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Rail News Home Short Lines & Regionals

April 2011



Rail News: Short Lines & Regionals

Short-line profile: Rick Webb, Watco



— by Pat Foran, Editor

Rick Webb doesn't come across as someone who is all that eager to talk about himself. The Watco Cos. L.L.C. chairman and CEO will do it, mind you, if asked, as he was last month by this reporter. He'll do it because he's a stand-up guy. But it isn't Webb's style. A spotlight sharer whose definition of "team" is all-inclusive, he would much rather talk about his colleagues at the Pittsburg, Kan.-based short-line holding company, which provides transportation, mechanical and transload/intermodal services to customers in 26 states and, soon, Australia.

About halfway through a recent interview, while Webb is talking about how much he values his management team, he begins to list them, citing their contributions and marveling at their commitment. Then he pauses.

"I know you can't mention them all, but I've got such a great management team — a great team, period," Webb says, alluding to all of the family-owned Watco's 2,100 employees. "I'd hate to leave any of them out."

In spirit, he won't at any time during this interview. He mentions "The Team" in just about every question he answers. That team includes Watco's customers. The late Dick Webb, Watco's founder and Rick's father, instilled a "customer first" focus in Rick and the rest of The Watco Team, and they haven't lost it. If anything, they've sharpened it.

"To my father, it was: Take care of the customer, as well as the people who take care of the customer, and you'll succeed," Webb says. "It sounds like a cliché, but that's a way of living. If you're good to people, I think good things happen."

That sentiment tells you all you need to know about Rick Webb, several customers said in subsequent interviews, although it didn't stop them from adding their own two cents.

Given the extent to which they went out of their way to praise Webb, it's unlikely anything would have prevented them from weighing in.

On the road and in and out of meetings, a rail-car lessor left several voice and e-mail messages in response to this reporter's call, wanting to be sure his high regard for Webb was registered. Another shipper sent a follow-up "thanks" for being asked to talk about Webb, calling him a mentor and a "true logistics hero." A grain shipper tapped out detailed answers to questions about Watco and Webb on his iPad. He e-mailed them from Europe, where he was on his honeymoon.

"Rick sees his business the same as we see ours," said iPad tapper William Fellows, president of Bartlett Grain Co. L.P., a longtime Watco customer and friend of Webb's. "We're nothing without our customers — they are the reason we are here. Without them, we're out of work. Rick has never lost sight of this."

And even though Watco has "a great team" that solves almost all issues at lower levels, Fellows knows that if there's ever something that doesn't get resolved through normal channels, he can pick up the phone and talk to Webb, who'll make sure it gets taken care of.

"He will always do the right thing," Fellows said. "That's unique in business, [and] it's why I am an unabashed supporter of Rick's."

The unique story that is Webb's and Watco's began in Pittsburg, where it continues to unfold. Webb, 51, was raised in the southeastern Kansas town that until the early 1970s was home to Kansas City Southern's car shops.

"That's why our family located here," says Webb.

A 'Customer-First' Focus

Webb's grandfather, Bus Johnson, served as KCS' chief mechanical officer for KCS in the '60s and early '70s. Webb's father, too, toiled in the KCS mechanical department.

"My father taught me focus, and he taught me honest, straightforward communication," Rick Webb says. "He was a guy who told it like it was. Most of the time, if you listened to what he said, you had a real lesson to learn."

Something else Webb's father taught him: Things just don't happen, you have to make them happen — and not necessarily by acting on your own assumptions, however reasoned. Sometimes, it's better to let others show you how to do it. And you let them by listening. The way his father did.

By the late '70s/early '80s, Dick Webb was doing consulting work and decided to go into business for himself.

"We'd be beating on doors, asking customers if we could repair their rail cars," Rick Webb says. "One said, 'That's all well and good, but deregulation just happened, and we need you to switch this plant rather than repair cars.' And my dad listened."

Boise Cascade Corp. in DeRidder, La., was the customer from which Dick Webb took his cue. In July 1983, he created Watco (a combination of Webb and Timms Co., "Timms" being Carl Timms, a KCS colleague of Dick's) at the Webb family's kitchen table.

"We started with one customer with a one-year contract and a 30-day performance out," says Webb. "We became Boise's transportation department. We had to perform."

Rick Webb tried to do his part. His job? "Fill in where needed and to learn the business," he says. The business, Webb quickly learned, was all about keeping the customer satisfied.

"My father really made such a fantastic foundation to build on," Webb says, noting that Boise Cascade remains a Watco customer today. "He made it easier for us to get to the next level."

Time To Adapt

Next levels, actually. In 1985, Dick Webb opened a rail-car repair shop in Coffeyville, Kan. Rick helped with the launch, working in the office and on the repair floor. In 1987, the company entered the short-line realm when it purchased a Coffeyville-to-Pittsburg line from Union Pacific Railroad.

"We were the first UP spin-off after deregulation," Webb says. "From there, we had our two main businesses up and running — transportation and short lines."

Both business units grew quickly as Watco opened shops and acquired short lines at a rapid clip. Webb continued to worked alongside his father in various capacities, including leadership positions in operations, purchasing, marketing, accounting and financial management.

"After a while, my father and I kind of had an understanding: I could get business in the door, he could get business out the door," Webb says.

In 1998, Rick Webb started doing a bit more than that. He took over as CEO after his father stepped down for health reasons. Rick Webb ensured his father's customer-service focus remained front and center. But for Watco to remain on the growth track, the company would have to adapt.

"When my father ran the business, it was pretty top down — we were small enough that one guy could manage the whole thing — but as a growing company, you cannot do that," he says.

During the next few years, Watco's operational structure evolved into what Webb characterizes as "decentralized management supported by a centralized culture." The move had everything to do with maintaining that customer-first focus.

"You've got to build the team, empower people and train them, and let them do what they know how to do," Webb says. "Around here, I'm as far away from our customers as you can get, so we had to invert things. If we didn't, we wouldn't be able to get to the next level."

Honest, Fair and Sincere

What was next? Watco's customers knew.

"They were telling us, 'You guys can help us on the transportation and car-repair sides — can you help us with inventory control?'" Webb says.

So, Watco entered the service-intensive transload intermodal business in 2008, acquiring Reload Inc. That gave Watco three business units: Watco Transportation Services L.L.C., which had become the largest privately held U.S. short line holding company (it now operates 24 short lines and 24 industrial contract switching locations); the Mechanical Services division, which operates 14 car-repair, four locomotive and 19 mobile mechanical shops; and the Transload/Intermodal Services division, which manages 12 transload facilities, seven warehouses and one intermodal location.

Next up: exporting the Watco way of doing business. In December 2010, the company was awarded a 10-year contract to provide grain transportation services for the CBH Group, a western Australian farmer-owned co-operative.

"We won the Australian bid, I believe, because of our focus on the customer," Webb says.

That's hardly a surprise to Watco customers who know Webb.

"Rick is all about maintaining customer relationships," says Wayne Johnson, manager, global carrier relations for Watco customer Owens Corning. "He's easy to get along with, he's honest and he's fair. He also thinks out of the box. He'll do things for you as a person that a lot of railroads wouldn't think of."

Adds Rob Zmudka, vice president and executive director of strategic sales for rail-car lessor GATX Corp.: "What impresses me the most about Rick is his sincerity. He certainly makes us feel special as a customer of theirs."

Webb's business acumen also has impressed a few people. In June 2010, he received an Ernst & Young L.L.P. "Entrepreneur of the Year" award in the Central Midwest Region.

At Watco, entrepreneurial thinking also has become part and parcel. Late last year, Watco and Kinder Morgan Energy Partners L.P. reached an agreement under which Kinder Morgan will invest up to $150 million in Watco in exchange for a preferred equity position.

The transaction gave Watco capital for expansion and Kinder Morgan — a North American pipeline transportation and energy storage company and Watco customer — growth opportunities through new projects. In March, the partners announced plans to construct and operate rail transload facilities in key U.S. markets for loading and unloading crude oil and other oil/gas industry commodities.

Industry observers, including Watco customers, have taken notice of the company's recent ventures.

"I like what they've been doing," GATX's Zmudka says, citing Watco's work in the Bakken oil fields and with crude oil. "They've certainly differentiated themselves."

Teaching the Watco Way

Continuing to do so, particularly in the customer-service realm, won't be easy.

"Right now, we have 2,100 people taking care of 1,300 customers," Webb says. "If they don't understand how to do what we want them to do, we'll have 2,100 different ways of doing business, and our customer-service brand will be diluted."

Enter Watco University. Established in June 2010, Watco U. is a training initiative designed to ensure company managers learn and teach the Watco way.

Watco U. would have made Dick Webb proud. He died a year before it opened after a short battle with lung cancer.

"He worked up to the day he passed away," Rick Webb says. "I and other Watco team members were truly blessed to have the opportunity to work with and learn from my father."

More than a few Watco customers feel the same way about Dick Webb's son.

"Rick is exactly that guy that started out many, many years ago with his father with one railroad," Bartlett Grain's Fellows said. "He has never changed. That is a great quality."



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