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APPENDIX C.--Examples of plan III "piggyback" charges involved in No. 33670

and amount by which they are below motor carrier charges

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1 Applies only where weight of the tractors (exclusive of the trailers on which they are loaded) does not exceed 55,000 pounds.

> Applies only where weight of the tractors (exclusive of the trailers on which they are loaded) is greater than 55,000 pounds.

APPENDIX D.-Examples of revenues and earnings of motor carriers engaged in

transportation of tractors, farm machinery, and roadmaking machinery before and after rail rate adjustments in Nos. 33334 and 33463

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Diamond Transportation System:

Gross operating revenue..
Profit or (loss)..---

Operating ratio (perce
Donaldson Transfer Co.:

Gross operating revenue.
Profit or (loss)....

Operating ratio (percent)
Warren Transport, Inc.:

Gross operating revenue.
Profit or loss)------

Operating ratio (percent)
Daily Express, Inc.:

Gross operating revenue.
Profit or loss) ----

Operating ratio (percent)..
Ringle Express, Inc.:

Gross operating revenue.--------
Profit or (loss)...

Operating ratio (percent)...
Crouch Bros., Inc.: Gross operating revenue...

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1 1st 6 months, 1960. 2 2d 6 months, 1960.

NOTE.-This carrier does not break down its earnings on its machinery division and its general commodity division. However, it is estinated that the machinery division operated at a substantial loss, and contributed to the carrior's overall operating ratio of 99.08 percent.

STATEMENT OF L. M. CUTCLIFF, TRAFFIC MANAGER, ALABAMA BY-PRODUCTS CORP.

STATEMENT OF INTEREST

Alabama By-Products Corp. is engaged in the mining of coal, with mines in Jefferson and Walker Counties, Ala.; and the manufacture of coke and resultant coal chemicals at its operation at Tarrant, Ala. Too, the corporation is 50-percent owner of Ketona Chemical Corp. with a plant at Ketona, Ala., producing anhydrous ammonia, nitogen fertilizer solutions, ammonium nitrate, and limed ammonium nitrate.

At these operations the companies employ approximately 1,700 persons.

Neither Alabama By-Products Corp. nor party preparing this statement own any stock of, or otherwise financially interested in, any carrier subject to, and governed by, parts I, II, III, and/or IV of the Interstate Commerce Act.

In the operation of our business and distribution of our products we utilize the services of common carriers by railroad subject to part I, common carriers by motor subject to part II, and water carriers exempt under part III.

Our opposition to Senate bill 1197 is the serious adverse effect it could and undoubtedly would have on rate levels; the detrimental effect it would have on common carriers by rail in endeavoring to maintain and/or improve their position on traffic competitive between different modes of transportation, the loss of which from volume standpoint alone would force upon and demand from other commodities that move primarily by rail a greater contribution to fixed overhead: with the net result it will further limit our companies in the distribution of their products, restrict our market areas, weaken our companies, and reduce our employing ability.

OUR INTERPRETATION OF CHANGES THAT WOULD BE WROUGHT BY BILL

The Interstate Commerce Act now provides authority for the Interstate Courmerce Commission to prescribe maximum or minimum and/or maximum and minimum reasonable rates, to declare unlawful any rate or rates that cast unjust burden upon other traffic, and the act as amended in 1958 provided: "Rates of a carrier shall not be held up to a particular level solely to protect the traffie of any other mode of transportation." Therefore, the changes that would be accomplished by Senate bill 1197 are: "shall consider, among other factors, the facts and circumstances attending the movement of the traffic by, and the effect upon the earnings of, the carrier or carriers to which the rate is applicable, the competitive necessity for the rate, its effect upon a lawful rate structure, and its tendency, if any, to cast an unjust burden upon other traffic." [Italic ours.) If enacted, this legislation would

(1) Usurp from carriers their managerial rights and place in the hands of the Interstate Commerce Commission;

(2) Place paramount emphasis upon earnings of carriers, competitive ne cessity, and effect upon lawful rate structures, to the deteriment of the American public, the same American public the act was enacted to protect: and

(3) Render null and void that portion of national transportation policy reading "so administered as to recognize and preserve the inherent advantages of each.”

REASONS AND ARGUMENTS IN OPPOSITION THERETO

The net result of this bill would be to limit and restrict competition, and more or less freeze by legislation the division of traffic among carriers. In other words, technological improvements would be discouraged as only questionable advantage could be derived by carrier or accrue to shipper, as it might effect earnings of carrier or carriers to which rate is applicable, competitive necessity might not warrant, or it might effect a lawful rate adjustment.

This is not in keeping with the regulation of transportation over the years. nor of industry in general, and which was so forcefully brought to the attention of the country in recent past.

Certainly the railroad industry has made more technological improvements in recent years than any other industry, or at least not exceeded by any other industry (dieselization, central traffic control, electronic yards, roller bearings, hot box detectors, larger cars, etc.), and not only greatly improved their ability to render more efficient, dependable, and desirable service but to render at : lower unit cost, and this legislation, if enacted, would nullify these advancements and deny to shippers and the public the advantages thereof.

Representatives of transportation agencies other than rail have made state ments, we understand, to your committee as to so-called spot adjustments or selective rate cutting, and adjustments that cast burden on other traffic. These mere statements do not make the situation so, and indeed this is not the case. We shippers of commodities on who such alleged burden would be cast deny such allegations, and do not look with favor on such crocodile tears shed in our behalf.

Indeed the actual and true situation is exactly the reverse. If rail carriers are denied through legislation the opportunity of competing on all traffic on their ability to render satisfactory service on reasonable rates, regardless of rates applying by other modes of transportation, or the effect it would have on earnings of carrier or carriers to which rate is applicable, competitive necessity, or the effect on lawful rate adjustment, then, they will be denied through legislation the right to handle certain traffic even though they can do so with reasonable profit to them, and contributing to fixed overhead. The loss of this profitable

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business would then cast an undue and unjust burden on other traffic handled by the rail carriers.

Despite the great improvements made by rail carriers, and their efficient operation, they are today in not to strong a financial condition, and the passage of this legislation, in our humble and sincere opinion, would be like grafting a cancer on rail carriers, to usurp their strength to where they will finally wither and die.

We respectfully urge that this bill be defeated.

STATEMENT OF WILLIAM DEBOER, GENERAL TRAFFIC MANAGER, COLORADO FUEL &

IRON CORP., DENVER, Colo. My name is William DeBoer. My occupation is general traffic manager of the Colorado Fuel & Iron Corp. with offices in the Continental Oil Building, Denver, Colo.

This statement is made in opposition to S. 1197.

The Colorado Fuel & Iron Corp. operates a fully integrated steel mill at Minnequa, Colo., adjacent to Pueblo, Colo., where they produce railway track material, merchant and structural steel, wire products, seamless pipe or tubing, and coke oven byproducts. It uses all types of surface transportation, including rail carriers, motor carriers, and private carriage to meet its transportation needs, and it is interested in sound and economical transportation.

Outbound shipments normally exceed a million tons annually, and the inbound movements of materials and supplies are substantially greater. The majority of the outbound tonnage is shipped to destinations within the United States, with most going to destinations west of the Missouri and Mississippi Rivers.

All products are sold in direct competition with mills located in the United States, and with imported materials from mills located in foreign countries. To compete successfully, rail rates must necessarily be properly related to rates from competitive origins.

Our concern with S. 1197, if it should be enacted into law, is twofold: First, with its effect on the shipping public; second, with its impact on the railroad industry.

It is in the interest of all shippers that freight rates be properly related; that they be compensatory to the carrier; that they do not discriminate unjustly among shippers and localities; and that they do not result in unfair or destructive competition. Many rates are not properly related now and any move to adjust them, within the limits stated, should be encouraged, not hindered.

In our opinion, s. 1197 would tend to prevent many realistic and fair rate adjustments which the railroads, as well as other carriers, could profitably and reasonably make. While on the face of it S. 1197 appears only to set out certain criteria as guides for the Interstate Commerce Commission in passing upon rates, it would in operation, we are sure, tend to reverse the healthy trend toward fair, competitive ratemaking, which was fostered by the enactment in 1958 of section 15a (3) of the Transportation Act. Section 15a (3) was enacted, after thorough and detailed consideration by Congress, with the end in view of reaffirming what had been intended to be one of the basic principles of our transportation laws. This principle is that each mode of transportation-rail, water, motor, etc.-should be allowed to offer shippers the inherent advantages which pertained to it, including the advantage in certain instances of being able to operate profitably at a rate lower than that of competing types of transportation (Schaeffer Transportation Co. v. United States, 355 U.S. 83).

The means which Congress adopted to restate the principle was to incorporate in section 15a (3) the requirements that in determining whether a rate is lower than a reasonable minimum, the Commission should consider the facts and circumstances attending the movement of the traffic by the carrier to which the rate is applicable, and that, giving due consideration to the objectives of the national transportation policy, the Commission should not hold up the rate of one carrier to any particular level to protect the traffic of any other mode of transportation.

It is clear that the enactment into law of the criteria incorporated in S. 1197 would go far to nullify the sound theory behind section 15a (3). These criteria, which the proposed law would impose in cases of competition between different types of transportation, are, in brief: The Commission would have to take into account the effect of the rate on the earnings of the carrier to which it would apply; the need for the rate from the competitive standpoint; the effect of the rate on a lawful rate structure; and the tendency to unjustly burden other traffic. Finally, S. 1197 would modify part of section 15a (3) by stating that rates should not be held up to any level "solely" to protect another mode of transportation. The prescription in the law of these factors, in the light of the history of section 15a (3), would go far toward destroying the effect of the ratemaking policy of that section and would act in many cases to prevent needed and justifiable rate reductions. The added requirements would unduly delay necessary rate adjustments forcing shippers to increase private carriage to the detriment of all for-hire transportation. Those who would use and pay for transportation service would be denied the benefits which they, and the public generally, should be able to enjoy, and this frequently simply to protect a higher cost carrier.

Just as important is the effect which S. 1197 would have on the railroads. For all too long they have operated at a regulatory disadvantage with respect to their ratemaking powers. The disastrous effect of this disadvantage is evidenced by the steady loss by the railroads of the proportion of the intercity freight business which they have handled. Some of the fetters must be cut if the railroads are to continue to be a sound and vigorous part of our transportation system. Section 15a (3) severed some of them and it has allowed the rails to make reasonable reductions in some rates and to put themselves in a stronger competitive position with respect to other forms of transportation. More can be done in this direction, if the way is left open for the Commission to approve such reductions where it is found that the circumstances of each case justify the reduction and that the new rate will allow the railroads to add to their earnings. If the door, which has been opened slightly, is slammed shut, we may have a transportation system of sorts, but it will not be a very well balanced one in which there will be represented a strong and vital railroad industry.

It is our opinion that no change is necessary at this time in section 15a (3) of the Interstate Commerce Act. The railroads should be free to establish rail rates from Minnequa, Colo., to competitive destinations, properly related to any rates from competitive origins, regardless of the mode of transportation.

We believe that s. 1197 is unsound legislation and that it should not be recommended.

STATEMENT BY C. L. DOSTAL, PRESIDENT, THILMANY PULP & PAPER Co.,

KAUKAUNA, Wis. This is a statement by C. L. Dostal, president, Thilmany Pulp & Paper Co., Kaukauna, Wis. I have asked to appear in this hearing to voice opposition to Senate bill S. 1197. I do this without prejudice to any position that I may take with regard to other legislation dealing with ratemaking procedures.

Thilmany Pulp & Paper Co. is engaged in the manufacture and distribution of practically all types of kraft paper products to every section of the continental United States. We have only one plant which is located at Kaukauda, Wis.

We are heavy users of all types of transportation. During the year 1960 our shipments of pulp, paper, and bags exceeded 117,000 tons, with incoming shipments of wood, chemicals, pulp, and paper equaling again as much tonnage. Approximately two-thirds of our outgoing shipments involved rail and one-third truck shipments. Fifteen percent of the rail shipments involved a piggyback operation.

Under our free enterprise system "competition" is the key and this bill S. 1197 we believe would restrict such competition and in certain circumstances allow the fringe high-cost carrier to hold the rates up to their level, thus preventing the more economical carrier from taking advantage of their inherent lower cost characteristics. We at Thilmany are particularly aware of this competition factor as paper products are not of a high unit value and transportation charges are a vital part of our cost picture and any further curtailment of freedom of action by the more economical modes of transportation could work to our disadvantage.

We favor no one particular mode of transportation over the other. It is our aim to seek and use all types of transportation that can meet our needs and our shipping consistent with economic requirements.

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We are opposed to S. 1197 because we believe the Interstate Commerce ComQission presently has adequate powers to regulate freight rates. We feel "ery definitely that they should possess wide flexibility in such regulation. 3. 1197 as it is presently written would alter section 15a (3) by adding four actors to the consideration the Commission must take into account in passing ipon a competitive rate. Those factors are:

1. The effect upon the earnings of the carrier filing the rates.
2. The competitive necessity for the rate.
3. The effect of the rate upon a "lawful rate structure or adjustment."

4. Whether the rate would have a tendency to cast an unjust burden upon other traffic.

The net effect of this bill would simply be to reverse the policy of more liberality in competitive ratemaking, enacted into law in 1958, and to provide for umbrella-type ratemaking by statute. It should not be accepted in the lisguise of an innocent provision to prevent destructive competition.

Statutory floors under competitive rates is something that this country has avoided throughout history. To employ such methods would simply stifle initiative and enterprise. We are concerned about being denied the results of technological improvements and we are concerned about the ever-increasing spiral of freight rates. We are strong believers in private enterprise and in rewarding the most efficient possible means.

The stringent restrictions which controlled the Interstate Commerce Commission actions, rulings, investigations, etc. were somewhat relaxed by the Transportation Act of 1958 and allowed a little more managerial discretion in ratemaking. Now, however, we have S. 1197 which is a step back toward the former stringent regulation and we believe this is the wrong direction, but more relaxation is needed.

In spite of all the arguments pro and con as to the degree of effect of this bill, S. 1197, it may be assumed that if Congress does pass it that the I.C.C. will regard it as a mandate to deprive the shipping public of the benefits of normal competition between carriers.

The railroads are too important to the industry of this country, as well as to the defense of this country, to be penalized or hamstrung by the proposed S. 1197.

We urge that S. 1197 be rejected and respectfully ask your support to that end.

STATEMENT OF ERNEST FALK, NORTHWEST HORTICULTURAL COUNCIL,

YAKIMA, WASH.
I am the manager of the Northwest Horticultural Council, with offices at 1002
Larson Building, Yakima, Wash. The council is composed of the following or-
ganizations of fruit growers and shippers in Washington and Oregon :

Washington State Apple Commission.
Winter Pear Industry.
Hood River Traffic Association.
Medford Pear Shippers Association.
Wenatchee Valley Traffic Association.

Yakima Valley Traffic Association. The member traffic associations are composed of growers and shippers of deciduous fruits, in their respective areas, who annually ship in excess of 40,000 cars (rail car equivalent) of apples, pears, peaches, apricots, prunes, and cherries to market for fresh consumption. This includes practically 100 percent of the apples and in excess of 90 percent of other deciduous fruits grown commercially in the two States.

Fruit growers and shippers in the Northwest use both rail and motor carriers to move our products. Rail carriers have an advantage on some shipments; motor carriers an inherent advantage on other shipments. The largest volume of our shipments can move by either rail or motor carrier depending upon circumstances, which include rates, availability of equipment, service, and other factors. Attached hereto, and marked exhibit 1, is a table showing the carlot movement of apples and pears from the Wenatchee and Yakima districts of the State of Washington from 1939-40 up to the present. This exhibit shows the dominant position of the railroads in 1939-40 when 92.3 percent of our shipments moved by rail. The percentage moved by truck declined during the war. After the war when equipment became available, the percentage moved by truck started to in

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