Railroad Switching and Terminal Establishments

SIC 4013

Companies in this industry

Industry report:

This category covers establishments engaged primarily in the furnishing of terminal facilities for rail passenger or freight traffic for line-haul service and in the movement of railroad cars between terminal yards, industrial sidings, and other local sites. Terminal companies do not necessarily operate any vehicles themselves, but they may operate the stations and terminals. Lessors of railway property are classified in SIC 6517: Lessors of Railroad Property.

Industry Snapshot

In 2010, 553 railroad switching and terminal establishments employed 17,900 people. Companies in this industry were working to incorporate Positive Train Control (PTC) systems, defined by the Federal Railroad Administration as "technology that is capable of preventing train-to-train collisions, overspeed derailments, and casualties or injuries to roadway workers." Whereas PTC had been voluntary up until the late 2000s, it became mandatory with the passage of the Rail Safety Improvement Act of 2008. Passenger-service lines were required to have PTC systems in place by 2016.

The push for PTC was prompted in part by the concern about rail tracks and terminals shared by more than one railroad company as mass transit systems spread across America. A train going just 30 mph needs two-thirds of a mile to stop; a train going 50 mph needs 1.5 miles. High-speed trains traveling in excess of 125 mph also were being placed into the rail system. By 2010, Amtrak was operating a train that ran between Washington, D.C., and Boston at 150 miles an hour.

The human error factor, which accounted for the majority of train switching accidents, decreased as trains became more electronically controlled, and safety for passenger and freight cargo rose dramatically. By the early 2000s, approximately 80 percent of railroad tracks in the United States used a technology employing electromechanical relay signal systems. However, wireless microprocessors that used computer signals were rapidly replacing the relay systems. The remote control technology was touted by proponents as a way to reduce miscommunication and the accidents resulting from human error, and the technology could be upgraded continually. The result was a less expensive and more safety-oriented rail system. According to Florida East Coast Railway President and CEO John McPherson, quoted in Railway Age, the technology was "the most productive implementation in our industry since we were able to eliminate the caboose."

Background and Development

Railroad switching and terminal establishments for line-haul railroads are connection points facilitating the movement of tons of goods on and off trains, as well as the assembly and tracking of those trains. Closely tied to the railroads' increased profitability in the 1990s was tighter scheduling and dispatching made possible by high-tech tracking systems that aided crews in train turnover, which could reach hundreds of trains a day.

In order to cut costs and attract new truck-to-rail business, railroad companies began to upgrade their transfer terminals. At the heart of this activity was a desire to facilitate the movement of intermodal traffic. In 1997, Illinois Central upgraded its transfer terminal at Harvey outside of Chicago to increase its intermodal business. Norfolk International Terminals constructed a new intermodal transfer container facility to increase the facility's intermodal rail handling capacity.

The biggest technological advance affecting railroad terminals in the later twentieth century was the use of computer networking and scheduling to speed jobs that were once handled by paperwork and tracked by human operators. These advances, which in the long run save money for railroads and make them able to compete with other forms of transportation, shook up the industry and reduced the number of workers necessary for a task. Automatic Train Control System (ATCS) networks, used by most Class 1 (large railroad) lines, were based on transponders attached to tracks at certain intervals and triggered by passing trains.

With ATCS, information gained from the transponders is sent via fiber-optic cable or telephone line to a regional data center or directly to the switching yard to which a passing train is headed. Once gathered, this information allows switching establishments to react more quickly to changes on the line, as well as to assign incoming trains to certain tracks in the yard. Switching establishments, which may or may not be run by the railroads that use them, can use up to 100 track segments on which cars and locomotives are coupled and uncoupled, loaded and unloaded.

ATCS was being implemented in four areas: work order reporting, locomotive performance monitoring, track force equipment management, and positive train separation and control. The U.S. Department of Transportation's (DOT) Federal Railroad Administration (FRA), in cooperation with the industry, conducted a safety inquiry into this new technology and reported to Congress the feasibility of implementing ATCS in a way that would enhance the safety, efficiency, productivity, and customer service capabilities in the railroad industry.

Union Pacific's rail complex in North Platte, Nebraska, which covered 1,067 miles, could deal with up to 700 trains in a day by way of its computerized command center. Outside Albany, New York, Conrail's Selkirk Yard sorted 3,200 freight cars per day, thanks to computer scheduling and track assignment. A move by the railroads to a hub-and-spoke system of organization reduced local stops and focused time and money on larger, more centralized switching establishments (see SIC 4011: Railroads, Line-Haul Operating).
To meet the new demand, corollary industries experienced commensurate growth. For example, Harmon Industries, manufacturer of signaling and safety systems, posted a record $265 million in sales for 1998. The company offered a six-week training program to train switch operators in crisis situations, which were simulated in its 3,500-square-foot lab, complete with two full-size switching machines and three railroad crossing gates.

Another corollary industry was that of renovating and refurbishing train stations that service switching terminals. The nonprofit Great American Train Foundation published its first "Guidebook on Train Station Revitalization" in 1999 to assist local governments and communities in transforming railroad stations into multimodal centers of transportation, commerce, and economic development.

Interest in passenger rail continued to grow, with both intercity and rapid transit applications. The Congressional fiscal year 2000 budget for the federal transit program was $5.8 billion, with the passenger railcar-building industry being a key beneficiary.

The Surface Transportation Board Reauthorization Act of 2003, introduced to Congress by the DOT on July 10 of that year, authorized appropriations for the Surface Transportation Board (which replaced the Interstate Commerce Commission) from $20.5 million in 2004 to $23.5 million in 2008. A key provision of the act, when it was reauthorized four years before as the Surface Transportation Board Reauthorization Act of 1999, was the mandate calling for reciprocal switching in railroad terminal areas, enhancing competition among terminal providers.

The remote control technology was not foolproof, however. In 2002, Atlanta experienced three collisions with remote-controlled engines in only eight months. The third collision derailed five cars, three of them filled with cement. Those in the Brotherhood of Locomotive Engineers, a railway worker's union, claimed the collision would not have occurred under the oversight of a human engineer.

Although labor unions fought against radio remote control technology in the 2000s due to its impact on jobs, it was coming into widespread use. Engineers began to cease fighting a losing battle against the inevitable and started training to work with the technology. While there were still documented cases of collisions due to equipment failures, the number caused by human error declined.

In addition, switching to remote control was expected to save the industry upwards of $250 million annually. Rather than eventually become obsolete itself, radio remote control technology was able to be continually upgraded. In the 2000s, the government also was putting money into research and development of technologies through such programs as IDEA.

Current Conditions

According to Dun & Bradstreet, the railroad switching and terminal services industry generated $995.7 million in revenues in 2009. New York accounted for a majority of that amount, with $710.8 million. Indiana was a distant second at $92.8 million, and at least 14 other states registered $1 million or less in revenues.

In 2010, the industry awaited the coming effects of President Obama's $8 billion in railway system grants. The grants were part of an initiative to encourage the use of trains for between-city travel. According to The Journal of Commerce, $1.25 billion of the federal grant went to a high-speed railway linking Tampa and Orlando, Florida, and $2.25 billion was awarded to develop a 220-mph electrified train service between Los Angeles and San Francisco. In the Midwest, a railroad project that was to run from Chicago to St. Louis and then to Kansas City received $1.13 billion. While some of the money was to be distributed among freight lines, the government also planned to fund such projects as signal and track upgrades, new sidings for trains to pass each other, flyovers (bridges) to eliminate road crossings, and implementation of PTC systems. Switching and terminal stations were set to benefit from the increased construction and investment.

Industry Leaders

Leaders in this industry operated in the Chicago area, which remained North America's main railroad hub in the early 2010s. Indiana Harbor Belt Railroad Co. of Hammond, Indiana, was founded in 1907 and provided switching services in Indiana and Illinois. With 750 employees, the company had revenues of about $85 million in 2009. The Belt Railway Company of Chicago, based in Bedford Park, Illinois, and owned by six of the largest railroads in North America, had 480 employees and revenues of approximately $78 million in the mid-2000s.

Workforce

Railroad terminals use a hierarchical employment structure much like that found in the larger railroad industry, in which engineers, conductors, and brake operators work together on operations. In the terminals, however, job descriptions are slightly different. Railyard engineers oversee the movement of cars within the freight yard or terminal and the assembly of trains. Yard conductors oversee all yard employees, instructing them in assembling and disassembling trains and switching cars between tracks. Yard brakers (or "yard helpers") assist the conductor and do much of the physical labor of coupling and uncoupling cars. In addition to the yard crew, railroad terminals employ clerks, maintenance workers, and signalers and signal maintainers. Passenger terminals also employ station agents and ticket agents, who deal directly with the public.

In 2008, there were 23,160 people working in the industry classified as "support activities for rail transportation" by the U.S. Census Bureau, whereas Dun & Bradstreet estimated that 17,900 employees specifically worked in switching and terminal services in 2010. Because of continued automation, the industry was expected to lose employees.

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