Monday, November 1, 2010

Things That Maybe We Should Be Doing

There are some things that we should be planning for, especially during this mayoral election cycle, rather that bickering about who has or has not done enough in the past four years. We should be talking about looking to the future in concrete terms, not just rosy sounding platitudes.

This past weekend, the state of Indiana and Progress Rail Services Corp. announced the intention to reopen a long closed industrial plant in Muncie, Ind. Progress Rail Services Corp. is a wholly owned subsidiary of Caterpillar Inc., a U.S. heavy equipment maker that has been moving aggressively into the rail business lately.

Why is this important to Lexington and Central Kentucky? Well, for one, it displays a coming revitalization of American industry. Something that our region desperately needs.

Caterpillar has long been known for their bright yellow construction and mining equipment, but recently they have been looking to get more into the railroad business. To that end, Caterpillar purchased Progress Rail Services in 2006 to repair and rebuild locomotives and freight cars for Class Is, passenger railroads and private owners. Although started in 1983, one reason that we may never have heard of them, is that much of their business is in other countries. They have more than 130 facilities and most are overseas. The Muncie plant will be largest project tackled by Alabama-based Progress Rail.

The situation took a sharp turn back in August when, due to an advantageous position of the autos bail-out, Progress Rail bought Electro-Motive Diesel Inc. (EMD) from General Motors Inc. Funding for the $820 million purchase came from the private equity firms Berkshire Partners LLC and Greenbriar Equity Group LLC. I see no direct connection between Berkshire Partners and Warren Buffet’s Berkshire Hathaway Inc. other than they both see American railroads and their attendant corporations as good business investments.

Although EMD's headquarters, engineering facilities and parts-manufacturing operations are located in LaGrange, Illinois, just west of Chicago, they do all final assembly in London, Ontario CANADA. So much for a “buy American” plan for our American railroads. EMD has also languished a distant second to GE in the American locomotive industry. This new plant will give Progress Rail locally produced locomotives to comply with the “buy American” requirements of publicly-funded passenger rail contracts.

Reports have it that this 740,000 square-foot facility and its 75 acre property will have a test track and allow the company to pursue transit-rail business. The site originally was home to a Westinghouse transformer factory and will require minimal redevelopment as it has rail lines built-in and rail access.

Transit/rail, would that be the streetcar or regional light rail that we see spoken of by the Obama administration and so easily dismissed by the Republican leadership of Congress? Will these 650 new jobs, which should come on line sometime in 2012 or later, be ascribed to the recovery efforts of Democrats or the Republicans? Will these 650 employees and their resultant boost to the local economy be a legacy of the “disastrous auto bail-out”?

When will Lexington seek out these types of developments? When will Central Kentucky realize that we need these types of jobs, not just high-tech or medical jobs? Toyota works well for us but they are not the only transportation manufacturing game in the world. We have one of the foremost rail building companies in the central U.S. and we should be looking toward their view of the future.

According to Association of American Railroads, through 2010’s first 42 weeks, 13 reporting U.S., Canadian and Mexican railroads originated 15.7 million carloads, up 9.8 percent, and 11.4 million containers and trailers, up 15.1 percent year over year. If the oil prices do rise steeply, as others have predicted, then the long haul trucking industry will be hit hardest first. Rail has been proven to be ten times more efficient than trucks per ton/mile traveled and we should be jumping toward this future, not shying away from it.

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