Santa Fe shows US how to run a railroad
The beat is up. It carries the clip of a chugging freight. For the Atchison , Topeka & Santa Fe Railway Company, the pace is profitable. Robert E. Welk, vice-president and executive representative, discourages too many glowing terms."I don't want it to sound like it's all cotton candy," he says.
Troubles do exist. There is inflation. Energy costs are frustrating. And untangling the thicket of federal regulation is a constant battle. But business , which may even include transporting cotton candy, is nonetheless sweet. Revenue ton-miles rose 9.8 percent in 1979 for the railway, generating a record in Chicago. Total net income for the Chicago holding company increased 38 percent in 1979, yielding more than $8 a share.
With a strong anchor of its railroad network in southern California, the Santa Fe appears ready to accommodate growth and so far has detoured around any economic slowdown. "People say the recession is supposed to be just around the corner," says H. D. Fish, the railway's general manager for operations in Los Angeles and much of the West. "But the people we deal with here haven't even reached the corner."
As industrial southern California expands, as the nation assembles a new economy in the Sunbelt and across the Texas gulf coast, and as the country begins to dip deeper into Western coal reserves, Santa Fe plans to be busy transporting goods, equipment, and energy.
It is well positioned. Over the entire Santa Fe system more grain and coal are being moved. The railroad handled 9 million tons of coal in 1978, an estimated 18 million tons in 1979, and anticipates 25 million tons by 1983. While small quantities by comparison with coal carriers, the coal business for Santa Fe will further buoy the rest of the line.
But today there is little sign it will need buoying -- the current slump in automobile manufacturing is the only significant dent in the railway's traffic.
Santa Fe executives repeatedly cite one factor for their bright prospects: care of the tracks, trains, and equipment. The company returns between 16 and 18 percent of every dollar earned into improving its property. In 1980 Santa Fe plans to spend $371 million for 140 new diesel locomotives, 2,075 new freight cars, 448 miles of new and reconditioned rail, and improvements to other facilities. In 1979, $300 million was spent for capital improvements. Once charged with "gold plating" their railway, the 112-year-old company believes its policy of maintaining equipment has been vindicated by attractive profits.
"What's important is that we consistently spend money on the plant," says Mr. Welk. "We aren't playing games with maintenance. Its valuable to have the rail in top shape."
In 1976 Santa Fe opened a $50 million computerized sorting yard in Barstow to assemble trains moving in and out of southern California. Handling 4,500 cars each day, and operating smoothly, the yard is still 30 or 40 percent below capacity. The point of all the investment, says Mr. Welk, is to avoid future strain on the system and to guarantee efficiency today.
Among drags on that efficiency, Mr. Welk cites federal over-regulation and inflation as the two biggest culprits. While not specific about which federal rules he would like altered, because negotiations over various deregulation proposals continue in Congress, Mr. Welk asks for equal tax and rate treatment for the railroads in comparison with airlines and companies that use domestic waterways.
"We have had layer on layer of regulations that have hobbled the ability of the railroad to compete in the marketplace," he says. "Railroads have never been treated like other businesses. There is still a reference back to the period when they were regarded as monopolies -- which they certainly are not."
The general trend of government extracting itself from railroad operations, he adds, is encouraging.
But inflation is not. "We are just getting clobbered," says Mr. Welk.
In October 1978 diesel fuel cost 34 cents a gallon. Last October, the price was 68 cents a gallon. It is higher today. But burning some 1 million gallons of fuel each day, the Santa Fe Railways pays an extra $10,000 in costs each time the price of fuel rises one penny per gallon.
Shippers and consumers don't always pay all the extra freight costs. "You buy it, pay for it, and then go look to see how to get it back," says Mr. Welk.
To save fuel, the railroad introduced the "fuel foiler" in 1978, a streamlined, lightweight railroad car designed to handle piggyback truck trailers. Compared with conventional flatcars, the new train is 35 percent lighter. On a round trip between Chicago and Los Angeles the railroad saves 6, 000 gallons of diesel fuel. The company, not surprisingly, is building four more "fuel foilers."
With the national concern over energy supplies, however, Santa Fe expects its services to be in high demand to move coal from the coal-rich belts around the West to cities and industry on the California and Texas coasts.
"We feel we may be part of the solution," says Mr. Fish, "instead of part of the problem."