Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, December 4, 1994 TAG: 9412080015
SECTION: BUSINESS PAGE: C1 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Long
The crane snatches a large metal box of freight from the trailer's chassis and sets it gently on the rail car. A special truck tractor quickly pulls another trailer alongside the rail car, and the crane lifts another container and sets that atop the first.
And so it goes. The crane moves along the sitting train's length, stacking a container every three minutes, until as many as 60 pairs of the 55-foot containers are loaded. Four times each week, one of these "double-stack" trains from Norfolk Southern Corp.'s intermodal yard in Charlotte heads for Los Angeles.
Goods that can move via any combination of truck, train or ship - intermodal freight, in transportation industry parlance - is Norfolk Southern's fastest-growing line of business. The goods travel in containers on specially built cars or in traditional wheeled highway trailers parked on flatcars.
Intermodal freight is playing a key role as NS highballs toward what could be its most profitable year since 1982, when the rail giant was formed by the merger of the Norfolk and Western and the Southern railways.
Norfolk-based NS is not alone in its financial success. America's railroads claim 38 percent of the nation's freight, the largest share among all modes of transportation. That success reflects both the strength of the U.S. economy and the railroads' increasing ability both to compete with and to work with the trucking industry.
Overall, major U.S. railroads reported healthy financial gains through the first three quarters of 1994. Norfolk Southern's net income for the first nine months was a record $491.7 million, up 13 percent from the corresponding period last year.
NS Chairman David Goode has said that the strength of U.S. manufacturers and the railroad's productivity gains have contributed to his railroad's financial success. NS is doing well with all the commodities it carries, he said.
"It's been a good year for all the railroads," observed Renee Weaver, a former financial strategist for CSX Corp. and now a stock analyst with Wheat First Butcher Singer in Richmond. "With a company like Norfolk Southern with a good operating ratio, you have some very good earnings."
A railroad's operating ratio compares how much it spends to the income it takes in. NS has the lowest, and best, ratio among the major railroads, standing at 73.9 percent for the first nine months of this year.
With the improvement in business, NS hiring is up, although total employment is about the same as last year. Through October, the company had hired 818 people, and it plans to hire 883 for the entire year, compared with 579 hired last year. Most of the new hires are locomotive engineers and other train crew members to handle the increased freight-hauling business.
NS is careful about its hiring. "What you want to do is maintain your productivity," Goode said. "That's the way you maintain yourself in business."
The corporation has 24,897 railroad workers, a drop of 42 percent from the 42,584 the company had at the end of 1982 and a result of the company's efforts to cut costs and increase productivity. About 2,800 additional people work for North American Van Lines, an NS subsidiary.
What saved the railroad industry was its being thrown into open marketplace competition by the 1980 Staggers Act, through which Congress removed much of the government's regulation of railroads, Goode said. Absent that control, rail rates are lower and worker productivity is better now, he said.
Goode sees the railroad industry as one of "the greatest comeback stories of the 20th century" and one of its "best-kept secrets." Last year, major U.S. railroads moved a record 1.1 trillion ton-miles of freight with 57 percent fewer employees, 30 percent fewer miles of track, 36 percent fewer freight cars than in 1980.
"The free market has worked very well for the industry and our customers," Goode said in a recent speech at Massachusetts Institute of Technology's Center for Transportation Studies. Things could be even better with less regulation, he said.
In an interview at Goode's Norfolk office, 15 floors above the Hampton Roads harbor and within sight of the NS coal export piers at Lamberts Point, he said some of the remaining federal regulations that should be discarded or modified are those requiring approval of mergers and acquisitions and the abandonment of rail lines. It takes 31 months to obtain government approval of railroad mergers, and a quicker process is needed, Goode said.
Earlier this year, NS reportedly was talking merger with Conrail Inc., the Philadelphia-based railroad that's dominant in the Northeast. Subsequent reports said the merger talks had been abandoned. NS and Conrail officials never publicly confirmed any such talks took place.
"We're going through a little period of volatility in the rail business now with all the activity out West," Goode said, referring to the bidding war between Union Pacific Corp. and Burlington Northern Inc. for Santa Fe Pacific Corp.'s railroad as well as other merger activity. More rail industry consolidations may occur but Goode said he's not sure how soon.
The demand from shippers for better service may encourage mergers, but if railroads can find ways to cooperate better, the need for mergers may be diminished, he said.
An example of such cooperation is Norfolk Southern's Triple Crown partnership with Conrail, which moves freight in intermodal trailers equipped to operate both on rails and the highways. Goode said NS would like to work out an arrangement with Conrail through which the railroads could capture some of the freight traffic moving between the Northeast and Southeast on Interstates 81 and 95.
Historically, railroads have not worked well together and have used different systems for handling traffic. Three years ago, however, major railroads began to work hard on developing a "seamless" service through which freight can be handed off from one railroad to another without slowing it down on its way to a destination.
Such efforts to improve customer service have been forced on the railroads as a matter of survival by the competitive world of rail deregulation. The reason NS has been so successful this year is the railroad's attention to service, Goode said.
With U.S. manufacturers now employing a system of low inventories and just-in-time deliveries of parts and supplies, better transportation is more important than ever. "Everything works on a higher level of service and a higher level of guarantee of that service," Goode said. That means railroads have to work together, he said.
NS is looking both to technology and people power to improve its service.
One example of technology that NS and other railroads are deploying is a computerized car tracking system. The system uses electronic "tags" mounted on the sides of rail cars. The micro-circuits in the tags can be programmed with information about the car, its contents and destination. They are read by trackside scanners that keep up with the cars.
"If a rail car has $250,000 in merchandise on it, shouldn't we know immediately where it is?" said Henry Watts, NS executive vice president for marketing. By the end of next year, every car in the rail industry should bear one of the electronic tags, he said.
NS pioneered the car-tracking technology; but sometimes the railroad takes the cautious route and lets others test new technology, then NS adopts and improves it.
For example, Norfolk Southern was one of the last railroads to build a computerized customer-service operation. But when the company decided to put one in Atlanta, it went far beyond what other railroads had done, Watts said.
When a customer calls the Atlanta center, a computer determines where the call is coming from and routes it to the service representative assigned to that customer. The caller's name, the name of his or her company and the details of the customer's last call pop into view on a screen.
NS employees answer the customer's questions about such things as shipping weight, arrival time, delays, expediting and tracing. "The whole idea was to personalize the center," Watts said.
Norfolk Southern is attempting to involve its employees in the improvement of customer service through a total quality management program, dubbed Thoroughbred Quality. The Thoroughbred horse is a company logo.
"What the quality program has done for us is reorient all our people toward the fact that we're all marketers," Watts said.
One of the first things NS did after starting the program was send questionnaires to 250 of the company's major customers. The result of the first set of questionnaires was the creation of 175 quality teams to address specific problems with customer satisfaction, Watts said.
Although all NS employees are trained in the quality-team concept, participation is voluntary, said Donald O'Brian, assistant vice president of quality management. The teams are given the room to work with problems and to try solutions and fail, he said.
NS customers saw that the company was serious about keeping them better satisfied, and NS has received more business and more customers as a result, O'Brian said. "We've gotten more awards from customers in the last two years than we have any time in the past."
The railroad's labor unions have cooperated in the move toward total quality management, O'Brian said. Union leaders were fully briefed on what NS had in mind and attended total quality management training sessions with senior NS managers, he said.
With labor contract negotiations ahead and both labor and management taking tough positions, problems with the rail labor unions could cause NS and other railroads service problems next year. Railroads are seeking the right to cut the size of train crews further, and the unions may seek substantial wage increases.
Still, Goode said, "The basic strength of Norfolk Southern is we're very deep in talented people." Looking at some of the achievements of the quality program, there's no doubt the returns have been enormous, he said.
Those achievements include such things as streamlining the procurement process by issuing credit cards for small purchases and improving the turnaround time for grain cars at a big Midwest agribusiness company, making it worthwhile for NS to continue to serve the company.
Norfolk Southern's intense focus on customer service was behind the company's unpopular decision to eliminate its steam-train excursion program after this year and also plays a role in the railroad's resistance to opening its track to proposed passenger service.
Goode is skeptical about the demand for passenger rail service connecting Bristol, Roanoke, Richmond and Washington. A government-financed study is looking at the need for that service.
"What Norfolk Southern is is a freight rail system - I think the finest in the world," Goode said. "It is our mission to be the best surface transportation company. That mission is focused on freight transportation."
by CNB