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Mr. GILLILAND. That is right. The distance is too short for us to compete profitably with the motor carrier, or servicewise.

(4) In setting the level of rates, we approached the matter by carefully considering our cost for hauls 400 miles and beyond. Experience had proven that for such longer rail hauls we could perform road haul service at lower cost than the highway haulers, and after adding profit to our costs and coupling them with the already profitable highway hauler's rates, the two in combination resulted in a total overall lower rate. Manifestly, this type of ratemaking is entirely proper and the fact that it does happen to result in lower rates than the highway hauler's rates for long hauls is not destructive rate cutting. To the contrary, it is simply passing along the inherent advantages of both types of transportation to the shipping public, which is sound economics and in line with the national transportation policy.

During the time that Frisco was experimenting with the handling of automobiles loaded in trailers on flatcars, our engineers were also working upon the design of a railroad car which would handle more automobiles. They had felt for some time that a railroad car upon which three levels of automobiles could be loaded was practical. In January of 1960, Frisco, in cooperation with Pullman Standard, produced a prototype trilevel car and began using it to transport experimental loads of automobiles over various parts of our system. From then until June of 1960—a year ago—this car was tested extensively both by Frisco and other railroads. These tests had proved so satisfactory that in June of last year Frisco placed an order to purchase 100 of these cars.

I point out that this car is loaded with standard-sized automobiles. You will observe that it carries four cars on each of its three decks. Here we succeeded in tripling the carrying capacity from the original boxcar which carried only four automobiles. We also accomplished something else. We increased the carrying capacity of one car above that picture which you previously saw of the original piggyback load, which was capable of carrying only eight automobiles.

The third picture shows one of these cars loaded with 12 standardsized automobiles and the fourth picture shows a load of 15 compact cars. You will notice that we have 5 automobiles on each deck or a total of 15 automobiles, or the equivalent of 3 highway trailer loads of automobiles.

One needs only compare these pictures with the first picture to which I referred to see the obvious economies in using this type of car. Not only does it carry three times the number of automobiles, but the automobiles can be driven onto the railroad car, using their own power. The next picture shows the loading operation. This is one of the loading ramps in use on various railroads. It is adjustable in height by means of electric motors and cables. Also the application of some hydraulics, so that you can move up to the top deck or the middle deck or move it out of the way and load the lower deck.

Frisco's trilevel car initially weighed approximately 103,000 pounds. This means that the railroad must haul approximately 8,500 pounds of tare weight per automobile. In boxcar service the railroads generally had to haul not less than 15,000 pounds of tar weight per automobile.

I might add here that the economies of this trilevel car, its carrying capacity is generally three times that of a highway trailer. It would

cost in capital investment by highway approximately $40,000 worth of equipment to do what we can do now with something on which the price has dropped, since we bought our first car, down to $22,500.

We were again faced with the necessity of developing suitable rates to apply upon automobiles moved in the new trilevel car. Our experience with the joint rail-motor rates in the handling of automobiles in trailers on flatcars had proved so satisfactory that the initial trilevel tariff, which became effective on August 20, 1960, followed the same pattern.

The economies which are apparent from the pictures I have shown enabled us to further reduce the railroad charge per automobile and at the same time realize substantially more revenue per carload. This meant that the trilevel rates were lower than the piggyback rates had been.

In addition, the use of this new car enabled our connecting trunklines to increase their efficiency in the handling of the automobiles. For example, upon receiving the automobiles at the interchange point they were able to use five and six automobile trailers for their haul, whereas only four automobiles were generally loaded upon the trailers which had to be carried on the flatcars.

In addition, there was another basic difference. In the trilevel tariff a slightly lower rate per automobile was published to apply on automobiles weighing under 3,150 pounds than applied on automobiles weighing 3,150 pounds or more. The change brought our tariffs more closely in line with motor common carrier tariffs on automobiles.

I might add that it enabled us to give some effect to the difference in size and value of automobiles handled. This first tariff published rates from Frisco's automobile loading terminal at Valley Park, Mo.which is in St. Louis—to points in Oklahoma and Texas.

Subsequently, we have added destinations in Arizona and New Mexico and in the southeastern States. We have also joined with the trucklines in publishing truck-rail-truck rates from the automobile manufacturing points in Michigan, Wisconsin, and Indiana to the southwestern States, and we have joined with other rail lines in publishing joint rail-truck rates from Detroit, Mich., to these States.

There are also published, both by Frisco and other lines, all-rail rates which apply on the trilevel car. Some of these rates are published in a stated amount per carload and require the shipper to load the trilevel car. Others are published on a per vehicle basis and the railroad loads and unloads the car.

While the trilevel car was being developed and the shippers were beginning to use it, a bilevel car was developed to handle loads which for various reasons are not adaptable to the trilevel car, and rates have been published to apply upon loads handled in this car. A picture of this type of car is also attached. Here you can see the cabs of this type of car which requires a higher clearance than can be obtained with a trilevel car. So we come out with a double-deck car that produces more verticle clearance. Here you see a load of jeeps, 12 of them.

It would hardly be possible to describe in detail all of the rates which have been published within the past year to apply on automobiles handled in trailer-on-flatcar service or on the bilevel and trilevel cars. Suffice it to say that a shipper of automobiles can now obtain, or will

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be able to obtain in the near future, transportation of automobiles in some or all of the three kinds of service to virtually every place in the country.

The principles which I have described, which dictated the establishment of Frisco's joint rail-truck rates on automobiles in TOFC service. have been adhered to in the establishment of our trilevel rates. We feel that these rates have been published so as to give the public the benefit of the improved techniques of handling automobiles on multilevel equipment and to combine those benefits with the flexibility of the motortruck.

There has not been a single petition for suspension filed against any of the Frisco trilevel or bilevel rates. While it is of course impossible to state exactly why no such petitions were filed, we feel that their absence is at least indicative that there was no unlawfulness and that the rates were fully compensatory to the railroad.

In developing these rates we again gave the truck lines their regularly published local rate for the portion of the service which they performed and we set the railroad division of the joint rates at a point believed to be fully compensatory to the railroad. In all cases the railroad receives substantially more revenue per carload for handling a trilevel car than it did for handling a flatcar loaded with two trailers of automobiles. Because of the greater efficiency of the trilevel car and the increased efficiency of the motor carriers, we were still able to reduce the charges per vehicle to the shipper. This reduction undoubtedly accounts for the dramatic shift which occurred in Frisco's method of handling automobiles.

In the first 9 months of 1960 we handled approximately 53,000 automobiles in trailer-on-flatcar service, and approximately 3,000 had been moved in trilevel service. During October of 1960 we handled 9,675 automobiles in trilevel service and only 1,140 in TOFC service. In November only 690 automobiles moved in TOFC service while 10,820 moved in trilevel service. In December, automobiles in TOFC service had declined to 156 while 8,240 moved in trilevel service. So far this year Frisco has not handled any automobiles in traileron-flatcar service.

Thus, it can be said that, at least as far as Frisco is concerned, the piggybacking of automobiles has given way to the handling of automobiles in the specially designed bilevel and trilevel rail cars.

In some of the Teamster publicity there have been charges that the railroads were handling automobiles for less than they are handling some low-grade commodities. In one of the Teamster pamphlets entitled "A Dangerous Combination”, it is stated :

This is dramatically proven by the fact that in many instances the railroads are piggybacking the expensive Cadillac automobiles at rates cheaper than those they charge on sand and gravel.

Nothing could be further from the truth.

On a carload of automobiles shipped piggyback via Frisco from St. Louis to Dallas (Irving), Tex., the railroad received $480 per car. This is at the rate of 3.48 cents per ton-mile and 67.5 cents per loaded car-mile. On a carload of sand and gravel between the same two points—and I might add it doesn't move between the same two points because it is ridiculous to send sand from St. Louis to Dallas. when you have a pile of sand in Dallas to take care of the local needs, so this comparison has very little merit in our opinion—but if there

had been a movement of a carload of sand between St. Louis and Dallas, the railroad receives only $167.30 per car, which is at the rate of 6.7 mills per ton-mile and 23.5 cents per loaded car-mile.

As shown in the following table, the difference is even more pronounced when the automobiles move on the new trilevel railroad cars:

Railroad rates-St. Louis-Dallas

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As you will see there, the carload rate on Cadillacs is $619; small autos, 15 on a car, the same; on sand and gravel, $167.30; and on coal, which incidentally doesn't move between those same points, $401.10. The rate per mile on the automobiles is 3 cents and 412 cents, as against 6.7 mills on sand and gravel and 18.8 mills on coal. The rate per loaded car-mile on the automobiles is 87.06 cents as against 23.5 cents on sand and gravel and 56.4 cents on coal.

To demonstrate graphically Frisco's average earnings on automomiles as compared with other commodities, I have had prepared two charts. The first, appendix B, shows that during 1960 our average per carload revenue from sand and gravel was only $62.56 as compared with our average revenue on passenger automobiles of $436.34 per carload. This automobile figure includes some boxcar traffic. If boxcar traffic is eliminated and Frisco's earnings on trailer on flatcar and multilevel automobile cars are taken alone, our average per carload revenue during 1960 on automobiles handled in those services was $510.35. During the first 2 months of 1961 our average revenue on automobiles in multilevel equipment was $614.64 per carload. These average earnings from automobiles in multilevel equipment were higher than all other commodities handled by the Frisco.

I might inject here that we handled last year 17,827 carloads of sand and gravel, which produced for us $1,298,000. We handled approximately 12,000 carloads of automobiles, or approximately 5,000 cars less. But we got for that $5.4 million. If we were handling sand and gravel for less money than we are handlnig automobiles, why does in take 17,000 carloads to produce only $1.3 million against 12,000 that produce $5.4 million ?

In the case of bituminous coal, we handled last year 33,055 carloads, which produced $2.7 million for us. That is almost three times as many carloads of coal that produced half the amount of revenue as automobiles. Obviously we cannot be handling automobiles for the same price as we are handling sand and gravel.

If average earnings per ton are considered, the next chart, appendix C, graphically demonstrates that Frisco's average earnings per ton from sand and gravel in 1960 were $1.01 while automobiles-including those handled in boxcars, in TOFC and in multilevel equipment-produced $27.35 per ton. In other words, 27 times as much as sand and gravel.

While I have not made a specific study of the figures of other railroads, I feel quite sure that their experience is substantially the same as ours. This would particularly be so for railroads operating in the same territory as we because, in general, we charge approximately the same rates for the same type of service.

It is abundantly clear from these figures that the charge made by the Teamsters that excessive earnings from low-grade commodities are enabling us to make "cheap rates” on automobiles is absolutely without foundation. The truth of the matter is that if it were not for the high revenue which we receive from commodities such as automobiles, we would not be able to survive on the low-grade commodities.

I should like to inject here, sir, that the rates that produced these high earnings per carload and per ton are far above out-of-pocket cost. Contrary to the charges that have been made against us, instead of adding a burden on the other commodities—sand, gravel, coal, and other low-rated commodities—we are removing a burden from those.

In summary, I submit to the committee that the Frisco's automobile piggyback rates represented a step forward in the transportation of new automobiles. It was a step which was made by the Frisco in cooperation with established motor common carriers of automobiles. Our experience proved that the shipper found this new service satisfactory and used it for a portion of their shipments. It by no means replaced the over-the-road movement of automobiles and there is little prospect that it could ever be able to completely replace such movements.

The trilevel or bilevel cars and the rates applicable thereto represent a further step forward in the transportation of new automobiles. As far as my company is concerned, our progress in this field has been materially aided by the close cooperation of some well-established motor common carriers of automobiles. Together, we have produced a new transportation service which is proving to be highly attractive to the shippers. That service, I submit, clearly preserves the inherent advantages of each form of transportation and is in all respects fully in accord with the national transportation policy.

My company appreciates very much the opportunity to have presented our side of this story to your committee. We think that it shows that within the framework of the present Interstate Commerce Act new methods of transportation can be developed and put into operation. Most of the statements which have been circulated by the supporters of S. 1197 indicate that it is designed to stop developments such as the one I have described. The effect of this bill would be to materially restrict the ability of the railroads to make competitive rates based upon improved techniques. For that reason, I have no hesitancy in telling you that it should not be passed.

Congress has traditionally refused to stifle the development of new methods and there is no valid reason why it should start to do so now. The survival of the railroads as a privately owned and operated transportation system is dependent upon their ability to develop new techniques for the handling of their business.

(The appendixes to the prepared statement follow; the photographs were not capable of being reproduced and are being retained in the files for public inspection :)

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