(The article referred to is as follows:)

[From Railway Age, Jan. 26, 1959]

FORWARDERS FIND NEW PROFIT IN PIGGYBACK

Morris Forgash, president of U.S. Freight, helped set a new pattern in piggybacking in 1958. Now he sees fast growth ahead-with big gains for both forwarders and railroads.

Question. Mr. Forgash, we hear increased talk that forwarder traffic will bring on major changes in railroad piggybacking-set it on a faster growth curve, so to speak. As one of the major forwarders, do you think this prospect likely? Answer. I certain do. A number of railroads, as you know, have published rates aimed at helping bring this about. Our company, along with other forwarders, has proposed numerous rate changes based on these underlying rail rates. Unfortunately, the ICC suspended our rate proposals after receiving protests from motor carriers. I have hopes, though, for a reasonably early decision. Some major shipper groups have now intervened in our support, as you know. Question. You're talking here about two kinds of piggyback, are you notone where you provide the trailers, and another where you provide both trailer and flatcar?

Answer. Yes. And you realize, of course, that we already are piggybacking quite a lot of business under both plans.

Question. Just exactly how do railroads benefit from all this?

A. Well, I think some arithmetic will answer that. In a recent month, our subsidiary, Universal Carloading, moved 765 boxcars, Chicago to Los Angeles, and the average loading per car was 19,633 pounds. The railroads received $658 per car, on an average, for this business. During the same month, we moved 94 flatcars, piggyback, between Chicago and Los Angeles. Average weight per car was 61,918 pounds, and the average per-car revenue we paid the railroads was $1,009. That was all plan IV business, where we provided both flatcars and trailers.

Question. You mean that when you provided the basic vehicle the revenue to the rail carriers was higher than when the carrier provided it?

Answer. Exactly. And it points up, to me, a real paradox in transportation. That $658 the railroads received for boxcar movement isn't the whole story. Now, if you figure it costs the railroad, conservatively, $58 to handle that car at the terminals, you trim the gross back to $600. Then you have to figure something for empty mileage, say 20 percent to be safe, and you can knock off still more of their revenue. Figure 4 cents a mile to own and service the car and you finally get that $658 down pretty low-and you've still made no allowance for anything like common carrier liability.

Question. In other words, the railroad not only gets more revenue for handling your traffic piggyback, but actually keeps a bigger percentage of it?

Answer. That's how it figures out. On the example I mention, the average load per flatcar was about three times that of each boxcar. Of even greater significance, I think, is the release of tremendous capital investment by the railroads for other urgent purposes. The replacement cost in today's market of a modern rollerbearing boxcar is around $10,000. In 1 single month of our experience, barely the beginning of the operations, the capital saving to the railroads was approximately $4 million. The potential in that direction is fantastic. Another source of potential saving lies in elimination of loss and damage claims. Since this service was started, not a single dollar in claims has been filed against a rail carrier.

Question. I can see where that would appeal to a railroad, but where does your company fit in? Where does your payoff come?

Answer. Well, we effect substantial savings in terminal freight costs. Piggyback enables us to eliminate a great deal of rehandling and transfer. For example, a large part of our business in the Midwest feeds into Chicago via common carrier trucklines. We are now beginning to load solid truckloads of consolidated shipments at Detroit for Los Angeles and San Francisco. The trailer arrives at Chicago and is loaded on a flatcar for destination. We avoid rehandling over a warehouse platform. That's a big economy for us. We're also having some success in loading trailers at origin in store door delivery order, which eliminates physical rehandling over the platform at destination.

Question. Lets' go back, for a moment, to the rate proposals suspended by the ICC. Motor carriers protested those rates, did they not, on grounds that you were invading their field?

Answer. They say that. But essentially what we're proposing isn't inimical to motor carriers.

A few months ago some trucking organizations were contending that they would be put out of business by our piggyback operations. Now, 6 months later, nothing has happened to justify their fears. It boils down basically to the understandable feeling that one does not like to see added competition. I am confident the Commission is going to evaluate the situation in a most objective and impartial manner. I am certain that no “Chinese Wall" will be built around anybody's business simply because he feels he has squatter's rights and doesn't like additional competition.

Actually, I think it's more a case of the trucks invading our field than the other way around. As we've pointed out to the Commission, forwarders have published volume rates for years and these present proposals are nothing more than a move to stay competitive.

Question. If this is a competitive fight with the motor carriers, how do your costs compare? That must enter this picture in a big way.

Answer. Well, take a trucker. His minimum cost for a well-equipped diesel tractor is about $20,000 and the cost of an aluminum trailer is approximately $7,500. So his total capital investment is $27,500.

By comparison, the cost of an 85-foot flatcar is about $15,000. Steel trailers, which cost less, can be purchased for approximately $4,500 each. The total capital investment by rail figures $24,000 for the flatcar and two trailers. The comparable investment for hauling two trailers on the highway is two times $27,500 or $55,000.

Question. But that isn't the whole cost for either carrier. How do operating costs compare?

Answer. Of course, there are other expenses. Let's reduce them to per-mile costs. Owning and operating a flatcar won't run about 5 cents per mile. Calculate two trailers at 12 cents or a total of 3 cents per mile. Add to that the terminal-to-terminal cost of 42 cents a mile provided in the railroad tariff, and it all adds up to total of around 50 cents. To that must be added a reasonable allowance for empty car movements which would bring you in the neighborhood of 62 cents per mile. Now, there is just one additional cost, as I see it, and that is moving trailers to and from railroad yards and loading on the flatcars. This item runs about $35 a trailer or $140 for two trailers on a flatcar. Reduced to a mileage basis-2,200 miles from Chicago to Los Angeles-you get around 62 cents per mile.

When you add all this up you arrive at an overall cost of 69 cents per flatcar or 342 cents a trailer mile, door to door. The best estimate I have of comparable cost over the highway is 35 cents.

Question. Well, the trucker can use piggybacking too, can't he? A lot of railroads have plan I piggyback and are out seeking motor carrier business, as you know.

Answer. That is true and it raises an interesting point. These are contract arrangements, with railroad furnishing flatcars. No guaranteed round trip load factor is required as it is under plan IV piggyback. Yet railroads make available to the trucker a much lower cost per trailer-mile. I have always had grave doubts as to the legality of this arrangements, and I haven't been persuaded that in the long-range viewpoint it is in the best interest of the railroads themselves.

After all, these arrangements can only work out terminal to terminal in the longer hauls, and that is exactly where railroads are trying desperately to compete. When a motor carrier goes off the highway onto the "back" of a railroad he is no longer, in fact, operating as a motor carrier in accordance with his certificate. The arrangement certainly isn't a "true" joint rate in the accepted sense of the term. If you get down to the substance of the law, and outline what the motor carrier actually does alongside the forwarder definition contained in the Interstate Commerce Act you will be hard put to tell the difference. What I mean is, the motor carrier is actually performing forwarder service without a forwarder certificate. The basic tenet of law is to recall what one does and not what one calls himself. This entire question may have to be answered in the near future.

Question. But forwarders can consolidate and use railroad piggyback because that's the nature of their business?

Answer. Yes.

Question. Mr. Forgash, just how did you come into piggyback? What propelled your companies into it after railroads had been offering the service in other forms for at least 6 years?

Answer. It was a combination of things. You don't just sit down and say, "I'll think this thing out." It started, I'd say, when we were looking into the tank car situation. There you have about an 80-cent-per-mile general rate level on cars owned or leased by shippers. A railroad pays a 4-cent mileage allowance for the right to move it, including the "privilege" of moving it empty, by the way. So the real rate is 72 cents, or 36 cents one way, and for this the rail carrier also provides terminal services. That got us thinking that something similar to this might apply in our case. Out of a lot of work and talking to a lot

of railroads, this thing took shape.

Question. You appear to have approached this thing from the angle of carmile costs, not on any specific rate on any specific commodity or group, is that right?

Answer. Yes. The real measure of railroad earnings is revenue per car. The "car" is the basic factor of calculating railroad costs. Car utilization is what counts. We are putting our emphasis on that and I think this approach promises to open new vistas in railroad thinking and ratemaking. I don't say that forwarders hold the panacea for all the ills in the railroad industry, but I do think that in piggyback plans II, III, and IV may well lie the beginning of the answer to many of their compettitive problems.

Question. I've heard discussion, Mr. Forgash, that the entry of forwarders into piggybacking, and railroad publication of these plan III and plan IV rates, will, as they say, undermine the whole rate structure. Do you want to comment on that?

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Answer. In the first place, I don't think there's any danger of that. time is coming, however, when rail carriers are going to have to take some kind of new look at the atomic composition of a freight rate. The emphasis will have to shift more toward car-mile earnings and away from the traditional factors of cost and value of service, common carrier liability, what the traffic will bear, empty movements, and things like that. They have gone to the incentive rate idea already, and variable minimums, increasing per-car revenue by encouraging heavy loading.

Question. Let's go on to another area of this thing, the matter of service. How are the railroads doing on that score, as far as your piggyback operations are concerned?

Answer. Good, with a few exceptions here and there. We keep after this, of course, and one measure of how well we've done is in our daily mileage. It hasn't been too uncommon to roll our piggyback cars 500 miles a day and we've been averaging 450 miles on all our cars. We keep them busy.

Railroads, as you know, have initiated drastic improvements in line-haul service in recent years. Just a few weeks ago you had announcement of third midnight service, Chicago to Los Angeles. It wasn't too long ago that it was 5 to 7 days, and sometimes pretty haphazard at that. We now get second midnight, Los Angeles to San Antonio and from Los Angeles to Memphis it's 2 a.m., fourth morning.

Question. And you see more improvements coming?

Answer. Oh, yes, I also foresee that the railroads will have to change their concept on the economics of long heavy-tonnage freight trains. They're going to have to seek a more direct relationship between the ton-mile cost of moving the train and the contents of cars in that train. The revenue on a 100-car coal train is one thing; and the revenue on a 50-car train of manufactured products is quite another.

Question. You think, then, that these changes aren't too far in the future? Answer. It's a matter of months, I'd say, rather than years. The speed you get between your tonnage storm center is going to get faster. After all, what does a shipper buy when he buys transportation? It's not the mode of transport. He's interested in elapsed time and price.

Question. Pertinent to this service competition, if we can call it that, I understand motor carriers move a lot more LTL than truckload between the Pacific coast and the Midwest. Is that true?

Answer. Something like 75 percent of the motor carrier business in transcontinental territory is LTL. That comes back to what we were discussing earlier, this argument over our rate proposals. What is a truckload lot, anyway? Twenty years ago, when you had 20-foot trailers, it was 20,000 pounds. Now your trailers are up to 40 feet and the truckload of yesterday is the LTL of today. Rates, of course, grew up around the old basis.

There's one myth surrounding today's truck service that has to be challenged and broken. The public sees a truck on the highway and figures it was backed up somewhere, loaded, and is on its way. That's very seldom the case. Truckers consolidate, the same as forwarders. Actually, when you talk about trucks and forwarders today you are talking about the same kind of business.

Question. One other point, Mr. Forgash. Your companies have various types of equipment-General American cars, Flexi-Vans, and you recently joined Trailer Train. How do you coordinate these different types of equipment, or is that a problem?

Answer. It is a problem, with us and everyone else, though it hasn't bothered us too much yet. We've even been able to interchange some of this equipment through a little ingenuity. And we're greatly interested in any move to standardize piggyback equipment.

Question. Is there any likelihood that through a company like United States Freight, where you have these different types of equipment under single ownership, you might make some contributions to this standardization idea?

Answer. That is a question I'm especially interested in right now. At the National Defense Transportation Association convention in St. Louis a few weeks ago, that organization recognized the necessity for standardizing containers and other equipment for both piggyback and fishyback service. The military people are interested and the subject was thoroughly discussed.

After the convention, NDTA's executive committee appointed a committeethe committee of containerization and standardization-of which I have the honor of being chairman. Since then, we have begun a "crash" program on this problem and are already making progress.

Question. Who's on this committee?

Answer. Well, we have been fortunate to enlist such men as Champ Carry, president of Pullman; Herbert Rogge, president of the Car & Foundry Division of ACF; Roy Fruehauf, of Fruehauf Trailer; W. A. Burns, president of Trailmobile; Gen. F. T. Voorhies, Assistant Chief of Transportation; E. M. Fitch, Department of the Interior; J. P. Newell, vice president of the Pennsylvania. There are others, too. The committee is approaching standardization of the basic container or truck body at 40 feet and multiples thereof-down to 20- and 10-foot boxes, for instance. Further meetings will be held in the next few weeks and I'm sure we will make quick progress. After we agree on a definite standard we'll then go to work on the matter of construction. It has to be something practical and economical.

Question. Mr. Forgash, is there any chance of piggyback offering a solution to large passenger service losses of the railroads? I noticed you mentioned this in a recent speech.

Answer. I think so, very definitely. There's no reason why roller bearing piggyback cars can't be incorporated in symbol passenger trains, particularly on longer runs. This could compensate for passenger revenue deficits and the reduced volume of passenger traffic. If it's done with demountable truck bodies of anodized aluminum of varying shades of color this equipment will harmonize with the motifs of the most luxurious passenger trains. In other words, eye appeal need not be sacrificed.

Question. A short time ago, you said in a speech that we may see transcontinental freight moving across the Nation in 48 hours. What basis do you have for that opinion?

Answer. That prediction is not as farfetched as it might appear to be on the surface. It's already in effect in passenger service. You leave New York at 6 p.m. and arrive in Los Angeles 9 a.m. third morning, after a 9-hour stopover in Chicago for connections. Just think-performing such service on one of their most unprofitable segments of business? What is needed is high speed trains comprised of roller bearing equipment. I also think we'll see development of an atomic-powered locomotive inside 10 years. We already have atomic submarines. An atomic-powered ship is on the drawing board and we are on the threshold of atomic-propelled aircraft. The railroads will be able to capitalize on what the Federal Government is spending to develop these atomic-powered plants for other forms of transportation.

Question. From what you say, I take it you see big things ahead for the railroad industry. Is that right?

Answer. I do indeed. I believe the railroads are on the threshold of the most dynamic and profitable years of their entire existence. They are just beginning to see the real potential of their private rights-of-way. They've done a

tremendous modernization job already. They have, right now, the means to produce mass transportation on a cost level unequaled by any other form of transportation anywhere in the world. Man for man, organization for organization, they don't need take second place to any other industry.

I would term the period of 1929 to 1949 the period of "bewilderment." Since then they have come to better understanding of their problems. No doubt an expression of their initiative in producing transportation at the lowest possible rates will find a more favorable climate under the revised Transportation Act of 1958.

Mr. BENNETT. That is all I have.

The CHAIRMAN. Mr. Flynt?

Mr. FLYNT. Thank you, Mr. Chairman.

Mr. Loomis, during your industrial relations conferences, your labor-management conferences, has any joint effort ever been made to remove from the jurisdiction of Congress the question of railroad retirement increases, both increased benefits and increased costs? Has that been presented to one of these joint discussions to remove it from the realm of controversial legislation?

Mr. LOOMIS. No; I would have to answer that in the negative, Mr. Flynt.

Mr. FLYNT. Do you feel that a combination of railway labor representatives and railway management representatives would be better qualified and have more resources available to them to study to resolve these differences by mutual agreement rather than throwing it into the Congress?

Mr. LOOMIS. I think I would have to agree with that.

Mr. FLYNT. Yet you say that no effort has ever been made to arrive at such a uniform approach and one that could be ascribed to by both railway labor and railway management?

Mr. LOOMIS. I think that is correct, with this exception. You recall that the Retirement Act itself, in its origin in 1937, finally came out as the product of negotiations between management and labor and was a joint agreement presented to the Congress by both sides.

The original, and I don't mean the early acts which were contested in the courts, but the act which actually went into effect and became law was the joint product of negotiation. I believe the 1950 or 1951 amendments to the retirement and the unemployment acts were finally the result of a joint negotiation.

Those are the only two that I know of. Insofar as unemployment is concerned, the railroads were originally under the State acts. The labor unions sought a Federal act. The railroads opposed it, but the Congress passed the Federal Unemployment Act and that has remained on the books ever since, with amendments.

Mr. FLYNT. I am going to make an assumption here which I believe is a correct assumption: that railway management and railway labor are both mutually interested in maintaining high operating revenues, maintaining maximum railway employment and, third, increasing, retirement and wage benefits whenever the economic condition of the railway industry will permit.

Mr. LOOMIS. I can subscribe to that.

Mr. FLYNT. Since you subscribe to that assumption, I wonder if you also would agree with me that each of these three highly desirable objectives could be more adequately and more promptly arrived at by joint negotiations between railway management and railway labor