Do You Lease or Own Private Railcars?

Imagine spending thousands or even tens of thousands of dollars per month to lease or hundreds of thousands or even millions of dollars in one fell swoop to buy a group of rail assets. Now imagine the only control you have over those rail assets is to issue billing instructions for where those rail assets should go when loaded or where to go to load and when they arrive at destination loading or unloading them. Once you’ve waybilled the railcars, it’s up to the railroad to transport them to the billed destination and/or to your customer and to return them to the origin, last loading location or to another point designated by you. Once the rail assets are accepted by the railroad, care of those railcars is now in the hands of the railroads. The railroads job is to move the railcars loaded with product quickly and consistently from an origin loading location to the customer who takes possession of the railcars and unloads them. Once unloaded, the railroad(s) will move the railcars back empty to the original loading location.

Safety First, Maintenance First!

Mechanically, the railroads are required to do what is called a one-thousand-mile inspection* and an interchange inspection when the railcar interchanges from one railroad to another as mandated by the Federal Railway Administration. A typical one-thousand-mile inspection generally consists of a roll by of the train with a rail mechanical person observing on each side of the train looking for safety defects (hand holds and ladders), mechanical defects (wheels, bearings, couplers, train line, brake system) and any other non-conforming item that would negate safe operation of the train.  Note, sometimes the carmen walk or ride All Terrain Vehicle’s (ATV) by the train as it sets in the railyard in lieu of a roll-by depending on the operations of that particular rail yard.

Maintenance Rules

Per the American Association of Railroads (AAR) Rule 1, a Class I railroad inspects safety appliances such as grab holds, steps, crossover platforms and the Class I also checks that all brakes are applied and operative, brake rigging is properly secured and does not bind or foul and there is proper air flow as required by FRA rules. If a mechanical inspector (carman) does the inspection they are trained to look for more further details (example wheel flange requirements, air piston travel requirements, etc. that are a lot more in depth than what a crewman is trained to look for. More details on these inspection rules can be identified and reviewed in the AAR Field Manual but for all intents and purposes of this article, this is a good understanding to have.

Defect Found, Now What?

When any defects are discovered, the culprit empty or loaded railcar is either repaired in train if it’s a minor defect or taken out of the train and sent to a Repair In Place (RIP) track or sent to a railcar repair shop if it requires more time to fix the defect than the current train schedule allows. The concern as a railcar owner or lessee (even under a full service lease) is that this process requires no consultation of the responsible party for the maintenance bill unless the repair takes over (per Field Manual Rule 108.1) 25 hours or (36 hours if truck work included) or excess of 85 man-hours for heavy repairs at the shop. Although it may seem unfair to a railcar owner or lessee, the process is actually very important and is most effective for most all. The system is designed to allow the railroad to make minor repairs to ensure safety and/ or repairs that have specific efficient work processes against them (e.g. wheel change out) that are easily completed by the railroad to negate impacting safety and train and railcar velocity. For example, if a railcar is inspected on a roll-by and a hand-hold is found to be out of compliance, the mechanic(s) on duty can torch it off and replace it with a new hand-hold while the railcar is in train. The decision on whether to repair the railcar in train, send it to the RIP or send it to a home-shop designated repair agent is entirely up to the railroad handling the railcar.  The exception is the railcar repair items that are Federal Railway Administration (FRA) governed these must be repaired before moving the railcar. FRA items govern the safe operations of the railcar. Items governed by the Association of American Railroads (AAR) generally have more restrictive tolerances than FRA allowing railroads a degree of latitude on performing immediate repair to the railcar or sending it to a railcar shop.  The rule here is that railroads must be in compliance with FRA rules but are self-governed through AAR rules granting them a degree of flexibility.

Railroads vacillate their focus on how deep they typically go in maintaining railcars. We’ve seen corridors where almost every railcar on every train that runs through a particular yard gets a focused inspection and railcars will incur several railroad repair items every time they run by that yard. On the flip side, we’ve seen other corridors that have dedicated consistent railcar traffic with so few inspections that it seems to be detrimental to the safe operations of the train and railcars. Something for you to understand and keep in mind, when railroads have maintenance income dollars as a Key Performance Indicator (KPI), you can rest assured that your railcar maintenance costs will go up.

Identifying A Problem.

Outside of manual inspection, railroads have a few ways to determine if a railcar has defects using artificial intelligence or smart sensors.  The trend has been to move towards these smart-sensor driven methods to reduce labor costs and improve safety of railcar operations. Two primary sensors are Wheel Impact Load Detectors and Truck Hunting Detectors.  Wheel Impact Load Detectors (WILD) help detect wheel defects and the Truck Hunting Detectors (THD) look for movement & force discrepancies of the trucks on the rail surface.

One part of the billing process that sometimes confuses railcar lessees (even under full service) and railcar owners is that the metric for invoicing is time driven and not cost driven. One item may cost you $35 to repair or replace while another item such as wheels can range from $1000 to $2000 per wheelset. Remember, this is all completed within the 85-man hour limit not requiring any input or approval by the railcar mark owner. For many, we know this is a difficult concept to envision. That is why effective railcar equipment health management processes are critical and can reduce this exposure and potentially lower maintenance costs. Furthermore, an effective preventative maintenance program can drastically reduce your railcar time out of service and ensure your railcars stay in service when and where you need them.

How Can You Take Control?

When our customers are introduced to railcar maintenance for the first time or they’re frustrated by the exposure they still had with a railcar fleet under a “full service lease” where certain parts of the railcars (gates, doors, hatches, body damage, loader/unloader damage, etc.) weren’t taken care of by the lessor, we try to take the shock out of the system. We explain the railroad process of repairing railcars and what is controllable, what you can influence and what is outside of your control. The first step to reducing repair costs is to commit to a repair data gathering system; train, hire or outsource interpretation of this data to a professional; and develop a preventative and proactive maintenance plan and then put it into effect. If you are running railcars in service, you will get maintenance bills. It’s up to you if you let them happen to you unchecked or you can influence them through proactive management and furthermore preventative maintenance. Tealinc experience has been positive as we’ve effectively reduced what seems to be the industry standard of $100 – $150 per railcar per month in AAR / FRA maintenance invoices down between a low of $36.22 to a high of $89.23 per railcar per month.

You can find out more about equipment health processes and receive a review of your fleet by contacting Tealinc:

Shannon Rodgers
Director-Operations
Phone: (814) 631-9277
Shannon@tealinc.com

This article was co-authored by Darell Luther, CEO and Shannon Rodgers Director Operations both of Tealinc, Ltd.

(*) there are some exceptions to this rule allowing for a greater distance obtained by the railroad through a waiver with the FRA.

Let’s Create Value Together.

Tealinc is a railcar lessor, railcar management and consulting firm.  Contact us for an evaluation of your rail transportation situation.  We’re always engaged and care about generating positive results be it a railcar lease, management of your rail assets or providing exemplary consulting results. We’re looking forward to creating true value with you.