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I merely cite that finding in order to not exclude plan V which you have detailed here in your trilevel cars.

Apparently the examiner has found that the rate on a car is a rate on a car, regardless of the type of equipment.

Then going down to the last paragraph before his final finding:

The examiner finds that the investigated and assailed rates and charges on freight and passenger motor vehicles between certain points in central, southern, and southwestern territories are unjust and unreasonable, and otherwise unlawful and in contra vention of the national transportation policy. Except to the extent that a modification of the order in Chrysler Corp. v. Akron C. & Y. Co. supra, is necessary, the examiner would make his findings without prejudice to the establishment of TOFC all-rail (plan II) and rail-motor (plan V) rates which are no lower than the all-motor rates or the present all-rail regular rates, whichever are lower.

This was the finding, I believe, the most recent action by the ICC hearing examiner.

Isn't it true, in light of this, that the loss of automobile traffic

a matter of service, rather than ratecutting by the motor transport companies?

Mr. GILLILAND. I think the primary loss was in the service angle, Senator, supplemented, of course, by the rate situation, too.

When the total cost of moving automobiles was taken into account, we were at a disadvantage on both counts.

Senator MONRONEY. The haulage rate from point to point was taken into account. There was no reduction between specific points on the auto transport lines prior to piggyback? Mr. GILLILAND. Yes, there were instances.

Senator MONRONEY. Generally speaking it was service rather than rate. It was determining the movement of automobiles by truck, rather than by rail. Mr. GILLILAND. No. Senator MONRONEY. You don't know what the rates were? Mr. GILLILAND. I think that, generally speaking

Senator MONRONEY. The point I am trying to make is, was it necessary, in order to meet competition, for you to cut about a third below competition? Mr. GILLILAND. It was necessary for us to cut below.

Senator MONRONEY. Didn't the examiner find that the piggyback service provided by the Frisco was competitive with all-truck service?

Mr. GILLILAND. That was the opinion he expressed; yes.
Senator MONRONEY. And that it was competitive.

Despite competitive service by this new means, with all-trucks, aren't the rates set by the Frisco, then, far lower than the all-truck rates ? Mr. GILLILAND. They are lower, yes.

Senator MONRONEY. To what degree, between you mentionedTulsa and Dallas?

Mr. GILLILAND. I may have some figures on that.

Mr. GRINNELL. If I may interrupt you, on page 10 of the report you are reading there are comparisons of all-motor, all-rail, and the Frisco piggyback rates. I have copies of that here.

Senator MONRONEY. As I read that, Tulsa, Okla., plan V, per auto, $58.90; all-motor, per auto, $62.83.

Birmingham, plan V, rail, per auto, $62; all-motor, $75.99.
Dallas, Tex., $73.90; all-motor, $94.99.
And Floydada, Tex., $111.05; all-motor, $119.67.

Mr. GILLILAND. Those were the rates, I am sure, which were effective at the time of the establishment of our rates.

The differences there were the differences between rail and allhighway.

Senator MONRONEY. Isn't it a fact that after those rates went into effect, between Tulsa and Dallas particularly, that it completely eliminated all-truck service between those two points?

Mr. GILLILAND. I believe that it has. I don't know.

Senator MONRONEY. Didn't the examiner find that the Frisco rates were at an unreasonably low level considering the nature of automobile traffic and the competitive service features of the TOFC services, and that the rates at such unreasonably low levels resulted in destructive competition, in contravention of the national transportation policy?

Mr. GILLILAND. Senator, summarizing the whole report, which I wouldn't like to discuss since it is a matter of adjudication, one sentence which summarizes that report is simply this, that any time a rail TOFC rate is lower than a truck rate or boxcar rate, it is unlawful.

The extension of this doctrine would mean the end of competitive transportation in this country. And I mean between all modes of transportation. It would require that there be one rate by rail, barge, truck, for everything.

Senator MONRONEY. You have one rate that exists on all-rail. You don't compete among yourselves.

Mr. GILLILAND. Ratewise, no, sir.
Senator MONRONEY. What?
Mr. GILLILAND. Ratewise we are not competing among ourselves.

Senator MONRONEY. If when other cases have been brought, along the lines that Mr. Langdon testified, as to the value of the servicethe ICC held that you couldn't ship a Cadillac on motor carriage for the same price that you could ship a compact car, and that was designed, I presume, to hold up the rate to protect the rail rate when it involved competition with rail lines.

But there is no competition ratewise between the vast network of railroads, is there? Mr. GILLILAND. No, sir.

Senator MONRONEY. Then the competitive theory that we are living in a competitive enterprise system, and one which allows the full competitive force to take place, is simply not true; is that correct? Mr. LANGDON. May I make a comment on that, sir?

A railroad, if it has a competitive advantage at all, has the competitive advantage of a lower cost. If it can't be permitted to let that lower cost be expressed in the form of lower rates, it is denied the use of its one competitive advantage.

This report of Examiner Dahan, of which I have a copy before me, would condemn as unlawful these lower rail rates. And why? They are not noncompensatory. In fact, they more than cover the fully distributed costs. They are unlawful, in his opinion, because they are lower than the motor rates.

Senator MONRONEY. They are unlawful, he said, because they violate the national transportation policy, which wasn't repealed by the act of 1958.

Mr. LANGDON. Sir, if I may read you what I think is the controlling sentence in his report—it is on sheet 17.

Since rail and rail-motor service with TOFC equipment are fully competitive with all-motor service, the finding is inescapable that the plan III and plan IV rates, to the extent that they are lower than the all-motor rates or all-rail regular rates, are unreasonably low.

In other words, what he says in effect is that we can't employ our competitive advantage of lower cost. He finds that rail rates must be on the level of the rates on the higher cost motor carriers.

If this is true, of course, if this is to be the guiding principle and it would be the guiding principle if S. 1197 were enacted—the railroads are through—absolutely through in competing with for-hire highway transportation.

Senator MONRONEY. In all of this testimony I haven't heard one single word of the railroads stating that you quoted on a car-mile, car revenue miles, and so on; but you don't give a single figure of the cost of the deadhead haul back. You deadheaded back the trailer on flatcars, the equipment, and everything went back to the source of the cars. There is no possible use for the cars on that return. Just the same as there is no possible use for it today.

I don't see how you can figure a one-way trip and say this is all revenue and that some way or other by magic the car gets back to its point of destination for reloading.

Mr.LANGDON. Sir, I beg to differ on that.

In no cost study that I know of, involving the cost of rail transportation, have we ever ignored the return empty haul. This is part of the cost of moving the traffic. If there is 100 percent empty return haul, this is included as an element of the cost of moving the traffic. It has been so since the year 1 in determining the costs of handling railroad freight traffic.

Senator MONRONEY. I don't find that in these statistics that are here given in the comparisons.

Mr. LANGDON. This is so elementary

Senator MONRONEY. The earnings of Frisco presume, apparently that-we had a volume of testimony earlier as to the percentage of use of normal flatcars and other things that go both ways. But I can't see, and I don't think you purport to tell this committee, that these have any return value in haul.

Mr. GRINNELL. Senator, I am the general solicitor of the Frisco Railroad. I was the attorney in the case that the Senator is talking about.

Mr. Parr, who appeared before you previously, was the cost witness for the National Automobile Transporters Association in that case. His cost study, using his figures which include all of the costs that you are talking about, that is, the costs of getting this car back to the point where it originated, showed that these rates produced from Valley Park—that is our loading ramp in St. Louis—to Birmingham, 106 percent of fully distributed cost. That includes fully distributed costs by the Commission's formula, which includes every item of costs, an allowance for the passenger deficit, and an allowance for the less

than-carload-deficit, a 6-percent return on our entire investment, equipment, and land.

His other figures were 111 percent on the same basis to Tulsa, 97 percent between Valley Park and Irving

And I might add that on cross-examination he admitted he had included in there something that he admitted should not have been included, because he didn't know how the matters were handled between the truckline and railroads at the time. One hundred and three percent on our move to Floydada and 94 percent between Kansas City and Irving.

Those are all his preliminary figures.

On the adjustments that he agreed to, his figures came out very closely with ours. He was slightly higher in cost than we were, but, for instance, taking the adjustments that he himself admitted should be made, after he had seen our exact figures, his cost, for instance, between Valley Park and Irving, came out to $418.03 for a round trip, as against ours of $414.32.

The railroad revenue for that move is $480. So both of us, in the final analysis, substantially agreed on how this thing should be costed under the Commission's formula. We both agreed that the rates were substantially above fully distributed costs. So this return haul has been taken into consideration.

The car-mile figures to which you have referred are just a custom, because we don't sit down and say we are going to get so much a carmile and then figure everything out that way. That is the way of determining what your revenue is, and the custom is to use the loaded car-mile.

If you turn around and use the loaded and empty, you get half of that in any situation.

Senator MONRONEY. Those are the figures presented to this committee, in ignoring the return haul.

Mr. GRINNELL. No; we do not. We include it. That is what I am telling you.

Both Mr. Parr in his presentation, and our cost witnesses in their presentations to the Commission, and every place that we have presented costs, have included the full expense of getting these cars back to origin. Always.

We should just be living in a false world if we didn't do that. Our cost people would absolutely go crazy.

Senator MONRONEY. In appendix C, your appendix shows the return as well as the one-way trip?

Mr. GRINNELL. Yes. Senator MONRONEY. And the same on the sand and gravel ? Mr. GRINNELL. These figures you are talking about? These are not costs.

Senator MONRONEY. This is appendix C.

Mr. GRINNELL. These are not not costs. This is taking the total revenue that we received and figuring it out, dividing that total revenue on that commodity by the number of tons of it we haul. It is just a mathematical calculation for comparative purposes.

Senator MONRONEY. But there is no comparable figure on the return of the gravel ?

Mr. GRINNELL. The return is not in either of those. It is the total revenue that we receive, divided by the total number of tons that we haul.

Senator MONRONEY. What I am saying is that the testimony previously before the committee showed that about 50 or 60 percent of the sand and gravel and coal cars were utilized on a return haul, while there can be no utilization of this equipment on a return haul.

Mr. GRINNELL. I don't have an exact study on our railroad, Senator, but I know one of the big points is bringing sand and gravel into St. Louis from the Missouri Pacific, and we have 100 percent empty return on that, too.

Senator MONRONEY. These are ICC figures.
Mr. GRINNELL. That is probably countrywide.

Senator MONRONEY. So the revenue wouldn't bear any relationship to the deadhead. You are figuring only the use of the car per loaded mile?

Mr. GILLILAND. Senator, in these automobile rates, just like the highway carrier who also comes back empty, we have figured the cost of that empty return movement. It is unproductive. But its cost has been included in all of our figures.

And when we say that these are above out of pocket, or above fully distributed cost, we have taken into account the fact that that car comes back empty and the cost thereof is included therein. We have not ignored it.

If you are under the impression that we just figure the going-downloaded revenue here, and cost solely against that, that is incorrect. We cover the round trip on this.

Senator MONRONEY. I am talking about the average earnings per ton in appendix C, which show only the loaded car.

Mr. GILLILAND. That is true. That shows only the loaded traffic, that is true, in both the cases of the automobiles and the coal and the sand and gravel.

Mr. GRINNELL. On sand and gravel, Senator, I might tell you that the Frisco is the railroad that handles rate matters in Oklahoma. There has been testimony in a number of recent cases down there, whenever we tried to increase the rates, that until we reach a 95- to 100-mile haul in Oklahoma, our rates do not even equal out-of-pocket costs. And that is including this backhaul, too.

So sand and gravel rates all over our system are very much depressed, because our State commissions—and this is primarily an intrastate matter

Senator MONRONEY. Didn't I understand Mr. Langdon's testimony to say that up to 300 or 400 miles, rail hauls were uneconomic, even on automobiles ?

Mr. GILLILAND. I said that we refrained from making rates under 300 miles because we felt that we could not compete profitably against the trucklines, nor could we meet their service for those short distances.

Senator MONRONEY. Isn't there something in the ICC basic law about short haul and long haul and the rate in between shouldn't be greater for the short haul than for the long?

Mr. LANGDON. Yes. That is section 4, the long and short haul.

Whenever we seek the opportunity to publish a lower rate to farther distant points, we have to show to the Commission that there is in

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