News
Working on the Railroad
March 17, 2011
| The increased chugging of choo-choos translates to good things for the economy. The rail industry has been upping the ante on capital improvements even during the recession. Last month, Fort Worth?s BNSF released plans for $3.5B of capital improvements. Boxcar Willie would be proud. | |
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| The largest component of the BNSF?s plan is $2B for its core network and related assets, with $450M set aside to acquire 227 locomotives and another $350M for freight cars and other equipment. There's also $300M for federally mandated positive train control and $300M for terminal, line, and intermodal expansion and efficiency projects. (These will be focused on the mid-continent and coal routes to improve velocity and throughput capacity.) BNSF spent $32.4M on its Alliance intermodal facility expansion in 2007, which included expanding the terminal?s storage, staging, and lift capacities. We bet Hillwood's Todd Platt will address this at our DFWIndustrial Real Estate Summit next month. (Sign up now!) | |
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| Above, the Alliance facility. BNSF wasn't the only one making improvements: The American Association of Railroads lists Class I Freight Railroad capital spending at $10.2B in 2008, up $1B from a year earlier. During the severe freight shipment downturn in 2009, top rail firms totaled $9.9B in investments, and in 2010, Class I Railroads completed an impressive $10.7B in capital investments, North America's Corridor Coalition's Frank Conde tells us. He says the North American freight railroad industry is entering a new Golden Age, with growing demand from shippers powering net profits and a projected record $15B in capital investment planned for 2011 in renewed rails, rail cars, smart computer and software transportation technology, and cleaner, more efficient locomotives. | |
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| Warren Buffett?s Berkshire Hathaway bought BNSF last year for$26B as an investing vehicle, calling his targeting of the rail industry an all-in bet on the US economic recovery. His move was seconded by Bill Gates on March 8, when his personal investment vehicle sunk another $8M into his stake of Canada's No. 1 rail company, CN Railway, giving him 10% ownership. It looks like the smart guys might be on to something. The American Association of Railroads says US rail firms will add about 10,000 or more workers in 2011. More good news on the job front: the industry's top leaders say more than 70,000 new professionals are needed to replace a longtime industry workforce headed into Baby Boomer-era retirement. |
