U.S. Freight Railroads Facing Transformational Shifts

Significant transformational shifts are occurring within the freight rail industry today. These fundamental changes require the industry to review all aspects of the rail network and move to a more efficient operation in order to minimize long-term harm to the industry. These issues impact the national labor negotiations now underway.

Railroads face enormous pressure to make large investments in maintaining and growing their networks to remain competitive with other transportation modes.

Here are several of the key factors at play:

• An important rail commodity that has traditionally provided significant volumes and revenue— coal used to generate electricity — has been rocked by powerful market and political forces that have led to dramatically lower shipments of coal by rail.

• Intermodal is an important business sector for the industry, but it faces enormous competitive challenges. Every shipping container and trailer carried by rail in intermodal service could move entirely by truck instead. That means railroads are under constant pressure to improve intermodal service and keep intermodal rates competitive with truck service or the freight will return to the highway.

• If railroads are to increase volumes and attract new business, they will need to continue to make targeted and expensive investments in new and expanded capacity. This is on top of rail’s annual investments to ensure the safety and reliability of the North American rail network.

As technologies continue to advance, (such as autonomous trucks), and transformational shifts continue to affect our industry, it is imperative for railroads to be able to respond to these challenges through resourcefulness, flexibility and, most importantly, with unrelenting focus on cost control.

Even as freight rail faces uncertainties, so do the companies that rely upon it. The overwhelming majority of rail customers operate in intensely competitive environments. This places railroads under pressure from their customers to keep prices as competitive as possible and meet continually rising customer service expectations.

For railroads to remain competitive, they must continue to invest in their networks, even as volumes remain challenged. This will require substantial levels of rail investment in infrastructure, equipment and new technologies. In the last five years alone, railroads have invested an average of $26 billion annually to purchase new equipment and improve rail lines and facilities. In order to remain competitive and continue to provide attractive jobs, railroads must control expenses in all areas, including labor costs.

Learn more about key issues impacting the health of freight railroads:

What is intermodal transportation?

Railroads make huge investments to improve the rail network.

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