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Private freight-car owners not making enough returns, report says


A new report from the University of Maryland's Supply Chain Management Center says the nation's $90 billion fleet of privately owned freight cars may be in "jeopardy" because the cars' owners are not making high enough returns to justify their continued investment.

The report, "Economic and Environmental Benefits of Private Railcars in North America," found that the "poor rates of return for private rail-car owners are due in part to changes in the railroad industry's interchange rules, which have resulted in a number of new rules to increase safety and efficiency," university officials said in a prepared statement.

Those improvement costs have been paid primarily by the private car owners, who reap little benefit in return compared with the efficiency benefits realized by railroads, the report states.

The report, prepared with financial support from the North American Freight Car Association, was authored by Thomas Corsi, a professor of logistics at the university’s Robert H. Smith School of Business, and Ken Casavant, a professor of economics at Washington State University.

"From an economic efficiency and welfare point of view, benefit/cost ratios should be calculated for the industry as a whole and costs should be allocated in proportion to the benefits received," said Corsi. "For the market to work for car investment, there is a need for equitable, non-discriminatory and transparent interchange rules."

If the freight-rail system lost all or part of the privately owned fleet now used to transport a large portion of goods, those commodities and products might be diverted to truck transportation, the report states.

Contact Progressive Railroading editorial staff.

More News from 2/25/2011