While companies continue to struggle in the nation’s economic downturn, billionaire investor Warren Buffet may see brighter days ahead for the freight industry. But is the increasing interest in shipping by rail a good sign for trucking?
In a $44B deal, Buffet’s Berkshire Hathaway would increase the company’s ownership of the Burlington Northern Santa Fe (BNSF) rail corporation from a current 22.6 percent to 100 percent. Expected to be finalized in 2010, the deal must yet pass shareholders’ approval and get the nod from the Dept. of Justice.
The move highlights a revived interest in rail-based freight transportation, once the primary shipping method, which could place greater stress on the already beleaguered trucking industry.
Two primary factors may make rail a more attractive alternative to trucking – the nation’s infrastructure woes and pressures to environmentally ‘go green’.
With a 52 percent increase in truck traffic between 1990 and 2005, and a motoring trend favoring heavier passenger vehicles like SUVs, America’s roadways have borne a heavier load, both figuratively and literally.
Touting a more eco-friendly way to get goods across the country, the rail industry promotes itself as more ‘green’, requiring less fuel and emitting less pollutants to the air than the rival trucking.
However, rail proponents’ suggestion of benign impact on the environment are questionable, claims Clayton W. Boyce, V.P. of public affairs and press secretary for the American Trucking Association (ATA). In a factcheck.org article, Boyce says rail traffic’s advantage in fuel economy is offset by accessibility problems. Also, heavy-duty truck requirements to use ultra-low sulphur diesel fuel have been in place since 2006, while similar regulations won’t be in effect for trains for another four years.
The U.S. Environmental Protection Agency (EPA) reports “locomotive engines are significant contributors to air pollution in many of our nation’s cities and ports”, emitting large amounts of health hazardous nitrogen oxides and particulate matter.
Trucking still holds the advantage in flexibility and the ability to locate a shipment in the supply line. Nearly every business that ships or receives goods has access to a loading dock. Catching up in these areas would require serious railway investment in railcar-tracking technology, and additions to the physical infrastructure, with new routes and receiving docks to grant more access to customers.
Until then, motor carriers may take Buffet’s purchase as a sign of a better freight market overall in future days.
Sources: Forbes.com: Behind Buffet’s Rail Bet. Kevin O’Marah
FleetOwner.com: Buffett bets $44B on freight recovery. Brian Straight, managing editor.
Factcheck.org: Can a freight train really move a ton of freight 436 miles on a gallon of fuel? Brooks Jackson.
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