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As a former lawyer with both Southern Pacific Transportation Company and the APL Stacktrain (as it was generally known), I was in the middle of the complex and often elaborate relationship between the railroad and APL. Between APL’s international business and APL Stacktrain’s domestic and third party international business, APL was the biggest shipper of containers on the railroad in the 1990s. This created opportunities and obstacles. Among the opportunities was APL’s active role in directing and overseeing the logistics of running the double stack trains. One obstacle was the fact that APL had so much business that, as the railroads merged and consolidated, it was difficult to create much competition for the business. An interesting issue was to what degree antitrust regulations and law impacted a relationship where certain segments of the railroad and APL could be viewed as competitors.
I look forward to the thoughts and memories of other folks who were involved in this relationship, a relationship that spanned decades as intermodal traffic grew to become a dominant sector of railroad traffic.
Ann, you bring up some interesting points in the long history APL and then Pacer had with its underlying rail carriers. As the APL Stack Train was developed with the underlying carriers, we soon realized the rail carriers did not fully understand the efficiencies and gains they could realize by operating stack trains. Too many slots (a position on a double stack rail car where a container could be loaded) were left open thereby not utilizing all available loading positions. Nothing worse than an under utilized loaded train carrying around empty slots and air! We decided we could do it better by instructing the rail carriers how to load the trains, in fact, giving them instructions on where each and every container would go on the train. Internally this meant we could prioritize more time sensitive customers by loading them on the top so they would be unloaded first at destination. Of course, the rail carriers had a hard time accepting this new approach of letting a customer tell them how to better do their jobs. We proved to the carriers the actual benefits they could reap by properly loading their trains to full 100% utilization to the extent this whole process became part of the contractual agreement with the underlying rail carriers. I don’t think this load plan process created any anti-trust issues from a legal perspective, but it sure created some animosity at the onset. Imagine that, a customer telling the railroad how to do their business!
This for either Ann or Pete: What was the magnitude of APL’s cost of transportation in the lanes covered by the legacy Southern Pacific contract after that term expired post UP merger?
Post UP purchase of SP I do know that APL/Pacer was UP’s single largest revenue customer, bringing in over $1 billion of top line revenue to the UP balance sheet. They always stated we gave them a lot of revenue, but they made nothing on the book of business. Typical UP response. If I recall correctly, the former SP portion of the lanes (El Paso, San Antonio, Dallas, Memphis, Houston, New Orleans and beyond, plus the Hermosillo auto parts) accounted for about 35-40% of the total payout to rail providers. APL/Pacer had excellent underlying rates with the SP prior to merger. We seriously thought about ways we could use the SP contractual rates to enhance the bottom line for APL/Pacer.
Although not precisely an answer to your question, APL paid a per container rate based on container size and lane. There was a separate table of rates for international containers. There were other factors that could affect the rates, such as train utilization as Pete has discussed above. There were also annual adjustments to the rates.
To Anne and Pete. Good to hear about SP and APL. It’s interesting that upon taking the UP buyout… and closing down One Market, I was working for APL as a consultant about three weeks later. We were engaged in terminal/traffic evaluations thru out the US, Mexico, London and China. That tenure took me to Kearney NJ, LA Ports, Oakland, Atlanta, El Paso, Mexico, and finally to Hong Kong and parts in mainland China. When the APL team was going to send to Karachi, Pakistan, I decided it wasn’t safe and jumped ship. Singapore NOL bought APL. I wasn’t moving to Singapore. Hope all is well.
Hi Ken! You bring back many memories of the people who were either consulting for or hired on by APL. You were able to tour the operations of some of the real “garden spots” of the APL network. Kearny NJ was a real “gem”! I’m glad your work helped evaluate what we at APL could actually accomplish prior to the purchase of APL by NOL in 1997. That was a whole additional “opportunity” to help them understand and support the gigantic capability they purchased.
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