1 00:00:07,120 --> 00:00:09,920 Speaker 1: Hi everyone, this is Lee Klasgow when We're Talking Transports. 2 00:00:09,960 --> 00:00:13,480 Speaker 1: Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host, 3 00:00:13,520 --> 00:00:17,439 Speaker 1: Lee Clasgow, senior freight transportation logistics analyst at Bloomberg Intelligence, 4 00:00:17,640 --> 00:00:20,439 Speaker 1: Bloomberg's en house research arm of almost five hundred analysts 5 00:00:20,440 --> 00:00:23,599 Speaker 1: and strategists around the globe. Before diving in a little 6 00:00:23,600 --> 00:00:26,720 Speaker 1: public service announcement, your support is instrumental to keep bringing 7 00:00:26,760 --> 00:00:30,080 Speaker 1: great guests and conversations to you, our listeners, So we 8 00:00:30,120 --> 00:00:32,720 Speaker 1: need your support. So please, if you enjoy this podcast, 9 00:00:32,800 --> 00:00:35,559 Speaker 1: share it, like it and leave a comment. Also, if 10 00:00:35,600 --> 00:00:37,600 Speaker 1: you have any ideas for a future episodes, or just 11 00:00:37,680 --> 00:00:40,280 Speaker 1: want to talk transports, please hit me up on the 12 00:00:40,280 --> 00:00:43,720 Speaker 1: Bloomberg terminal, on LinkedIn or on Twitter at Logistics Lee. 13 00:00:44,080 --> 00:00:47,280 Speaker 1: Now onto our episode. We're delighted to have Tony Hatch, 14 00:00:47,360 --> 00:00:51,720 Speaker 1: an analyst consultant at ABH Consulting and a fixture within 15 00:00:51,760 --> 00:00:55,040 Speaker 1: the North American railroad industry. Tony has been a senior 16 00:00:55,120 --> 00:00:59,320 Speaker 1: transportation analyst on Wall Street for over twenty years, starting 17 00:00:59,360 --> 00:01:03,360 Speaker 1: at Sell Brothers, proceeding to Argus Painweber, and most recently 18 00:01:03,800 --> 00:01:08,399 Speaker 1: notat West Markets. Prior to starting his independent consultancy in 19 00:01:08,480 --> 00:01:09,520 Speaker 1: nineteen ninety nine. 20 00:01:10,080 --> 00:01:11,039 Speaker 2: Tony is known for. 21 00:01:11,080 --> 00:01:14,240 Speaker 1: His knowledge of the intermodal area where the various modes 22 00:01:14,240 --> 00:01:18,920 Speaker 1: of free transportation converge, on which he has held several 23 00:01:19,040 --> 00:01:23,640 Speaker 1: dozen specialized conferences. Recently, Tony has been providing not only 24 00:01:23,720 --> 00:01:28,440 Speaker 1: traditional institutional transportation research, but also providing due diligence in 25 00:01:28,520 --> 00:01:32,679 Speaker 1: other services to new forms of transport investments, such as 26 00:01:32,920 --> 00:01:38,080 Speaker 1: private equity infrastructure hedge funds in such areas as intermodal 27 00:01:38,360 --> 00:01:43,240 Speaker 1: rail maintenance and construction rail cars and three pls. He 28 00:01:43,360 --> 00:01:48,800 Speaker 1: has a research partnership with PLG Consulting and an equity 29 00:01:48,880 --> 00:01:54,960 Speaker 1: marketing partnership with CV Securities. Along with Progressive Railroading magazine, 30 00:01:55,480 --> 00:01:59,560 Speaker 1: he co founded, CO presents and leads Rail Trends, the 31 00:01:59,600 --> 00:02:03,200 Speaker 1: most apprehensive rail conference every fall in New York City. 32 00:02:03,760 --> 00:02:06,080 Speaker 1: Welcome to the podcast, Tony Lee. 33 00:02:06,120 --> 00:02:09,520 Speaker 3: I'm sorry about the length of that autobiography that that 34 00:02:09,600 --> 00:02:12,519 Speaker 3: bio there. It's I'm really happy to be here. I 35 00:02:12,520 --> 00:02:14,400 Speaker 3: appreciate what you do and I appreciate your having me 36 00:02:15,280 --> 00:02:15,880 Speaker 3: my pleasure. 37 00:02:17,000 --> 00:02:20,520 Speaker 1: I've always enjoyed talking to you throughout the years at 38 00:02:20,600 --> 00:02:26,760 Speaker 1: various you know, investor conferences, and you know, I really 39 00:02:26,760 --> 00:02:30,600 Speaker 1: appreciate your insights because you're probably this I don't say 40 00:02:30,639 --> 00:02:32,720 Speaker 1: this is as an insult. You're probably the oldest person 41 00:02:32,919 --> 00:02:34,840 Speaker 1: doing this right now, right because you've been doing it 42 00:02:34,880 --> 00:02:35,520 Speaker 1: for so long. 43 00:02:36,480 --> 00:02:38,840 Speaker 3: I think that's right. You know, the other people that 44 00:02:38,919 --> 00:02:42,000 Speaker 3: are senior people that we could think about there were 45 00:02:42,080 --> 00:02:45,200 Speaker 3: actually the assistance of the people that were my peers 46 00:02:45,360 --> 00:02:48,480 Speaker 3: that have lasted you know, out there and it is 47 00:02:48,480 --> 00:02:49,880 Speaker 3: you know, it's one of the things you just point 48 00:02:49,919 --> 00:02:51,720 Speaker 3: out to made me think, was we used to running 49 00:02:51,720 --> 00:02:54,880 Speaker 3: each other at these investor conferences, and given all the 50 00:02:55,240 --> 00:02:57,840 Speaker 3: craziness of the last five to seven years, they've been 51 00:02:57,919 --> 00:02:59,920 Speaker 3: fewer and fewer, so this is great to catch up. 52 00:03:00,120 --> 00:03:02,160 Speaker 3: They used to be annual events that a railroad would 53 00:03:02,160 --> 00:03:05,680 Speaker 3: hold and investigature maybe every other year. And at CSX 54 00:03:05,760 --> 00:03:07,560 Speaker 3: last year the last time I saw you that was 55 00:03:07,600 --> 00:03:10,600 Speaker 3: the first one and I think five So that's unfortunate. 56 00:03:11,320 --> 00:03:15,160 Speaker 1: Absolutely, So you know, why don't you tell us what 57 00:03:15,320 --> 00:03:18,960 Speaker 1: the state of the North America railroad railroading industry is 58 00:03:19,040 --> 00:03:19,480 Speaker 1: right now? 59 00:03:20,320 --> 00:03:24,519 Speaker 3: Quiet anxiety? You know, I don't know where we are. 60 00:03:24,720 --> 00:03:27,040 Speaker 3: You know, when you all hear this, what will be 61 00:03:27,320 --> 00:03:29,280 Speaker 3: whether the world will be on the tariff you know, 62 00:03:29,360 --> 00:03:32,320 Speaker 3: trade war story, changes all the time. But one of 63 00:03:32,320 --> 00:03:35,680 Speaker 3: the problems railroads have is that they're in a derived 64 00:03:35,720 --> 00:03:39,040 Speaker 3: demand business, meaning that as we see the world changing, 65 00:03:39,480 --> 00:03:41,280 Speaker 3: they need to wait to see what their customer is 66 00:03:41,320 --> 00:03:43,640 Speaker 3: going to do. There's very little they can do but 67 00:03:43,760 --> 00:03:48,240 Speaker 3: to emphasize words like agility and resilience, as they did 68 00:03:48,280 --> 00:03:50,960 Speaker 3: in their last earnings calls, and they have approved their 69 00:03:51,000 --> 00:03:54,600 Speaker 3: service significantly off the bottoms of the pandemic recovery. That's 70 00:03:54,680 --> 00:03:57,040 Speaker 3: one thing they can control. But right now in terms 71 00:03:57,080 --> 00:03:59,680 Speaker 3: of and they maintain their guidance for earnings, but are 72 00:03:59,720 --> 00:04:03,320 Speaker 3: VeryE whereas a lot of other industries pulled it. But 73 00:04:03,680 --> 00:04:06,960 Speaker 3: they are, you know, wondering what the immediate future will 74 00:04:07,000 --> 00:04:08,600 Speaker 3: be and the long term they're going to be fine. 75 00:04:09,120 --> 00:04:10,880 Speaker 3: But I think one of the biggest problems the roads 76 00:04:10,920 --> 00:04:14,240 Speaker 3: have faced is the beginning in about January twenty twenty, 77 00:04:14,280 --> 00:04:17,200 Speaker 3: and that's an important date to remember. The railroads were 78 00:04:17,640 --> 00:04:19,839 Speaker 3: going to do with Keith Kreele of the CP case 79 00:04:20,000 --> 00:04:23,080 Speaker 3: is called pivot to growth. They'd spent the years of 80 00:04:23,120 --> 00:04:26,480 Speaker 3: the second half of the prior decade going through PSR 81 00:04:26,560 --> 00:04:30,640 Speaker 3: transformation and efficiency moves, and we're really willing and wanting 82 00:04:30,680 --> 00:04:34,560 Speaker 3: to test the growth potential out of this. They've come 83 00:04:34,680 --> 00:04:37,279 Speaker 3: pretty close to the end of the pure cost cutting 84 00:04:38,160 --> 00:04:41,320 Speaker 3: story as far as generating cash flow and whatnot, and 85 00:04:41,360 --> 00:04:44,240 Speaker 3: they really needed to grow the revenue side, and they 86 00:04:44,240 --> 00:04:45,760 Speaker 3: did that, you know, in the month and a half 87 00:04:45,760 --> 00:04:50,200 Speaker 3: before the pandemic started, followed by labor shortages, labor review, 88 00:04:50,360 --> 00:04:54,520 Speaker 3: East Palestine, trade War one. You know, now we have 89 00:04:54,600 --> 00:04:58,400 Speaker 3: Trade War two, a freight recession that has gone on 90 00:04:58,480 --> 00:05:01,960 Speaker 3: really since the end of twenty So you're seeing relevance 91 00:05:02,000 --> 00:05:04,120 Speaker 3: trying to grow at a time when they given that 92 00:05:04,160 --> 00:05:07,000 Speaker 3: they can't do it themselves, they need their customers to grow, 93 00:05:07,200 --> 00:05:09,599 Speaker 3: at a time when their customers are showing you know, 94 00:05:10,120 --> 00:05:13,840 Speaker 3: green shoots, but no full trees worth, no forest of growth. 95 00:05:14,080 --> 00:05:16,839 Speaker 3: And that's unfortunate. And we've now, you know, led by 96 00:05:16,880 --> 00:05:20,760 Speaker 3: government policy, may have another year, maybe longer, in which 97 00:05:20,800 --> 00:05:24,040 Speaker 3: we say, well, you know, they would have, but because 98 00:05:24,040 --> 00:05:26,280 Speaker 3: of the trade war and all the other the fact 99 00:05:26,279 --> 00:05:28,960 Speaker 3: that we may we're looking a little better today. But 100 00:05:29,040 --> 00:05:32,359 Speaker 3: maybe the trade war's lowers demand. It certainly looks like 101 00:05:32,400 --> 00:05:35,559 Speaker 3: it's extending the trucking recession. That's not good for the rails. 102 00:05:35,600 --> 00:05:39,320 Speaker 3: So where they are now is uncertain, and they won't 103 00:05:39,440 --> 00:05:41,920 Speaker 3: say it. They put on a very brave front. Keith 104 00:05:41,960 --> 00:05:46,120 Speaker 3: Crele probably the most, but I'd say somewhat anxious, right. 105 00:05:46,120 --> 00:05:50,440 Speaker 1: And so you know you mentioned agile and resiliency. Do 106 00:05:50,480 --> 00:05:52,599 Speaker 1: you really think the rails are either of those things. 107 00:05:53,600 --> 00:05:56,160 Speaker 3: I think over the intermediate to long term they're incredibly 108 00:05:56,200 --> 00:05:59,680 Speaker 3: resilient and agile and flexible. If you think about the 109 00:05:59,760 --> 00:06:02,599 Speaker 3: rail in the rough century that I've followed them, I 110 00:06:02,640 --> 00:06:04,760 Speaker 3: mean in the in the thirty years now that I 111 00:06:04,800 --> 00:06:10,480 Speaker 3: actually have they you know, they they were an industrial supplier, 112 00:06:10,480 --> 00:06:15,359 Speaker 3: industrial carrier. The automobiles here were manufactured. Now they're mostly 113 00:06:15,400 --> 00:06:19,120 Speaker 3: assembled with containers or trucks coming with parts. That was 114 00:06:19,160 --> 00:06:22,480 Speaker 3: a big change. The movement from you know, the Michigan, 115 00:06:22,480 --> 00:06:25,560 Speaker 3: Ohio down to the south and South US in the 116 00:06:25,560 --> 00:06:29,159 Speaker 3: you know, the Dixie States for automobile production. The move, 117 00:06:29,279 --> 00:06:32,640 Speaker 3: you know, the whole globalization move of raw materials and 118 00:06:32,680 --> 00:06:35,800 Speaker 3: finished products into containers is to showed a great deal 119 00:06:35,800 --> 00:06:39,360 Speaker 3: of flexibility. They're pivot to most recently crewed by rail. 120 00:06:39,839 --> 00:06:41,679 Speaker 3: You know when that was, when that boomed in twenty 121 00:06:41,720 --> 00:06:44,800 Speaker 3: thirteen fourteen. You know that within a year they were 122 00:06:44,800 --> 00:06:47,640 Speaker 3: able to handle that extra capacity. They are not very 123 00:06:47,640 --> 00:06:49,640 Speaker 3: good at doing it over over a quarter or two, 124 00:06:49,839 --> 00:06:52,680 Speaker 3: or over one piece of their system and not the rest, 125 00:06:53,000 --> 00:06:55,360 Speaker 3: because you know, labor is not as flexible as all that. 126 00:06:55,640 --> 00:06:58,440 Speaker 3: But over time, you know, actually, if you think about it, 127 00:06:58,480 --> 00:07:00,360 Speaker 3: you know, one of the big impediments of their growth 128 00:07:00,320 --> 00:07:03,000 Speaker 3: story for the last decade plus decade and a half 129 00:07:03,240 --> 00:07:07,000 Speaker 3: has been the reduction in coal. Railroads, you know, have 130 00:07:07,120 --> 00:07:09,600 Speaker 3: lower car loads because of that and a few other things, 131 00:07:09,720 --> 00:07:12,800 Speaker 3: but they haven't fallen apart, right. You know, coal was 132 00:07:13,080 --> 00:07:15,960 Speaker 3: what started the rail industry. They were powered by coal, 133 00:07:16,000 --> 00:07:18,800 Speaker 3: they moved coal, it remained in two thousand and eight 134 00:07:19,080 --> 00:07:21,880 Speaker 3: the biggest and most profitable component, and now, you know, 135 00:07:22,120 --> 00:07:24,480 Speaker 3: less than twenty years later, we barely talk about it. 136 00:07:24,600 --> 00:07:27,320 Speaker 3: In the short term, like the recovery from the pandemic, 137 00:07:27,720 --> 00:07:30,000 Speaker 3: they're they're the fact that they're tied to the ground 138 00:07:30,400 --> 00:07:32,960 Speaker 3: and that their labored or tied to the region, and 139 00:07:33,040 --> 00:07:36,760 Speaker 3: that they are big, somewhat cumbersome organizations, you know, shows 140 00:07:36,760 --> 00:07:38,800 Speaker 3: that they're not in the short term. But over time, 141 00:07:38,840 --> 00:07:42,000 Speaker 3: when things become obvious, they actually can allocate their capital 142 00:07:42,040 --> 00:07:46,240 Speaker 3: and their resources and pivot to you know, from you know, 143 00:07:46,360 --> 00:07:49,480 Speaker 3: industrial products, which are still important to intermodal which is 144 00:07:49,920 --> 00:07:53,680 Speaker 3: the growth opportunity, So yes and no, do answer your question. 145 00:07:54,320 --> 00:07:57,480 Speaker 1: Right, And so you know, look looking forward, where do 146 00:07:57,560 --> 00:08:00,480 Speaker 1: you see growth coming from? Since obviously it's not really 147 00:08:00,480 --> 00:08:03,800 Speaker 1: probably going to come from con over the long term 148 00:08:03,880 --> 00:08:06,080 Speaker 1: and we've seen like a bump and call this year, 149 00:08:06,920 --> 00:08:09,520 Speaker 1: but you know there's a lot of factors into that. 150 00:08:09,600 --> 00:08:12,040 Speaker 1: But you know, longer term, where is the growth going 151 00:08:12,120 --> 00:08:15,560 Speaker 1: to come for the rail industry in your opinion? 152 00:08:16,160 --> 00:08:18,840 Speaker 3: So you know, we're in a very uncertain phase about 153 00:08:18,840 --> 00:08:22,640 Speaker 3: where where will production in North America come from? Where 154 00:08:22,680 --> 00:08:25,520 Speaker 3: where will which ports are going to win? You know, 155 00:08:25,560 --> 00:08:27,800 Speaker 3: so you couldn't ask that question at a more sort 156 00:08:27,840 --> 00:08:31,120 Speaker 3: of difficult time. But in the fullness of time, innermodal 157 00:08:31,200 --> 00:08:33,719 Speaker 3: is going to be the leader. There are there's sort 158 00:08:33,760 --> 00:08:37,360 Speaker 3: of two or three areas of growth potential for railroads. 159 00:08:37,400 --> 00:08:40,360 Speaker 3: One is they have yet to recapture share they lost 160 00:08:40,840 --> 00:08:44,760 Speaker 3: with their self induced labor shortage driven service problems in 161 00:08:45,440 --> 00:08:48,600 Speaker 3: twenty one and into twenty two. So for example, in 162 00:08:48,640 --> 00:08:51,559 Speaker 3: areas like paper, I mean they have a one time comeback, 163 00:08:51,880 --> 00:08:55,360 Speaker 3: they have the services come back, the share hasn't Because 164 00:08:55,400 --> 00:08:57,920 Speaker 3: if you were a shipper that had figured out how 165 00:08:57,960 --> 00:09:00,440 Speaker 3: to pivot the truck, if your tradition on a rail 166 00:09:00,480 --> 00:09:04,200 Speaker 3: shipper like a paper company whose plants are built on 167 00:09:04,360 --> 00:09:08,120 Speaker 3: rail spurs and have bays that are fit box cars. 168 00:09:08,640 --> 00:09:10,680 Speaker 3: If you've been able to pivot the trucks, why would 169 00:09:10,720 --> 00:09:13,319 Speaker 3: you change now when trucks are giving the product away 170 00:09:13,360 --> 00:09:16,080 Speaker 3: as you write about it. Maybe I'm exaggerating there, but 171 00:09:16,160 --> 00:09:18,400 Speaker 3: that will happen. The second thing is I think they 172 00:09:18,400 --> 00:09:22,720 Speaker 3: have great opportunity recapture share in domestic intermodal. They began 173 00:09:22,800 --> 00:09:26,240 Speaker 3: to They peaked and share in twenty eighteen through problems 174 00:09:26,280 --> 00:09:29,160 Speaker 3: of their own making and global problems like the pandemic 175 00:09:29,720 --> 00:09:33,280 Speaker 3: that share dropped at port share shift. They've began to 176 00:09:33,320 --> 00:09:35,720 Speaker 3: recover in the second half of last year. They're kind 177 00:09:35,760 --> 00:09:39,000 Speaker 3: of stable now as the freight percision goes, but they 178 00:09:39,040 --> 00:09:42,320 Speaker 3: have great opportunity to grow that business, and their service 179 00:09:42,400 --> 00:09:45,840 Speaker 3: level suggests that when truck capacity shrinks, they will grow 180 00:09:45,880 --> 00:09:49,240 Speaker 3: that business. The third place they could grow is something 181 00:09:49,240 --> 00:09:51,800 Speaker 3: they've always done, but then now they're talking about more, 182 00:09:52,040 --> 00:09:56,640 Speaker 3: which is industrial production. I mean, sorry, industrial development. I 183 00:09:56,679 --> 00:09:58,800 Speaker 3: spent a lot of time talking about it. That's always 184 00:09:58,800 --> 00:10:00,960 Speaker 3: an opportunity, and I would combine that with sort of 185 00:10:01,040 --> 00:10:05,640 Speaker 3: new industries battery, you know, which may be delayed by 186 00:10:05,679 --> 00:10:08,200 Speaker 3: the current political situation. But certainly there was a lot 187 00:10:08,240 --> 00:10:11,880 Speaker 3: of talk last year for the twelve months prior about 188 00:10:12,960 --> 00:10:17,319 Speaker 3: new energy opportunities to carry rail freight as well as 189 00:10:17,320 --> 00:10:20,079 Speaker 3: the power rail freight. But so, you know, industrial development 190 00:10:20,120 --> 00:10:22,480 Speaker 3: and the problem the success in c Sex is highlighted 191 00:10:22,760 --> 00:10:25,360 Speaker 3: that other carriers are talking about. You know, if you 192 00:10:25,520 --> 00:10:30,200 Speaker 3: see near shoring, you know, if you see reshoring, railroads 193 00:10:30,240 --> 00:10:32,559 Speaker 3: will play a big role in that. I'm not sure 194 00:10:32,640 --> 00:10:35,319 Speaker 3: right now that we're going to see major capital decisions 195 00:10:35,400 --> 00:10:39,800 Speaker 3: or supply chain decisions by enormous industrial consumer companies until 196 00:10:39,840 --> 00:10:41,720 Speaker 3: they figure out what the world is really going to be. 197 00:10:42,559 --> 00:10:45,360 Speaker 3: But you know, Mexico fits into that. Mexico is both 198 00:10:45,679 --> 00:10:49,640 Speaker 3: a intermotial play and an industrial development play, and the 199 00:10:49,679 --> 00:10:54,880 Speaker 3: connection of the whole NAFTA or USMCA economy, I think 200 00:10:55,000 --> 00:10:57,960 Speaker 3: is a you know, tremendous opportunity for rail and it 201 00:10:58,000 --> 00:11:00,920 Speaker 3: may be sort of on hold now, but it's not. 202 00:11:00,880 --> 00:11:04,439 Speaker 1: Going to go away, right, you know, absolutely, And it's 203 00:11:04,440 --> 00:11:07,400 Speaker 1: harder for rails to compete because diesel prices are pretty 204 00:11:07,440 --> 00:11:11,000 Speaker 1: low and truck rates are low, so the dollar savings 205 00:11:11,040 --> 00:11:13,800 Speaker 1: really aren't that compelling. And at the end of the day, 206 00:11:14,040 --> 00:11:16,400 Speaker 1: A chuck tends to provide better service because they can 207 00:11:16,440 --> 00:11:17,240 Speaker 1: go door to door. 208 00:11:17,360 --> 00:11:19,960 Speaker 2: For a rail, the freight needs to be touched a 209 00:11:19,960 --> 00:11:20,600 Speaker 2: couple of times. 210 00:11:20,960 --> 00:11:23,960 Speaker 3: What I hear is you know, yeah, railroad X, I 211 00:11:24,000 --> 00:11:26,720 Speaker 3: see that you're running. You know, back to trip plane 212 00:11:26,720 --> 00:11:28,880 Speaker 3: compliance levels of ninety percent. You know, you're back to 213 00:11:28,920 --> 00:11:31,160 Speaker 3: where you are. Maybe you're better, But why would I 214 00:11:31,160 --> 00:11:34,360 Speaker 3: you know, at this point, at these prices, when they 215 00:11:34,360 --> 00:11:35,880 Speaker 3: pick it up right where I want and take it 216 00:11:35,880 --> 00:11:38,280 Speaker 3: directly where I want, why would I take a chance? 217 00:11:38,679 --> 00:11:41,480 Speaker 3: Keep me informed? You know you we'll be back to you. 218 00:11:42,000 --> 00:11:43,160 Speaker 3: Just I'm not going to do it now. 219 00:11:43,920 --> 00:11:44,120 Speaker 2: Yeah. 220 00:11:44,360 --> 00:11:46,640 Speaker 1: So for those who know that the rails, the large 221 00:11:46,640 --> 00:11:51,240 Speaker 1: class one rails, they've since deregulation nineteen eighty, the industry's 222 00:11:51,280 --> 00:11:56,800 Speaker 1: consolidated pretty significantly. There's two players in the West, two 223 00:11:56,840 --> 00:12:00,240 Speaker 1: players in the East, and the Canadians and so on 224 00:12:00,320 --> 00:12:02,439 Speaker 1: that Tony, you know, is there an area or is 225 00:12:02,440 --> 00:12:05,720 Speaker 1: there a network that you think is better positioned for 226 00:12:06,280 --> 00:12:07,280 Speaker 1: the growth that's out there? 227 00:12:07,360 --> 00:12:08,440 Speaker 2: Longer term? 228 00:12:08,559 --> 00:12:12,079 Speaker 3: Well, you know it the first fiftory or what is 229 00:12:12,120 --> 00:12:15,400 Speaker 3: what are the goal of the current trade you know, positions? 230 00:12:15,559 --> 00:12:18,680 Speaker 3: When does the administration want I mean, certainly the Canadians 231 00:12:18,720 --> 00:12:24,400 Speaker 3: run transcontinental. They run the fastest services into the Midwest 232 00:12:24,520 --> 00:12:27,920 Speaker 3: from Asia. Maybe that won't be as important in the future. 233 00:12:28,640 --> 00:12:30,800 Speaker 3: The Western carriage traditionally have had the growth. There is 234 00:12:30,880 --> 00:12:34,800 Speaker 3: huge intermodal opportunities. In the East. You have lower intermotial share, 235 00:12:34,840 --> 00:12:38,480 Speaker 3: but that when trucks get tight, that's an opportunity. In addition, 236 00:12:38,600 --> 00:12:41,960 Speaker 3: the two Eastern carriers have the Southeast, and that's where 237 00:12:42,000 --> 00:12:43,920 Speaker 3: a lot of you know, if you're going to reshore 238 00:12:44,480 --> 00:12:46,679 Speaker 3: or even just in the normal course of business development 239 00:12:46,760 --> 00:12:49,679 Speaker 3: in normal times for getting any big changes. You know, 240 00:12:49,679 --> 00:12:51,920 Speaker 3: a lot of stuff is happening in Alabama and for 241 00:12:52,080 --> 00:12:55,040 Speaker 3: you know those so everybody has a piece of a 242 00:12:55,080 --> 00:12:57,600 Speaker 3: growth story. Depends on how the cards shakeout. And of 243 00:12:57,640 --> 00:13:01,600 Speaker 3: course both Canadian railroads also run like a tee down 244 00:13:01,679 --> 00:13:04,800 Speaker 3: into the into the Gulf area. One goes into Louisiana 245 00:13:04,800 --> 00:13:07,960 Speaker 3: and then CPKC goes through Texas all the way to Mexico. 246 00:13:08,400 --> 00:13:10,720 Speaker 3: So you know, if you restore, we're gonna we're gonna 247 00:13:11,120 --> 00:13:14,360 Speaker 3: renew and refresh, I hope, and not cancel us MC 248 00:13:14,480 --> 00:13:16,920 Speaker 3: A two. It's due next year, it'll probably happen this year. 249 00:13:17,320 --> 00:13:20,280 Speaker 3: You know, if we restore the North American continent as 250 00:13:20,280 --> 00:13:23,240 Speaker 3: an economic fortress and forget about fifty per state and 251 00:13:23,280 --> 00:13:25,840 Speaker 3: other things like that. Then you know, the opportunity to 252 00:13:25,840 --> 00:13:29,160 Speaker 3: move through you know, Mexico, through Texas into the Midwest 253 00:13:29,160 --> 00:13:31,439 Speaker 3: and in the southeast and linking these growth areas is 254 00:13:31,480 --> 00:13:34,640 Speaker 3: a great opportunity. I'm not sure it was looking good 255 00:13:35,120 --> 00:13:37,319 Speaker 3: and now everybody's sort of sitting on their hands. That's 256 00:13:37,360 --> 00:13:39,280 Speaker 3: the anxiety part that I meant. 257 00:13:39,800 --> 00:13:44,839 Speaker 1: Right In Canadian Pacific, Kansas Southern as the most exposure 258 00:13:44,880 --> 00:13:49,080 Speaker 1: to that cross border business with Mexico, followed by Union Pacific. 259 00:13:49,800 --> 00:13:51,600 Speaker 2: You know, you mentioned you know in the. 260 00:13:51,559 --> 00:13:53,600 Speaker 1: East, you know, one of the one of the challenges 261 00:13:53,640 --> 00:13:55,960 Speaker 1: for the East because the truck competitive market there's a 262 00:13:56,000 --> 00:13:58,520 Speaker 1: lot shorter length of hall. Can you talk about how 263 00:13:58,600 --> 00:14:01,200 Speaker 1: length of hall comes into play when a rail is 264 00:14:01,200 --> 00:14:03,199 Speaker 1: trying to compete with with another mode. 265 00:14:03,920 --> 00:14:07,760 Speaker 3: Well, railroads are actually almost always been really good at 266 00:14:07,800 --> 00:14:09,920 Speaker 3: the long haul part of their business. Who they're harder 267 00:14:09,960 --> 00:14:14,199 Speaker 3: when they at terminals in airline transfers. You know, the 268 00:14:14,720 --> 00:14:18,600 Speaker 3: timing and the coordination causes friction and sometimes that leads to, 269 00:14:18,920 --> 00:14:21,640 Speaker 3: if not failure, then delay. What railroads do really well 270 00:14:21,720 --> 00:14:23,720 Speaker 3: is take a loaded train and move it a long distance, 271 00:14:24,080 --> 00:14:27,240 Speaker 3: and so they're very competitive in double stacked. Nature of 272 00:14:27,240 --> 00:14:31,480 Speaker 3: bringing containers from LA to Chicago is the classic lane. 273 00:14:31,600 --> 00:14:34,760 Speaker 3: There are other ways that are competitive in that, but 274 00:14:34,800 --> 00:14:38,840 Speaker 3: that's one that's that's just not just imported, it's reclassified domestic. 275 00:14:38,880 --> 00:14:42,400 Speaker 3: They're double stacked. You know, they run I'm sure from 276 00:14:42,480 --> 00:14:46,080 Speaker 3: terminal to terminal. BNSF runs ninety eight percent on time. 277 00:14:46,760 --> 00:14:49,160 Speaker 3: Does that door to door on time? No, although they've 278 00:14:49,200 --> 00:14:52,000 Speaker 3: got got pretty qig numbers right now. So the longer 279 00:14:52,040 --> 00:14:55,000 Speaker 3: the haul, the things that railroads do well automatically are 280 00:14:55,320 --> 00:14:57,840 Speaker 3: you know, longer haul because that really also plays to 281 00:14:57,880 --> 00:15:00,400 Speaker 3: their fuel strength, their labor. You know, it's a two 282 00:15:00,440 --> 00:15:03,080 Speaker 3: man crew right now, you change it maybe ten times 283 00:15:03,120 --> 00:15:06,360 Speaker 3: suites twenty people can run three hundred trucks across the 284 00:15:06,480 --> 00:15:10,800 Speaker 3: entire West versus the truck drow. So labor, fuel emissions 285 00:15:10,880 --> 00:15:13,880 Speaker 3: when that matters again. You know, if you have density, 286 00:15:14,160 --> 00:15:16,400 Speaker 3: if you have weight, railroads do really good at haul 287 00:15:16,440 --> 00:15:19,040 Speaker 3: in coal because trucks, you know, you need so many 288 00:15:19,080 --> 00:15:21,440 Speaker 3: trucks to carry the same amount as a railcar. Those 289 00:15:21,480 --> 00:15:24,240 Speaker 3: are the natural advantages. I think the railroads also have 290 00:15:24,280 --> 00:15:27,400 Speaker 3: an advantage in their infrastructure, which they paid for as 291 00:15:27,440 --> 00:15:29,880 Speaker 3: opposed to the highway system, and that you would think 292 00:15:29,960 --> 00:15:32,240 Speaker 3: is a disadvantage, but that allows them to make capital 293 00:15:32,280 --> 00:15:36,560 Speaker 3: decisions quickly, and their infrastructure got to be rating from 294 00:15:36,600 --> 00:15:39,680 Speaker 3: the American Society of Civil Engineers in the highway consistently 295 00:15:39,680 --> 00:15:42,240 Speaker 3: gets a D. So the fact is that their infrastructure 296 00:15:42,360 --> 00:15:44,720 Speaker 3: could shape as a plus and that adds to their 297 00:15:44,720 --> 00:15:47,320 Speaker 3: long haul bit. But one thing we haven't talked about 298 00:15:47,360 --> 00:15:50,600 Speaker 3: as short lines. I follow them the Class one railroads 299 00:15:50,640 --> 00:15:52,600 Speaker 3: the six, and I followed being a saf even though 300 00:15:52,640 --> 00:15:55,080 Speaker 3: it's not publicly traded, that's the sun. And then there 301 00:15:55,080 --> 00:15:57,480 Speaker 3: are all these moons, and the short lines do that 302 00:15:58,560 --> 00:16:01,880 Speaker 3: first and last mile well and a great cooperation. Being 303 00:16:01,920 --> 00:16:06,200 Speaker 3: a Class one and a short line can often replicate 304 00:16:06,360 --> 00:16:08,600 Speaker 3: pretty closely, if not one hundred percent, the door to 305 00:16:08,680 --> 00:16:10,640 Speaker 3: door service a truck can do. And I want to 306 00:16:10,640 --> 00:16:13,560 Speaker 3: point out the union specific of all carriers has signed 307 00:16:13,560 --> 00:16:18,160 Speaker 3: two deals Eugene organ and Kansas City, Missouri to work 308 00:16:18,240 --> 00:16:21,800 Speaker 3: with you to turn over their terminal and their last 309 00:16:21,880 --> 00:16:24,280 Speaker 3: mile business to a short line to do what they 310 00:16:24,280 --> 00:16:26,360 Speaker 3: could do best. And I think that's a real that's 311 00:16:26,400 --> 00:16:28,960 Speaker 3: a real glimmer. That's a really good sign in a 312 00:16:29,080 --> 00:16:30,800 Speaker 3: very what's been so far a very difficult year. 313 00:16:30,920 --> 00:16:33,000 Speaker 2: But are they doing that to lower their O R? 314 00:16:33,280 --> 00:16:36,320 Speaker 1: Is this like a kind of like a shuffling of 315 00:16:36,480 --> 00:16:39,760 Speaker 1: the deck if you well, because you know, at least 316 00:16:39,760 --> 00:16:43,480 Speaker 1: as far as i'm I understand it, those sort of 317 00:16:43,520 --> 00:16:47,520 Speaker 1: movements tend to have higher R. And o R is 318 00:16:47,560 --> 00:16:50,120 Speaker 1: an operating ratio for those that don't know, an operating 319 00:16:50,240 --> 00:16:53,080 Speaker 1: ratio is the inverse of an ebit margin. So the 320 00:16:53,240 --> 00:16:56,880 Speaker 1: lower the number, the better the rails. UH really have 321 00:16:56,960 --> 00:17:00,680 Speaker 1: the ability to operate below sixty, which is you know, 322 00:17:00,720 --> 00:17:04,879 Speaker 1: a highly profitable industrial company. So I'm sorry about that 323 00:17:05,080 --> 00:17:07,879 Speaker 1: tangent there, but you know, is some of that do 324 00:17:07,920 --> 00:17:10,800 Speaker 1: you think because they're looking to kind of tweak their R? 325 00:17:11,640 --> 00:17:15,680 Speaker 3: So yes, you know the operating ratio, and there's what 326 00:17:15,800 --> 00:17:18,400 Speaker 3: I call the cult of the operating ratio. BIL rights 327 00:17:18,440 --> 00:17:21,000 Speaker 3: can truly drive their cost down, so when they're not growing, 328 00:17:21,600 --> 00:17:24,800 Speaker 3: shorter term investors can demand and often get managements to 329 00:17:25,080 --> 00:17:28,440 Speaker 3: change or to or to change policy to in fear 330 00:17:28,480 --> 00:17:30,960 Speaker 3: of change, to drive cost down and cut what I 331 00:17:31,040 --> 00:17:34,520 Speaker 3: think might be as much a muscle as fat. In 332 00:17:34,640 --> 00:17:37,119 Speaker 3: this particular case, I think you accomplished both I mean, 333 00:17:37,160 --> 00:17:40,119 Speaker 3: as Keith Crile of CPKC would say, you know, the 334 00:17:40,200 --> 00:17:42,000 Speaker 3: o R is the outcome of the process, and if 335 00:17:42,040 --> 00:17:44,800 Speaker 3: you do things well, you know you should be able 336 00:17:44,800 --> 00:17:48,320 Speaker 3: to grow and reduce your o R or increase your margin. 337 00:17:48,800 --> 00:17:51,960 Speaker 3: So up as definitely the case of Oregon also talked 338 00:17:52,000 --> 00:17:55,320 Speaker 3: about headcount reduction because they're going to transfer, there'll be 339 00:17:55,440 --> 00:17:58,800 Speaker 3: somebody else's, you know, Genesion and Wyoming's employees are not theirs. 340 00:17:59,160 --> 00:18:01,800 Speaker 3: That really was a political shot across the bow at 341 00:18:02,280 --> 00:18:04,359 Speaker 3: the labor Union says that we begin to think about 342 00:18:04,359 --> 00:18:07,960 Speaker 3: the next amount of labor. That was a calculated jab 343 00:18:08,720 --> 00:18:12,359 Speaker 3: from CEO Jim Venna because fifteen people to the Mighty 344 00:18:12,480 --> 00:18:14,600 Speaker 3: Union Pacific is like the change you can find in 345 00:18:14,680 --> 00:18:18,119 Speaker 3: your couch, right. So I don't think it's OAR driven. 346 00:18:18,160 --> 00:18:20,480 Speaker 3: I truly think it's service driven and growth driven. There's 347 00:18:20,520 --> 00:18:23,800 Speaker 3: been other cases that CN has turned some business over 348 00:18:23,840 --> 00:18:27,080 Speaker 3: in Louisiana in a similar way a switching way to 349 00:18:27,240 --> 00:18:30,119 Speaker 3: a Watka which is the second largest trotlet holy company, 350 00:18:30,400 --> 00:18:32,800 Speaker 3: and they grew in one year their total car loads 351 00:18:32,840 --> 00:18:36,560 Speaker 3: by thirty percent, allowing creating a pre block train to 352 00:18:36,880 --> 00:18:38,920 Speaker 3: allow CN to do what they do best which is 353 00:18:39,000 --> 00:18:41,960 Speaker 3: go terminal the terminal over long distance, and I think 354 00:18:41,960 --> 00:18:44,399 Speaker 3: it's a win win. It may not work everywhere, it 355 00:18:44,520 --> 00:18:47,280 Speaker 3: may get resisted by labor, they may be political ramifications, 356 00:18:47,640 --> 00:18:50,040 Speaker 3: but the UP is trying it twice. And I think 357 00:18:50,080 --> 00:18:53,119 Speaker 3: they're doing it for service. They got beaten up by 358 00:18:53,160 --> 00:18:55,760 Speaker 3: the STB in the past for their first and last 359 00:18:55,800 --> 00:18:59,800 Speaker 3: mile failures under the prior leadership, and I think this is, 360 00:19:00,200 --> 00:19:02,600 Speaker 3: you know, a way to I mean that service should, 361 00:19:02,600 --> 00:19:05,080 Speaker 3: to quote the late great Pat Onspier of Kansaity Southern 362 00:19:05,440 --> 00:19:08,560 Speaker 3: service begets growth. Kind of an awkward phrase, but I 363 00:19:08,680 --> 00:19:11,200 Speaker 3: love Pat and so I really think that in this case, 364 00:19:11,240 --> 00:19:14,080 Speaker 3: Jim Vening in pacifically using this to see if they 365 00:19:14,119 --> 00:19:16,960 Speaker 3: can grow business that would be highway driven, they'll accept 366 00:19:17,000 --> 00:19:17,679 Speaker 3: a better margin. 367 00:19:17,800 --> 00:19:19,480 Speaker 2: Oh yeah, of course, of course. 368 00:19:19,720 --> 00:19:23,280 Speaker 1: You know you mentioned regulators, the Surface Transportation Board and 369 00:19:23,480 --> 00:19:28,639 Speaker 1: and and regulation. Are there any regulations in Congress or 370 00:19:29,119 --> 00:19:31,600 Speaker 1: at the STB that you're paying close attention to that 371 00:19:31,720 --> 00:19:34,840 Speaker 1: you think could be good or bad for the industry. 372 00:19:35,520 --> 00:19:38,399 Speaker 3: So I think the new chairman of the STB, Patrick Fuchs, 373 00:19:38,520 --> 00:19:42,920 Speaker 3: is incredibly smart. He's you know, pro rail industry. That 374 00:19:42,960 --> 00:19:44,840 Speaker 3: doesn't mean he doesn't look out for shippers. I think 375 00:19:44,920 --> 00:19:47,080 Speaker 3: he's going to be fine. I don't see. I think 376 00:19:47,119 --> 00:19:50,480 Speaker 3: that we're sort of past where it past peak STB 377 00:19:50,640 --> 00:19:53,680 Speaker 3: power during the merger, a merger of any kind that's 378 00:19:53,960 --> 00:19:57,480 Speaker 3: they have full power. I think some of the rules 379 00:19:57,520 --> 00:20:01,160 Speaker 3: like reciprocal switching will be more market oriented. I don't 380 00:20:01,160 --> 00:20:03,160 Speaker 3: think so. I think the SEVN anyways will get out 381 00:20:03,200 --> 00:20:05,520 Speaker 3: of the way of growth. I don't think they were 382 00:20:05,560 --> 00:20:08,680 Speaker 3: really a huge impediment before we could talk about the 383 00:20:08,840 --> 00:20:10,760 Speaker 3: sort of being a rise in m and a conversation 384 00:20:11,160 --> 00:20:14,360 Speaker 3: which I think is mostly that just chatter out there. 385 00:20:14,760 --> 00:20:17,680 Speaker 3: But the scb's in fine hands and will work with 386 00:20:17,840 --> 00:20:22,879 Speaker 3: railroads and shippers to see more transparent, quicker solutions. The 387 00:20:22,960 --> 00:20:26,760 Speaker 3: other big regulatory agencies the Federal Railroad Administration, which regulates 388 00:20:26,800 --> 00:20:30,560 Speaker 3: safety and was a huge impediment over the prior four 389 00:20:30,640 --> 00:20:35,080 Speaker 3: years to any technological advances that already exist, such as 390 00:20:35,160 --> 00:20:39,800 Speaker 3: autonomous inspection of track or more even more complex of 391 00:20:39,960 --> 00:20:42,840 Speaker 3: railcars that does the job, you know, ninety percent better 392 00:20:42,920 --> 00:20:45,840 Speaker 3: than the human eye freeze that capacity. You used to 393 00:20:45,840 --> 00:20:48,280 Speaker 3: have to walk the length of the train and eyeball 394 00:20:48,400 --> 00:20:50,800 Speaker 3: the cars to see that everything was right. Imagine doing 395 00:20:50,840 --> 00:20:53,160 Speaker 3: that in the rain and the cold, and the packers 396 00:20:53,240 --> 00:20:56,080 Speaker 3: lost and all that kind of stuff that had been 397 00:20:56,119 --> 00:21:00,320 Speaker 3: all forestalled by the prior administration. The biggest win and 398 00:21:00,400 --> 00:21:02,520 Speaker 3: the change administration for railroads, and there are a lot 399 00:21:02,600 --> 00:21:05,119 Speaker 3: more losses, but the biggest win is a changeover in 400 00:21:05,160 --> 00:21:08,200 Speaker 3: the f RA which should allow the application of already 401 00:21:08,280 --> 00:21:11,440 Speaker 3: existing technology, which I think will be a big help, 402 00:21:12,000 --> 00:21:18,440 Speaker 3: uh in terms of you know, reliability, uh, resiliency, you know, detection, safety, 403 00:21:19,119 --> 00:21:19,560 Speaker 3: et cetera. 404 00:21:20,160 --> 00:21:22,879 Speaker 1: Yeah, and some of these technologies that can be like 405 00:21:22,960 --> 00:21:26,600 Speaker 1: that movie The Minority Report where they find defects before 406 00:21:26,640 --> 00:21:29,159 Speaker 1: they happen, Yes, and so they can they can they 407 00:21:29,200 --> 00:21:32,359 Speaker 1: can fix them before it becomes an issue, you know, 408 00:21:32,440 --> 00:21:35,040 Speaker 1: which is uh, you know, a win win really for 409 00:21:35,160 --> 00:21:38,520 Speaker 1: the rails and for the workers because it's a safer network, 410 00:21:38,560 --> 00:21:41,200 Speaker 1: and then also for shippers because it's a it's a 411 00:21:41,359 --> 00:21:44,400 Speaker 1: more I guess resilient network doesn't. 412 00:21:44,119 --> 00:21:46,880 Speaker 3: Break down, it doesn't, you know. East palscene was an anomaly, 413 00:21:47,000 --> 00:21:48,960 Speaker 3: but you know, if it brave, if you have to 414 00:21:49,080 --> 00:21:50,720 Speaker 3: do this work and change out of car that you know, 415 00:21:50,760 --> 00:21:54,920 Speaker 3: you're probably blocking crossings, you know, et cetera. There's there's 416 00:21:55,000 --> 00:21:57,359 Speaker 3: not really a loser there and the idea is not 417 00:21:57,880 --> 00:22:00,119 Speaker 3: this isn't a job reduction effort. It really should be 418 00:22:00,560 --> 00:22:03,360 Speaker 3: a win win. I think there was a very myopic 419 00:22:03,440 --> 00:22:06,119 Speaker 3: and simple minded leadership at the FRA before and I 420 00:22:06,200 --> 00:22:08,000 Speaker 3: think that's all going to change. And I think that's 421 00:22:08,000 --> 00:22:10,560 Speaker 3: a huge positive. You know, I think the STB will 422 00:22:10,600 --> 00:22:16,080 Speaker 3: remain a neutral body, maybe more positive bent uh. And 423 00:22:16,840 --> 00:22:19,760 Speaker 3: you know then there's trade wars and all other things. 424 00:22:20,280 --> 00:22:23,240 Speaker 2: Yeah, so what's your view on one man cruise and 425 00:22:23,320 --> 00:22:24,200 Speaker 2: one person cruise? 426 00:22:25,000 --> 00:22:28,159 Speaker 3: So the in the hearings this week for the new 427 00:22:28,280 --> 00:22:32,639 Speaker 3: leader of the FRA, he perroted the dot secretary saying 428 00:22:32,840 --> 00:22:37,240 Speaker 3: that you know they support the fire regulation on mandated 429 00:22:37,240 --> 00:22:39,640 Speaker 3: two bank cruise the United States. We've seen it where 430 00:22:39,680 --> 00:22:42,240 Speaker 3: it works, you know, with no man cruise in Australia. 431 00:22:42,520 --> 00:22:46,000 Speaker 3: The technology exists today. I know publicly, the appetite isn't 432 00:22:46,040 --> 00:22:48,480 Speaker 3: there for that. It is ironic that it's acceptable to 433 00:22:48,560 --> 00:22:52,439 Speaker 3: test autonomous cars and trucks on public land, on private 434 00:22:52,560 --> 00:22:56,159 Speaker 3: land right where people do trespass but they shouldn't. So 435 00:22:57,119 --> 00:23:00,399 Speaker 3: but getting to one man crew, the railroads dodged a bullet, 436 00:23:00,880 --> 00:23:03,560 Speaker 3: or successfully lobbied away a bullet that was going to 437 00:23:03,600 --> 00:23:06,480 Speaker 3: potentially be legislated, and that would have made it very 438 00:23:06,600 --> 00:23:09,159 Speaker 3: hard to break down. The number of people in a 439 00:23:09,240 --> 00:23:12,600 Speaker 3: train is usually a negotiated thing, and if you could 440 00:23:12,600 --> 00:23:14,760 Speaker 3: do man on the ground, you actually get people to 441 00:23:14,840 --> 00:23:17,639 Speaker 3: have more reliable hours. I have a friend who's a 442 00:23:17,680 --> 00:23:21,280 Speaker 3: major league umpire. When he does, you know, comes into 443 00:23:21,320 --> 00:23:23,960 Speaker 3: New York to do replay, he gets these hours and 444 00:23:24,400 --> 00:23:25,760 Speaker 3: he doesn't have to wait for the game to be over. 445 00:23:25,880 --> 00:23:28,280 Speaker 3: He's got five to nine. If you can do that 446 00:23:28,359 --> 00:23:30,560 Speaker 3: for the person in the pickup truck, you know. And 447 00:23:30,840 --> 00:23:33,040 Speaker 3: in the East there's so many opportunities to that because 448 00:23:33,280 --> 00:23:36,280 Speaker 3: shorter distances, many more intersections with roads. You know, that's 449 00:23:36,280 --> 00:23:38,800 Speaker 3: a disadvantage to running a train, but it's an advantage 450 00:23:38,800 --> 00:23:41,120 Speaker 3: to keeping a train fresh. I think we will get 451 00:23:41,160 --> 00:23:44,480 Speaker 3: this removed from regulation and then negotiated. It'll cost them money. 452 00:23:44,760 --> 00:23:47,240 Speaker 3: When I started railroads at five people in the locomotive, 453 00:23:47,600 --> 00:23:50,840 Speaker 3: and literally three of them did nothing. But they held 454 00:23:50,880 --> 00:23:52,280 Speaker 3: on to those jobs for a long time, and when 455 00:23:52,280 --> 00:23:55,240 Speaker 3: they finally got the they negotiated the right to remove 456 00:23:55,320 --> 00:23:58,760 Speaker 3: them at quite a hefty payout. You know, hundreds of 457 00:23:58,800 --> 00:24:02,200 Speaker 3: millions of dollars. Charges were taken the ROI was great, 458 00:24:02,280 --> 00:24:04,560 Speaker 3: and the stocks did really well because of that. But 459 00:24:04,760 --> 00:24:07,560 Speaker 3: you know, this isn't like they can't be just produced. 460 00:24:07,880 --> 00:24:09,440 Speaker 3: You know, we want to bring it back into the 461 00:24:09,480 --> 00:24:12,680 Speaker 3: negotiatoration room. The one complexity is that you have two 462 00:24:12,680 --> 00:24:14,880 Speaker 3: different unions representing the two people in the cab now, 463 00:24:15,240 --> 00:24:17,520 Speaker 3: and you know, both of them don't like each other. 464 00:24:18,280 --> 00:24:20,040 Speaker 3: And the other point I want to make is this 465 00:24:20,200 --> 00:24:23,800 Speaker 3: is not a typical Republican administration. You know that might say, well, 466 00:24:23,800 --> 00:24:25,840 Speaker 3: we're pro management. You know, it's supposed to be pro 467 00:24:25,920 --> 00:24:29,280 Speaker 3: labor because the Teamsters Union is a major ally of 468 00:24:29,359 --> 00:24:32,520 Speaker 3: the Trump administration, and the Teamsters Union represents locomotive engineers. 469 00:24:33,320 --> 00:24:37,320 Speaker 1: Right, yeah, I know it's you know, the technology is 470 00:24:37,400 --> 00:24:40,800 Speaker 1: definitely there, but is there an operational reason to have 471 00:24:41,040 --> 00:24:41,520 Speaker 1: two people? 472 00:24:42,920 --> 00:24:45,560 Speaker 3: The operational reason for the second person is to help 473 00:24:45,640 --> 00:24:48,000 Speaker 3: the first and to do things like go down and 474 00:24:48,040 --> 00:24:50,040 Speaker 3: walk the train if something's wrong, to look at the 475 00:24:50,119 --> 00:24:54,000 Speaker 3: defect that wasn't caught in advance. Sometimes there's some signaling 476 00:24:54,040 --> 00:24:57,000 Speaker 3: to be done by hand. There really isn't a reason 477 00:24:57,640 --> 00:25:00,359 Speaker 3: for that second person. I mean we fly airplanes with one, right, 478 00:25:00,480 --> 00:25:06,480 Speaker 3: I mean commercial plates. There isn't There really isn't a 479 00:25:06,560 --> 00:25:09,240 Speaker 3: reason part of the issue is that political issue. The 480 00:25:09,600 --> 00:25:12,160 Speaker 3: brakemen and the conductor conductors used to be the most 481 00:25:12,200 --> 00:25:14,640 Speaker 3: important person on a train, going back into the steam era, 482 00:25:15,000 --> 00:25:18,320 Speaker 3: they ran the train, the engineer ran the locomotive. Those 483 00:25:18,400 --> 00:25:21,399 Speaker 3: are two different unions. One is a Teamster, one is AFLCIO. 484 00:25:22,119 --> 00:25:24,359 Speaker 3: The fight is who's going to be that person. I 485 00:25:24,440 --> 00:25:28,400 Speaker 3: think the Team Serve engineers have won that fight politically, 486 00:25:28,480 --> 00:25:31,080 Speaker 3: but that makes it very difficult because one union would 487 00:25:31,080 --> 00:25:34,160 Speaker 3: bear the brunt of the reductions right and the other 488 00:25:34,240 --> 00:25:36,840 Speaker 3: would not. I don't see that happening at any kind 489 00:25:36,880 --> 00:25:39,639 Speaker 3: of investment cycle. I think you might get a test, 490 00:25:40,119 --> 00:25:42,520 Speaker 3: you know, a waiver to use it on certain regions, 491 00:25:42,560 --> 00:25:44,320 Speaker 3: and then we'll see that it's safe. There is no 492 00:25:44,520 --> 00:25:47,600 Speaker 3: safety reason, there's no data to support a second person 493 00:25:47,720 --> 00:25:51,199 Speaker 3: having anything. However, it's a very easy sound bite. They 494 00:25:51,280 --> 00:25:54,919 Speaker 3: only had one person, you know. I mean, it's right, 495 00:25:55,000 --> 00:25:57,080 Speaker 3: but only one person is on the throttle and it's 496 00:25:57,119 --> 00:26:01,840 Speaker 3: on a fixed track, right, So you know, the political 497 00:26:01,920 --> 00:26:04,520 Speaker 3: aspect is something that rails have to, you know, consider, 498 00:26:05,200 --> 00:26:08,199 Speaker 3: and the unions have been very sophisticated in their approach 499 00:26:08,320 --> 00:26:10,240 Speaker 3: to this situation. Going back to the labor round of 500 00:26:10,240 --> 00:26:11,000 Speaker 3: twenty twenty. 501 00:26:11,320 --> 00:26:13,680 Speaker 1: You mentioned earlier you were talking a little bit about 502 00:26:14,080 --> 00:26:18,159 Speaker 1: you mentioned consolidation. Do you think there's any further consolidation 503 00:26:18,320 --> 00:26:20,080 Speaker 1: of the class ones or do you think we're done. 504 00:26:21,200 --> 00:26:23,959 Speaker 3: Most people thought after CP won the fight for Kensity 505 00:26:24,040 --> 00:26:27,040 Speaker 3: Southern become CPKC, that that was the last merger. I 506 00:26:27,160 --> 00:26:30,440 Speaker 3: wrote that. I still think it's true. But in the 507 00:26:30,520 --> 00:26:33,560 Speaker 3: last six months, starting with the presentation at Rail Trends 508 00:26:33,600 --> 00:26:36,960 Speaker 3: by Oliver Wyman's Adrian Bailey, who said reilroads can no 509 00:26:37,080 --> 00:26:39,760 Speaker 3: longer save the way to prosperity, we're pretty close to 510 00:26:39,840 --> 00:26:41,879 Speaker 3: the end of that story. They've got to grow and 511 00:26:42,000 --> 00:26:44,359 Speaker 3: if they can't grow, they either shrink or they merge. 512 00:26:45,280 --> 00:26:48,200 Speaker 3: So that started people thinking, and some of the thinking was, 513 00:26:48,760 --> 00:26:51,400 Speaker 3: you know that there are there is friction at inner line. 514 00:26:51,440 --> 00:26:53,040 Speaker 3: You got to meet two schedules. You have to have 515 00:26:53,359 --> 00:26:56,280 Speaker 3: two different decisions on capital to make more capacity at 516 00:26:56,280 --> 00:26:59,080 Speaker 3: the interline. You have lots of these issues that you 517 00:26:59,160 --> 00:27:03,800 Speaker 3: could get saved days transportation at an East West hub 518 00:27:03,840 --> 00:27:08,680 Speaker 3: of Chicago. Mostly that there's business that's five hundred miles 519 00:27:08,720 --> 00:27:10,800 Speaker 3: on either side of the Mississippi River that no railroad 520 00:27:10,840 --> 00:27:13,880 Speaker 3: wants to start because the revenue split wouldn't you be fair, 521 00:27:13,960 --> 00:27:16,720 Speaker 3: or if it's three hundred and seven hundred, so there's business, 522 00:27:16,760 --> 00:27:19,679 Speaker 3: they forego. Most of the CEOs in the rail business 523 00:27:19,760 --> 00:27:22,320 Speaker 3: agree with that. They think railroads would be better if 524 00:27:22,359 --> 00:27:26,240 Speaker 3: you had four that is, two American railroads cross country. 525 00:27:26,560 --> 00:27:29,160 Speaker 3: But most of the CEOs also think that the risk 526 00:27:29,880 --> 00:27:32,480 Speaker 3: of trying to prove the STV rule, which is you 527 00:27:32,640 --> 00:27:39,200 Speaker 3: must not just maintain competition, but enhance competition, that nebulous 528 00:27:39,240 --> 00:27:42,000 Speaker 3: and ill defined rule means that shippers will come with 529 00:27:42,119 --> 00:27:44,720 Speaker 3: their you know, their knives out at any hearing and 530 00:27:45,480 --> 00:27:49,240 Speaker 3: take away I think much of the benefits. That's Tony's opinion. 531 00:27:49,280 --> 00:27:51,240 Speaker 3: I think a lot of the railroaders think, you know, 532 00:27:51,320 --> 00:27:54,200 Speaker 3: until the shippers want this, they're not going to get 533 00:27:54,240 --> 00:27:57,440 Speaker 3: it passed. The other thinking behind this was five of 534 00:27:57,520 --> 00:28:00,720 Speaker 3: the six railroad CEOs are not his historically tied to 535 00:28:00,800 --> 00:28:04,240 Speaker 3: their company. Historically where you never change companies, and the 536 00:28:04,320 --> 00:28:06,560 Speaker 3: head of Norfolk Southern grew up at Norfolk Southern. That 537 00:28:06,680 --> 00:28:09,400 Speaker 3: is not the case today, and there's been a little 538 00:28:09,400 --> 00:28:11,800 Speaker 3: growth in market capital of the railroads did extremely well 539 00:28:12,320 --> 00:28:15,960 Speaker 3: this century till about twenty nineteen, and since then it's 540 00:28:16,000 --> 00:28:18,720 Speaker 3: been you know, a tougher go for lots of external 541 00:28:18,800 --> 00:28:22,119 Speaker 3: and internal reasons. And lastly, they was thinking that this 542 00:28:22,240 --> 00:28:26,359 Speaker 3: new administration might be more forgiving. But the head of 543 00:28:26,440 --> 00:28:30,000 Speaker 3: the Department of Justices, any trust division, is very anti 544 00:28:30,080 --> 00:28:34,960 Speaker 3: big company, very anti consolidation, and has actually used the 545 00:28:35,000 --> 00:28:38,480 Speaker 3: phrase rail baron in her first speech. So I don't 546 00:28:38,560 --> 00:28:40,440 Speaker 3: think the you know, I think a lot of the 547 00:28:40,520 --> 00:28:43,520 Speaker 3: thinking that people had, the magical thinking that Wall Street 548 00:28:43,560 --> 00:28:45,440 Speaker 3: had and that railroad leaders had in the fall and 549 00:28:45,720 --> 00:28:48,080 Speaker 3: around the time of the inauguration, was we've got a 550 00:28:48,240 --> 00:28:51,960 Speaker 3: traditional Republican administration that's going to allow certain things to happen, 551 00:28:52,040 --> 00:28:54,400 Speaker 3: and we do not have that. We have you know, 552 00:28:54,800 --> 00:28:57,600 Speaker 3: they're pro some big business, but they're not pro big 553 00:28:57,680 --> 00:29:01,240 Speaker 3: tech for example. You know, they're attacking for consolidation reasons. 554 00:29:01,560 --> 00:29:05,160 Speaker 3: So I don't I think it may not happen. But 555 00:29:05,200 --> 00:29:08,080 Speaker 3: as I've always said about this, uh, if I'm wrong, 556 00:29:08,160 --> 00:29:10,400 Speaker 3: I'm not a little wrong. You know, if I'm wrong, 557 00:29:10,480 --> 00:29:12,200 Speaker 3: it's gonna be too read. It'll be big, it'll be 558 00:29:12,240 --> 00:29:12,720 Speaker 3: a big fight. 559 00:29:13,040 --> 00:29:15,480 Speaker 1: We don't think there's like a natural merger between one 560 00:29:15,520 --> 00:29:19,200 Speaker 1: of the Canadians and one of the US carriers. 561 00:29:19,480 --> 00:29:24,040 Speaker 3: So historically, when you looked at the possibility of future consolidation. 562 00:29:24,240 --> 00:29:27,040 Speaker 3: You were going to put you know, the six into two. 563 00:29:27,560 --> 00:29:30,600 Speaker 3: So right now we have a harder border in Canada, 564 00:29:30,760 --> 00:29:33,320 Speaker 3: right the fifty first state of You can't see this 565 00:29:33,440 --> 00:29:36,600 Speaker 3: out there, but I air quoted that. Right there's a 566 00:29:36,720 --> 00:29:39,840 Speaker 3: rule that CN must be headquartered in Montreal. I think 567 00:29:39,920 --> 00:29:42,760 Speaker 3: you'd run into National you know, National Pride ten or 568 00:29:42,800 --> 00:29:45,840 Speaker 3: fifteen years ago might have been subsumed by a business interest. 569 00:29:46,080 --> 00:29:48,520 Speaker 3: I'm not sure that's the case now. So I think 570 00:29:48,560 --> 00:29:50,880 Speaker 3: the you know, the the natural fit would be like 571 00:29:51,040 --> 00:29:54,880 Speaker 3: b n NS Union Pacific CSX. I think there are 572 00:29:54,960 --> 00:29:58,360 Speaker 3: growth potentials and some cost productions, you know, you don't 573 00:29:58,400 --> 00:30:00,720 Speaker 3: need two CFOs, et cetera, that would come out of that. 574 00:30:00,840 --> 00:30:05,080 Speaker 3: But when you open the books, you'd have major customers. 575 00:30:05,440 --> 00:30:08,040 Speaker 3: Some of them have never been involved before because they 576 00:30:08,120 --> 00:30:10,160 Speaker 3: had other fish to fry in d C. I'm thinking 577 00:30:10,200 --> 00:30:14,240 Speaker 3: about Walmart, you know, I'm thinking about ups. These are 578 00:30:14,520 --> 00:30:16,960 Speaker 3: these are a lot of clout, a lot of political juice, 579 00:30:17,320 --> 00:30:19,360 Speaker 3: and they have the opportunity to ask for whatever they want, 580 00:30:19,800 --> 00:30:23,080 Speaker 3: and they may say it's in their fiduciary interests to 581 00:30:23,480 --> 00:30:27,400 Speaker 3: demand more access and things like that. You know, I 582 00:30:27,520 --> 00:30:31,120 Speaker 3: don't think since the reals don't know what would happen, 583 00:30:31,640 --> 00:30:33,840 Speaker 3: I'm not sure they're willing to take the chance on 584 00:30:33,960 --> 00:30:36,200 Speaker 3: that for these benefits. After all, they still have a 585 00:30:36,240 --> 00:30:37,840 Speaker 3: lot of benefits right in front of them once we 586 00:30:37,880 --> 00:30:39,760 Speaker 3: get to a politically stable situation. 587 00:30:40,800 --> 00:30:42,440 Speaker 1: And so you know, we've been talking about the long 588 00:30:42,560 --> 00:30:45,240 Speaker 1: term here for a while, so kind of like little 589 00:30:45,280 --> 00:30:49,120 Speaker 1: short term conversation or conversation about the short term. You know, 590 00:30:49,720 --> 00:30:52,080 Speaker 1: how is this all the tarrifs that's going on. How 591 00:30:52,200 --> 00:30:56,080 Speaker 1: is that impacting not only rail volume, but how is 592 00:30:56,120 --> 00:30:58,200 Speaker 1: it impacting you know, operations. 593 00:30:59,000 --> 00:31:01,840 Speaker 3: So so far it hasn't really been impacting operations. You 594 00:31:01,960 --> 00:31:04,560 Speaker 3: have some specific issues like at CSX and or Howard 595 00:31:04,560 --> 00:31:08,400 Speaker 3: Street Tunnel, but operation and a winter that was sort 596 00:31:08,440 --> 00:31:11,480 Speaker 3: of normalist but harsher than the previous one. So comparisons 597 00:31:11,680 --> 00:31:14,240 Speaker 3: in February are tougher, but rail operations are going pretty well. 598 00:31:15,320 --> 00:31:19,400 Speaker 3: We saw i think the last surge last month and 599 00:31:19,600 --> 00:31:23,360 Speaker 3: into this month of international intermodal as people were moving 600 00:31:23,400 --> 00:31:26,360 Speaker 3: supplies ahead of these tariffs that now are delayed. So 601 00:31:26,640 --> 00:31:29,480 Speaker 3: the key phrase and rail analysts and you know this league, 602 00:31:29,640 --> 00:31:32,440 Speaker 3: there's always like a hot phrase, and then everybody says 603 00:31:32,480 --> 00:31:34,880 Speaker 3: it and I'm only to say it now and put 604 00:31:34,920 --> 00:31:37,560 Speaker 3: air quotes on it. And it is about air that 605 00:31:37,640 --> 00:31:41,040 Speaker 3: we're seeing an air pocket coming right because nothing moved, 606 00:31:41,440 --> 00:31:42,960 Speaker 3: you know, And it takes two or three It takes 607 00:31:43,000 --> 00:31:45,080 Speaker 3: two weeks to a month, you know for that nothing 608 00:31:45,120 --> 00:31:48,240 Speaker 3: coming out of China to become nothing hitting La and 609 00:31:48,360 --> 00:31:51,200 Speaker 3: getting nothing getting on a train. Now we have a 610 00:31:51,280 --> 00:31:54,800 Speaker 3: ninety day you know, reprieve, which means everybody's going to 611 00:31:55,200 --> 00:31:57,640 Speaker 3: jump the shipping to try to get suppered. Back to 612 00:31:57,680 --> 00:32:01,120 Speaker 3: school of Christmas, railroads do better. They're an assembly on 613 00:32:01,200 --> 00:32:03,640 Speaker 3: They're an outdoor assembly line if you give them even flow. 614 00:32:04,520 --> 00:32:06,640 Speaker 3: One of the key Hunter things that Hunter Harrison, the 615 00:32:07,240 --> 00:32:10,320 Speaker 3: late creator of Precisions going to railroading. He would try 616 00:32:10,320 --> 00:32:13,240 Speaker 3: to use price to say, don't give me everything Thursday Friday. 617 00:32:13,680 --> 00:32:15,800 Speaker 3: You know, I'm gonna you get a pay dollar twenty 618 00:32:15,840 --> 00:32:18,320 Speaker 3: on the dollar for that. I'll charge you eighty cents 619 00:32:18,360 --> 00:32:20,840 Speaker 3: on Monday. Because we can make the benefits of moving 620 00:32:20,840 --> 00:32:23,200 Speaker 3: stuff all the time. You can. You know, your crews 621 00:32:23,240 --> 00:32:26,200 Speaker 3: show up and the train is there. What we may 622 00:32:26,280 --> 00:32:29,640 Speaker 3: be creating, I think there's more capacity than the recovery 623 00:32:29,680 --> 00:32:32,400 Speaker 3: from the pandemic. But this stop and start thing is, 624 00:32:32,880 --> 00:32:35,480 Speaker 3: you know, in a short way is a mini version 625 00:32:35,560 --> 00:32:38,959 Speaker 3: of what the pandemic caused. Everything stopped and then everybody 626 00:32:39,040 --> 00:32:41,520 Speaker 3: wanted a peloton, and the railroads did really well for 627 00:32:41,560 --> 00:32:43,800 Speaker 3: a month or two and then ran out of you know, 628 00:32:43,920 --> 00:32:46,840 Speaker 3: labor capacity, and you know, et cetera. And the ports, 629 00:32:46,920 --> 00:32:49,000 Speaker 3: you remember the Port of La look like they were 630 00:32:49,040 --> 00:32:51,960 Speaker 3: doing a D day, you know, a stage version, one 631 00:32:52,040 --> 00:32:57,040 Speaker 3: hundred ships offshore, et cetera. So, you know, I worry 632 00:32:57,080 --> 00:32:58,880 Speaker 3: a little bit about the operations because of this stop 633 00:32:58,960 --> 00:33:00,920 Speaker 3: and start. But what happens at the end of ninety 634 00:33:00,960 --> 00:33:03,440 Speaker 3: days If people aren't going to make major decisions, they'll 635 00:33:03,480 --> 00:33:07,320 Speaker 3: make short term decisions. I need toys, I'm gonna tell 636 00:33:07,520 --> 00:33:10,720 Speaker 3: I need toys in marisk boxes in the La Long Beach. 637 00:33:11,000 --> 00:33:13,560 Speaker 3: I stopped it. Now get everything you can, you know, 638 00:33:13,720 --> 00:33:15,640 Speaker 3: So it's here before the ninety days are up. 639 00:33:16,280 --> 00:33:18,440 Speaker 1: And do you think that the industry kind of learned 640 00:33:18,440 --> 00:33:21,080 Speaker 1: their lesson from the pandemic with like you know, of 641 00:33:21,320 --> 00:33:24,080 Speaker 1: furloughing too many people and so do you think they're 642 00:33:24,120 --> 00:33:26,160 Speaker 1: they're they're they're well resourced for this. 643 00:33:26,280 --> 00:33:27,800 Speaker 2: Surgeon demand that could be coming. 644 00:33:28,480 --> 00:33:30,160 Speaker 3: Well, So you raise a really good point. I think 645 00:33:30,200 --> 00:33:32,640 Speaker 3: the industry rit hole because the whole supply chain industry. 646 00:33:32,640 --> 00:33:35,520 Speaker 3: I think there's more capacity at the ports. I think 647 00:33:35,600 --> 00:33:39,520 Speaker 3: there's more capacity in trailers. You know, there's obviously excess 648 00:33:39,560 --> 00:33:42,200 Speaker 3: truck capacity. So the industry as a whole is better 649 00:33:42,320 --> 00:33:45,440 Speaker 3: prepared in terms of one of the things that they did. 650 00:33:45,720 --> 00:33:48,920 Speaker 3: Railroads historically in my career, were really good at beating 651 00:33:49,000 --> 00:33:51,880 Speaker 3: street estimates in a known downturn. If you knew two 652 00:33:51,880 --> 00:33:55,280 Speaker 3: thousand and eight, you know, well, great financial recession. You 653 00:33:55,360 --> 00:33:58,160 Speaker 3: know it's hurt you furlow people, and you could you 654 00:33:58,240 --> 00:34:00,840 Speaker 3: have a much more flexible cost base people get credit for. 655 00:34:01,320 --> 00:34:03,400 Speaker 3: They could beat it. Everybody would cut their estimates by 656 00:34:03,520 --> 00:34:06,480 Speaker 3: fifty percent and they would be down ten or twelve 657 00:34:06,760 --> 00:34:09,360 Speaker 3: and the stocks should actually do well. I think that 658 00:34:09,480 --> 00:34:11,680 Speaker 3: was a very short sighted thing then, but it's extremely 659 00:34:11,719 --> 00:34:15,520 Speaker 3: short sighted now because when they did that in the past, 660 00:34:15,760 --> 00:34:18,560 Speaker 3: up through the two thousand and eight nine period, eighty 661 00:34:18,640 --> 00:34:21,040 Speaker 3: percent of the workers came back, and when they did 662 00:34:21,120 --> 00:34:24,319 Speaker 3: it in the in the pandemic, about thirty percent came back. 663 00:34:24,719 --> 00:34:27,200 Speaker 3: And remember this is a network. If you have a 664 00:34:27,320 --> 00:34:30,239 Speaker 3: shortage in Atlanta, that'll back up all the way to 665 00:34:30,400 --> 00:34:33,319 Speaker 3: La or vice versus. So you know, it was sort 666 00:34:33,360 --> 00:34:36,200 Speaker 3: of a rolling shortage, and then every railroad on its 667 00:34:36,239 --> 00:34:37,759 Speaker 3: own said, oh my god, we've got to get get 668 00:34:37,800 --> 00:34:40,320 Speaker 3: out there and hire people. And that's you know, a 669 00:34:40,440 --> 00:34:42,880 Speaker 3: long process of hiring, training, and putting in the field. 670 00:34:43,239 --> 00:34:46,040 Speaker 3: You saw safety numbers de spikee the wrong way because 671 00:34:46,400 --> 00:34:49,640 Speaker 3: you had inexperienced crews, not bad ones these pals was 672 00:34:49,680 --> 00:34:53,440 Speaker 3: an anomaly, but you know, a yard derailments because you 673 00:34:53,520 --> 00:34:56,799 Speaker 3: had new people moving cars. So I think reilvants should 674 00:34:56,840 --> 00:34:59,640 Speaker 3: learn that through a cycle. To win two quarters of 675 00:34:59,680 --> 00:35:01,880 Speaker 3: street acceptance and give it up on the back end 676 00:35:02,280 --> 00:35:06,320 Speaker 3: with unhappy customers, higher safety incident rates, et cetera, is 677 00:35:06,719 --> 00:35:09,080 Speaker 3: a poor way to do business. That being said, the 678 00:35:09,160 --> 00:35:11,480 Speaker 3: cult of the operating ratio is out there, the short 679 00:35:11,560 --> 00:35:14,160 Speaker 3: termers out there. If you don't grow, they will put 680 00:35:14,239 --> 00:35:18,440 Speaker 3: pressure on managements to cut costs, and that's the easiest 681 00:35:18,520 --> 00:35:20,800 Speaker 3: lever to pull. So I worry about it. We have 682 00:35:20,840 --> 00:35:24,360 Speaker 3: already had layoffs or nots furloughs at CN which had 683 00:35:24,440 --> 00:35:28,759 Speaker 3: previously basically had a no furlough you know promise not 684 00:35:28,880 --> 00:35:32,360 Speaker 3: a lot one hundred and seventy five. But you know, 685 00:35:32,600 --> 00:35:35,920 Speaker 3: if this if this uncertainty and we hit the air 686 00:35:36,000 --> 00:35:40,320 Speaker 3: pocket and nobody's expanding. A chemical business goes flat and 687 00:35:40,480 --> 00:35:43,360 Speaker 3: are a great export green business goes down because China's 688 00:35:43,440 --> 00:35:46,080 Speaker 3: not buying. You might see that lever pulled again. I 689 00:35:46,120 --> 00:35:46,440 Speaker 3: hope not. 690 00:35:47,920 --> 00:35:51,640 Speaker 1: Yeah, you know, so we talked about, you know, rail trends. 691 00:35:52,000 --> 00:35:55,120 Speaker 1: A couple times we mentioned rail trends. So that's uh, 692 00:35:55,239 --> 00:35:57,200 Speaker 1: you know, if people forgot it. This is a you know, 693 00:35:57,280 --> 00:35:59,560 Speaker 1: a long podcast. We're talking for thirty five minutes now. 694 00:36:00,360 --> 00:36:02,759 Speaker 1: So Rail Trends is kind of like a conference that 695 00:36:02,880 --> 00:36:06,319 Speaker 1: happens every year in New York. What were the big 696 00:36:06,440 --> 00:36:07,319 Speaker 1: takeaways this year? 697 00:36:07,880 --> 00:36:10,000 Speaker 3: Well, so, yeah, happens every November in New York, and 698 00:36:10,080 --> 00:36:11,840 Speaker 3: it's I'm trying to do it very differently than a 699 00:36:11,960 --> 00:36:14,800 Speaker 3: typical analyst or investor conference. We have a no CFO 700 00:36:14,960 --> 00:36:17,520 Speaker 3: rule because I don't want the message. I mean that's 701 00:36:17,560 --> 00:36:20,200 Speaker 3: been broken obviously, but basically the idea is I don't 702 00:36:20,239 --> 00:36:22,720 Speaker 3: want the message. I don't want, you know, the spin. 703 00:36:22,880 --> 00:36:25,480 Speaker 3: I want to talk to people who do try to 704 00:36:25,520 --> 00:36:28,080 Speaker 3: set it for me. And this past year, Tracy Robinson 705 00:36:28,120 --> 00:36:30,640 Speaker 3: a CN said it was the Woodstock of rail conferences. 706 00:36:30,680 --> 00:36:33,360 Speaker 3: I love that. That's gonna be on my my you know, 707 00:36:34,040 --> 00:36:35,479 Speaker 3: epitaph whenever that happens. 708 00:36:35,560 --> 00:36:37,520 Speaker 2: There was a lot of mud and acid is that what? 709 00:36:37,760 --> 00:36:42,320 Speaker 3: Yeah, and a lot of nudity. No, but I don't know. 710 00:36:42,640 --> 00:36:44,400 Speaker 3: It's very eclectic and we try to appeal to a 711 00:36:44,480 --> 00:36:48,560 Speaker 3: variety of people from investors to you know, to infrastructure guys, 712 00:36:48,600 --> 00:36:51,240 Speaker 3: to to lease in companies to railroads themselves. We're always 713 00:36:51,280 --> 00:36:53,520 Speaker 3: pleased that most of the people stay after they speak. 714 00:36:53,560 --> 00:36:55,160 Speaker 3: They don't you know, hit a couple of one on 715 00:36:55,280 --> 00:36:58,560 Speaker 3: ones go. The theme last year was really a focus 716 00:36:58,680 --> 00:37:02,720 Speaker 3: on growth and you know, yet we now see what's happened, 717 00:37:03,239 --> 00:37:06,320 Speaker 3: you know, to the outlook. They really was trying to 718 00:37:06,360 --> 00:37:10,080 Speaker 3: reassurance that we appreciate that we you know, getting to 719 00:37:10,280 --> 00:37:12,720 Speaker 3: a sixty one oh r with the new labor rules 720 00:37:12,960 --> 00:37:15,720 Speaker 3: that might be pretty close to what the base industry 721 00:37:15,760 --> 00:37:18,719 Speaker 3: and I'm taking NSMB and sep out. You know that's 722 00:37:18,800 --> 00:37:20,719 Speaker 3: close and we need to grow and I think, you know, 723 00:37:21,320 --> 00:37:24,440 Speaker 3: Jim Lenna talked about buffer and Steff one of the 724 00:37:24,480 --> 00:37:27,760 Speaker 3: best speaches I told you at Adrian at Oliver Wyman 725 00:37:27,880 --> 00:37:30,000 Speaker 3: talking about, you know, they must grow because we've done 726 00:37:30,040 --> 00:37:32,800 Speaker 3: the end. Mike Miller, who was the CEO of Genesee 727 00:37:32,800 --> 00:37:35,120 Speaker 3: and Wyoming the largest shortline Holy company. They own one 728 00:37:35,200 --> 00:37:37,920 Speaker 3: hundred and ten shortlines in North America. They're owned by Brookfield. 729 00:37:38,320 --> 00:37:41,160 Speaker 3: He said that what the railwatively need is a higher 730 00:37:41,200 --> 00:37:44,279 Speaker 3: sense of urgency. You know, he is a member of 731 00:37:44,360 --> 00:37:47,880 Speaker 3: rail Pulse, which is his consorting to do add visibility 732 00:37:47,920 --> 00:37:49,800 Speaker 3: to the rail car chain. Railroads don't have the visibility 733 00:37:49,840 --> 00:37:53,000 Speaker 3: that FedEx has now they interline. It's more complicated. But 734 00:37:53,120 --> 00:37:54,640 Speaker 3: he said, it's just not good enough. We need to 735 00:37:54,680 --> 00:37:56,759 Speaker 3: pick the pick up the pace. And I think there 736 00:37:56,840 --> 00:37:59,960 Speaker 3: was a really healthy optimism that we had. New management 737 00:38:00,000 --> 00:38:03,120 Speaker 3: said almost all the railroads we had restored problems that 738 00:38:03,239 --> 00:38:05,919 Speaker 3: existed at Norfolk Southern and the quarter flight and being 739 00:38:05,960 --> 00:38:08,000 Speaker 3: a saf and we were we had momentum, and we're 740 00:38:08,040 --> 00:38:11,240 Speaker 3: moving the right way and adding these new services like Quantum, 741 00:38:11,280 --> 00:38:14,359 Speaker 3: which was introduced at rail Trands two years ago. That's 742 00:38:14,400 --> 00:38:18,000 Speaker 3: the Bings F JB. Hunt super partnership. So we left 743 00:38:18,120 --> 00:38:20,920 Speaker 3: rail Trends with a really on on a really high note. 744 00:38:20,960 --> 00:38:22,200 Speaker 3: Then we got to the inauguration. 745 00:38:23,239 --> 00:38:24,960 Speaker 2: Yeah, I know, I know, you don't do like my 746 00:38:25,120 --> 00:38:26,439 Speaker 2: whole cell recommendations. 747 00:38:26,520 --> 00:38:28,960 Speaker 1: Right, yeah, you go, But is there is there like 748 00:38:29,080 --> 00:38:32,520 Speaker 1: a railroad that you think has the most growth opportunities 749 00:38:32,719 --> 00:38:33,720 Speaker 1: versus its peers. 750 00:38:34,080 --> 00:38:37,600 Speaker 2: From from a from a volume standpoint, you know, right now. 751 00:38:37,560 --> 00:38:40,080 Speaker 3: I would you know it would be Birchhier Hathaway's being 752 00:38:40,120 --> 00:38:42,759 Speaker 3: a SEF maybe, but you know that's not a piece 753 00:38:42,760 --> 00:38:44,839 Speaker 3: of it. But I would say, you know, railroads tend 754 00:38:44,880 --> 00:38:46,720 Speaker 3: to do it. Historically, when I could have these ratings, 755 00:38:46,760 --> 00:38:49,720 Speaker 3: they moved as a group. Now they would be leaders. 756 00:38:50,480 --> 00:38:52,440 Speaker 3: And and it's one of the reasons that people attack 757 00:38:52,480 --> 00:38:55,800 Speaker 3: intermodal because intermodial has a higher o R or worse margin, 758 00:38:56,160 --> 00:38:58,359 Speaker 3: but it could be a very strong contributor to return 759 00:38:58,400 --> 00:39:01,920 Speaker 3: on investment capital. The first decade of this century there 760 00:39:02,000 --> 00:39:04,680 Speaker 3: was the rail renaissances they called it, and all the 761 00:39:04,719 --> 00:39:06,880 Speaker 3: stocks out performed the market by a lot. But the 762 00:39:06,960 --> 00:39:10,080 Speaker 3: two best were Canadian National, which did it through improving 763 00:39:10,120 --> 00:39:12,719 Speaker 3: its margin under Hunter Harrison. The other one was being 764 00:39:12,719 --> 00:39:15,000 Speaker 3: a saf which did it by doubling its innermodal. So 765 00:39:15,080 --> 00:39:16,759 Speaker 3: there are multiple ways to skin a cat. And if 766 00:39:16,800 --> 00:39:18,759 Speaker 3: you believe, as I do, that intermotal will be the leader, 767 00:39:19,200 --> 00:39:21,880 Speaker 3: then I would say bn NS. But right now the 768 00:39:21,920 --> 00:39:25,320 Speaker 3: best performing road is the Union Pacific. If you restore 769 00:39:25,400 --> 00:39:28,800 Speaker 3: the USMCA story, then I would you know the clarity 770 00:39:28,920 --> 00:39:34,200 Speaker 3: behind the three part economic fortress that is North America. 771 00:39:34,560 --> 00:39:39,120 Speaker 3: Cpkc's got a compelling story. CN always manages to find 772 00:39:39,160 --> 00:39:42,239 Speaker 3: growth because they run themselves so well. So you know, 773 00:39:42,520 --> 00:39:44,440 Speaker 3: if you had me pick one, now I would pick 774 00:39:44,440 --> 00:39:49,880 Speaker 3: a Union Pacific. But you know, it's just because of 775 00:39:49,920 --> 00:39:53,280 Speaker 3: the uncertainty if you're playing defensively. The two Eastern American 776 00:39:53,360 --> 00:39:56,080 Speaker 3: carriers have the least growth exposure. But one thing I 777 00:39:56,160 --> 00:39:57,800 Speaker 3: want to point out is if you read about this, 778 00:39:57,880 --> 00:40:01,080 Speaker 3: and somebody's listening looks into this, and the Association American 779 00:40:01,160 --> 00:40:03,960 Speaker 3: Railroad says that railroads have a thirty eight percent exposure 780 00:40:04,000 --> 00:40:06,840 Speaker 3: to trade. That's all trade, not just China. That's a 781 00:40:06,920 --> 00:40:11,960 Speaker 3: significantly underrepresented number. It doesn't include inputs like fertilizer that 782 00:40:12,080 --> 00:40:15,880 Speaker 3: makes corn that goes to Mexico, or transodent boxes. It 783 00:40:15,960 --> 00:40:18,640 Speaker 3: doesn't include the Canadian or Mexican carriers at all, and 784 00:40:18,760 --> 00:40:21,000 Speaker 3: it doesn't include the growth plants. And all of those 785 00:40:21,080 --> 00:40:25,120 Speaker 3: Eastern carriers had growth plans to connect with CN or 786 00:40:25,200 --> 00:40:29,000 Speaker 3: CPKC into the Southwest and into Mexico, you know, so 787 00:40:29,160 --> 00:40:31,880 Speaker 3: their futures were going to be more trade weighted, and 788 00:40:32,040 --> 00:40:35,640 Speaker 3: you put their futures on hold, but defensively, you know, 789 00:40:35,719 --> 00:40:38,000 Speaker 3: I would look to Norfolk Southern and its restoration of 790 00:40:38,080 --> 00:40:41,759 Speaker 3: its margin under Mark George and John Orr and say 791 00:40:41,920 --> 00:40:45,000 Speaker 3: they're going to be the least impacted by whatever the 792 00:40:45,040 --> 00:40:47,919 Speaker 3: whims of Washington DC are in the short term. Their 793 00:40:48,000 --> 00:40:50,680 Speaker 3: volume should be least impacted in the next twelve months. 794 00:40:51,239 --> 00:40:53,120 Speaker 3: But I don't like that, you know, for me, i'd 795 00:40:53,160 --> 00:40:55,680 Speaker 3: look I'd say Union Pacific because I'm looking beyond it. 796 00:40:56,600 --> 00:40:58,280 Speaker 3: But I think they're all they all have good plants. 797 00:40:58,360 --> 00:41:00,600 Speaker 3: We just need the world to change more more and. 798 00:41:00,680 --> 00:41:03,680 Speaker 1: More of a macros story. So is there anything like 799 00:41:03,800 --> 00:41:07,680 Speaker 1: on your radar that you're really looking at or or 800 00:41:07,960 --> 00:41:11,239 Speaker 1: kind of waiting to see the impact on that that 801 00:41:11,360 --> 00:41:13,680 Speaker 1: could impact the freight transportation markets. 802 00:41:14,239 --> 00:41:16,719 Speaker 3: So one thing that just happened, I don't know the 803 00:41:16,800 --> 00:41:19,400 Speaker 3: full detail, is that railroads have been trying to achieve 804 00:41:20,200 --> 00:41:22,480 Speaker 3: new culture and a labor piece led by Joe Henrich 805 00:41:22,560 --> 00:41:24,879 Speaker 3: and CX and we were down there and he really 806 00:41:25,239 --> 00:41:27,640 Speaker 3: the last labor round was a normally scheduled round and 807 00:41:27,760 --> 00:41:29,440 Speaker 3: went all the way to Congress, which is part of 808 00:41:29,440 --> 00:41:32,000 Speaker 3: the way the rules often play. I've seen it before. 809 00:41:32,480 --> 00:41:34,279 Speaker 3: It got written up in the front pages like it 810 00:41:34,440 --> 00:41:38,040 Speaker 3: was this disaster, like workers were walking off because of 811 00:41:38,160 --> 00:41:41,080 Speaker 3: the of the working missions. It was that's complete. Well, 812 00:41:41,120 --> 00:41:44,279 Speaker 3: it was wrong, and really it was just a normal round. 813 00:41:44,280 --> 00:41:46,360 Speaker 3: It was of negotiating amount of money because we're in 814 00:41:46,400 --> 00:41:50,120 Speaker 3: a capitalist society. However, it did lead to hard feelings. 815 00:41:50,160 --> 00:41:53,080 Speaker 3: There were shortages because of the you know what happened 816 00:41:53,080 --> 00:41:56,279 Speaker 3: in the pandemic response and whatnot. And the railroads, led 817 00:41:56,320 --> 00:41:58,560 Speaker 3: by c Sex Joe Henrick, have made the attempt to 818 00:41:59,040 --> 00:42:03,440 Speaker 3: change that and ONEX is his big effort and going 819 00:42:03,480 --> 00:42:05,879 Speaker 3: to town halls and being a public face and sort 820 00:42:05,880 --> 00:42:07,840 Speaker 3: of saying we're one team and a lot of that. 821 00:42:07,960 --> 00:42:10,960 Speaker 3: People think of it as soft and whatnot. But the railroads, 822 00:42:10,960 --> 00:42:13,800 Speaker 3: with the exception of UP, have signed roughly forty percent 823 00:42:14,280 --> 00:42:17,319 Speaker 3: of their labor force to contracts now for the round 824 00:42:17,360 --> 00:42:20,279 Speaker 3: of negotiations that is really beginning now. They would last 825 00:42:20,360 --> 00:42:23,160 Speaker 3: usually three years, right, we would usually in three years 826 00:42:23,200 --> 00:42:25,200 Speaker 3: now get down to signing contracts. To the fact that 827 00:42:25,280 --> 00:42:27,400 Speaker 3: they've got forty percent of the workers done is a 828 00:42:27,520 --> 00:42:31,440 Speaker 3: very positive sign. And then CSX this week signed the teamsters, 829 00:42:31,480 --> 00:42:35,480 Speaker 3: the locomotive engineers. That's a huge breakthrough because the teamsters 830 00:42:35,520 --> 00:42:38,759 Speaker 3: were the most were calcil trips tied to the administration. 831 00:42:39,120 --> 00:42:41,440 Speaker 3: They didn't want any change. They don't you know, they 832 00:42:41,480 --> 00:42:43,719 Speaker 3: were the tough guys that you know, they were the 833 00:42:43,840 --> 00:42:45,719 Speaker 3: tough guy in the bar. And the fact that they 834 00:42:45,760 --> 00:42:49,120 Speaker 3: signed with CSX means that, you know, Joe Hendrix one 835 00:42:49,200 --> 00:42:53,880 Speaker 3: CSX culture change, magic beans, you know, have meaning if 836 00:42:53,920 --> 00:42:56,919 Speaker 3: you can restore I mean, as he says, and Mark 837 00:42:56,920 --> 00:42:59,080 Speaker 3: George and has said, people used to line up for 838 00:42:59,160 --> 00:43:01,919 Speaker 3: these jobs. Roughly, you know, I think the highest paying, 839 00:43:02,600 --> 00:43:07,200 Speaker 3: you know, blue collar union jobs doesn't require college education, 840 00:43:07,320 --> 00:43:10,920 Speaker 3: requires trading. You know, these are jobs that people lined up. 841 00:43:10,920 --> 00:43:13,839 Speaker 3: They were so sought after generations went into it, your 842 00:43:13,880 --> 00:43:16,600 Speaker 3: kids went into it, and then after the pandemic, you know, 843 00:43:16,680 --> 00:43:19,320 Speaker 3: they had to go out and advertise and you know, 844 00:43:19,360 --> 00:43:22,200 Speaker 3: it's sort of like truck fibers have to So we 845 00:43:22,280 --> 00:43:24,279 Speaker 3: could have seen a major labor breakthrough. I mean, I 846 00:43:24,320 --> 00:43:26,480 Speaker 3: think when we look back at this year, we're going 847 00:43:26,520 --> 00:43:29,360 Speaker 3: to say technology change because the FRA and maybe labor 848 00:43:29,400 --> 00:43:32,720 Speaker 3: breakthrough change. You know, culture change. You know, it'll always 849 00:43:32,719 --> 00:43:35,200 Speaker 3: be frictious because somebody pays somebody and somebody takes the 850 00:43:35,239 --> 00:43:37,640 Speaker 3: money and they're going to argue about how much. But 851 00:43:37,840 --> 00:43:38,920 Speaker 3: it doesn't have to be war. 852 00:43:39,320 --> 00:43:41,319 Speaker 1: Yeah, I think to your point, I think Joe has 853 00:43:41,320 --> 00:43:46,160 Speaker 1: been transform transformational down at CSX, and it's always nice 854 00:43:46,160 --> 00:43:48,440 Speaker 1: to see on LinkedIn when he's giving an employee a 855 00:43:48,520 --> 00:43:49,120 Speaker 1: pickup truck. 856 00:43:49,719 --> 00:43:51,040 Speaker 2: Yeah, pickup truck. 857 00:43:51,760 --> 00:43:54,319 Speaker 3: Yeah, what fifty Although he had said when we were 858 00:43:54,360 --> 00:43:56,719 Speaker 3: on that trip together, I said there were a couple 859 00:43:56,760 --> 00:43:58,600 Speaker 3: of times when they couldn't find an employee to give 860 00:43:58,640 --> 00:44:00,960 Speaker 3: it to. That was for a technic perfect attendance. And 861 00:44:01,400 --> 00:44:04,160 Speaker 3: you know the paid sickly that they want. I mean, 862 00:44:04,280 --> 00:44:06,320 Speaker 3: if you see some of their charts that people just 863 00:44:06,560 --> 00:44:09,040 Speaker 3: can now leave without saying a lot in advance, and 864 00:44:09,160 --> 00:44:11,760 Speaker 3: things like the Alabama Auburn game they now plan around 865 00:44:11,840 --> 00:44:13,920 Speaker 3: it because everybody gets sick that day. 866 00:44:14,520 --> 00:44:18,680 Speaker 1: Right, All right, Tony, we're rounding out the end of 867 00:44:18,760 --> 00:44:20,680 Speaker 1: our time here, So I really want to thank you 868 00:44:20,800 --> 00:44:22,720 Speaker 1: for your time and your insights today. 869 00:44:23,280 --> 00:44:25,680 Speaker 3: Oh I joy talking to you anytime about anything, but 870 00:44:25,760 --> 00:44:27,759 Speaker 3: this was terrific. Thanks for having me on it. 871 00:44:28,280 --> 00:44:29,880 Speaker 2: All right, and I want to thank you for tuning in. 872 00:44:30,000 --> 00:44:32,880 Speaker 2: If you liked the episode, please subscribe and leave a review. 873 00:44:33,280 --> 00:44:35,719 Speaker 1: We've lined up a number of great guests for the podcast, 874 00:44:35,800 --> 00:44:39,759 Speaker 1: so please check back to hear conversations with c SPEE executives, shippers, 875 00:44:40,120 --> 00:44:43,520 Speaker 1: regulators and decision makers within the freight markets. Also, if 876 00:44:43,560 --> 00:44:46,160 Speaker 1: you want to learn more about the freight transportation markets, 877 00:44:46,320 --> 00:44:49,000 Speaker 1: please check out our work on the Bloomberg Terminal at. 878 00:44:48,960 --> 00:44:53,200 Speaker 2: Bigo and on social media. This is Lee Glasgow signing 879 00:44:53,239 --> 00:44:55,200 Speaker 2: off and thanks for talking transports with me.