New Senate Report Shows How Rail Industry Deceives in Order to Obstruct Pro-Consumer Reforms

Railroads Proclaim Riches to Wall Street, Claim Poverty to the Federal Government

WASHINGTON, D.C. – The U.S. Senate Commerce Committee released a new report today spotlighting the lengths the railroad industry will go to avoid reforms that protect rail shippers and consumers.  The report, unveiled by Chairman Jay Rockefeller (D-WV), showed examples of how the railroads paint a bleak picture of their finances to help stall efforts at rail reform, yet tout strong profits and robust growth to investors. “This report shows the railroads will stop at nothing to fight off common-sense reforms that would protect American businesses and consumers,” said Glenn English, Chairman of Consumers United for Rail Equity (CURE), a coalition of freight rail customers seeking changes in federal law to allow for more competitive railroad pricing and reliable service.  “The railroads plead poverty to protect their monopoly and charge excessive rates to shippers, then turn around and boast of their strong profits to Wall Street.” The report concluded that the railroads are some of the “most highly profitable business in the U.S. economy,” but found a consistent pattern over the past several years of the railroads downplaying their success to the federal government in order to preserve regulatory protections.  The railroads then use these protections to extract excessive rates from American businesses and farmers.  According to the report:

The Railroads’ Pattern of Deception

According to the Railroads… According to the Senate Commerce Committee…
In 2007, the Association of American Railroads (AAR), the rail industry’s trade group, told the Surface Transportation Board that the railroad industry had “only slowly made progress toward the goal of long-term financial stability.”  Yet filings with the Securities and Exchange Commission (SEC) show the four largest U.S. rail carriers have nearly doubled their collective profit margin since the year 2000.  
In 2008, the AAR testified to the STB that the railroads’ profitability “consistently lagged most other industries.” Yet in 2008, the railroads’ 12.6% profit margin placed the railroad industry fifth out of 53 industries on Fortune’s list of “most profitable industries.”
A class-1 railroad CEO told the House Transportation Committee in 2009 that “our industry is only investing about half the level DOT studies say is needed to meet the demands on freight rail in the future.” Yet that same CEO told investors in a 2010 conference call that his company was “continuing to make the critical, long-term capital investments that support the Company’s growth strategy.”
  “Last week, President Obama asked for $50 billion dollars in new spending for transportation infrastructure, much of which would benefit the railroad industry.  This report should make every Member of Congress think twice. Before Congress considers more funding for the freight railroad monopoly, they need to pass meaningful rail reform legislation that would protect consumers from the railroads’ monopoly pricing power,” said English. A full copy of the Senate report can be found here.

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September 15, 2010 Contact: Chad Kolton 202-789-4365 ckolton@hdmk.org