New Freight Rail Service Headed Here

July 28, 2007
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KALAMAZOO — Sometime in the first quarter of 2008, the new Michigan Central Railway will begin offering freight rail service over nearly 400 miles of rail line in Michigan and Indiana, including a freight rail line segment between Grand Rapids and Elkhart, Ind.

The new freight rail line is a joint venture between Norfolk Southern Railway Co. of Norfolk, Va., and Watco Companies of Pittsburg, Kan.

Watco is contributing the capital and Norfolk Southern, the assets.

Watco will serve as the parent company of Michigan Central Railway, which will be headquartered in Kalamazoo. The two railway companies plan to invest $6 million in track infrastructure and equipment in the first year. Over the first three years of operation, they’ll put more than $20 million into track improvements, said David Eyermann, Michigan Central’s interim president.

“A critical component of industrial growth and job creation is a vibrant freight rail network, and we are excited about the partnerships we will establish with shippers doing business in southern Michigan, as well as with state and local governments on the Michigan Central network,” Eyermann said.

Michigan Central will operate over freight rail line segments between Ypsilanti and Kalamazoo, between Jackson and Lansing, and between Grand Rapids and Elkhart. The deal includes the trackage right agreements Norfolk Southern has over the Amtrak line between Kalamazoo and the Indiana border. The joint venture remains subject to regulatory approval by the Surface Transportation Board in Washington, D.C.

Ron Husband, director of public relations for Norfolk, said the existing rail lines that comprise Michigan Central Railway are Norfolk Southern lines, but because there has been a significant drop in volume over the last couple of years, the company thought establishing a joint venture with Watco — a proven short-line operator — would revitalize the lines and add freight on those routes. “They’re bringing a sharper focus on developing business in Michigan,” Husband said. “What Norfolk Southern is contributing to the joint venture is the track and property between Ypsilanti and Kalamazoo, Grand Rapids to Elkhart, Ind., and up from Lansing to Jackson.”

Ed McKechnie, Watco’s chief commercial officer, said there are 250 potential customers on the Michigan Central line, and each has received a letter from Watco introducing the new service. Watco representatives began face-to-face meetings with the companies two weeks ago, he said. The joint venture marks Watco’s first foray into Michigan.

“Initial meetings were very positive, and we’re excited about doing business in Michigan,” McKechnie said.

“Our focus is going to be to grow the railroad business here.”

Michigan Central will employ 118 people, including 10 to 15 people who will work out of the Kalamazoo office, and trainmen, conductors, engineers and trackmen who will work throughout the network. The president of Michigan Central will be responsible primarily for growing the business and working with Amtrak and state and local governments, McKechnie said. Two to three full-time marketing officers will be dedicated to marketing the line and generating new customers. Norfolk Southern presently doesn’t have any marketing people in Michigan, he noted.

Watco Companies operates 16 railroads in 14 other states. It also operates industrial switching locations and mechanical and locomotive shops across the United States, and owns Millennium Rail Inc., which provides repair and maintenance services to the rail industry.

Norfolk Southern has been operating freight rail service in Michigan since June 1999, Husband said.

It operates 21,000 route miles in 22 states, the District of Columbia and Ontario, Canada, serving every major port in the eastern U.S. It is the country’s largest rail carrier of metals and automotive products.

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