By M.E. Singer
Although I acknowledge how thrilled we should all be that The Wall Street Journal plunged into depths unknown by electing to run yet another story on Amtrak, “New Finance Chief Looks to Keep Amtrak on Track ” (17 April), the story was overly conflated with the proposed cuts in federal funding, Penn Station derailments, and the ever so popular Governor Christie of New Jersey blithely blaming Amtrak for his own state’s poor planning and safety record of NJT. However, in respect to Yogi Berra, I experienced a moment of “deja vu-all over again” in the lack of knowledge of this journalist, or, simply the writer being uninterested in pursuing any meaningful follow-up. As my response to this piece was limited by the WSJ’s policy, I wanted to expand here upon my reaction and dissect this minimalist, superficial interview in respect to how the real media transportation writers would have conducted this story and followed up on points previously identified from their solid research. First, I would commend Mr. Feidt on his recruitment, as Amtrak’s own HR has fervently stated that the company does not recruit management from the outside.
Two back-to-back comments in this story by Amtrak’s new CFO since February, Mr. William Feidt, screamed out at me: “Mr. Feidt said his priority would be to make the trains safer and more efficient, which may be difficult given the funding constraints. He also said he wanted to add 40% more trains by 2012 across all routes.” Really? Careful scrutiny by the journalist should have provoked the following inquiry re a proposed 40% expansion of more trains:
The question begs what, when, and how to increase the trains by 40% in but four years?
1) The Northeast Corridor is operating at or near capacity with the numerous commuter lines and Amtrak; plus the serious infrastructure deficiencies that inhibit increased frequencies and higher velocities. Despite PRIIA 2008 requiring these commuter lines to pay for their use of the NEC, why did this not happen until mandated by Congress in December, 2015? Where was Amtrak’s number crunchers, let alone its board?
2) The State-Supported Corridors outside the Northeast face a three-fold problem:
a) No equipment. The lowest bidder to produce the new bi-level intercity passenger cars, Nippon Sharyo, has failed to fulfill its contractual obligations. The federal funding earmarked for this project expires in September, 2017. Will Amtrak and the USDOT move this contract to a firm operating in the US with a skilled American workforce to save this investment, e.g., Siemens, Alstom, Bombardier?
b) The Class 1 privately-owned freight railroads have identified an economic valuation of their track slots far above what was initially agreed upon when they were on their death throes in 1970. Any increased frequencies and/or expanded regional routes would trigger significantly higher costs than the bare bones services currently provided. Will such costs consume any additional potential revenue from increased services?
c) Amtrak’s own fully allocated cost methodology inhibits any state incentives towards increasing frequencies or expanding routes. Every additional train is not priced as an incremental cost.
3) The long distance passenger services are currently operating at capacity and experience lack of equipment to meet seasonal demands. Despite this fact, their is not even a proforma to build more bi-level Superliner cars. The Midwest to East Coast-Florida/South routes dependent upon a single level car order with CAF has been delayed by years. As well, this order does not include coach or lounge cars.
Could the new CFO explain why Amtrak has insisted on purchasing its equipment, when everybody else is leasing, given the interest of such leasing companies to obtain the tax benefits, just as they do with orders from Boeing? Also, the asset utilization of this equipment has a significant financial impact. What is the plan to increase schedule velocity and decrease schedule padding to facilitate the turnaround of consists and reduce the number of consists required to cover routes? Concomitantly, what is the future of equipment pools to serve seasonal services? For example, instead of surplus equipment from the “Auto Train” parked in the Sanford, FL yard during the summer, how will Amtrak look to re-direct such assets, such as developing with the State of Colorado a P3 relationship for an overnight Chicago-Denver summer service for access to the western national parks?
Although Amtrak’s CEO, Wick Moorman, will attend to infusing a safety culture into the recalcitrant ranks of employees, it is incumbent upon the new CFO to make Amtrak more “efficient” despite the funding constraints. How will this be conducted and achieved to actually make Amtrak more “efficient?” In what areas, such as:
As it is acknowledged that no serious opening to re-negotiate labor agreements occurred in the past ten years allegedly to buy labor peace, what will now be done differently now to reduce labor costs? What are the options to the cost of LSAs and SAs in diners? Just as Amtrak is the opposite of privately-owned airlines and buses using publicly-funded infrastructure, so it is with food & beverage services–typically, those in that industry derive the majority of their income not from salary, but from tips with a minimum of health benefits, as they do not regard such positions as lifetime careers. As well, what are the alternatives to LSAs staffing corridor cafes-vending as on North Carolina state trains, rolling trolley cars as with VIA Rail?
Will their be a “deep dive” into how such contracts were let out on bids, negotiated, decided, and implemented? Why does it appear that accountability over the vendors falls into a “Grey Zone?” For example, why does Aramark run commissaries when after Amtrak took over the “Auto Train,” it assumed all food services from Marriott? Other than the ex-CEO of Aramark coming from Pepsi, why does Amtrak serve only Pepsi products, when the national market clearly favors Coke products? (Coke=17%+Diet Coke=9.4% vs. Pepsi=8.9%).
Food & Beverage/Catering Services:
In view of the inconsistencies of providing an acceptable F&B service, aside from some individual tweaking on the west coast (meals at coach seats), what is the consideration of outsourcing all catering operations; staffing? Perhaps even focusing on just the Sleeper Class services? Acknowledging that Amtrak cannot continue on this sclerotic approach to what was an appeal of rail travel, if not to be outsourced, than how does Amtrak get control over its inventory PARs to prevent stock-outs on trains? To secure cash management, what will Amtrak propose to provide acceptable pre-paid cash alternatives? Will Amtrak contemplate terminating the inclusion of meals with the sleeper class fares in order to upgrade the menu variety and quality, and to increase overall revenues by strictly identifying the true costs of F&B, instead of burying it within the sleeper revenues? Other than the super-hyped Dunkin Donuts coffee to be served on “Acela,” and the availability of NY state products on the Empire service, what is the plan to move more quickly forward to offer a diversified and attractive menu of regional food and drink specialties to increase revenues? How much faster can this rollout occur beyond the slow rolled, incremental approach as exemplified by the Dunkin Donuts coffee? How will the long distance Superliner diners be more optimally utilized, such as encompassing a full grill service appealing to coach passengers?
What is to be contemplated to move beyond the current situation and actually increase revenues to reduce federal/state subsidies? Why has Special Train movements diminished over the years? What can be done to attract more Private Varnish movements; tours, e.g, “American Orient Express”? To build revenues aboard trains, why have the LSAs not been trained in mixology to make cocktails–and equipped to do so? To what extent can the successful Amtrak Thru bus concept be extended, as recently accomplished in Michigan? In respect to consumption of resources, is their a plan to start charging the states served by the Northeast Corridor in the same full cost allocation methodology created by Amtrak? If not, why not? How are those states uniquely different than the rest of the nation? Is their consideration towards returning to an improved version of the package service concept, without impeding schedules as before? What has Amtrak considered to expand advertising revenues, such as car wrapping? Would Amtrak contemplate re-positioning itself to receive payment by offering open access or franchises on its routes?
In respect to the obvious need to increase revenues, what will the CFO propose to attain an acceptable OTP (On-Time Performance) relationship with the Class 1s? What shall determine the economic value of the track slots, and how such value will rise and fall with traffic, as well as the passenger demands of schedules, timing, velocity, and frequency? As well, what role will the new CFO play in measuring the metrics of corridors to identify the gaps in services to serve micros portions of the corridors, such as Kalamazoo-Chicago; Chicago-Springfield, etc?
If any aspect of HR remains outsourced from the former regime, how soon will it be brought in-house? Given the repetition compulsion identified in far too many numerous OIG reports, what is the plan to bring Amtrak into the 21st century to stop once and for all defalcations and fraud re timecards, overtime, and bonus metrics? As well, given the emphasis on Lean and Six Sigma to run the organization, to what extent has this been identified as impeding cooperative efforts? How can Amtrak seriously embrace Lean and Six Sigma given its unresolved operational and financial issues?
Aside from the snickering politicos of the Northeast who think they pulled the wool over our eyes, when will the new CFO acquiesce to the concerns how Amtrak presents the numbers for the Northeast Corridor makes the editor of Pravda blush? As Amtrak still remains a national system, the taxpayers deserve a modicum of integrity. How does the new CFO develop a financial system that is truly transparent, to respect GAAP (Generally Acceptable Accounting Principles) to reflect all infrastructure costs and improvements before profits for the Northeast Corridor? As well, and as importantly, to create a truly transparent cost methodology for the state-supported corridors west of the Potomac? Although Amtrak lost key personalities in Government Relations and PR when its board wrongly attacked Mr. Gunn, somebody should be able to explain that with a less opaque cost structure, the states paying their way 100% would be more inclined to contemplate more frequencies or route expansions. Indeed, such states would be before Congress with Amtrak to support funding for more equipment to serve their needs to fulfill mobility and development derived from rail. As well, to what extent will the new CFO come front and center to admit that without the long distance routes, it is obvious that the state-supported route costs would only increase?
How will the new CFO identify the captive value of depots to achieve the collateral value of development, as we have witnessed along the LOSSAN corridor between San Diego-Los Angeles.?
In regards to the latest OIG report, what process and verifiable audit will the new CFO implement to prevent Amtrak paying duplicate bills, missing discounts, and basically running its A/P like a “candy store?”
How will the new CFO prevent the excessively costly and wasteful duplication of needless implementation of IT services within each area of the firm, instead of being controlled and coordinated by IT itself?
Although the new CFO for Amtrak will spend much of his time housekeeping from the past; hopefully, he will have the time to also assiduously plan how he will scale up requisite capital and benchmark to successfully endeavor to more than preserve Amtrak, but to truly expand our national passenger rail system?