Marquette Rail based in Ludington is one of several short lines in West Michigan.

Railroads Gain Work
As Truck Firms Struggle
Pete Daly

GRAND RAPIDS — One of Michigan's newest short-line railroads is getting a lot more inquiries from shippers, even as some trucking companies here struggle to stay alive.

Kevin Ruble, founder, president and CEO of Marquette Rail based in Ludington, said his company is quoting business it hasn’t quoted before, including “stuff that has typically moved by truck and has never moved by rail, for some of our customers."

Marquette Rail, one of several short lines in West Michigan, was established in 2005 with 130 miles of track linking Ludington and Manistee to Grand Rapids, where it connects with two major railroads; CSX and Norfolk Southern. Marquette Rail revenue last year, according to Ruble, was about $7.5 million from moving about 13,000 loaded cars. Business has been improving every year, he said.

	Ruble

Ruble said the American railroad industry as a whole is "handling more ton miles of freight than at any point in the industry's entire history."

Both trucks and railroads are major users of diesel fuel, which is increasing dramatically in price. But the overall impact is less on the railroads, partly because fuel is a smaller percentage of railroad operating costs than it is for trucking — and because some truckers are barely getting by.

According to a May 6 news release from the American Trucking Association, trucking is "a highly competitive industry with very low profit margins." It noted that "in the 2008 first quarter, 935 trucking companies with at least five trucks failed. This represents the largest number of trucking-related failures since the 2001 third quarter."

Ruble said the shift to more interest in shipping by rail became noticeable in the spring of 2007 when there was a spike in trucking bankruptcies. Those tend to happen in the spring because that is when truckers are faced with license and permit renewals, which can cost thousands and sometimes are the last straw for an independent trucker or small company that has just been breaking even.

Meanwhile, the railroads have been gaining momentum for years.

"I think (the railroads) are getting a lot more attention because of the fuel costs, particularly due to the most recent spikes in fuel, but actually railroads have been increasing their intermodal freight consistently for at least the last 10 years," said Bob Chaprnka, president of the Michigan Railroad Association in Lansing.

Chaprnka said that a railroad can ship more than three times the amount of freight that a truck can on the same amount of fuel.

Ruble said Marquette Rail uses about 50,000 gallons of fuel each month.

“Fuel is a big cost to us and it's becoming bigger,” said Ruble. That cost is of great interest to every Marquette Rail employee, too, because "we are the world's only majority employee-owned railroad," he said.

Like the trucking industry, price increases in fuel are passed on to the shipper in the form of a surcharge.

Intermodal shipments involve a combination of railroads and trucks, where freight on semi-trailers or in large shipping containers is shipped long distances on railroad flatcars and then transferred to trucks for final delivery.

Marquette Rail works with eight "transload" trucking companies in West Michigan, such as Van's Delivery Service.

"We're seeing hardwood lumber, shipped (intermodal with) two of our transload partners, and that has not moved out of Michigan in at least 30 years," said Ruble.

Another sign of the resurgence of the railroads is the increasing number of contacts Ruble has received from industrial real estate agents and developers who say that they have a client that must have rail access.

Marquette Rail on average has been extending spurs to two new industrial locations a year. He said that may not sound like much but he noted that new plants aren't built every day, and putting in a rail spur can be an expensive proposition.

He said he is not aware of any other time in his career "when we had this level of demand for industrial development properties that must have rail."

Ruble, 51, has worked in the railroad industry since 1978, when he went to work for the Missouri-Kansas-Texas Railroad (known in the industry as "the Katy").

A Chicago native who lives in Texas while the manager and employees in Ludington basically run the business, Ruble is the fourth generation in his family to work in railroading. He holds an economics degree from Sam Houston State University and an MBA from the University of Dallas. From the mid-1980s to 2005 he worked as a consultant to the railroad industry and to financial companies involved in 85 transactions involving short-line railroads. At the same time, he developed another expertise as a consultant in the development of what he calls "high-performance, employee-owned companies," based on the successful Southwest Airlines model.

Eventually, he saw an opportunity to meld his two specialties "or eat my words." In late 2005, Ruble acquired the CSX branch line running north out of Grand Rapids to Baldwin and west to Ludington and Manistee. The track runs next to M-37 for much of the way.

The Marquette Rail lines were formerly part of the Pere Marquette Railroad network that covered much of Michigan's Lower Peninsula for many generations. Marquette Rail serves about two dozen companies in six West Michigan counties, transporting chemicals, paperboard, grain, salt, petroleum products and other commodities.

As the Web site makes clear, Marquette Rail "is no Mom and Pop short line railroad." The main line, which is welded rail for one-third of its length, is capable of handling the new industry standard 286,000-pound gross rail loading cars at speeds of 40 mph. Although Marquette maintains its track to federal standards allowing maximum speeds of 40 mph, it operates its trains at 30 mph "so as to conserve fuel and minimize risk of derailment and customer lading damage."

Marquette Rail has a locomotive fleet of seven engines, including four-axle 2,000-horsepower GP38-2 locomotives and six-axle 3,000-horsepower SD40-2 locomotives, all of which are equipped with modular electronic control systems, as opposed to the older, lower-horsepower, less reliable locomotives found on many short lines. The engines are leased with options to purchase. Marquette also leases 350 freight cars.

"Our motive power fleet enables us to handle 80-car trains with ease. You won't find that on any 'Mom and Pop' short line!" states the company’s Web site.

Its employees are empowered, too. Sixty percent of the ownership is by the employees through their Employee Stock Ownership Plan. Marquette started with 20 full-time employees in November 2005. Today there are 25, plus additional seasonal workers.

Rail transportation is a service business, noted Ruble. Thus, every employee is issued

"A short line (railroad) is a small company, and small businesses are able to pay closer attention to their customers than large businesses," said Ruble. BJX