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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Joe Weisenthal and I'm Tracy Halloway. So, Tracy, I mean,

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Speaker 1: you know, it's actually been a little while, I guess

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Speaker 1: since we've done one of our pure logistics episodes. Earlier

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Speaker 1: in the summer, we were doing a lot. We We've

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Speaker 1: done a lot all year. I just feel like, uh,

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Speaker 1: you know, we've probably gone at least three or four

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Speaker 1: without coming back to what is, without a doubt the story.

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Speaker 1: When you say more than a little bit or it's

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Speaker 1: been a while, I mean, we did do the semiconductor

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Speaker 1: episode like the other week, which I kind of file

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Speaker 1: under the shortages and bottlenecks. Um, yeah, Brella, But I

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Speaker 1: guess it's true. It is true. We haven't done a

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Speaker 1: transport episode in a while, and there are some big

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Speaker 1: ones that we haven't addressed just yet. And I'm thinking

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Speaker 1: specifically of palettes and barges, but of course the biggest

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Speaker 1: transport mode that we have yet to talk about and

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Speaker 1: the issues taking place there, it has to be rail

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Speaker 1: and it's come up quite a bit. When we were

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Speaker 1: talking to um Jeans Siroca that the head of the

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Speaker 1: part of Los Angeles, for instance, Whenever we've been talking

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Speaker 1: about gridlock in transport, generally we do tend to touch

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Speaker 1: on rail and some of the issues there, but we

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Speaker 1: haven't talked about it in depth yet, right, so we

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Speaker 1: kind of have taken this, you know, end to end approach.

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Speaker 1: We talked about factory issues that originate in Asia. We

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Speaker 1: talked about the ship you know, there's the bottomnecks at

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Speaker 1: the ports. I think latest I saw there's like seventy

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Speaker 1: two ships just waiting to be undocked right now at

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Speaker 1: the Port of Los Angeles. Then the trucks. Talked a

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Speaker 1: little bit about barges. Although we need to talk a

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Speaker 1: lot about talk a lot about more, but we have

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Speaker 1: not talked about rail. And so if we're going to

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Speaker 1: be leadist in our discussion of of you as logistics,

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Speaker 1: we have to talk about the rail part of the equation. Yes, indeed,

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Speaker 1: I'm looking forward to this one. I am too. I'm

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Speaker 1: very excited, and we have the perfect guest for it.

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Speaker 1: We're going to be speaking with Ian Jefferies, President and

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Speaker 1: CEO of the Association of American Railroads. Ian, thank you

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Speaker 1: so much for coming on odd lots. So look, anyone

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Speaker 1: who's picked up the newspaper or you know, read the

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Speaker 1: news knows about all the disruptions, particularly around ship, particularly

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Speaker 1: around sports, particularly around trucking, particularly about the lack of

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Speaker 1: containers specifically, what do you just start by giving us

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Speaker 1: the very big picture overview and then we'll drill deeper,

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Speaker 1: but the very big picture overview in how pandemic related

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Speaker 1: disruptions have affected h the flow of rail. Well, first

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Speaker 1: of all, thank you Joe and Tracy so much for

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Speaker 1: having me on this morning. And you've hit on based

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Speaker 1: on on what you listed, you've hit on a lot

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Speaker 1: of key, key issues and key sectors of the supply chain.

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Speaker 1: So I'm thrilled to be able to add to that conversation.

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Speaker 1: I think when you look at what we're seeing in

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Speaker 1: the supply chain right now, which as you know, is

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Speaker 1: an incredibly sophisticated, integrated complex process getting goods from Asia

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Speaker 1: into the US, into the heartland of the the US

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Speaker 1: UM and then throughout, what we really are looking at

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Speaker 1: now is something that really began about this time last year,

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Speaker 1: even you know a little earlier in the summer midsummer,

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Speaker 1: where once the economies of China and the US started

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Speaker 1: to for lack of a better term turned back on.

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Speaker 1: You saw a pretty dramatic influx of goods, and I

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Speaker 1: think it's a combination of a variety of things. Um,

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Speaker 1: if your houses or anything like mine, you've got to

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Speaker 1: know the the Amazon delivery person really well. We saw

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Speaker 1: such a massive surge of e commerce as a portion

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Speaker 1: of our economy, and not only that, given the the

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Speaker 1: rush to acquire goods, um consumer goods from from the stores,

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Speaker 1: the physical stores across the countries as well, combined with

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Speaker 1: the shutdowns we saw in factories throughout throughout the US,

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Speaker 1: throughout Asia, you saw really strong snap back in in

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Speaker 1: production and demand on the international side. And so really

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Speaker 1: about last summer, i'd call it last July last August,

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Speaker 1: we saw pretty dramatic uptick in international intermodal traffic and

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Speaker 1: that has really sustained itself and continued through this year

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Speaker 1: to present day. And I think we're expecting to see

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Speaker 1: it into at least Q one, if not Q two

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Speaker 1: of next year, based on comments that are our CEOs

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Speaker 1: of meeting the public space and so what we're seeing

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Speaker 1: is there are certain parts of the supply chain where

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Speaker 1: where there are some choke points and where there's there's

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Speaker 1: there's one choke point. The supply chain is only as

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Speaker 1: strong as as its weakest link, or it's as it's

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Speaker 1: uh as its most inefficient point, and that that tends

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Speaker 1: to tends to come up the whole situation, and so

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Speaker 1: Rail is navigating that. UM. I can tell you in

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Speaker 1: the first six months, we moved more intermodal products, which

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Speaker 1: is that container traffic, which consumer goods, either e commerce

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Speaker 1: or brick and mortar store. We move more traffic in

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Speaker 1: the first six months of than we ever had in

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Speaker 1: our history during that same time period. So we are

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Speaker 1: moving a colossal amount of traffic, and we're really the

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Speaker 1: middle piece of the supply chain, the middle miles we

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Speaker 1: are navigating. I would call um some challenges on on

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Speaker 1: both the port side and and then the offloading side.

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Speaker 1: UM with our our partners, but taking steps as others

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Speaker 1: are to to continue to work through this, to to

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Speaker 1: get back and get right sized and get equilibrium and

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Speaker 1: get this thing running as efficiently as possible. That was

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Speaker 1: a great overview, and I want to dig in a

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Speaker 1: little bit more into what role Rail actually plays in

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Speaker 1: the sort of transport and logistics network overall. But before

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Speaker 1: we do, can you maybe give us a little bit

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Speaker 1: more color on the contestion issues that you're facing right now.

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Speaker 1: Are there some numbers that you could throw out? So,

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Speaker 1: for instance, Joe and the intro mentioned more than seventy

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Speaker 1: ships waiting off the you know, off l a port.

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Speaker 1: I'm wondering if there are similar statistics for rail and

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Speaker 1: how those might differ from normal times. Yeah, absolutely so.

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Speaker 1: So our our primary role when it comes to the

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Speaker 1: West coast ports is is, you know, containers are loaded

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Speaker 1: onto to our trains and brought into the middle of

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Speaker 1: the country, much of them. So think about the key

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Speaker 1: gateways up and down the Mississippi River, up and down

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Speaker 1: the center of our country. Primary be in Chicago. Approximately

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Speaker 1: of rail freight move through Chicago, but also Memphis, New Orleans, St. Louis,

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Speaker 1: Kansas City, So those are primary gateways. But let's take

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Speaker 1: Chicago for example, and what we are seeing is in

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Speaker 1: a lot of the international intermodal guards. So those are

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Speaker 1: those are the locations that that freight is offloaded from

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Speaker 1: the train, put into a parking slot, and picked up

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Speaker 1: by a truck for that last mile delivery to a

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Speaker 1: warehouse or to a or to another location. So when

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Speaker 1: the train brings into containers, that's referred to as in gating,

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Speaker 1: and when the containers are picked up, it's referred to

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Speaker 1: as outgating. And I can tell you that the in

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Speaker 1: gates in certain locations are dramatically exceeding the outgates. In

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Speaker 1: other words, we have many more containers coming in that

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Speaker 1: are getting picked up and taken out, and so you

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Speaker 1: can understand how that begins to back things up. And

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Speaker 1: so one of our railroads had over twenty intermodal trains.

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Speaker 1: So think about that. That's twenty trains with approximately we'll

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Speaker 1: call it or take two containers on it. So what

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Speaker 1: is that for thousand containers sitting outside the Chicago terminal

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Speaker 1: waiting to get into the yard to unload, but can't

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Speaker 1: do so because the outdates aren't aren't being picked up,

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Speaker 1: so local trucking isn't able to um able to get

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Speaker 1: that out. That just goes to show you how quickly

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Speaker 1: things can start backing up. I know they've made significant

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Speaker 1: progress and driving the number of trains waiting down, but

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Speaker 1: it's it's sort of akin to the boat's waiting. The

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Speaker 1: ship's waiting off the coast of the ports of l

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Speaker 1: A and Long Beach, and that causes conververberating effects because

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Speaker 1: when you have trains sitting waiting to get into the yard,

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Speaker 1: those are trains that should be unloading and should be

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Speaker 1: on their way back to the West coast ports, but

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Speaker 1: can't because our our partners in the supply chain are

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Speaker 1: shipping partners don't have the capacity or ability to to

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Speaker 1: pick up the containers and get them out of the

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Speaker 1: yard to create the space needed to unload. And so

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Speaker 1: it's kind of a it's seven operation for the railroads,

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Speaker 1: and any part of that that that gums up that

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Speaker 1: seven operations starts to have reverberate and consequences back to

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Speaker 1: the network. Just that stat is extremely useful in striking

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Speaker 1: how much of that capacity constraint is it? Okay, with

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Speaker 1: with I don't know what the term is. I mean

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Speaker 1: with ships they talk about, Okay, how many births there

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Speaker 1: are at the port at any given time. How much

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Speaker 1: is it the sort of like physical space to unload

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Speaker 1: or load a given uh, twenty cars uh? And how

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Speaker 1: much versus how much is it uh the labor And

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Speaker 1: how much is a labor itself contributing to some of

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Speaker 1: the constraints and the slowness of these turnaround time? So

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Speaker 1: I would I would say it's a combination depending on

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Speaker 1: where you are. There are certain situations where railroads are

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Speaker 1: highering additional employees, going through the process of highering additional employees,

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Speaker 1: but there are variety of other situations where where manpower

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Speaker 1: employee numbers are are not the issue in the least.

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Speaker 1: And what we're seeing again is so so if it's

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Speaker 1: a labor issue, it might be a shorthaul trucker shortage issue,

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Speaker 1: or it might be a warehouse worker issue. Um again,

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Speaker 1: because if there are breakdowns and those pieces of supply

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Speaker 1: chain that directly impacts the ability of a shipp or

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Speaker 1: to to get their goods, get their boxes out of

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Speaker 1: the yard, to create space for additional boxes, and so

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Speaker 1: I can tell you railroads have taken a number of

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Speaker 1: steps that are far out of the norm than they

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Speaker 1: normally would, which is literally creating additional capacity within their yards,

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Speaker 1: paving over tracks in certain areas to allow for additional

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Speaker 1: storage for containers, opening up long dormant intermodal facilities that

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Speaker 1: haven't been used for quite some time to allow for

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Speaker 1: additional capacity. And so we feel like we're we're taking

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Speaker 1: numerous steps, and really we just need the system to

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Speaker 1: flow um. Again, we're bringing in trains of inter total

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Speaker 1: equipment seven so seven days a week that x time

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Speaker 1: throughout each day they're intermodal trains arriving that need to

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Speaker 1: be unloaded. And some of our our partners don't work

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Speaker 1: in seven operation the last mile service. I think when

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Speaker 1: you look at the data when our yards, our railroads

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Speaker 1: look at the data in their yards, the volume of

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Speaker 1: pickups aka the outgate and I was talking about drops

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Speaker 1: pretty dramatically later in the day, and drops pretty dramatically

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Speaker 1: over the weekend, and then starts to pick back up

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Speaker 1: in the beginning of the week. And of course the

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Speaker 1: challenges that the trains keep coming in during all of

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Speaker 1: that time, and so railroads are taking a number of

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Speaker 1: operational steps as well to try to alleviate that. Are

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Speaker 1: offering incentives to our shipping partners to to come get

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Speaker 1: their goods on the weekend as well, just to keep

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Speaker 1: that throughput going and just to keep the spick it on,

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Speaker 1: so to speak, so that we can keep bringing things

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Speaker 1: in pushing them out into the communities where there where

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Speaker 1: the demand is so strong right now, So it's a combination.

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Speaker 1: So do you maybe go back to the that point

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Speaker 1: that you briefly raised earlier about where rail actually sits

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Speaker 1: in the wider supply or transport chain. So my understanding is,

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Speaker 1: you know, stuff comes in through the ports, then it

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Speaker 1: gets loaded onto rails, and basically if it's heading to

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Speaker 1: you know, the other side of the country or the interior,

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Speaker 1: it's going to have to travel through rail, and it's

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Speaker 1: probably going to have to travel through a limited number

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Speaker 1: of hubs like Chicago and you know, maybe Kansas or

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Speaker 1: Memphis or something like that. So I guess my question is,

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Speaker 1: you know, where does rail sit in the broader supply chain?

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Speaker 1: But also are there always going to be choke points

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Speaker 1: of some sort given that goods have to travel through

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Speaker 1: a limited number of hubs. So let's talk about So

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Speaker 1: right now we're just talking about this, this intermodal traffic,

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Speaker 1: this container traffic, and I think we need to take

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Speaker 1: a step back and look at rail's role in the

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Speaker 1: kind of the overarching economy. And it's important to remember

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Speaker 1: that that rail is moving the goods economy, the tangible economy.

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Speaker 1: So whether it's industrial products, whether it's agriculture products of

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Speaker 1: all kinds, whether it's chemicals, whether it's automotive automobiles, rail

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Speaker 1: news about finished automobiles, not to mention very high percentage

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Speaker 1: of a lot of the components to go into automotives

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Speaker 1: during the during the manufacturing process. Of course, going back

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Speaker 1: to the challenges we're seen in the semi conductor area,

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Speaker 1: they're impacting that and then intermodal covers. At this point,

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Speaker 1: probably about half of rail traffic UM. That has changed

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Speaker 1: over the years. Coal used to amount for approximately of

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Speaker 1: all rail traffic. I would say, you know, societal shifts,

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Speaker 1: market shifts have dramatically reduced that. But what we've what

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Speaker 1: we've grown in place of that is this explosive growth

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Speaker 1: in in consumer goods and container traffic. So railroads are

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Speaker 1: are managing all of those different types of UH of

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Speaker 1: products that they're moving through their pipelines at any given time,

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Speaker 1: and those different types of products need to be moved

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Speaker 1: at different levels of pace based on customer demands. So

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Speaker 1: there are certain commodities that that can move at a

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Speaker 1: more measured pace, but your your premium products, or your

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Speaker 1: innomodal traffic, your your UPS traffic. UPS is the largest

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Speaker 1: customer for the rail industry at large UM. That stuff

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Speaker 1: needs to move very quickly, and so railroads have designed

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Speaker 1: their networks to to allow for the staggering of different,

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Speaker 1: different speed of traffic that's required to meet customers needs.

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Speaker 1: And so you hit on, you know, the relatively limited

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Speaker 1: number of major gateways that that rail traffic needs to

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Speaker 1: flow to, and I would say that's what we're primary

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Speaker 1: talking about, that traffic that again comes from the West

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Speaker 1: coast and needs to disperse in the middle of the country.

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Speaker 1: And so you mentioned Chicago, we talked about Kansas City, Memphis,

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Speaker 1: New Orleans, St. Louis. Those are the main ones that

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Speaker 1: come to mind. I can tell you that that our

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Speaker 1: railroads have built out over the years very efficient systems

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Speaker 1: that allow for a very speedy movement of goods from

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Speaker 1: the West coast into these gateways. And they're designed as

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Speaker 1: such because those gateways are the ones that have the

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Speaker 1: terminal capacity to to sort, shift and rebuild trains as

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Speaker 1: needed to hand off to the eastern partners or you know,

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Speaker 1: we're we're not even talking about the East coast, but

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Speaker 1: we have a similar situation, uh inverse situation coming from

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Speaker 1: the East coast going going western into the heartland as well.

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Speaker 1: But I can tell you that these networks have been

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Speaker 1: designed in a very methodical and very intentional way to

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Speaker 1: allow for a very efficient movement of interline traffic into

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Speaker 1: the middle of the country where it can then get

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Speaker 1: dispersed as needed um to its final destination. So obviously

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Speaker 1: we are in the middle of some sort of negotiations

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Speaker 1: going on in Washington, d C. Although they seem to

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Speaker 1: be very muddled right now about that's a kind way

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Speaker 1: of putting it, to put it, to put it mildly

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Speaker 1: about infrastructure and rail and theory. And I'm sure is

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Speaker 1: you're hoping for is a part of that. It's it's

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Speaker 1: it's it's interesting timing because we're talking about constraints on

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Speaker 1: the economy due to supply side disruption, and every form

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Speaker 1: of transportation of goods is experiencing bottlenecks and so forth.

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Speaker 1: What more could be done? You know, obviously, I'm sure

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Speaker 1: your industry would like a plenty of money to build

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Speaker 1: out rail systems, but from a realistic, uh standpoint, what

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Speaker 1: more could be done in a more functional political system

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Speaker 1: to build out rail side capacity in a way that

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Speaker 1: would be productive for the nation. So, Joe, I'm really

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Speaker 1: glad you you brought up the investment side of things,

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Speaker 1: in the infrastructure side of things, because one one fact

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Speaker 1: that a lot of people don't necessarily realize is that

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Speaker 1: our freight rail system is almost entirely privately owned and

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Speaker 1: financed in the US. So what does that mean. That

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Speaker 1: means our railroads are investing about twenty five billion dollars

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Speaker 1: of their own cash back into their networks every year,

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Speaker 1: which has resulted in and this isn't me talking, this

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Speaker 1: is this is others. This is straight up fact. We

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Speaker 1: have the freight rail system that's the en via the

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Speaker 1: rest of the world. It's the most efficient, safest, most

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Speaker 1: advanced rail system, freight rail system in the in the

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Speaker 1: entire world. And so you juxtapose that against um the

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Speaker 1: other types of infrastructure, other types of surface transportation infrastructure

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Speaker 1: we have in this country, you know, the the interstate

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Speaker 1: highway system, which is at this point at least fift

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Speaker 1: subsidized by by general taxpayer funds. I think we've hit

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Speaker 1: about a hundred forty billion dollars in general fund transfers

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Speaker 1: to support that, a system that was historically supported by

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Speaker 1: by user fees, a lot of gas tax and other fees.

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Speaker 1: We've gotten away from that. We need to get back

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Speaker 1: to that. Users of infrastructure need to pay for that.

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Speaker 1: You look at our ports again, largely publicly funded, I

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Speaker 1: would argue, I would bet that the folks you've talked

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Speaker 1: to in the port industry would say dramatically underfunded. Their

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Speaker 1: significant investment needed there to increase efficiency, make use of

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Speaker 1: technology to allow for a more efficient throughput of goods,

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Speaker 1: and so Rail. When we look at infrastructure legislation, we

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Speaker 1: take a little bit of a different point of view. Yes,

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Speaker 1: agree that we need robust public investment into the nation's

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Speaker 1: public infrastructure because if rail is gonna function, we're seeing

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Speaker 1: this right now, If rail is gonna function at its

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Speaker 1: highest level, we need a healthy integrated supply chain, a

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Speaker 1: healthy integrated transportation network. So that includes sports, that includes

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Speaker 1: translate facilities, that includes are high ways. Again, we'd love

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Speaker 1: for our chucking partners to have to pay for the

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Speaker 1: infrastructure they operate over. But you know that that's probably

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Speaker 1: a debate for another day. But Rail is looking at

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Speaker 1: infrastructure legislation more as a vehicle to take advantage of

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Speaker 1: our environmental performance, take advantage of our safety performance, take

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Speaker 1: advantage of our inherently efficient operations, and really making sure

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Speaker 1: that we create a framework, whether it's a legislative framework,

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Speaker 1: or a regulatory framework that allows rail to one earn

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Speaker 1: the revenues necessary to invest back into the system to

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Speaker 1: meet current demand and future demand, because freight demand is

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Speaker 1: only going to grow in this country. But two also

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Speaker 1: allows us to innovate our operating models, to deploy new

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Speaker 1: technologies to create an even more efficient system with the

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Speaker 1: infrastructure we have, while also maximizing safety. And so to

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Speaker 1: your to your second the second part of your question,

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Speaker 1: what can rail do in a We have a hundred

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Speaker 1: and forty seven thousand miles of rail infrastructure in the country.

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Speaker 1: I don't think it's any secret that standing up a

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Speaker 1: massive new freight railroad is probably uh not something you

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Speaker 1: should expect anytime soon, given the challenges and getting right

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Speaker 1: of way, etcetera. But railroads can make the investment within

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Speaker 1: the right of way to maximize throughputs. So what does

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Speaker 1: that mean? That that means adding second, third, in some

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Speaker 1: instances even fourth lines of of rail on the rights

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Speaker 1: of way. It means extending sidings to allow for temporary

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Speaker 1: parking of trains to allow those premium trains that need

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Speaker 1: to get through the space they need to get through.

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Speaker 1: It means investing in our intermodal yards to to deploy

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Speaker 1: new technologies increase automation that allows for a safer, more

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Speaker 1: efficient throughput of goods. So between technologies, between maximizing the

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Speaker 1: infrastructure we have and expanding within our our rights of way,

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Speaker 1: you know, we have the ability to move the amount

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Speaker 1: of traffic that's demanded. And quite frankly, all of our

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Speaker 1: railroads are looking to grow the volumes that we're moving

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Speaker 1: because it's good for good for the highways, it's good

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Speaker 1: for the public, it's good for the environment, and it's

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Speaker 1: good for business. So you know, that's the focus right now.

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Speaker 1: So in the interim when um, you know it is

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Speaker 1: very crowded on the railways, there's all this congestion. People

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Speaker 1: are trying to manage it as best as they can. Um,

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Speaker 1: how do the rail companies actually a portion capacity? So

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Speaker 1: one thing we learned from our shipping episodes is that like,

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Speaker 1: it doesn't necessarily come down to whoever is willing to

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Speaker 1: pay the highest rate. It might come down to connections

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Speaker 1: or whether or not you're a big customer like a

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Speaker 1: Walmart or an Ikea or something like that of a

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Speaker 1: shipping company. And I'm wondering if it's a similar deal

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Speaker 1: when it comes to rail So you know, I can't

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Speaker 1: speak for each individual railroads marketing or decision making for

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Speaker 1: how it determines which traffic is going to move, but

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Speaker 1: I think overall the system is designed to to move

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Speaker 1: the most traffic in the least amount of time, with

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Speaker 1: an emphasis put on that track fix that is paying

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Speaker 1: for this premium more just in time type service. Again,

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Speaker 1: you know, there are their industrial products. You know, gravel

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Speaker 1: for example, does not normally need to move at the

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Speaker 1: same pace as a train full of ups packages, and

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Speaker 1: so the system needs to be designed to meet those

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Speaker 1: customers needs or they're going to look elsewhere to move

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Speaker 1: their goods and that's the last thing we want as

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Speaker 1: our industry. And so again I would just I would

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Speaker 1: have to point to each individual railroad and how they

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Speaker 1: manage that process. But at a at a macro level,

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Speaker 1: that's that's how things get from point at point B.

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Speaker 1: So you mentioned the possibility of customers moving elsewhere. Is

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Speaker 1: that something that you've seen over the past year or two. Um,

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Speaker 1: you know, given the situation, are there some people who

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Speaker 1: just don't want to wait for railway capacity to get

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Speaker 1: freed up and maybe they switched to something like trucking well,

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Speaker 1: so I think the intermodal freight market by its very nature,

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Speaker 1: by its very name, it is hyper hyper competitive. You know.

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Speaker 1: That is that that traffic that can flow on either

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Speaker 1: trucks or can flow on trains, and whether it's coming

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Speaker 1: out of the ports or domestically between points in the US,

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Speaker 1: you know, the customer is very real options and it

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Speaker 1: could be you know, it could be rail to rail competition,

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Speaker 1: it could be rail to truck competition, it could be

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Speaker 1: choosing the you know, potentially the port you want to

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Speaker 1: go into to to use a different type of a

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Speaker 1: different form of transportation as well. And so absolutely, if

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Speaker 1: if a railroad isn't providing good service, you know that

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Speaker 1: business is going to go elsewhere. And when you look

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Speaker 1: at the fact that rail has grown its intermodal offerings

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Speaker 1: to again about fift of overall rail traffic in today's mix,

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Speaker 1: that shows you that rail is doing a continuously better

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Speaker 1: job at providing a product that is appealing to to

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Speaker 1: that customer that that has a wide variety of options again,

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Speaker 1: whether it's another railroad, whether it's any number of trucking

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Speaker 1: companies out there, and so railroads have done a good

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Speaker 1: job in getting much more predictable in their deliveries, decreasing

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Speaker 1: the time it takes to make a delivery, and really

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Speaker 1: shrinking the distance where rail can be viable. I think

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Speaker 1: the general cut off used to be a goods movement

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Speaker 1: had to be at a minimum five hundred miles in

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Speaker 1: order for for rail to to ever be competitive. And

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Speaker 1: I can tell you there are many instances around the

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Speaker 1: country where due to operational changes, due to increased efficiency,

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Speaker 1: rail can compete down south of that fund five mile

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Speaker 1: number UM, sometimes significantly down south. And again that's just

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Speaker 1: that's just the class one railroads. We have several hundred

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Speaker 1: regional and what are known as short line railroads around

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Speaker 1: the country as well, and on any given they they are,

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Speaker 1: they're out there working to to win traffic over as well.

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Speaker 1: So the freight mar market is UH is vibrant and hot,

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Speaker 1: and freight's gonna go where the price is right and

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Speaker 1: where the services. I wanna pivot just a little bit,

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Speaker 1: you know. And Tracy and I started UM this series.

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Speaker 1: Obviously the context was pandemic related disruptions, and of course

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Speaker 1: that is still the overarching context, and basically everyone has

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Speaker 1: been affected. Another phenomenon this year that certainly hasn't helped

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Speaker 1: has been the rise of extreme weather, and whether it's

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Speaker 1: associated with specific climate change or not doesn't change the

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Speaker 1: fact that, you know, numerous stories have been written about

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00:25:32,119 --> 00:25:37,800
Speaker 1: rail lines being affected by whether it's flooding, the fires

433
00:25:38,200 --> 00:25:43,720
Speaker 1: in California and so forth, fires in Canada, lingering effects

434
00:25:43,840 --> 00:25:48,000
Speaker 1: from the hurricanes Hurricane Ida. I'm curious, like how much

435
00:25:48,119 --> 00:25:51,200
Speaker 1: you think, how much of you're thinking about the future

436
00:25:51,400 --> 00:25:57,200
Speaker 1: of the industry is based on anticipation of more extreme

437
00:25:57,280 --> 00:26:01,480
Speaker 1: weather events, and how you're thinking about mitigating against some

438
00:26:01,600 --> 00:26:05,760
Speaker 1: of those effects. Oh. Absolutely, I mean, you're you're spot

439
00:26:05,840 --> 00:26:07,800
Speaker 1: on with with everything you just hit on in the

440
00:26:08,320 --> 00:26:12,439
Speaker 1: impacts it's had on rail operations, whether the Western fires

441
00:26:12,480 --> 00:26:16,080
Speaker 1: specifically in certain parts of California, the Gulf Coast again,

442
00:26:16,240 --> 00:26:18,200
Speaker 1: you know, it's it's almost predictable that they're going to

443
00:26:18,240 --> 00:26:20,480
Speaker 1: be extreme weather events every year at this point, and

444
00:26:21,040 --> 00:26:23,639
Speaker 1: in rail you know, we we've got to adjust for that.

445
00:26:23,800 --> 00:26:25,760
Speaker 1: So you can do that a variety of different ways.

446
00:26:25,840 --> 00:26:29,600
Speaker 1: You can do that by making your infrastructure more resilient.

447
00:26:30,200 --> 00:26:32,239
Speaker 1: And so what does that mean. It means in low

448
00:26:32,359 --> 00:26:36,320
Speaker 1: lying areas and the Gulf you're probably increasing the height

449
00:26:36,440 --> 00:26:38,879
Speaker 1: of the rail, increasing the ballast so that you can

450
00:26:38,960 --> 00:26:43,000
Speaker 1: withstand a decent amount of standing water. You know, out

451
00:26:43,080 --> 00:26:44,639
Speaker 1: west with the fires, it's a little bit of a

452
00:26:44,680 --> 00:26:47,960
Speaker 1: trickier situation, but a lot of it is having alternative

453
00:26:49,359 --> 00:26:52,040
Speaker 1: routing plans in place. It's having partnerships in place that

454
00:26:52,119 --> 00:26:54,960
Speaker 1: allow you if you're if your line is damaged via

455
00:26:55,400 --> 00:26:58,399
Speaker 1: via fire, you have interline agreements or interchange agreements with

456
00:26:58,480 --> 00:27:01,320
Speaker 1: other railroads that allow you to temper rarely move your

457
00:27:01,400 --> 00:27:04,200
Speaker 1: goods over their tracks and vice versa. I know, one

458
00:27:04,240 --> 00:27:08,359
Speaker 1: of our biggest railroads out west had a bridge burned

459
00:27:08,400 --> 00:27:11,720
Speaker 1: down on it's one of its main lines. And while

460
00:27:11,760 --> 00:27:14,760
Speaker 1: they were able to miraculously rebuild the bridge and I

461
00:27:14,840 --> 00:27:17,000
Speaker 1: believe three weeks and have it back up and running,

462
00:27:17,040 --> 00:27:19,719
Speaker 1: which is a stunning feed of engineering in and of itself,

463
00:27:20,080 --> 00:27:22,160
Speaker 1: goods had to keep moving during that time. So alternate

464
00:27:22,320 --> 00:27:25,400
Speaker 1: arrangements have to be made. And so I can tell

465
00:27:25,440 --> 00:27:28,800
Speaker 1: you that it is absolutely called it climate change, called

466
00:27:28,920 --> 00:27:32,919
Speaker 1: you know, anticipated increased number of extreme weather events, absolutely

467
00:27:32,960 --> 00:27:37,600
Speaker 1: being built into strategic planning, absolutely being built into how

468
00:27:37,680 --> 00:27:41,600
Speaker 1: we're maintaining our infrastructure, how we're planning our our networks.

469
00:27:41,840 --> 00:27:43,960
Speaker 1: And it's just a reality that we're all going to

470
00:27:44,040 --> 00:27:47,880
Speaker 1: have to contend with. Now, I suppose on the positive side,

471
00:27:47,960 --> 00:27:52,240
Speaker 1: if we're looking to address climate change, rails environmental performance

472
00:27:52,760 --> 00:27:55,800
Speaker 1: far exceeds any other form of service insptation when it

473
00:27:55,880 --> 00:27:59,760
Speaker 1: comes to admissions, uh, when it comes to fuel use,

474
00:27:59,840 --> 00:28:03,600
Speaker 1: it um when it comes to overall environmental impact. And

475
00:28:03,760 --> 00:28:06,760
Speaker 1: so you know, our customers are cognizant of that Rail

476
00:28:06,800 --> 00:28:09,400
Speaker 1: can play a role in helping customers meet their overall

477
00:28:09,680 --> 00:28:13,560
Speaker 1: environmental targets or emissions targets. But Rail, all the Class

478
00:28:13,680 --> 00:28:17,720
Speaker 1: one railroads have all committed to significantly reducing their emissions

479
00:28:17,760 --> 00:28:21,200
Speaker 1: as well over the next several years and are using

480
00:28:21,240 --> 00:28:25,320
Speaker 1: a variety of technologies to decrease fuel use. It's decrease emissions.

481
00:28:25,600 --> 00:28:29,200
Speaker 1: We're exploring the use of battery electric locomotives, use of

482
00:28:29,280 --> 00:28:33,680
Speaker 1: hydrogen locomotives, biofuels, renewable fuels, um all. You know, it's

483
00:28:33,720 --> 00:28:36,520
Speaker 1: kind of an all hands on deck because we're going

484
00:28:36,560 --> 00:28:38,680
Speaker 1: to play a role in helping reduce the countries or

485
00:28:38,720 --> 00:28:41,720
Speaker 1: those globes emissions and helping our customers reduce emissions, which

486
00:28:41,840 --> 00:28:44,840
Speaker 1: you know, to come full circle hopefully, if if society

487
00:28:44,920 --> 00:28:48,040
Speaker 1: can can achieve the overall goals. Maybe we can make

488
00:28:48,080 --> 00:28:50,720
Speaker 1: a make an impact in on the extreme weather side

489
00:28:50,760 --> 00:28:53,760
Speaker 1: as well, but in the meantime, resiliency is absolutely key.

490
00:29:11,200 --> 00:29:13,880
Speaker 1: I have a slightly weird question, but is there any

491
00:29:14,000 --> 00:29:19,320
Speaker 1: way that extreme weather and specifically drought might actually UM

492
00:29:19,800 --> 00:29:22,720
Speaker 1: benefit rail. And the reason I'm asking is because I

493
00:29:22,760 --> 00:29:27,000
Speaker 1: remember reading one story UM that said Valet was transporting

494
00:29:27,320 --> 00:29:30,760
Speaker 1: more iron ore by rail because of lower river levels.

495
00:29:30,840 --> 00:29:34,640
Speaker 1: So I'm wondering if if there are situations where it

496
00:29:34,840 --> 00:29:38,040
Speaker 1: could be a good thing for for the rail business.

497
00:29:39,720 --> 00:29:45,120
Speaker 1: So I will say that rail is generally the most

498
00:29:45,240 --> 00:29:49,320
Speaker 1: resilient form of transportation when it comes to extreme weather events.

499
00:29:49,680 --> 00:29:53,400
Speaker 1: Maybe you know the infrastructure burning down notwithstanding, but you know,

500
00:29:53,560 --> 00:29:56,320
Speaker 1: after a hurricane, for example, rail is usually the first

501
00:29:56,480 --> 00:30:01,640
Speaker 1: form of of infrastructure backup in operation. UM after Hurricane Katrina,

502
00:30:01,720 --> 00:30:03,720
Speaker 1: and a rail for quite some time was the only

503
00:30:03,760 --> 00:30:07,720
Speaker 1: way to get goods into the New Orleans region. And

504
00:30:07,880 --> 00:30:12,160
Speaker 1: so I would say that is all very temporary. Now

505
00:30:12,520 --> 00:30:15,719
Speaker 1: when you're talking about you know, moving more iron because

506
00:30:15,920 --> 00:30:18,480
Speaker 1: water levels have gotten low, we have the ability to

507
00:30:18,800 --> 00:30:20,720
Speaker 1: to get up and running more quickly than most and

508
00:30:21,240 --> 00:30:23,520
Speaker 1: we'll take advantage of that. But you know, in the example,

509
00:30:23,560 --> 00:30:26,080
Speaker 1: you brought up. I could see a situation where we're

510
00:30:26,120 --> 00:30:29,320
Speaker 1: providing better service, maybe we're providing a better rate, and um,

511
00:30:29,600 --> 00:30:32,400
Speaker 1: you end up winning business out of that shirt. A

512
00:30:32,480 --> 00:30:35,080
Speaker 1: lot of people maybe they don't pay attention to how

513
00:30:35,160 --> 00:30:37,880
Speaker 1: the business of rail has done, but it's actually done

514
00:30:37,920 --> 00:30:40,040
Speaker 1: like phenomenally well. And if you already just go on

515
00:30:40,120 --> 00:30:42,640
Speaker 1: the Bloomberg terminal right now and you were to pull

516
00:30:42,720 --> 00:30:46,440
Speaker 1: up a chart of you say Union Pacific and zoom

517
00:30:46,480 --> 00:30:48,959
Speaker 1: it out, it looks like an Internet stock. I mean,

518
00:30:49,000 --> 00:30:52,480
Speaker 1: it's just over the last years or whatever. It's incredible.

519
00:30:52,480 --> 00:30:54,440
Speaker 1: And I think that's the case with a number of

520
00:30:54,520 --> 00:30:58,440
Speaker 1: these for people who don't know what the story is.

521
00:30:58,920 --> 00:31:01,280
Speaker 1: And I would admit when I say people who don't know,

522
00:31:01,440 --> 00:31:03,840
Speaker 1: I include that myself. But I pretend that I don't

523
00:31:04,160 --> 00:31:06,200
Speaker 1: what is this story? Like? Why is it? You know,

524
00:31:06,400 --> 00:31:09,880
Speaker 1: twenty years ago rail is not thought to be like

525
00:31:10,040 --> 00:31:14,600
Speaker 1: this particularly exciting booming business and years later they just

526
00:31:14,720 --> 00:31:19,040
Speaker 1: haded just these like massive, massive industry success stories that

527
00:31:19,120 --> 00:31:22,680
Speaker 1: have made investors a ton of money. So I'll do

528
00:31:22,800 --> 00:31:25,600
Speaker 1: you one better. I want to only go twenty years ago.

529
00:31:25,640 --> 00:31:29,120
Speaker 1: I'll go back forty years even even one. So in

530
00:31:29,240 --> 00:31:32,840
Speaker 1: nineteen eighty what's known as the Staggers Rail Act took

531
00:31:33,000 --> 00:31:39,000
Speaker 1: what was a highly regulated, highly heavy handed government federal

532
00:31:39,080 --> 00:31:45,920
Speaker 1: government interventionist regulatory regime and partially deregulated the rail industry.

533
00:31:46,160 --> 00:31:49,560
Speaker 1: And at the time, at that time, approximately twenty five

534
00:31:50,320 --> 00:31:56,000
Speaker 1: of railroads were interfacing bankruptcy. The infrastructure was in decrepit shape.

535
00:31:56,160 --> 00:31:59,760
Speaker 1: The industry quite frankly, was on the verge of collapse overall, literally.

536
00:32:00,440 --> 00:32:03,600
Speaker 1: And so what what the Staggers Act did. It freed

537
00:32:03,680 --> 00:32:07,520
Speaker 1: up railroads to to operate in markets, to charge market rates,

538
00:32:07,800 --> 00:32:11,400
Speaker 1: to rationalize their networks. In other words, that the government

539
00:32:11,480 --> 00:32:14,840
Speaker 1: used to force railroads to operate networks, whether the partner lines,

540
00:32:14,920 --> 00:32:18,320
Speaker 1: whether there was traffic moving on it or not, whether

541
00:32:18,400 --> 00:32:20,920
Speaker 1: there was any ability to ever earn any sort of

542
00:32:21,000 --> 00:32:24,560
Speaker 1: return on your investment or profit based on that particular line.

543
00:32:24,600 --> 00:32:28,440
Speaker 1: And the Staggers Act bit freed railroads to act as

544
00:32:28,840 --> 00:32:32,720
Speaker 1: as normal companies in markets. And what that did is

545
00:32:32,960 --> 00:32:37,440
Speaker 1: a few different things. One, it allowed them that efficiency

546
00:32:38,080 --> 00:32:44,920
Speaker 1: increased dramatically. Prices actually dropped dramatically. Today when adjusted for inflation,

547
00:32:45,200 --> 00:32:48,280
Speaker 1: rail rates writ large or about forty less than they

548
00:32:48,320 --> 00:32:52,440
Speaker 1: were in nineteen eighty, and revenues increased and so it

549
00:32:52,600 --> 00:32:57,040
Speaker 1: took about twenty years for rail to really hit its stride.

550
00:32:57,160 --> 00:33:00,440
Speaker 1: So when you're when you're using that twenty number, I

551
00:33:00,480 --> 00:33:03,240
Speaker 1: would say, you know, it took about twenty years for

552
00:33:03,440 --> 00:33:06,400
Speaker 1: for rail to to really start to realize the benefits

553
00:33:06,720 --> 00:33:09,479
Speaker 1: of staggers. And in the past twenty years Rail has

554
00:33:09,560 --> 00:33:13,040
Speaker 1: been able to to really spring forward in a very

555
00:33:13,080 --> 00:33:16,440
Speaker 1: positive way. So you know, we're moving colossal amounts of goods,

556
00:33:17,000 --> 00:33:19,640
Speaker 1: we're doing it in a very efficient manner, we're maintaining

557
00:33:19,640 --> 00:33:24,280
Speaker 1: our own infrastructure, and we're charging rates that are dramatically

558
00:33:24,360 --> 00:33:27,880
Speaker 1: less than they were before the regulation. So on rates,

559
00:33:28,080 --> 00:33:30,600
Speaker 1: and this is something that I find to be an

560
00:33:30,640 --> 00:33:33,520
Speaker 1: important thing to learn about with every one of these discussions,

561
00:33:33,920 --> 00:33:37,560
Speaker 1: which is market power. And you know, we talked about trucking,

562
00:33:37,760 --> 00:33:41,080
Speaker 1: and I think I forget the stat exactly, but something

563
00:33:41,240 --> 00:33:44,400
Speaker 1: like you know, in the trucking world, by the time

564
00:33:44,720 --> 00:33:47,400
Speaker 1: you start a podcast and finish the recording, like ten

565
00:33:47,440 --> 00:33:51,440
Speaker 1: tho new trucking companies have been formed in that hour

566
00:33:51,600 --> 00:33:55,080
Speaker 1: or that. That's only a slight exaggeration. And so there

567
00:33:55,160 --> 00:33:58,280
Speaker 1: is not a lot of especially during the busts, there

568
00:33:58,400 --> 00:33:59,880
Speaker 1: is not a lot of pricing power. Then you get

569
00:33:59,920 --> 00:34:02,560
Speaker 1: the massive bankruptcy ways. You know, I'm looking at this

570
00:34:02,720 --> 00:34:06,360
Speaker 1: chart here someone sent to me a company like Norfolk Southern.

571
00:34:06,680 --> 00:34:12,600
Speaker 1: Is the consolidation seven companies event over time became what

572
00:34:12,840 --> 00:34:16,359
Speaker 1: is currently known as Norfolk Southern Union Pacific. It looks

573
00:34:16,400 --> 00:34:19,840
Speaker 1: like it's like thirteen different companies. Over time, various mergers

574
00:34:19,920 --> 00:34:23,160
Speaker 1: became what is now known as Union Pacific. Why has

575
00:34:23,239 --> 00:34:26,000
Speaker 1: it been the case such that over the last forty

576
00:34:26,120 --> 00:34:32,040
Speaker 1: or fifty years, despite this massive consolidation we've you would

577
00:34:32,080 --> 00:34:36,400
Speaker 1: not expect to see more competitive pricing. You would expect

578
00:34:36,760 --> 00:34:40,160
Speaker 1: the handful of big rail players Norfolk Southern, CSX, Union

579
00:34:40,200 --> 00:34:44,279
Speaker 1: Pacific and bing An SF to enjoy incredible pricing power

580
00:34:46,120 --> 00:34:50,680
Speaker 1: because competition is very alive, real and well, um, you

581
00:34:50,760 --> 00:34:54,040
Speaker 1: know you mentioned some of the mergers that created some

582
00:34:54,160 --> 00:34:56,560
Speaker 1: of the bigger railroads today. Well, a lot of that

583
00:34:56,760 --> 00:35:01,000
Speaker 1: is there were too many railroads back you know, several

584
00:35:01,040 --> 00:35:03,320
Speaker 1: decades ago. There were too many for for the economy

585
00:35:03,400 --> 00:35:06,680
Speaker 1: to to support. And so by by the mergers and

586
00:35:06,719 --> 00:35:10,399
Speaker 1: acquisitions that have historically occurred, you've you've allowed rail too.

587
00:35:11,000 --> 00:35:14,040
Speaker 1: You have your you know, your your primary rail lines

588
00:35:14,600 --> 00:35:18,520
Speaker 1: throughout the country again that have been made much more

589
00:35:18,560 --> 00:35:21,840
Speaker 1: efficient infrastructures dramatically improved over the years. But then you

590
00:35:21,920 --> 00:35:25,680
Speaker 1: have this entire economy of regional and short line railroads

591
00:35:25,760 --> 00:35:28,600
Speaker 1: that are called, for lack of a better term, the

592
00:35:28,640 --> 00:35:32,000
Speaker 1: feeder railroads to to the bigger guys. And so you've

593
00:35:32,680 --> 00:35:37,120
Speaker 1: the the economy and the regulatory structure has allowed for

594
00:35:37,320 --> 00:35:40,120
Speaker 1: rail to to rationalize itself, which is inherently you have

595
00:35:40,920 --> 00:35:44,600
Speaker 1: a smaller number of very large carriers, a significantly higher

596
00:35:44,680 --> 00:35:48,400
Speaker 1: number of regional and smaller carriers that all can that

597
00:35:48,480 --> 00:35:52,520
Speaker 1: can all excel at what they do. And so rail

598
00:35:52,640 --> 00:35:57,880
Speaker 1: rail competition is very real, very live and well. Intermodal competition,

599
00:35:57,920 --> 00:36:00,520
Speaker 1: as we've discussed, is even more alive and well. But

600
00:36:00,680 --> 00:36:03,400
Speaker 1: there are other types of competition, whether it's a geocratic

601
00:36:03,480 --> 00:36:07,360
Speaker 1: geographic competition, a company choosing to to cite a facility

602
00:36:07,400 --> 00:36:10,760
Speaker 1: one place over the other, product competition. No better example

603
00:36:10,800 --> 00:36:15,319
Speaker 1: of product competition than natural gas almost entirely replacing coal

604
00:36:15,360 --> 00:36:18,000
Speaker 1: as a fuel source or not that's an overstatement, but

605
00:36:18,239 --> 00:36:21,400
Speaker 1: dramatically eating into two coal share being a fuel source.

606
00:36:21,760 --> 00:36:24,600
Speaker 1: And so all of those issues have allowed for the

607
00:36:24,680 --> 00:36:27,960
Speaker 1: market to maintain itself in a very healthy way, and

608
00:36:28,360 --> 00:36:31,000
Speaker 1: on top of that, as a backstop we have we

609
00:36:31,080 --> 00:36:34,560
Speaker 1: have an economic regulator, the Surface Transportation Board, which is

610
00:36:34,880 --> 00:36:38,920
Speaker 1: a backstop for shippers who feel that they may not

611
00:36:39,080 --> 00:36:41,800
Speaker 1: be being charged reasonable rates and they can appeal to

612
00:36:41,840 --> 00:36:44,480
Speaker 1: the Surface Transportation Board, who's an adjudicator there. So you

613
00:36:44,560 --> 00:36:47,800
Speaker 1: do have that regulatory backstop that is a an outlet

614
00:36:47,960 --> 00:36:51,719
Speaker 1: for for shippers that do have concerns about about the

615
00:36:51,840 --> 00:36:55,000
Speaker 1: rates are being charged. So overall, that's created a very

616
00:36:55,080 --> 00:36:57,799
Speaker 1: healthy ecosystem. And i'll just point out your your your

617
00:36:58,000 --> 00:37:00,920
Speaker 1: comment about you know, the number of trucking companies going

618
00:37:00,960 --> 00:37:02,919
Speaker 1: in and out of business at any other any time.

619
00:37:03,239 --> 00:37:05,080
Speaker 1: You know, one thing I'm really proud of over the

620
00:37:05,120 --> 00:37:09,240
Speaker 1: pandemic is that because of the healthy capitalization of our companies,

621
00:37:09,640 --> 00:37:11,360
Speaker 1: we were fortunate that we did not have to go

622
00:37:11,480 --> 00:37:13,560
Speaker 1: to Capitol Hill to ask for any sort of bailout.

623
00:37:14,000 --> 00:37:16,920
Speaker 1: Are our members wrote it out on their own. And uh,

624
00:37:17,400 --> 00:37:20,400
Speaker 1: you know, our traffic, we didn't have the drop in

625
00:37:20,520 --> 00:37:23,279
Speaker 1: traffic that our our airline friends did, for example, but

626
00:37:23,520 --> 00:37:25,839
Speaker 1: we still about a thirty percent drop in traffic at

627
00:37:25,880 --> 00:37:30,520
Speaker 1: the at the trough um during the pandemic. And it

628
00:37:30,719 --> 00:37:33,680
Speaker 1: is that that history and that that ecosystem that we've

629
00:37:33,719 --> 00:37:36,120
Speaker 1: discussed that allowed rail to to ride it out with

630
00:37:36,560 --> 00:37:40,840
Speaker 1: without getting that that financial aid from the government. So

631
00:37:41,000 --> 00:37:43,560
Speaker 1: I want to go back to where we started the

632
00:37:43,640 --> 00:37:48,480
Speaker 1: conversation with the congestion issues. What's your sense of how

633
00:37:48,640 --> 00:37:51,920
Speaker 1: long this might actually go on for and what's it

634
00:37:52,040 --> 00:37:56,960
Speaker 1: going to take to get an improvement. Based on comments

635
00:37:57,120 --> 00:37:59,840
Speaker 1: that some of our executives have made, and certainly folks

636
00:37:59,880 --> 00:38:02,560
Speaker 1: in other parts of the supply chain, I think most

637
00:38:02,800 --> 00:38:06,440
Speaker 1: folks think that these volumes or some of these constraints

638
00:38:06,600 --> 00:38:09,759
Speaker 1: will last into the new year, potentially through Q one,

639
00:38:10,040 --> 00:38:12,560
Speaker 1: if not into Q two. And that's again just based

640
00:38:12,600 --> 00:38:14,840
Speaker 1: on public comments i've seen. How are we going to

641
00:38:14,920 --> 00:38:16,320
Speaker 1: get out of this. We're going to get out of

642
00:38:16,360 --> 00:38:20,080
Speaker 1: it by every part of the supply chain operating at

643
00:38:20,200 --> 00:38:25,600
Speaker 1: a high level of efficiency and a high level of optimization.

644
00:38:25,719 --> 00:38:30,000
Speaker 1: And so again I talked about Rails seven way of

645
00:38:30,080 --> 00:38:33,520
Speaker 1: doing business. Um, the ports don't operate like that now.

646
00:38:33,600 --> 00:38:36,560
Speaker 1: I did see news recently that some of the West

647
00:38:36,600 --> 00:38:39,040
Speaker 1: Coast ports are going to be expanding hours m for

648
00:38:39,280 --> 00:38:43,000
Speaker 1: for longshoreman shifts, are gonna be expanding hours for truck pickup,

649
00:38:43,200 --> 00:38:45,000
Speaker 1: which is a good sign. It's a good step forward,

650
00:38:45,200 --> 00:38:47,600
Speaker 1: and we'll we'll see what sort of impact that has

651
00:38:48,040 --> 00:38:50,239
Speaker 1: on the on the other side of the supply chain.

652
00:38:50,360 --> 00:38:52,920
Speaker 1: This this last mile delivery. As we talked about the

653
00:38:52,960 --> 00:38:55,560
Speaker 1: shippers getting their goods out of the intermodal yards to

654
00:38:55,640 --> 00:38:58,400
Speaker 1: allow for for throughput to continue, you know that that

655
00:38:58,520 --> 00:39:00,560
Speaker 1: might be a much trickier issue because as it's a

656
00:39:00,640 --> 00:39:04,640
Speaker 1: very localized challenge as far as drage trucker availability, as

657
00:39:04,680 --> 00:39:08,600
Speaker 1: far as warehouse capacity warehouse worker. You go out to

658
00:39:08,760 --> 00:39:13,080
Speaker 1: Chicago Land right now, the millions of square feet of warehouses,

659
00:39:13,160 --> 00:39:15,479
Speaker 1: practically every one of them has a four higher sign.

660
00:39:15,920 --> 00:39:18,320
Speaker 1: You go to some of those warehouses which are completely

661
00:39:18,400 --> 00:39:22,959
Speaker 1: full and they're storing containers on chassiss in their parking lots.

662
00:39:23,040 --> 00:39:25,160
Speaker 1: So what what's the problem with that, Well, that's taking

663
00:39:25,200 --> 00:39:27,440
Speaker 1: up a chassis that could be brought back to the

664
00:39:27,480 --> 00:39:30,680
Speaker 1: innermodal yard, picking up another container and getting it out

665
00:39:30,719 --> 00:39:33,279
Speaker 1: of the yard. So until we can work through some

666
00:39:33,400 --> 00:39:37,439
Speaker 1: of these issues and smaller parts of the supply chain,

667
00:39:37,520 --> 00:39:39,360
Speaker 1: I think, you know, it's going to be a challenge

668
00:39:39,440 --> 00:39:43,040
Speaker 1: for us to hit max capacity and max efficiency, and

669
00:39:43,080 --> 00:39:45,400
Speaker 1: it's something we need to do because you know, on

670
00:39:45,480 --> 00:39:49,120
Speaker 1: the bright side, the economy, the consumer continues to seem

671
00:39:49,160 --> 00:39:52,360
Speaker 1: to have cash to spend, and you know, hopefully we

672
00:39:52,440 --> 00:39:54,400
Speaker 1: can keep this strong demand going for a while. We

673
00:39:54,480 --> 00:39:55,960
Speaker 1: just need to be able to support it as a

674
00:39:56,400 --> 00:40:00,160
Speaker 1: as an overall supply chain and as an economy. Can

675
00:40:00,200 --> 00:40:03,480
Speaker 1: you talk a little bit about hiring right now at

676
00:40:03,760 --> 00:40:06,279
Speaker 1: at the rail companies? I mean, every industry seems to

677
00:40:06,360 --> 00:40:10,560
Speaker 1: be having trouble hiring. Rail jobs I think are considered

678
00:40:10,600 --> 00:40:14,560
Speaker 1: to be pretty good jobs. Union jobs. They seem to

679
00:40:14,640 --> 00:40:18,719
Speaker 1: be less physically taxing, less stressful on families than say,

680
00:40:18,760 --> 00:40:22,640
Speaker 1: truck truck driving jobs, which sounds extremely difficult from a

681
00:40:22,719 --> 00:40:26,040
Speaker 1: lifestyle perspective. Can you talk about a bit about where

682
00:40:26,080 --> 00:40:31,560
Speaker 1: the industry is in terms of its staff and goals? Sure? So,

683
00:40:32,000 --> 00:40:34,040
Speaker 1: one you you hit on a few key points. We

684
00:40:34,160 --> 00:40:38,440
Speaker 1: are almost an entirely collectively bargained industry and have very

685
00:40:38,520 --> 00:40:42,080
Speaker 1: productive work in relationships with our unions. Average wages and

686
00:40:42,160 --> 00:40:48,719
Speaker 1: compensation for a rail worker or roughly one dollars, So

687
00:40:48,840 --> 00:40:51,000
Speaker 1: these are these are very good paying jobs in the

688
00:40:51,160 --> 00:40:55,160
Speaker 1: in the manufacturing slash industrial sector specifically. Um that's why

689
00:40:55,239 --> 00:40:58,319
Speaker 1: you have more multi generations working in rail. There are

690
00:40:58,440 --> 00:41:01,680
Speaker 1: areas where railroads are looking to hire, and there are

691
00:41:01,680 --> 00:41:04,960
Speaker 1: areas where you know where staffing levels are or where

692
00:41:05,000 --> 00:41:08,520
Speaker 1: we want them to be. And yeah, I mean you

693
00:41:08,640 --> 00:41:10,560
Speaker 1: hit the nail on the head that I think every

694
00:41:10,640 --> 00:41:13,000
Speaker 1: industry is trying to bring people on board right now,

695
00:41:13,080 --> 00:41:16,000
Speaker 1: and and railroading, Look, it's a challenging job. It's a

696
00:41:16,560 --> 00:41:20,640
Speaker 1: seven operation, it's a hundred forty forty seven thousand mile

697
00:41:20,760 --> 00:41:23,719
Speaker 1: outdoor factory floor. Um, so it takes a certain type

698
00:41:23,760 --> 00:41:26,640
Speaker 1: of person who has that interest. But I think on

699
00:41:26,719 --> 00:41:29,080
Speaker 1: the bright side, we've seen once people get into the industry,

700
00:41:29,160 --> 00:41:31,800
Speaker 1: they stay in the industry because it is it's a

701
00:41:32,000 --> 00:41:36,000
Speaker 1: it's a highly compensating industry. You see what you're doing,

702
00:41:36,080 --> 00:41:39,600
Speaker 1: it's very tangible. You're literally moving the economy. And so

703
00:41:39,840 --> 00:41:42,600
Speaker 1: while there may be some temporary challenges and pockets around

704
00:41:42,640 --> 00:41:45,920
Speaker 1: the country, you know we'll work through that. And railroads

705
00:41:45,960 --> 00:41:49,040
Speaker 1: and railroading always has been and always will be a

706
00:41:49,120 --> 00:41:52,479
Speaker 1: really good place to work in a place where somebody

707
00:41:52,520 --> 00:41:54,480
Speaker 1: can earn a living and support their family. And so

708
00:41:54,840 --> 00:41:56,839
Speaker 1: that attraction at the end of the day is going

709
00:41:56,880 --> 00:41:58,960
Speaker 1: to be what keeps us having the high quality people

710
00:41:59,040 --> 00:42:01,719
Speaker 1: we have out on the railroad. You know, you're thinking

711
00:42:01,719 --> 00:42:05,680
Speaker 1: about disruption, and there are people who fantasize and more

712
00:42:05,760 --> 00:42:09,040
Speaker 1: than just fantasized are actively working on the idea of

713
00:42:09,160 --> 00:42:12,399
Speaker 1: one day fleets of self driving trucks, and of course

714
00:42:12,719 --> 00:42:16,160
Speaker 1: self driving trucks would be more efficient than normal trucks

715
00:42:16,360 --> 00:42:20,960
Speaker 1: and presumably could have a lot of competitiveness with rail itself.

716
00:42:21,560 --> 00:42:25,680
Speaker 1: What's your thoughts sort of like out there technologies twenty

717
00:42:26,000 --> 00:42:29,080
Speaker 1: that I don't know, maybe ten twenty years from now? Uh,

718
00:42:29,200 --> 00:42:31,400
Speaker 1: do you keep tabs on these? Do you worry about them?

719
00:42:31,680 --> 00:42:34,640
Speaker 1: Could that be something that in the medium to long

720
00:42:34,760 --> 00:42:39,440
Speaker 1: term of the industry is a becomes a meaningful threat. Oh,

721
00:42:39,520 --> 00:42:42,640
Speaker 1: it's absolutely competitive issue. I think you know, they're almost

722
00:42:42,680 --> 00:42:46,080
Speaker 1: as many autonomous trucking companies that start up every every

723
00:42:46,160 --> 00:42:49,480
Speaker 1: day as other trucking companies. But look that that is

724
00:42:49,520 --> 00:42:53,160
Speaker 1: a huge focus. Um, you're seeing progress in the trucking industry.

725
00:42:53,200 --> 00:42:55,840
Speaker 1: It's not going to happen tomorrow, but it is. It

726
00:42:56,000 --> 00:42:59,440
Speaker 1: is something that's mid term, I would say, and railroad's

727
00:42:59,440 --> 00:43:01,319
Speaker 1: got to compete with that. Now, when you think about

728
00:43:01,360 --> 00:43:04,680
Speaker 1: autonomous technology, railroads operate on a fixed guideway and a

729
00:43:04,800 --> 00:43:07,960
Speaker 1: largely closed network. You know, a truck on the highways

730
00:43:08,000 --> 00:43:11,879
Speaker 1: interacting with motorists at every direction. A railroad other than

731
00:43:12,200 --> 00:43:15,560
Speaker 1: you know, going across UH at Great Crossings is really

732
00:43:15,640 --> 00:43:18,799
Speaker 1: not interacting with the public, and so to US, rail

733
00:43:18,960 --> 00:43:23,160
Speaker 1: is a very natural place for automated technologies, and we

734
00:43:23,520 --> 00:43:27,400
Speaker 1: just at the end of last year recently completed a

735
00:43:27,560 --> 00:43:31,240
Speaker 1: nationwide build out of a technology called positive train Control,

736
00:43:31,760 --> 00:43:36,839
Speaker 1: which really is an automated system that that will override

737
00:43:37,040 --> 00:43:40,839
Speaker 1: the the engineer um if he or she breaks work rules,

738
00:43:40,880 --> 00:43:43,480
Speaker 1: that will automatically stop the train for for overspeed or

739
00:43:43,480 --> 00:43:47,000
Speaker 1: incursion into to work areas. Things along those lines. We've

740
00:43:47,120 --> 00:43:51,120
Speaker 1: also been deploying technology that acts as almost a cruise

741
00:43:51,200 --> 00:43:55,160
Speaker 1: control or fuel management system on the locomotive as well,

742
00:43:55,320 --> 00:43:59,320
Speaker 1: so it's maximizing the fuel efficiency throughout the trip. And

743
00:43:59,480 --> 00:44:03,359
Speaker 1: so you pair that with the number of other either

744
00:44:03,719 --> 00:44:08,040
Speaker 1: on train or on track technologies that Rail has deployed

745
00:44:08,320 --> 00:44:12,279
Speaker 1: or is deploying, and we're at a position where you know,

746
00:44:12,880 --> 00:44:16,360
Speaker 1: the train is moving in a highly automated state already,

747
00:44:17,000 --> 00:44:20,400
Speaker 1: and so we're fully prepared to engage in that battle.

748
00:44:20,719 --> 00:44:23,600
Speaker 1: The important thing for US is that we need the

749
00:44:23,680 --> 00:44:26,759
Speaker 1: federal government, whether it's the legislature or whether it's the

750
00:44:26,840 --> 00:44:31,520
Speaker 1: Department of Transportation, to allow trucking and rail to operate

751
00:44:31,600 --> 00:44:37,200
Speaker 1: on equal footing. When it comes to technology deployment, automated technologies, etcetera.

752
00:44:37,600 --> 00:44:39,919
Speaker 1: And you can imagine, you know, we have some folks

753
00:44:39,960 --> 00:44:42,239
Speaker 1: who have a vested interest in making sure that the

754
00:44:42,320 --> 00:44:45,080
Speaker 1: number of employees on a on a train is held

755
00:44:45,320 --> 00:44:49,440
Speaker 1: constant regardless of the technological advancements. And we think there

756
00:44:49,480 --> 00:44:52,520
Speaker 1: needs to be some flexibility there because technology is only

757
00:44:52,560 --> 00:44:55,400
Speaker 1: moving forward, not only in the rail and trucking industry,

758
00:44:55,400 --> 00:44:59,560
Speaker 1: in every industry around the economy, and we need regulations

759
00:44:59,600 --> 00:45:01,680
Speaker 1: and rule is that allow for that to happen, because

760
00:45:01,880 --> 00:45:04,600
Speaker 1: not only are their business benefits there dramatic safety benefits

761
00:45:04,640 --> 00:45:06,640
Speaker 1: as well, and that should be the focus of everybody.

762
00:45:08,640 --> 00:45:11,040
Speaker 1: Ian Jefferies, thank you so much for coming on. I

763
00:45:11,160 --> 00:45:13,759
Speaker 1: learned a ton about the real industry from you and

764
00:45:14,000 --> 00:45:17,160
Speaker 1: really appreciate you coming on outline. Thank you for having me.

765
00:45:17,239 --> 00:45:21,560
Speaker 1: I really enjoyed it. Thanks you sure, Yeah, that was fun.

766
00:45:21,680 --> 00:45:42,200
Speaker 1: Thanks you so. Tracy, you asked, well, you know what

767
00:45:42,400 --> 00:45:45,920
Speaker 1: was probably like the most important question, which is like, okay,

768
00:45:46,000 --> 00:45:49,360
Speaker 1: when is this all going to ease? And you know

769
00:45:49,440 --> 00:45:52,680
Speaker 1: we've been asking, we've been asking some version of that

770
00:45:52,840 --> 00:45:56,040
Speaker 1: question out for like six months. I would say, if

771
00:45:56,080 --> 00:45:59,759
Speaker 1: not longer, Yeah, I feel like everyone is sort of

772
00:46:00,160 --> 00:46:04,440
Speaker 1: settling on this after the lunar New Year kind of idea,

773
00:46:04,640 --> 00:46:07,400
Speaker 1: like that seems to be the consensus, like after early

774
00:46:07,760 --> 00:46:11,239
Speaker 1: next year, hopefully things will start to ease. So I

775
00:46:11,280 --> 00:46:13,360
Speaker 1: guess we should like mark that in our diaries that

776
00:46:13,520 --> 00:46:16,520
Speaker 1: if if things don't seem to be improving shortly after

777
00:46:17,280 --> 00:46:20,800
Speaker 1: early February, then uh, we may have these problems for

778
00:46:20,840 --> 00:46:25,160
Speaker 1: a long while. Yeah, let's mark that down as as

779
00:46:25,200 --> 00:46:26,920
Speaker 1: a point where we could hope. But on the other hand,

780
00:46:27,040 --> 00:46:29,759
Speaker 1: like by and large, and every once in a while,

781
00:46:29,760 --> 00:46:32,400
Speaker 1: I was like, there have been these tentative signs of easing,

782
00:46:32,480 --> 00:46:34,040
Speaker 1: like there will be like a week where like the

783
00:46:34,160 --> 00:46:37,120
Speaker 1: prices of shipping rates go down or the number of

784
00:46:37,160 --> 00:46:39,840
Speaker 1: ships waiting in the l A Harbor go down, But

785
00:46:40,000 --> 00:46:42,759
Speaker 1: by and large, things keep getting worse. And it's just

786
00:46:42,840 --> 00:46:45,960
Speaker 1: so clear that like all of these different industries which

787
00:46:46,040 --> 00:46:49,960
Speaker 1: intersect are compounding and lineately. Ian talked about sort of

788
00:46:50,040 --> 00:46:54,520
Speaker 1: like the wait times that exist for the Royal Yards

789
00:46:54,719 --> 00:46:57,279
Speaker 1: in Chicago, and that sounded so much like some of

790
00:46:57,320 --> 00:46:59,680
Speaker 1: the things that Jeans Tarrocco was saying about some of

791
00:46:59,800 --> 00:47:05,200
Speaker 1: their issues with getting the actual car containers back to

792
00:47:05,800 --> 00:47:09,040
Speaker 1: ships in l A I just don't feel like I

793
00:47:09,120 --> 00:47:11,799
Speaker 1: do think things will ease at some point, but I've

794
00:47:11,880 --> 00:47:14,400
Speaker 1: like becoming more pessimistic. I guess I would say that

795
00:47:14,480 --> 00:47:17,040
Speaker 1: there's like any sort of like natural mechanism for it

796
00:47:17,160 --> 00:47:21,879
Speaker 1: to ease, because it's also like inter interlocked. Yeah, I mean,

797
00:47:22,520 --> 00:47:25,200
Speaker 1: well Ian touched on this as well. You get this

798
00:47:25,280 --> 00:47:28,839
Speaker 1: sort of cascade effect, so you know, even talking about

799
00:47:28,840 --> 00:47:31,239
Speaker 1: like one problem in one rail system is going to

800
00:47:31,440 --> 00:47:33,760
Speaker 1: end up or in one part of the railway system

801
00:47:33,880 --> 00:47:36,040
Speaker 1: is going to end up affecting all of it, but

802
00:47:36,200 --> 00:47:39,680
Speaker 1: then a problem on the rail system itself is going

803
00:47:39,760 --> 00:47:43,120
Speaker 1: to end up affecting what's going on at the ports

804
00:47:43,480 --> 00:47:47,200
Speaker 1: or the barges um like Jeans spoke about earlier this summer,

805
00:47:47,960 --> 00:47:53,400
Speaker 1: there's something also interesting about rails, and of course in

806
00:47:53,719 --> 00:47:58,560
Speaker 1: is biased, but there's something interesting about rail as an

807
00:47:58,600 --> 00:48:00,880
Speaker 1: industry that sort of seems to work very well from

808
00:48:00,920 --> 00:48:04,399
Speaker 1: a sort of like public goods perspective, Like, okay, rail

809
00:48:04,480 --> 00:48:07,120
Speaker 1: shareholders have done very well. We know that you look

810
00:48:07,160 --> 00:48:11,040
Speaker 1: at the stocks. Rail employees seem to be doing well.

811
00:48:11,280 --> 00:48:14,319
Speaker 1: It's a heavily unionized industry with a high level of pay.

812
00:48:15,320 --> 00:48:18,920
Speaker 1: Rail customers seem to be doing well because despite the

813
00:48:19,200 --> 00:48:23,040
Speaker 1: consolidation in the industry from dozens of different rail lines

814
00:48:23,120 --> 00:48:27,520
Speaker 1: to really just four big national rail lines. According to Ian,

815
00:48:27,800 --> 00:48:30,799
Speaker 1: you know, pricing power remains competitive. I feel like there're

816
00:48:30,880 --> 00:48:33,320
Speaker 1: like must be some some lesson in there from like

817
00:48:33,360 --> 00:48:37,480
Speaker 1: a regulatory perspective about how you can have an industry

818
00:48:37,640 --> 00:48:39,920
Speaker 1: that I don't know, like it kind of seems like

819
00:48:40,360 --> 00:48:44,799
Speaker 1: the various stakeholders of this customers, employees, and shareholders all

820
00:48:44,880 --> 00:48:46,479
Speaker 1: seem to be doing well, and I'm trying to figure

821
00:48:46,480 --> 00:48:49,399
Speaker 1: out what the catches. I'm sure there is one. I'm

822
00:48:49,440 --> 00:48:53,080
Speaker 1: trying to compare and contrast the U S rail system

823
00:48:53,320 --> 00:48:57,439
Speaker 1: with like the rail system in the UK, which maybe

824
00:48:57,480 --> 00:49:00,520
Speaker 1: we should do a UK rail system episode at some point.

825
00:49:00,520 --> 00:49:02,600
Speaker 1: Do you know I used to cover rail for Bloomberg

826
00:49:03,080 --> 00:49:06,080
Speaker 1: in uh in London? I probably I think no, I

827
00:49:06,360 --> 00:49:10,520
Speaker 1: thought I only knew you covered airlines. Yeah, I covered

828
00:49:10,520 --> 00:49:16,680
Speaker 1: all transport. I did airlines, airports, cars and rail. But anyway, um,

829
00:49:16,800 --> 00:49:19,400
Speaker 1: maybe we should do maybe we should branch out from

830
00:49:19,440 --> 00:49:22,879
Speaker 1: our transport series and start doing transport around the world,

831
00:49:23,040 --> 00:49:26,080
Speaker 1: not just different modes of transport, but you know rail

832
00:49:26,320 --> 00:49:30,120
Speaker 1: in the US versus rail in the UK. Actually, you know,

833
00:49:30,239 --> 00:49:36,520
Speaker 1: we really need to do soon is a European power episode. Yeah,

834
00:49:36,640 --> 00:49:38,479
Speaker 1: let's do it. That's a good one. It's serious because

835
00:49:38,520 --> 00:49:40,279
Speaker 1: it's like I keep reading about all this, like if

836
00:49:40,320 --> 00:49:42,960
Speaker 1: the wind isn't blowing a natural gas prices, so let's

837
00:49:42,960 --> 00:49:46,480
Speaker 1: get that on the agenda too. Yeah, let's do it. Okay, Um,

838
00:49:46,640 --> 00:49:49,440
Speaker 1: shall we leave it there? Let's leave it there? All right?

839
00:49:49,880 --> 00:49:52,800
Speaker 1: This has been another episode of the All Thoughts Podcast.

840
00:49:52,920 --> 00:49:55,560
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at

841
00:49:55,600 --> 00:49:58,640
Speaker 1: Tracy Alloway. And I'm Joe Wisenthal. You can follow me

842
00:49:58,880 --> 00:50:02,399
Speaker 1: on Twitter at the Stalwart. Follow our producer on Twitter,

843
00:50:02,520 --> 00:50:06,440
Speaker 1: Laura Carlson. She's at Laura M. Carlson. Followed the Bloomberg

844
00:50:06,480 --> 00:50:10,520
Speaker 1: head of podcast, Francesca Levi at Francesca Today, and check

845
00:50:10,560 --> 00:50:13,600
Speaker 1: out all of our podcast at Bloomberg under the handle

846
00:50:14,000 --> 00:50:15,840
Speaker 1: at podcasts. Thanks for listening.