Railroads of the 1990s

The 1990s Railroad Business Boom

On some railroads where the norm has been to reduce costs and eliminate rail lines, old shops, and unused equipment, a reverse trend has taken hold. Many rail lines have struggled to keep up with all of the traffic.

At Union Pacific, business was so good in 1995 that the company leased 75 diesel locomotives from Norfolk Southern. The three-track Union Pacific mainline across Nebraska, a venerable funnel of American commerce connecting the West, Midwest, and East, is so packed that the line plans to add a fourth track. Likewise, Norfolk Southern plans to install a second track on much of its busily traveled route between Atlanta, Georgia, and Chattanooga, Tennessee.

Conrail, which had laid off employees for a number of years, hired 800 new workers in 1994. Southern Pacific, which had one of the oldest diesel locomotive fleets in the nation, spent more than $750 million on new power in the early 1990s, renewing almost half of its fleet.

Even General Motors, which quietly closed its LaGrange, Illinois, locomotive manufacturing shop in the late 1980s and considered selling its once-lucrative diesel business, took a second look. Although most diesels are still built at General Motors' Electro-Motive subsidiary in London, Ontario, production capacity was at such a high level in the 1990s that some engines had to be shipped unpainted for the railroads to finish in their own shops. Conrail even took diesel locomotive kits and finished them in the company's shops in Altoona, Pennsylvania, where steam locomotives were once constructed.

Earnings for the nation's railroads reached $3.3 billion in 1994. That's up from $2.5 billion the previous year. Railroad industry executives even credited deregulation with helping them become more safe. After the American Association of Railroads announced the safest year ever in 1994, association CEO Edwin Harper remarked that, since the enactment of the Staggers Act and the resulting increase in railroad cash flow, "freight railroads have made capital expenditures in excess of $50 billion to improve track, signals, equipment, and information systems." Technological advancements, better freight car designs, and better operating practices all led to the improved safety record.

The railroad industry's robust health has come as a result of an improving U.S. economy, computerization of everything from dispatching to waybills, increased research and development, and breakthroughs in labor agreements.