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Reports of the demise of carload freight have been greatly exaggerated. However, Class I railroads are changing the way they handle this high-value traffic, while-short lines and regionals are finding new opportunities for growth.
As the end-of-train device on the intermodal flyer fades into the dust, the crew of the local freight train springs into action. On authority received from the dispatcher, the brakeman aligns the siding switch and a lone locomotive urges its short consist of covered hoppers, tank cars, and center-beam flatcars forward onto the main line. For the next two hours this lowly train is king of the road, flitting between the main track and a tangle of connecting spurs to distribute its cars of raw materials to factories and warehouses that supply the necessities and luxuries of life to people in the area and around the world.
In today's heavy-duty railroad universe, the local train's work is as unglamorous as it is necessary and lucrative. While stock analysts and railroad managers lavish attention on the industry's growth markets - intermodal, coal, and ethanol - the rest of railroading seems to operate in a figurative shadow. This seems especially true for industrial products that move in less-than-trainload quantities: the single-car movements that characterized the freight business from railroading's creation well into the 1980s. Yet this traffic is vital to North America's railroads, and the carriers not only remain dedicated to moving it, but they are also encouraging it to grow profitably.
Where carload freight fits in
The perception that North America's manufacturing base is collapsing as production shifts to lower-wage countries like China is widespread, but not entirely accurate. According to the Department of Commerce, manufacturing today accounts for about 12 percent of U.S. economic output, down from 27 percent in 1950. While that's a substantial decline, this trend is not recent. Manufacturing's share of economic activity has been dropping steadily for the past half-century as service industries like computer software mushroomed and industrial production chased lower wages to Europe, Japan, the four Asian "tigers" (South Korea, Taiwan, Hong Kong, and Singapore) and today's growth economies of China and India.
In the past decade, the decline has been propelled by a one-two punch of cheaper overseas labor and falling transportation rates....