THE RAILROADS' ROLE IN THE MOVEMENT OF MERCHANDISE FREIGHT

The purpose of this paper is to examine ways in which railroads might (a) improve service and (b) improve capital utilization without increasing long-run total costs. Rail freight costs and truck costs are compared in considering the effects of a shift from truck to rail. In order to examine the full economic cost approach to rail and truck capital investment it is necessary to include, first, the recovery over the expected economic life of each investment of the amount of capital that would be required to replace that investment today and, second, an additional cash flow adequate to provide an average return on the investment of 9 percent after taxes. The justification for applying the capital cost approach is (a) to make enough money to replace equipment as it wears out at the prices that will prevail at that time and (b) to make enough profit to guarantee continued accessibility to the capital market. The validity of this approach to the cost of doing business has long been recognized in many capital-intensive industries but not in the railroads. This paper also describes some of the reasons rail car utilization is low, among which are (a) the low average line-haul speed, (b) the fact the 62 percent of the days attributed to line-haul are spent standing and being switched in intermediate yards, and (c) the fact that the average line-haul train is 1 hour late for every 200 miles traveled. There are many ways in which the railroad industry can and should improve utilization. This paper examines some methods for accomplishing this, including car control systems, operating strategy changes, physical improvements, and pricing changes that reflect and encourage actual equipment cost levels.

Media Info

  • Media Type: Print
  • Features: References;
  • Pagination: pp 13-19
  • Monograph Title: INTERCITY FREIGHT MOVEMENT BY RAIL AND HIGHWAY
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 00081833
  • Record Type: Publication
  • ISBN: 0309023556
  • Files: TRIS, TRB
  • Created Date: Mar 26 1975 12:00AM