STAR Solutions Officially Ends Participation in All Future Work in the I-81 Corridor!

Norfolk Southern Chairman
Debuts Railroad's I-81 Strategy

Roanoke, VA
10-19-06 (continued from homepage)

Norfolk Southern President, Chairman, and CEO Charles (Wick) Moorman made a major address this evening at Hotel Roanoke, which he characterized as a "coming out party" for the railroad's I-81 strategy.

He began by telling the annual meeting of Center in the Square, an umbrella cultural and arts group, that he had a written talk with him, but he was going to set that aside and work through the fundamentals of Norfolk Southern's intermodal policy and hope he didn't put everyone to sleep.

Intermodal is the fastest growing sector of NS's business, he said, and set out four key reasons behind this:

1.  rising oil prices 
(which consititute a competitive advantage for rail)

2.  chronic shortage of long-distance truck drivers
( he cited an example of a major trucking company that needs 18,000 drivers, and to retain this number they have to recruit 14,000/year)

3.  huge increase in imported goods
(all the big box stores, from Wal-Mart to Target to Lowes, etc. are importing enormous volumes of goods from overseas, which helps the railroads)

4.  highway congestion
(there's not the money nor the will to address this, he said, so it will stay with us)

Since the first quarter of 2003, Norfolk Southern's intermodal revenues are up 23%.  Margins are up, too, he said, noting how in the past it was hard for rail carriers to make money on intermodal shipments because of intense truck competition.  Now he said the margins on intermodal are comparable to those on other commodities.

Moorman went on to define some I-81 terms as a prelude to his talk.  "I-81 refers to the truck catchment area," he said, and can extend all the way to Texas.  "I-81 Corridor" refers to North Jersey into the deep South, and includes both the NS Piedmont and Shenandoah rail lines.  He said the Shenandoah line paralleling I-81 "will never be a route where we run a lot of trains at high speed."

"NS can be part of the solution to congestion on I-81, but we can't be the solution," Moorman said. 

A look back at the company's history of involvement in the corridor followed.  Moorman said Wiley Mitchell started the analysis as far back as 1981.  He traced developments up to more recent steps in 2003 with the PPTA and the Reebie Study, which he said is "the genesis of a lot of our plans since then."

"We didn't go out and beat the drums for I-81," Moorman said, "because of priorities with the Heartland Corridor project."  He went on to describe the significance of that effort and the multistate cooperation and financial support it has received.  Now that Heartland is okay, it's time to turn to I-81.  "We'll be talking a lot more about it as time goes on."

Moorman said there are about 4 million trucks per year on I-81, and validation of data is ongoing.  "This market is largely untouched by rail," he said.  He drew a contrast by way of comparison with the Chicago - New York market.  In that corridor rail has a market share of over 50% of the "would-be truck traffic."  Most of that is container shipments, and most of it is controlled by large companies.

The I-81 market is more highly fragmented.  It's mostly trucks, and many are "mom and pops" (owner operators).  Norfolk Southern faces inadequate infrastructure and a very complex market in the I-81 corridor, which will make competing difficult.  "Consistency is number one," he said, and that requires reasonable speed and adequate terminal capacity... in short, infrastructure.  High speed is not required.  Over-the-road speeds of 35 to 40 mph have been adequate, he said, to capture premium intermodal business elsewhere.

He went on to describe as a prerequisite for capturing the I-81 market a more open intermodal strategy, and helped the audience understand what this means -- mostly lots of new equipment, that can carry all kinds of trucks.

Moorman said the I-81 market could be attacked incrementally.  Modest infrastructure improvements could divert 100,000 -200,000 trucks annually.  At the billion dollar investment level in track, terminals, and rolling stock, it may be possible to take a million trucks per year off I-81.  A public private partnership would be needed, with the public's share in such cost commensurate with public value.

Ultimately he said, with $6 or $7 billion, and a completely double tracked railroad, NS could do even better.  It sounds like a lot, he said, but  went on to contrast it to STAR's $13 billion just for the section in Virginia.

State transportation officials are coming around, he said.  They realize they cannot whip this thing alone.  It's going to require a corridor or regional approach, and NS can do that.  "We are the environmentally friendly way to go," Moorman said going on to explain some of the other advantages of relying on rail.  "And we can move ahead quickly."  If funding can be identified, he said a project could be in place in five years. |||


RAIL Solution Analysis
It is significant that Moorman used this opportunity to discuss a rather technical subject before an affluent crowd on the cocktail/dinner circuit.  For most of those present the talk was probably a yawn.  For the rail advocates is was a plum.  It's interesting that he wanted to roll out the NS strategy and describe it publicly in substantial detail and refer to it as "a coming out party for this strategy."

It is also significant that the CEO put together this talk firsthand, halting and groping for words here and there, but not from a prearranged text assembled by his intermodal department.  This reveals good personal understanding of these concepts and the corridor strategy, at least to the point he can articulate it and draw some key distinctions.  One especially revealing detail is the contrast with conventional intermodal (large companies and container dominance) in the Chicago- NY market vs the I-81 corridor "largely untouched by rail".  He recognizes that capturing that market will require a very different approach than what rail carriers are doing today.  He knows that it wll take infrastructure (rail and terminal capacity) and new equipment for "open" intermodal capability.

We tend to fear the NS interest in incrementalism -- it's kind of heretical in the way an appeasement policy might be.  But at least the incremental steps don't stop at some token level of diversion.  They continue up to the billions of dollars of investment and the appreciation of public participation on a public value basis.

Reference to the Manassas to Front Royal line in his talk as a "choke point", reveals that NS is still too focused on the U.S. 29 corridor (Piedmont line).  Some of us goaded Louis Newton, a retired N&W Transportation Department sage, into challenging Wick Moorman on this afterwards.  The rail advocates among us all agree that eventually there will be plenty of business for both routes and in reality there's no reason that the Shenandoah line cannot be upgraded and function just fine. Typical of Southern Railway alumni, Moorman is drawn to the former Southern line, once completely double-tracked, through central Virginia, who probably inwardly yearn to restore it to that former glory. |||

NEXT MEETING:
June 7th at 10am
Salem, VA