while all six Class Is are enjoying a period of strong, if not record profits, and the ability to provide billions in stock buybacks to their respective shareholders. … From 2003 to 2023, freight rail has experienced negative growth among most business segments.” Among the data he cited: intermodal tonnage hauled by truck was up by 35% between 2002 and 2023, while intermodal tonnage by rail declined by 16%.
“Why are we hemorrhaging market share to truck?” he asked. “Why can’t we have sustained long-term growth at the Class I level?” The September growth hearings [see “Hearing focuses on turning around …,” Trains News Wire, Sept. 16, 2024, and “Regulators scrutinize trends …,” News Wire, Sept. 17, 2024] illustrated reasons, he said, listing five:
— Shippers have left rail because of inconsistent and unreliable service.
— High rates are not commensurate with the level of service.
— Failure of the Class I railroads to provide accurate information on service and schedules, particularly when measured against what trucking provides.
— Inadequate employment levels for railroads to handle growth.
— Prioritizing short-term gains at the expense of expanding network capacity.
“This all adds up,” Primus said. “What we have, in the words of former President Jimmy Carter, is a crisis of confidence. Far too many shippers have simply lost confidence in our freight rail network. It’s why a 2020 Oliver Wyman survey found 100% of large shippers polled believed truck to be superior to rail on key attributes of the customer experience. It’s why freight rail lines have declined by 28% over the last decade.”
If Class I railroads want to address many of these issues, they have a model to look to that is close at hand.
“The network must have an adequate labor force and be better resilient, and we need to shift our focus from short-term profits to long-term sustainable growth,” Primus said. “I know this sounds impossible, right? Well, what I just described is exactly what’s happening within our nation’s short lines, and they are seeing double-digit volume growth.
“It can be done because it is done.”
And, he said, railroads have been hurt by slow adoption of the kind of tracking technology available from trucks, or from consumer enterprises such as Amazon. He did, however, offer some optimism on that score.
“I’m a huge supporter of RailPulse,” he said, referring to the digital car-tracking enterprise, “and this is for two reasons. No. 1 is the first real collaborative between Class Is, short lines, shippers, car manufacturers, car leasors, and others to develop a universal telematics platform that can be used by the entire network. … If we get this right it can be a real game changer. My only gripe is that only four of the six Class Is are participating. To me that’s unacceptable, and a reminder that the stove-pipe mentality still exists within the network. Neither BNSF nor CN could give you good reason why they’re not on board. I hope they figure it out soon, and shortly.”
Concerns over retaliation
Earlier, Primus recounted accomplishments of the board during his time as chairman, but also noted issues that he would have liked to address if he had more time as chairman. (While Primus will remain on the board through 2027, President-elect Trump will have the opportunity to name a new chair, as well as fill the STB’s one vacant seat.) These, he said, included competition, matters involving private rail cars, and commodity exemptions, as well as the need for reauthorization of the STB by Congress: “I would have liked to led that effort,” he said.
But he also he was “truly disappointed” that the board had not addressed what he called the “pervasiveness of retaliation and intimidation” among those — be they shippers, labor, or short lines — who have brought matters to the attention of the board.” This was also the subject of the statement Primus issued today, which among other details asks those who feel they have been the targets of such actions to contact the STB’s Rail Customer and Public Assistance program.
“While I do not believe the leadership under Class Is promote or even tolerate this behavior, it nonetheless continues to permeate through the ranks,” Primus said at MARS, “and its impact has directly affected the board’s ability to do its work,” he said. “Quite simply, it’s wrong and it must be addressed. … Moving forward, I hope the board finds the courage to confront this troubling issue soon.”
Get rid of PSR and wall st would be a start. just retired after 30yrs on the rr. and I can tell you the class ones have no desire to grow! when I I’ve watched 2 of the class ones refuse over 500 cars a month of business it just gets sickening. and the current path they are on is not sustainable.
Where would railroads be without the investors who built/build the facilities, buy the equipment, etc.?
May I respectively suggest we all need a reality check on the issue of employment levels. Every mode is suffering from a labor shortage. The challenge of recruiting and retaining qualified truck drivers is legendary.
The current edition of the Boeing Pilot & Technician Outlook forecast the need for 674,000 new pilots and 716,000 new maintenance technicians over the next 20 years. Several well-known air carriers are already cancelling services to smaller markets due to a lack of qualified flight crews.
Speaking from personal experience, operating freight trains is a job for the young. The demographics shifts do not look good for any of the intercity carriers.
Easy: can’t happen. PSR rules prevent railroads from going after business that may be profitable, but which would add a few points to their OR’s. The railroads are terrified of that because then the hedge fund vultures would descend upon them. Read Bill Stephens’ excellent analysis of the paradox. Wall Street is slowly forcing the railroads into disinvesting, and ultimate collapse.
And like locust, once the railroads are completely depleted and fallow, they’ll move on to the next new, shiny thing to strip bare.
It’s a game to them, and money is how they keep score.
Without a motivated investor base, how would the railroads attract the levels of investment capital needed to make the big purchases? Improve routes? And so on?
Primus is entirely correct. There’s no chance it would happen, but I would wish that Trump would keep him on.
The one thing (the only thing) the Biden administration got right was STB.
Yes, Charles but his methods ignore the effect the Biden/Liberal way (including Mayor Pete) of dealing with it. This paragraph says it all. “The network must have an adequate labor force and be better resilient, and we need to shift our focus from short-term profits to long-term sustainable growth,” Primus said. “I know this sounds impossible, right? Well, what I just described is exactly what’s happening within our nation’s short lines, and they are seeing double-digit volume growth.” How can that ever happen on the class ones when the field they play on is not level with their competition, the trucking industry. Short lines face few if any of the problems Class One’s face. They don’t have to worry about Operating Ratio demands from Wall Street like the class ones do. How can you have a long term outlook when the Wall Street “piranha’s” are biting at your ankles all the time? (I am talking about you Ancora, and others of your ilk!) They don’t have the operating restrictions or union issues that the class ones do…They can’t afford them. In most cases their customer base is restricted to a much smaller customer base which most the time is dependent on a class one or regional railroad to get the shipment to its final destination irregardless of any obstacles in its path. Both levels are not apples to apples. They are definitely apples and oranges. Until Class ones are protected from the predatory hedge funds who only care about short term profits, long term outlook will never be a result. Is NS any better now that Ancora has infiltrated its management… Most customers would say no. And If the STB, FRA, USDOT and Congress really want to make a difference, then Train lengths must also be capped by law at reasonable lengths (< than 10,000 ft) and Trucks must be made to pay their full share of their tax bill, not the subsidized one by the tax payer that they (and the airlines) enjoy. And yes, the railroads have many issues of their own making that they need to address honestly, for themselves and for their customers, because without the customers, there would be no need for the railroads. But it is pretty tough when all your costs are fixed, except one: Labor. And crews and support (Machinist, Carmen, Maintenance of Way and Administrative forces) have to be in place for the railroads for them to function. And if MAnagement Bonuses were ties to actual performance then you bet that every manager receiving bonuses would be doing every thing they could to ensure trains arrived on time. And when was the last time you saw a trucking company building or repairing their own piece of highway. The answer is easy, Never. The STB is necessary. But it needs to be run in the best interest of the railroads, not as a wedge against the railroads. That is the way it was until recently. Even Martin Oberman couldn't get it all done but he was fair, for the most part, to his constituency. That's all the railroads, Class One's Regional and Short Lines want: fairness in all aspects,
Vincent, it is simply a failure of regulation. This is what “regulatory capture” looks like. Primus is simply a toothless pontificator. Only through tough federal regulations is it possible to level the playing field for safety, customer service and growth. Because class 1s are run by greedy executives paid with stock options, they hire armies of lawyers and lobbyists to keep their gravy train running, filling their pockets. Of course Trump’s record is equally bad as Biden’s WRT rail transport.