Opinion: Another Volkswagen CEO bites the dust

Herbert Diess is stepping down as CEO of VW after just four years. The reason? Bad communications skills apparently. But his problems while helming the German giant went much deeper, argues DW's Henrik Böhme.

VW has cycled through its CEOs in recent years

Leading Europe's largest carmaker, Volkswagen, means being in the hot seat. The announcement that current CEO Herbert Diess will be stepping down after only four years is just the latest proof of that.

Diess took over the position in 2018 from Matthias Müller. The latter had himself taken on the job from Martin Winterkorn in 2015 after the Dieselgate scandal broke. Today, the 75-year-old Winterkorn continues to fight with all legal means to keep from going to court.

Then again, Diess' departure is not all that surprising. His position has seemed uncertain for some time now. The 63-year-old Austrian had previously managed to unite all the major players in this game — the Porsche and Piëch families — behind him, thereby securing his power at Volkswagen fro some time. 

Herbert Diess will be stepping down as VW CEO at the start of September 2022

From one misstep to another

But things were already looking shaky for him around three years ago, when Diess was trying to get company management to back tough financial targets. Doing this, he used the sentence, "Ebit macht frei," or "Ebit makes you free" — a combination of a business acronym for earnings before income tax, and the notorious Nazi phrase "Arbeit macht frei," or "work sets you free." The Nazi slogan was written above the gates of numerous concentration camps. Clearly, this was totally inappropriate for the CEO of a major global company. Diess called it a "slip of the tongue." 

Or, the same year, when he was asked about the human rights situation in the Chinese province of Xinjiang, where VW has a plant and where there were rumors of forced labor using Uighur people, he said he knew nothing about the so-called reeducation centers that are really internment camps.

Then there was also the unpleasant way he dealt with the workforce at the main plant in Wolfsburg, where he, possibly with the best of intentions, repeatedly highlighted the successes of pioneering electric car company Tesla — only to then raise the possibility of some 30,000 job cuts.  

Rivals and buddies: VW's Herbert Diess (left) and Tesla's Elon Musk

Volkswagen is a special kind of company. In terms of ownership structure, the German state of Lower Saxony is the largest stakeholder, sits on the board of directors and has right of veto. Then there's the powerful German metalworkers' union IG Metall, which often plays the role of opponent. And finally there's the even more powerful Porsche and Piëch founding family members, all breathing down the necks of every VW executive.

The holding company in Salzburg is where the strings really get pulled. Just think back to early 2015 and the statement from former VW patriarch Ferdinand Piëch, about keeping his distance from Winterkorn. That caused a veritable earthquake at VW, a whole half a year before the Dieselgate scandal came to light.

So what caused Herbert Diess to fail?

Obviously, Diess' miserable communications skills played a role. Yes, he is undeniably a consummate professional in the car industry. That's precisely why VW's most powerful pried him away from BMW and lured him to Wolfsburg. And credit must be given where credit is due. In the aftermath of the Dieselgate scandal, he set Volkswagen firmly on the path toward electromobility, overseeing the transformation, shifting whole factories from combustion engines to electric cars, and also arranging for the huge billion-dollar investments VW needed in order to do this.

DW Business Editor Henrik Böhme

Diess didn't shy away from telling workers that significantly fewer personnel would be needed either, telling them it took Tesla 10 hours to build a car whereas it takes VW 30 hours. That didn't go down well. It seems Diess' soft touch is mainly reserved for the steering wheel of his car. 

New CEO, same old software problem

Now it's up to the head of one of VW's other brands, Porsche, to put things in order. Though Oliver Blume, who is succeeding Diess, is nine years younger than his predecessor, he has the same automotive industry genes. He'll be CEO of VW and also continue to head up the sports car brand, Porsche. That's if things go well. Blume will first have to prove that he can do at least one thing better than Diess: communicate. 

But — and this is likely to be the real challenge — Blume will also need to get a grip on VW's software needs.

Among Diess' failures was his inability to develop a proprietary software system at the German carmaker. Tens of thousands of IT workers are trying to develop a VW operating system that can be installed in all the company's car brands. Tesla already has this, Google and Apple do too.

In fact, this is one of the greatest fears of established car companies like VW. That, in the end, they will only build the things that wrap around the software, and the IT will actually be what makes the difference and the money. This would mean that whoever provides the software gets all the driver data, along with the cash that comes with it. 

And that would be the end of an era for classic car manufacturers. This is really what Diess failed at — and there is no guarantee that his successor will do any better.  

This article was translated from the German.

HOUSING IS A RIGHT! RENT STRIKE!
Nowhere to live: Rents in Canada surge as home prices fall


Julie Gordon and Shreya Jain
Fri, July 22, 2022 
By Julie Gordon and Shreya Jain

OTTAWA (Reuters) - Canadian home prices are dropping fast after surging during the coronavirus pandemic, but that is offering little relief for consumers who face sky-rocketing rents and fading buying power as interest rates rise.

Desperate would-be buyers found themselves caught in a frenzy of bidding wars for real estate during the pandemic, when home prices in Canada rose more than 50% in just two years.

Now the competition has moved to rentals, with landlords demanding months of rent upfront and at times, even pitting tenants against one another to see who will pay more, according to real estate agents and media reports.

The average rent on a 1-bedroom apartment in Canada is up 13.7% from the start of the year, data from Rentals.ca shows, with year-on-year rents surging 18.5% in Toronto and 19.2% in Vancouver.

RENT INCREASES ARE INFLATIONARY

GRAPHIC: Canada rents up sharply so far this year - https://graphics.reuters.com/CANADA-ECONOMY/RENT/gkvlgyqylpb/chart.png

The shift from frantic demand for homes-to-buy to homes-to-rent makes plain a broader issue with Canadian housing: that there simply is not enough of it, said Dan Scarrow, president of Macdonald Realty in Vancouver.

"Higher (interest) rates are not destroying demand for housing, it's just shifting the demand from buying to renting," he said. "The demand just sloshes between renters and buyers, depending on where rates are so long as you have constrained supply."

The Bank of Canada has raised its policy interest rate to 2.5% now from 0.25% at the start of the year to fight inflation, which hit a near 40-year high of 8.1% in June.

The rapid rise in borrowing cost has chilled the real estate market, pulling down Canada's average home price by 18.5% from its February peak, according to data from the Canadian Real Estate Association.

But softer prices do not appear to be helping would-be buyers, who now can't get loans due to far higher mortgage qualifying rates. And that, in turn, is driving up rental demand.

"Rents have gone insane because people have to have a place to live," said Paul Eviston, a Vancouver-based real estate agent. "Demand on the rental market has really taken off as a lot of people that were would-be buyers are now forced to rent."

That hot rental demand has put a floor under condo prices in large cities, real estate agents said, with investors feeling confident enough to wait out price dips and some even looking to snap up more investment properties.

Toronto agent Imran Khan just sold a loft apartment to an investor who was able to lease it out within days of closing.

"I've listed properties for rent ... and we get multiple offers, right. Like right away," said Khan.

Rising immigration and a post-pandemic return to urban centers will further bolster demand for city condos, said Khan. Landlords, for their part, are pushing for higher rents when units turn over, agents said.

The shift from owned-homes to rental-homes is also starting to show up in Canada's inflation data, with homeowners' replacement cost increases easing sharply to 10% from 13% in April, while rent inflation remains near the 32-year high hit in April.

Mortgage interest costs, which fell sharply as the pandemic took hold and rates were slashed, are now surging. Homeowners who took out variable loans or those with mortgages coming up for renewal are feeling the most pinch.

"Right now is actually one of those unique moments where buyers, sellers, and renters are probably all struggling," said Scarrow. "Usually, there is a winner. But I think this time it's a struggle really for everyone."

(Reporting by Julie Gordon in Ottawa and Shreya Jain in Toronto, editing by Deepa Babington)

Supreme Court reversed almost 200 years of US law and tradition upholding tribal sovereignty in its latest term


Kirsten Matoy Carlson, 

Professor of Law and Adjunct Professor of Political Science, 

Wayne State University
Thu, July 21, 2022 
THE CONVERSATION

Principal Chief of the Cherokee Nation Chuck Hoskin Jr. speaks in Tahlequah, Okla. A U.S. Supreme Court ruling is upending decades of law in support of tribes. AP Photo/Michael Woods

Over the past 50 years, Congress and the U.S. Supreme Court have increasingly diverged in how they view the laws that relate to Indian tribes. Congress has passed significant legislation that expands tribal governments’ sovereignty and control over their land, while the Supreme Court has ignored and reversed long-standing principles of federal Indian law that protected tribal sovereignty and prevented the states from exercising authority in Indian country.

This trend at the court was seen most recently in a ruling from late June, which, as one longtime court observer put it, wiped away “centuries of tradition and practice.” Justice Neil Gorsuch scorned the ruling in his dissent: “Truly, a more ahistorical and mistaken statement of Indian law would be hard to fathom.”

From my perspective as an expert in federal Indian law, the most recent case is noteworthy because it says that states may exercise authority in Indian Country even without express congressional authorization. For centuries, that was not the case.

Here’s the background:

The U.S. Constitution gives Congress authority over Indian affairs, including the power to diminish and restore tribal powers. Since 1885, Congress has granted authority to federal prosecutors to try major crimes committed in Indian Country, such as murder and rape, in federal courts. Tribal governments can probably try these crimes, but Congress has limited the sentences tribal courts can impose on convicted offenders. As a result, the federal government has been the primary enforcer of criminal law in Indian Country for a long time.

With limited exceptions, the Supreme Court has interpreted the Constitution to say that the states do not have authority in Indian Country unless Congress expressly grants such authority. Congress has rarely authorized states to exercise authority in Indian Country, and it has required tribal consent before granting any such authority to a state since 1968.

The background to this allocation of authority is a long history of states’ trying to usurp tribal sovereignty by asserting jurisdiction over Indians in Indian Country. States’ early attempts to govern Indians led to violence and encouraged the Founding Fathers to grant all powers over Indian affairs to the federal government in the Constitution.

Congress granted Eastern Oklahoma to Native tribes in the 19th century.

Kmusser/Wikimedia Commons, CC BY
The latest case

Yet on June 29, 2022, in Oklahoma v. Castro-Huerta, the Supreme Court ruled that Oklahoma could prosecute Manuel Castro-Huerta, a non-Indian, in a case of neglect and abuse of an Indian child on the Cherokee reservation. By ruling that Oklahoma may prosecute non-Indians for crimes committed against Indians in Indian Country, the court granted states authority in Indian Country, even though the relevant law does not expressly authorize states to do that. It was a serious blow to tribal governments across the nation.

The Castro-Huerta case arose out of the state of Oklahoma’s prosecution and conviction in 2015 of Castro-Huerta in the neglect of his legally blind and developmentally disabled 5-year-old Cherokee stepdaughter by severely undernourishing her. While his appeal was pending, the Supreme Court in 2020 decided McGirt v. Oklahoma, which held that the Muscogee Creek reservation in Oklahoma is Indian Country. That ruling meant that federal criminal laws applied to much of eastern Oklahoma as Indian Country and enabled the federal government – instead of the state of Oklahoma – to prosecute crimes committed by and against Indians there.

Courts have since held that the lands in Oklahoma of five additional tribes – the Cherokee Nation, the Choctaw Nation, the Seminole Nation, the Chickasaw Nation and the Quapaw Nation – also remain Indian Country. This meant that the relevant law, enacted in 1817 and known as the General Crimes Act, extends federal criminal laws even farther into eastern Oklahoma and enables federal prosecution of crimes committed against Indians there.

In light of the McGirt decision, Castro-Huerta claimed that only the federal government had the authority to prosecute him, not the state, because his crimes occurred against an Indian within Indian country.

Before this case, no state had argued that states, in addition to the federal government, had criminal jurisdiction in Indian Country under the General Crimes Act. Yet the state of Oklahoma made just this argument in response to Castro-Huerta’s claims. It also actively resisted implementation of the McGirt decision and asked the Supreme Court to reverse it over 40 times.

The U.S. Congress, left, tries to expand Indian sovereignty; the U.S. Supreme Court, right, has consistently been diminishing those rights over the past 50 years. The Capitol: iStock / Getty Images Plus; the Supreme Court: Mike Klein, Getty Images

Two visions of federal Indian law

Conflicts between state and tribal governments are not new; states have long tried to assert power – often violently – over sovereign tribes. In 1790, the first Congress enacted the Trade and Intercourse Act, which confirmed federal government power over almost all aspects of Indian affairs. Criminal jurisdiction in Indian Country has been considered federal and tribal ever since, with only one limited exception, for crimes committed by non-Indians against non-Indians.

In 1832, the Supreme Court interpreted the U.S. Constitution as giving Indian affairs jurisdiction exclusively to the federal government and confirmed that state law had no force in Indian Country without specific congressional authorization.

The majority in Castro-Huerta departs from this long-established premise, concluding that state jurisdiction should be presumed absent congressional action to preempt it. The court then rejected Castro-Huerta’s claim that Oklahoma did not have jurisdiction over non-Indians committing crimes against Indians in Indian Country.

The dissent presented a very different view. Justice Neil Gorsuch wrote that the U.S. Constitution, Congress and the court’s own previous precedents treat tribes as separate sovereign governments. He focused on Congress, which has authorized only a few states – not including Oklahoma – to exercise criminal jurisdiction in Indian Country. Gorsuch concluded by calling on Congress to correct the outcome of the decision and restore the presumption that states do not have authority in Indian Country absent express congressional authorization.

Congress’ support of sovereignty

Castro-Huerta is the most recent example of a growing divide between the Supreme Court and Congress over federal Indian law.

As my research shows, Congress has actively remade federal Indian law over the past 50 years. Members of Congress introduced almost 8,000 bills related to Indian affairs from 1975 to 2012. Congress enacted almost 13% of them – double the percentage of bills enacted by Congress generally.

Congress has supported tribal sovereignty through legislation that has promoted tribal legal systems, ensured tribes operate effective child welfare systems, treated tribes like states for tax and environmental purposes, entered into compacts with tribal governments to provide federal services to their communities, and restored tribal criminal jurisdiction over specific crimes committed by non-Indians in Indian Country. At the same time, it has refused to grant states authority in Indian Country absent tribal consent.

The Supreme Court has repeatedly limited tribal sovereignty, often when confronted with conflicting state claims of authority. It has not deferred to Congress as the Constitution requires but has usurped lawmaking power for itself. The result has been confusion within federal Indian law and on the ground in Indian Country.

Nowhere has this divide between the court and Congress’ visions of federal Indian law been more evident than in the criminal law context. Congress has repeatedly limited Supreme Court decisions that interfere with its framework for criminal jurisdiction in Indian Country. In doing so, it has promoted tribal jurisdiction, not state jurisdiction, over alleged criminals in Indian Country.

As the primary lawmaker in the United States, Congress can enact laws to reverse or change certain Supreme Court decisions. In 1991, Congress overturned the court’s decision in Duro v. Reina and recognized that tribal governments have criminal jurisdiction over non-member Indians. More recently, in 2013 and 2022, Congress started to reverse the court’s decision in Oliphant v. Suquamish Tribe by restoring tribal authority over nine crimes committed by non-Indians in Indian Country.

Castro-Huerta arose from a dispute between a state government and the federal and tribal governments but it reflects a larger conflict between Congress and the Supreme Court over federal Indian law. It is unlikely that the decision will resolve either. It may be time for Congress, as Gorsuch urges, to step back in. But even that may not end the conflict.

This article is republished from The Conversation, a nonprofit news site dedicated to sharing ideas from academic experts. It was written by: Kirsten Matoy Carlson, Wayne State University.

Read more:

Oklahoma state officials resist Supreme Court ruling affirming tribal authority over American Indian country

Supreme Court upholds American Indian treaty promises, orders Oklahoma to follow federal law

Mexican journalist complains to president of threats


Mexico's President Andres Manuel Lopez Obrador calls on a journalist during his daily press conference at the National Palace, in Mexico City, Wednesday, June 22, 2022.

 (AP Photo/Marco Ugarte) 

MARÍA VERZA
Wed, July 20, 2022 

MEXICO CITY (AP) — President Andrés Manuel López Obrador’s daily news briefing was nearing its end Wednesday when a reporter stood up and said he was afraid for his life, dramatically underscoring the dangers faced by journalists in Mexico.

Reporter Rodolfo Montes said with his voice trembling that he was afraid the government would withdraw bodyguards assigned to him after he got a threatening telephone call. Montes said the caller claimed to be from the Jalisco drug cartel, but he suspected that wasn’t true.

“I suspect somebody else, they are hiding a government employee,” Montes said.

López Obrador pledged to protect him. Montes is an independent reporter who has contributed stories to the newsweekly Proceso and other national outlets.

He said he received the threat when he was in the Caribbean coast state of Quintana Roo, and that interior department officials helped him leave the state.

The fear is understandable. So far this year, a dozen reporters have been killed in Mexico, making it the most dangerous country for reporters outside a war zone.

“These kind of statements are a reflection of the danger and threats they face,” Jan-Albert Hootsen, the Mexico representative of the Committee to Protect Journalists, said of Montes' direct appeal to the president. It was not the first time a reporter has complained at the president's daily morning news briefing about being in danger.

“If they feel forced to go to the president, it's because they have faced problems at lower levels” in the government, Hootsen said.

Over the weekend, a reporter in the northern border state of Sonora said gunshots had been fired at him in the city of Ciudad Obregon.

Reporter Rubén Haro wrote on his Las Noticias de la Red page that he was not injured and said the gunman may have mistaken him for someone else.

In June, Antonio de la Cruz became the 12th journalist killed so far this year in Mexico, when a man on a motorcycle fired at him in his car outside his home in the northern Mexico border state of Tamaulipas. His daughter Cinthya de la Cruz Martínez, 23, was with him in the vehicle at the time of the attack and she later died of her injuries.

Can green hydrogen save a coal town and slow climate change?














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A smokestack stands at a coal plant on Wednesday, June 22, 2022, in Delta, Utah. Developers in rural Utah who want to create big underground caverns to store hydrogen fuel won a $504 million loan guarantee this spring. They plan to convert the site of the plant completely to cleanly-made hydrogen by 2045.

 (AP Photo/Rick Bowmer)


SAM METZ
Wed, July 20, 2022

DELTA, Utah (AP) — The coal plant is closing. In this tiny Utah town surrounded by cattle, alfalfa fields and scrub-lined desert highways, hundreds of workers over the next few years will be laid off — casualties of environmental regulations and competition from cheaper energy sources.

Yet across the street from the coal piles and furnace, beneath dusty fields, another transformation is underway that could play a pivotal role in providing clean energy and replace some of those jobs.

Here in the rural Utah desert, developers plan to create caverns in ancient salt dome formations underground where they hope to store hydrogen fuel at an unprecedented scale. The undertaking is one of several projects that could help determine how big a role hydrogen will play globally in providing reliable, around-the-clock, carbon-free energy in the future.

What sets the project apart from other renewable energy ventures is it’s about seasonal storage more than it’s about producing energy. The salt caves will function like gigantic underground batteries, where energy in the form of hydrogen gas can be stored for when it's needed.

“The world is watching this project,” said Rob Webster, a co-founder of Magnum Development, one of the companies spearheading the effort. “These technologies haven’t been scaled up to the degree that they will be for this."

In June, the U.S. Department of Energy announced a $504 million loan guarantee to help finance the “Advanced Clean Energy Storage” project — one of its first loans since President Joe Biden revived the Obama-era program known for making loans to Tesla and Solyndra. The support is intended to help convert the site of a 40-year-old coal plant to a facility that burns cleanly-made hydrogen by 2045.

Amid polarizing energy policy debates, the proposal is unique for winning support from a broad coalition that includes the Biden administration, Sen. Mitt Romney and the five other Republicans who make up Utah’s congressional delegation, rural county commissioners and power providers. Biden was set to announce new actions on climate change Wednesday during an event in Massachusetts at a former coal-fired power plant that is shifting to a renewable energy hub.

Renewable energy advocates see the Utah project as a potential way to ensure reliability as more of the electrical grid becomes powered by intermittent renewable energy in the years ahead.

In 2025, the initial fuel for the plant will be a mix of hydrogen and natural gas. It will thereafter transition to running entirely on hydrogen by 2045. Skeptics worry that could be a ploy to prolong the use of fossil fuels for two decades. Others say they support investing in clean, carbon-free hydrogen projects, but worry doing so may actually create demand for “blue" or “gray” hydrogen. Those are names given to hydrogen produced using natural gas.

"Convincing everyone to fill these same pipes and plants with hydrogen instead (of fossil fuels) is a brilliant move for the gas industry," said Justin Mikula, a fellow focused on energy transition at New Consensus, a think tank.

Unlike carbon capture or gray hydrogen, the project will transition to ultimately not requiring fossil fuels. Chevron in June reversed its plans to invest in the project. Creighton Welch, a company spokesman, said in a statement that it didn’t reach the standards by which the oil and gas giant evaluates its investments in “lower carbon businesses.”

As utilities transition and increasingly rely on intermittent wind and solar, grid operators are confronting new problems, producing excess power in winter and spring and less than needed in summer. The supply-demand imbalance has given rise to fears about potential blackouts and sparked trepidation about weaning further off fossil fuel sources.

This project converts excess wind and solar power to a form that can be stored. Proponents of clean hydrogen hope they can bank energy during seasons when supply outpaces demand and use it when it's needed in later seasons.

Here’s how it will work: solar and wind will power electrolyzers that split water molecules to create hydrogen. Energy experts call it “green hydrogen” because producing it emits no carbon. Initially, the plant will run on 30% hydrogen and 70% natural gas. It plans to transition to 100% hydrogen by 2045.

When consumers require more power than they can get from renewables, the hydrogen will be piped across the street to the site of the Intermountain Power Plant and burned to power turbines, similar to how coal is used today. That, in theory, makes it a reliable complement to renewables.

Many in rural Delta hope turning the town into a hydrogen epicenter will allow it to avoid the decline afflicting many towns near shuttered coal plants, including the Navajo Generating Station in Arizona.

But some worry using energy to convert energy — rather than sending it directly to consumers — is costlier than using renewables themselves or fossil fuels like coal.

Though Michael Ducker, Mitsubishi Power’s head of hydrogen infrastructure, acknowledges green hydrogen is costlier than wind, solar, coal or natural gas, he said hydrogen's price tag shouldn’t be compared to other fuels, but instead to storage technologies like lithium-ion batteries.

For Intermountain Power Agency, the hydrogen plans are the culmination of years of discussions over how to adapt to efforts from the coal plant’s top client — liberal Los Angeles and its department of water and power — to transition away from fossil fuels. Now, resentment toward California is sweeping the Utah community as workers worry about the local impacts of the nation's energy transition and what it means for their friends, families and careers.

“California can at times be a hiss and a byword around here,” city councilman Nicholas Killpack, one of Delta’s few Democrats, said. “What we I think all recognize is we have to do what the customer wants. Everyone, irrespective of their political opinion, recognizes California doesn’t want coal. Whether we want to sell it to them or not, they’re not going to buy it.”

The coal plant was built in the wake of the 1970s energy crisis primarily to provide energy to growing southern California cities, which purchase most of the coal power to this day. But battles over carbon emissions and the future of coal have pit the states against each other and prompted lawsuits. Laws in California to transition away from fossil fuels have sunk demand for coal and threatened to leave the plant without customers.

In Millard County, a Republican-leaning region where 38% of local property taxes come from the Intermountain Power Plant, two coal plant workers unseated incumbent county commissioners in last month's Republican primary. The races saw campaign signs plastered throughout town and tapped into angst about the multimillion-dollar plans and how they may transform the job market and rural community’s character.

“People are fine with the concept and the idea of it being built,” Trevor Johnson, one of the GOP primary winners, said, looking from the coal plant's parking lot toward where the hydrogen facility will be. “It’s just coal power is cheap and provides lots of good jobs. That’s where the hang-up is.”

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U.S. Rail System Still Deteriorating, On Balance

Written by Rick Paterson, Managing Director, Loop Capital Markets

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We’re now in the second half of 2022, when the four major U.S. Class I’s have committed to turning their operations around, but the current state of play is not encouraging. Only Union Pacific has made any progress in recent months, but that has been from a low base and fading somewhat over the past two weeks. We would regard UP and Norfolk Southern as now in a “steady state” and it’s the other two we’re more worried about in terms of trajectory.

BNSF’s intermodal business, in particular, is really struggling and in no shape to handle peak season volumes, which typically start around mid-August. Last week, BNSF Intermodal hit new lows in terms of network velocity (28.9 mph vs. 32.3 average in 2021) and on-time performance (only 57% of containers deramped within 24-hours of schedule), and a new high in terms of intermodal cars sitting idle for 48-hours or longer (1,610 out of 19,969 intermodal cars-on-line). To be fair, weather and other external factors had an impact. More broadly, the full system has seen record trains holding for crews over the last six weeks and a high in recrews to 1,789 at a recrew rate of 13.4% last week.

Over in the east, CSX is coming off two bad weeks, recording multi-year lows in velocity and multi-year highs in trains holding for crews, terminal dwell, and the proportion of cars-online sitting idle for 48 hours or more. Last week on-time performance in its manifest network hit a new record low of 64%.

While it pains us to recount these statistics (download the complete State of the Rails report below), for what it’s worth we’re confident both BNSF and CSX have the talent to turn this around and fully expect them to do so, but you can’t start getting better until you stop getting worse and more patience will, unfortunately, be required from all of us. 

SOTR_US_System_Deteriorates_acDownload

Fourth of July Double-Edged Sword

Last week we talked about 4th of July as both a blessing and a curse for the US railroads and we’ll dig into that a little more here. On the positive side, the holiday on Monday, subsequent four days of heavily reduced customer activity, and bookending weekends represents the second biggest drop in volume pressure of the year, behind of course the Christmas to New Years period. Historically, weekly volumes temporarily subside by 14% at NS, 13% at CSX, 11% at UP, and 8% at BNSF. These are big drops in volume pressure over a 9-day period, which is both positive and badly needed given the current state of affairs. However…

This period also represents peak summer vacation season, and the networks can obviously ill-afford to lose crews during a crew capacity crunch. In terms of putting some numbers around it, if we look at the monthly seasonality in the four years prior to the pandemic, midmonth crew headcount fell by 0.5% on average from mid-June into mid-July for the US rail industry. For some reason it’s more pronounced in the east, with CSX and NS down 3.3% and 0.8%, respectively, versus -0.2% at UP and +0.5% at BNSF. Clearly these mid-month statistics also understate the crew shortfalls over the first ~nine days of July. By July 15th the heavy vacation effect has partially normalized.

The railroads are of course well aware of this dynamic and no doubt doing all they can to buy out/stagger/delay vacations next week, but it likely won’t be completely successful and we’re still looking at a situation where the opportunity try to improve operations during the volume pressure reprieve will be diluted by temporarily increased crew scarcity.

Crew Deficit: ~4,100

Updating our crew models with the most recent data points for network velocity (last week) results in the following updated estimates with regard to the minimum number of additional crews required to trigger a service recovery. We’ve regressed slightly, with net velocity for the four major systems slightly slower last week, which pushes our estimated crew deficit from ~4,000 to ~4,100.

In terms of predicting the order in which these systems operationally inflect for the better, look at the % Deficit column on the far right. The smaller the number, the closer to recovery.

Some of the railroad’s T&E crew headcount numbers (Actual Crews) include trainees, which are higher as a percentage of total now than historically, which in turn makes the crew deficit numbers look slightly better (smaller) than they actually are. When railroads are running poorly, crew capacity is diluted by non-productive crew starts, such as deadheads (repositioning crews by road transport) and recrews (replacing a crew due to an unanticipated expiration of the allowable 12 hours). It will likely take several months before conductor graduates in the field are satisfactorily productive.

Rick Paterson covers the Transportation sector for Loop Capital Markets, including the North American Class I railroads. Prior to joining Loop Capital, he covered the Transportation Sector at Topeka Capital Markets and UBS Investment Bank. Rick previously worked in Intermodal Sales & Marketing and Strategic Planning for the Pacific National Railway in Australia. He testified at the Surface Transportation Board’s April 2022 hearing on “Urgent Issues in Freight Rail Service.”

Amtrak Maple Leaf Returns to Canada

Written by William C. Vantuono, Editor-in-Chief 

July 01, 2022

 

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Amtrak’s Maple Leaf crosses the U.S./Canada border on June 30. Stephen C. Host photo

Editor’s Note: Railway Age marks Canada Day, July 1, 2022, by extending greetings and best wishes to all our Canadian railway industry colleagues—freight and passenger/transit railroaders, suppliers, contractors, consultants, contributors—and by reporting on the return of cross-border intercity passenger rail service on Amtrak’s Maple Leaf. Thanks to Canadian contributor Stephen C. Host for the above photo of the Maple Leaf making landfall on the Canadian side of the Whirlpool Rapids Bridge in Niagara Falls, Ontario, Canada, June 30. – William C. Vantuono

International service returned for Amtrak and VIA Rail Canada customers for the first time since 2020 on June 27 as Amtrak, in conjunction with VIA, the New York State and several federal agencies, among the them the U.S. DHS, resumed service to Toronto via the Maple Leaf.

The first northbound Maple Leaf since 2020 departed Moynihan Train Hall at Penn Station New York on June 27 at 7:16 a.m. and arrived at Toronto Union Station via the GO Transit Lakeshore West Line at 7:43 p.m. The first southbound Maple Leaf since 2020 departed Toronto Union Station at 8:20 a.m. on June 28 and arrived at Penn Station at 9:55 p.m.

“Amtrak is delighted to welcome passengers back on board the Maple Leaf, connecting New York City and upstate New York with Toronto and Ontario,” said Amtrak Executive Vice President, Marketing and Revenue, Chief Commercial Officer Roger Harris (who becomes Amtrak President on July 5). “On board the Maple Leaf, customers can experience some of the best views in the country through the beautiful Hudson River Valley, New York’s wine country, and the incredible gorges of the Finger Lakes region, before crossing the U.S./Canadian border near the dramatic spectacle of Niagara Falls.”

“VIA Rail is delighted to collaborate with Amtrak in restoring this very important service that connects our two great countries,” said Michael Acosta, VIA Rail Senior Director, Commercial Affairs. “After two years of pandemic, people are eager to travel again this summer, and the Maple Leaf experience allows passengers on both sides of the border to book a beautiful vacation and travel beyond Toronto on VIA Rail trains that can connect them right across Canada.”

Amtrak noted that Toronto-bound travelers “can expect the same amenities onboard on the Maple Leaf as they do on all other Amtrak trains, including free Wi-Fi, Business Class seats, the freedom to use phones and electronic devices at all times (no ‘airplane mode’), the ability to travel with small pets, a café car, large spacious seats with ample leg room, and no middle seat.” 

Amtrak added it’s working to restore cross-border service to Montreal and Vancouver and will be announcing details at a later date.

Editor’s Supplemental Note: Yes, I know Railway Age is not a publication that covers model trains, but many in this industry do enjoy collecting and operating them. Below is my O gauge Canadian Pacific Fairbanks-Morse H-24-66 Train Master coupled to my CP N5C caboose. F-M and Canadian licensee Canadian Locomotive Company built 127 of these opposed-piston, 2,400-hp units from 1953 to 1957. CP rostered 21, CN 1. For you “rivet-counters,” the road number on the model is incorrect. CP’s units were numbered 8900-8920. According to Wikipedia, only one Train Master has survived intact: former CP 8905, owned by the Canadian Railroad Historical Association, which operates the Canadian Railway Museum in Saint-Constant, Quebec. Former Norfolk & Western Railway Train Master cab-less slugs survived well into Norfolk Southern service, with one currently preserved at the Reading Railroad Heritage Museum in Hamburg, Pa., where Class II Reading & Northern is based. – William C. Vantuono

Alstom Creates Sustainable Energy Innovations Center at its Canadian HQ

Written by Simon Artymiuk, News Reporter, International Railway Journal 

July 05, 2022

 

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Alstom's Coradia iLint hydrogen train. Photo Credit: Alstom

Alstom has announced that it is creating a new innovation center in Canada’s Greater Montreal area tasked with developing green methods of rail transport propulsion.

The center will be located at Alstom’s Americas headquarters in St-Bruno-de-Montarville, Quebec. The establishment of such a center was a key commitment made by the group at the time of the acquisition of Bombardier Transportation, a E$ 5.5 billion deal completed at the end of January 2021.

The new innovation center’s main mission will be to develop the future platforms for green hybrid, battery or hydrogen propulsion technologies specifically tailored to the North American rail freight and passenger market, and in doing so to meet the sector’s decarbonization needs.

The centre’s work will be led by Éric Rondeau, who has a proven track record in the field of transport electrification and recently worked as senior strategic advisor to Investissement Québec International and the Quebec Ministry of Economy and Innovation to develop and deploy the Quebec battery industry.

Dedicated prototyping facilities will also be close at hand and Alstom says the new innovation center will be equipped with the latest virtual and augmented reality equipment as an aid to developing future methods of green energy propulsion.

The center’s engineers will work closely with other organizations involved in Quebec’s research and innovation sector, as well as with industrial partners in the Quebec battery and hydrogen industry. In particular, the center will work with the Hydrogen Research Institute (HRI) of the Université du Québec à Trois-Rivières (UQTR) on developing a refueling and operating ecosystem for hydrogen propulsion. It will also participate in McGill University’s Sustainable Growth Initiative, a think tank aimed at providing companies and governments with innovative solutions to accelerate the transition to green energy in transport.

“We will now expand our capacity with products specifically tailored to the geographic, climatic and regulatory realities of the North American market,” says Michael Keroullé, president of Alstom Americas. “Quebec’s assets and business environment, combined with our design and engineering expertise here in St-Bruno, provide us with a unique environment to innovate and grow.”

“Unlike Europe or Asia, the rail network in Canada and the U.S. is barely 1% electrified,” says Rondeau. “It is used by 27,000 diesel locomotives every day, which is a significant proportion of the carbon footprint of our companies. Efforts to make this mode of transport greener must be stepped up, in particular by providing public decision-makers and our customers with proven electric propulsion technologies. It will be this innovation centre’s role to develop these new innovative platforms or to adapt them to meet the challenges of the region.”

VIA Rail, Union Reach Tentative Deal

Written by Carolina Worrell, Senior Editor

July 12, 2022

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Unifor VIA Rail Master Bargaining Committees (CNW Group/Unifor)

A strike threatening to suspend passenger rail services across Canada has been averted after Via Rail reached tentative agreements with Unifor hours before the July 11 deadline.

The tentative deal follows a strike mandate issued by Unifor, which represents 2,400 Via Rail employees, on July 7 and a 72-hour strike notice to the national car carrier issued on July 8 to “give the public ample notice and an opportunity to make alternative arrangements for travel” if a new contract could not be negotiated by 12:01 a.m. on Monday, July 11. Both Unifor and Via Rail confirm that service will operate normally, pending ratification of the agreement.

These tentative agreements, VIA Rail says, are subject to a ratification vote by VIA Rail’s Unifor Council 4000 and Local 100 members. Once ratified, the collective agreements will be retroactive to January 1, 2022, and in effect through December 31, 2024. Details of the agreements will be released following ratification by members.

“From the beginning, our bargaining committees felt the weight of their responsibility–to fight for the best deal for their members,” said Lana Payne, Unifor National Secretary-Treasurer. “They have done incredible work. They were tough and principled, and they have proven that when we fight, we can win for working people.”

“VIA Rail is pleased to have negotiated these agreements and recognizes the hard work of both parties during this process,” said VIA Rail President and Chief Executive Officer Martin R. Landry, in a statement. “We sympathize with the passengers and communities whose plans have been impacted in the past couple of days due to the uncertainty caused by this potential strike. As we look forward to ratification, these tentative agreements allow our teams to get back to doing what we do best: serving Canadians throughout the country.”

VIA Rail says it “regrets any uncertainties that the strike notice issued by the union may have caused,” adding that it wants to “reassure passengers that operations will run as scheduled as the company awaits ratification.

Via Rail also said it will continue to offer customers the opportunity to make changes to their travel plans without service fees for any departures prior to July 31, 2022.

Three Unions Ratify Agreements With CP

Written by William C. Vantuono, Editor-in-Chief 

June 29, 2022

 

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Canadian Pacific photo

Employees on Canadian Pacific’s Dakota, Minnesota & Eastern (DM&E) South; Central Maine & Quebec (CMQ) U.S. and Central Maine & Quebec Canada subsidiaries have ratified collective bargaining agreements.

The agreements on these CP properties, which are in Maine, the U.S. Midwest (Iowa, Missouri and Illinois) and parts of Quebec, affect approximately 430 employees represented by United Steel Workers Local 1976 on the CMQ Canada, SMART Transportation Division representing all employees on the CMQ U.S., and the Brotherhood of Locomotive Engineers and Trainmen representing all T&E employees on the DM&E South. They provide higher hourly wages for all employees at major CP crew bases at Ottumwa, Davenport, Marquette and Mason City, Iowa; Kansas City, Mo.; Savanna, Ill.; Brownville Junction, Maine; and Farnham, Que. CP said is hiring for various positions at all of these locations in 2022, with immediate openings.

“CP welcomes the ratification of these three recently negotiated agreements that bring wage increases to hundreds of our dedicated employees,” said CP Executive Vice-President Operations Mark Redd. “We continue to work productively with all of our union partners to achieve long-term agreements that meet the needs of CP’s growing business and our industry-leading railroaders.”

CP conductor Jim Smith. CP photo.

Tags: Breaking News, Brotherhood of Locomotive Engineers and Trainmen, Canadian Pacific, Central Maine & Quebec Canada, DM&E South, SMART Transportation Division, United Steel Workers Local 1976