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Railcar 101 The Basics of Railcars: Car Types, Components and Rules Acquisition and Maintenance Options Carol Scarborough.

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Presentation on theme: "Railcar 101 The Basics of Railcars: Car Types, Components and Rules Acquisition and Maintenance Options Carol Scarborough."— Presentation transcript:

1 Railcar 101 The Basics of Railcars: Car Types, Components and Rules Acquisition and Maintenance Options Carol Scarborough

2 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 2 So you need some Railcars… What are my options?  Order railcars from the railroad  Buy railcars  Trip lease (or borrow) some railcars from others on a temporary basis  Lease railcars Full service lease Net lease

3 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 3 Railcars Who Provides the Assets Shipping By Rail Increasingly Means Owning/Leasing Your Own Cars

4 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 4 Acquisition of Railcars by Railroads and Private Car Owners Source AAR Policy and Economics Department 2006 total new cars = 74,729. The most cars acquired since 1998 (75,685)

5 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 5 How the U. S. Freight Car Fleet Changed Source AAR Policy and Economics Department

6 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 6 Railcars Ownership/Maintenance Railroads are pushing capital investment in cars to their customers AAR will increasingly implement stricter standards on railcar maintenance with higher penalties  Wheel impact load detectors  Acoustic bearing detectors  Truck hunting detectors Revised Car Repair Billing Rules allow for specific pricing of repairs based on responsibility and why made codes

7 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 7 Railcars Ownership/Maintenance Railcars represent a new set of factors for the shipper  Acquiring/subleasing/disposing of railcars  Lease/ownership strategies  Maintenance  Administration  Fleet planning, distribution and management Analyzing and controlling these costs is a key factor in rail economics

8 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 8 Components for Furnishing Railcars Leasing Railcars Full Service Lease Everything is included Lessee pays premium price Usually annual mileage capped Excess mileage charges will apply if exceeded Responsible for loading/unloading damage Hatches, gates, linings Net Lease or Purchase Responsible for everything Taxes/InsuranceMaintenance RemarkingUMLER Registration

9 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 9 What does my railcar really cost? Leasing Railcars Monthly Rental Fee Mileage Transportation Charges Maintenance

10 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 10 Auditing Rental Lease Invoices  Monthly Rental Charges  Delivery (on rent) dates  Termination (off rent) dates  Shop Credits (rental abatement)

11 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 11 Auditing Mileage Mileage Credits  For loaded miles paid by railroads  Apply as offset against rental Excess Mileage Charges  Vary according to lease  Limit of miles for calendar year  Offset increased maintenance expense

12 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 12 Auditing Mileage (continued) Mileage Equalization  Apply to tank cars only  Cars usually return in reverse of loaded movement  Charges apply if empty miles exceed loaded miles by 106% on annual basis  Verify that railroads are not running up excess empty miles

13 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 13 Auditing Transportation Transportation Charges  Delivery into service Use prior lessee’s last free empty move  Lease Termination Be sure to follow loaded movement for free empty return Negotiate termination location at the beginning of the lease

14 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 14 Auditing Transportation (continued) Transportation Charges  Costs to / from shops If net lease use shops on loaded route If full service lease work with lessor to use shops on loaded route Use empty move after loaded move when possible

15 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 15 Auditing Transportation (continued) Transportation Charges  Out of route charges Use free empty repositioning movements when possible Verify that the route charges is for the route that was issued to the railroad Try to negotiate contract rates with railroads

16 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 16 Maintenance Responsibilities Net Leases  Lessee responsible for all maintenance Full Service Leases  Not always “full”  Usually AAR running repairs and FRA requirements

17 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 17 Maintenance Responsibilities (continued) Lessee’s responsible repairs:  Linings  Cleaning  Removable car parts outlet caps, valves, dome covering, fittings, gates and hatches

18 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 18 Other Administrative Tasks Possible Lessee’s responsibilities:  Net lease UMLER registration Remarking of equipment Ad Valorum tax reporting Insurance

19 May 21, 2008 DTE Rail Services, Inc Maintenance Management Seminar 19 Conclusion Railcar fleets are expensive There are several options for obtaining railcars Be sure to compare all options and responsibilities:  Does your company want to invest in assets long term or have a short term need?  Do you have the manpower and expertise to manage the assets?  Do you want to outsource some or all of the management?  Do you have a strategy for disposing of assets at end of term?


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