Congress Meets The Frankenstein Monster It Created-Amtrak
(Or, as Louis XV Predicted Before the French Revolution, “Après Moi, Le Déluge” (“After Us, the Deluge”)
By Rail Provocateur (M.E. Singer)
What a week this has been! Although the media has been long silent thanks to the dissipation of its once talented transportation writers, we finally witness Congress, and even Amtrak unions, rising to the occasion of being quite indignant, as if they never understood until now that the Frankenstein Amtrak they mutually created would eventually turn against them. As Tennessee Williams declared,“mendacity is a system that we live in.”
“There Ain’t Nothin’ More Powerful Than The Odor of Mendacity”
As ‘Big Daddy’ said in “Cat on a Hot Tin Roof,” is my response to those members of Congress who expressed such outrage over Amtrak’s double-dealing on funding the “Southwest Chief” infrastructure project. Perhaps this might be the “wake-up” call for Congress to finally realize the Frankenstein they invented in 1971 has turned on them. The issues that scream out for audit and investigation are focused on transparency: oversight of management and its financial accountability, as well as the Board of Directors stewardship.
Not since the Board staged its self-destructive coup in 2005 against Mr. David Gunn has Amtrak ever benefited again from being run long-term by a competent railroader. In that vacuum of 13 years, transparency went out the window, stewardship of the Board persistently depreciated; along with that, competent management left and Board oversight of management was extinguished. This explains why Amtrak has pushed to the edge, and now through, the envelope, by walking on its deal with the states impacted by the intended lynching of the “Southwest Chief”: Kansas, Colorado, and New Mexico.
But if the Board had been functioning in its intended role of stewardship over a national system, the dumping of infrastructure costs would not have been foisted upon these states. If Congress had been providing proper oversight, it would not have allowed this manipulation of beholden states to occur. If this was truly such a great idea, than their is simply no reason for New Jersey not to pay for the Portal Bridge over its Hackensack River.
If Congress is sincere in its bellowing about the lack of transparency, than let it not only enforce Amtrak’s deal with the three states, but audit and investigate the depths of how transparency lacks at its state-owned enterprise priding itself as a monopoly to impose its position, regardless if correct. In essence, to fix Amtrak, will it require a member of Congress to learn how Amtrak should function, just as Congressman Shuster has achieved at every breakfast over coffee to receive his education about the airlines? These inter-related issues that have been allowed to aggregate far too long at a minimum include:
Disregarding GAAP (Generally Acceptable Accounting Principles):
1) How does Amtrak claim the NEC is “profitable” before deducting the high cost of infrastructure work required of the owner?
2) How does Amtrak manipulate and leverage those NEC infrastructure costs and overhead costs unequally against the allocation of costs against the long distance and state-supported trains?
3) Why is the basic economic component of incremental cost eliminated when pricing out increased frequencies for state-supported services?
Depreciating Corporate Culture Playing an Orwellian Word Game Against the Long Distance Routes:
1) Extreme, Amtrak HQ antagonism against the long distance routes to overtly favor the NEC.
2) Unfounded facts against long distance sector embraced by Amtrak HQ to tell a story to favor regional political patronage of Board, and its management sycophants.
a) Transport industry standard measure of performance based upon passenger revenues per mile disregarded by Amtrak.
b) Dismissed how long distance trains revenue per mile equivalent to airlines of approximately 800 miles.
c) Dismissed how space on long distance trains turns over an average of 2.5 times en route.
d) Willful failure of Board stewardship to accept real/actual numbers, including numbers of intended travel turned away; to demand creation of proformas to Congress requesting funds to build new long distance equipment to capture lost revenues.
e) How PRIIA was created to subsidize the “black hole” of the NEC by taking revenues from state-supported routes and diverting those “revenues” to the NEC.
Perpetuating Revenue Losses:
1) No action to initiate cash and inventory control through a Point-of-Service (POS) IT system on-board.
2) Continuing the high cost to outsource commissaries.
3) Inability to train diner/lounge LSAs in mixology to increase revenues by crafting cocktails (but that requires improved liquor kits, mixers, and condiments).
4) Due to excessive re-organizations and buy-outs, nobody left in management who knows how to run a passenger train–to enhance service and amenities to increase revenues.
5) Lack of knowledge imposing revised fare programs in California to the detriment of the three JPAs.
Concomitantly, we also heard outrage this week from Congress over the de-staffing of depots along the “Empire Builder” route through North Dakota and Montana. Amazing how Congress jumps when it’s in their own backyard, eh? Too bad they did not take an interest earlier to appreciate how little Amtrak understands the dynamics and demographics of the “Empire Builder” route.
Without any advertising to seriously market the “Builder,” the many times I have traveled during different seasons on the “Empire Builder,” I have never experienced an empty train. Indeed, on my last several trips to Wolf Point and Whitefish, we were ordered back to our compartments so the sightseer lounge could be utilized for coach passengers boarding en route in North Dakota. At least the GN knew to operate the lead coach for “shorts” and preserve the sanctity of the lounge car.
Amusing how Congress has not figured out that Amtrak funds advertising in the Northeast to promote itself over the growing short haul NEC curbside bus lines, but omits any such advertising to identify how its route directly serves principal national parks, such as Glacier. Also, I have waited for the train or been aboard when very intoxicated oil workers raised a ruckus; onboard, the conductor had police waiting at Browning; at Wolf Point, the depot agent locked the doors. As well, waiting at Havre for a six hour late westbound “Builder,” at least I could leave my luggage with the agent, as well as be directed for superb ice cream and a tour of “Underground Havre.” So, now what’s Amtrak’s solution to be regarding safety and late trains..?
As trains are not jets, it’s foolish to try to emulate how airlines function. The “Empire Builder,” for example, serves a large swath of the nation that is still without viable internet; some without credit cards. So, how does Amtrak attempt to achieve what it is discarding, such as, what to do with luggage; where to board?
What Congress has yet to learn is how this is the end result of running Amtrak from the foggy Potomac with no appreciation for how the nation lives, and its mobility needs. This cocoon of Amtrak management is only encouraged by a Board of Directors solely focused on its own backyard–the NEC; at the expense of a true national system. This is the epitome of such a self-indulging Board that we would find members waiting on the platform at West Glacier (Belton), MT for a redcap–off season.
Congress needs to assert control over Amtrak–its direction, focus, and to eliminate its myopic vision of itself as a monopoly.
The New Motto of Amtrak’s Board and Management: “ça ne fait rien” (“That Doesn’t Matter”)
Pointing out yet another negative impact against the long distance train network, we even witnessed the Amtrak Service Workers Council (Transport Workers Union, UNITE-HERE, TCU-IAM) condemn the destructive elimination of dining car services. The problem is we are dealing with a three-headed hydra that has little common interest in each other.
Unions: absolutely their position is correct as it is absurd to give a long-term employee (diner chefs) but nine days notice of their job loss; to maintain their seniority in that class, they must uproot their family to the west coast; to bump other brothers. However, these are the same unions that balked at, and prevented former CEO David Gunn from allowing Subway to sell aboard the “Empire Service” trains between NYC-Albany, after New York’s governor refused to pay for the cafe cars (offering undesirable Guantanamo-style food and untrained bartenders). Also, other than preserving their own status, despite knowing the pressure by Congress to reduce food & beverage (F&B) costs, where were these unions not to propose how to reduce costs and waste, without destroying the product and jobs?
Executive Management: while adhering to its sour labor relations style emulating the 1930s; perhaps if not so totally focused upon the NEC, leadership would have intelligently reached out to work with the unions in a cooperative spirit to determine how to prepare and serve hot meals without ‘breaking the bank’. But how can we expect such a magnanimous approach to a long ignored, yet simmering issue, when management itself has persistently failed to cut costs and increase revenues where the opportunities have been. As described above in “Perpetuating Revenue Losses;” also, for example, to reduce labor costs of diners was it ever studied to determine the possibly by not running diner crews all the way through, but cut-off and add-on en route?
Board of Directors: delinquent in providing requisite oversight of management to ensure favorable labor relations; maximizing common sense approach to reducing costs and increasing revenues; failing to recognize its own weaknesses by ensuring a positive stewardship to include as members those with pertinent experience relative to Amtrak’s needs, i.e., food & beverage, IT, and travel.
This sadly is the end result of a Board forfeiting its stewardship and oversight to focus on its political patronage and the NEC; a management group well shorn of experience running passenger trains due to the far too numerous buy-outs and re-organizations; old-time unions lacking the spirit beyond self-preservation to undertake constructive action.
As this dilemma reminds me of the broken spirit of the French Army in 1940, nothing will change until Congress intervenes and re-sets the table for Amtrak–before it just runs off the track.
Fait Accompli: Self-Serving Interests Promoted by Amtrak’s Board; Embraced by Executive Management
As Amtrak has succeeded in cloaking its financials to cover diversion and manipulation of funding and revenues in its Stalinesque attack on the long distance routes, Congress remains blindsided by the sparse facts that if expanded, would tell a story of mis-management. How ironical that the same Congress has pursued the three Middle East airlines, in concert with our own three legacy airlines, to force Qatar, Etihad, and Emirates in agreement to “open up their financial books and publish ‘annual financial statements’ consistent with internationally recognized accounting standards.”
So relevant to the on-going heist of resources to plug the NEC was this timely article in the Wall Street Journal, “How Companies Use the Latest Profit Fad to Fool You (1 June)” which pointed out “In a disturbing coalition of the willing, companies have colluded to put a fake patina on results. This charade is meant to flatter profit by removing costs from reported earnings.” What better support to the known accounting deficiency of Amtrak not including its extensive infrastructure costs when declaring how “profitable” the NEC has been!
In parallel, this same article also elaborated upon an issue that has been of concern expressed here previously: “Companies, meantime, don’t use these numbers only to report earnings. They are a basis for awarding bonuses and other incentive payments to their managers. When managers’ pay is based on a “costs-don’t-count” metric, that sort of thinking may pervade other decisions as well.” In essence, this explains how former CEO Boardman’s Centurion Guard of his inner circle, and others in executive management have persistently survived. This despite questionable performances, lack of accountability, and inability to control costs, while maximizing revenues. In the corporate world, they refer to this manipulation as putting a “plug” into the budget of the new year, so those most favored already have their annual bonus identified. Too bad Mr. Moorman during his short tenure did not undertake to “claw back” such questionable bonuses upon the departure of the prior regime. And the OIG?
“Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants”–Supreme Court Justice Louis D. Brandeis
Ideally, we should seize the opportunity to stir the new found concerns of Congress to completely audit and thoroughly investigate Amtrak well beyond the dismissal of transparency by this monopolist. Congress should see Amtrak as a state-owned enterprise playing its parlor game of politics to protect its mis-management of resources; to the nation’s detriment Amtrak’s empowered comfort zone of a monopoly to deny a national system to exclusively focus upon the NEC.
It behooves Congress to see what is lacking in this picture, beyond transparency: competition. Indeed, the management of Amtrak today is reminiscence of the lack of a competitive spirit and interest to increase revenues that dominated the railroads after the Hepburn Act of 1906 that mandated maximum tariffs and rates. The mis-management of Amtrak is evidenced by the lack of new routes; expanding and connecting regional services and frequencies; the recognition-and desire-to request funding for equipment to further support a national system to build revenues.
Yet, as reported by The Wall Street Journal, “The New Tech That Terrifies OPEC” (1 June), the competitive instinct and spirit is not dead west of the Potomac. When it comes to the U.S. shale oil industry, Saudi Arabia tried to kill it off in 2016, but “The Saudi effort backfired. Instead of killing shale it spurred a wave of innovation that transformed drilling in the U.S. into a highly efficient industrial process, dramatically lowering costs and boosting output.” As one drilling executive summarized, “Downturns make you focus on cost because it’s the only thing you can control—the oil price is out of your hands.” If such management talent existed in Amtrak, they would not be focused on superficial cost cutting, like diners, that decimates the overall service and cuts revenues. Instead, this level of competence would push for more equipment to run more trains, knowing schedule convenience beyond one daily train is key to serving and building the national system and how it should interface as one market.
How Congress Can Control the Amtrak Frankenstein: Amtrak Under Management Contract
As we can certainly surmise, a full blown audit and investigation will clearly identify the misappropriation of national funds and revenues in behalf of the NEC and false bonuses; a defalcation of the Board’s stewardship in favor of its real estate developments patrons and politicians of the Northeast, as well its lack of direction to secure long distance equipment to enhance revenues–and fulfill its national mission and national mandate. Cleaning house is easy, but where to go from there?
The answer, I believe, was recently identified in a UK publication, Public Finance, “Are the Railways Getting There or Hitting the Buffers?”(30 May). Given some issues with private firms for UK passenger rail franchises unable to continue to take on the full risk for long term contracts, “a likely model is management contracts. Under these, the government takes the revenue risk and the company gets a small percentage, typically 3% of the overall income on top of its fixed costs, as a profit margin. It is a less exciting business and removes some incentives from franchisees to increase passengers but may attract more players.” Interesting, the UK faces the same problem as we have identified in North America–“few players are left apart from state-owned foreign railway companies such as SNCF, Trenitalia and the Nederlandse Spoorwegen. The paucity of British-based franchisees is subject to criticism and any attempt to develop a new model will need a greater range of bidders.”
Although we can continue to intellectually dissect the known problems of Amtrak today, and consider the options; however, time is not on our side. At their recent meeting with Congress, we know how Amtrak’s executive management, encouraged by its Board, stalled by talking out of both sides of their mouth regarding “a commitment” to continue the long distance network–but darkly hinting that the clock is already ticking against its long-term survival. (Note how no proformas were presented by Amtrak for new long distance equipment at this meeting with Congress.)
The Northeastern politicians must be made to understand the national system will not be any longer allowed to become disenfranchised by Amtrak for the NEC; indeed it should start now over the Gateway Project. As Senator Kay Bailey Hutchison (R-Tx) said on 30 July 2003, “Our motto for passenger rail is National or Nothing!”