Starting Small, Thinking Big
By Craig Sanders
July 2001 Trains Magizine
(Editor's Note: In 1958 Blue Rapids High School graduated twenty-one seniors from a high school with a few more than 120 students. Of the twenty-one, seven started first grade and attended all twelve years together.
The Free Press Publisher started and ended with the class but tookout two years to attend ninth and ten grade at Manhattan High School. This story in "Trains" Magazine is about one of the Class of '58. Larry Parsons grew up in Blue Rapids (45 miles north of Manhattan) and then graduated from Kansas University.
In June of 1995 Parsons made a special railroad car available for eight class mates and Blue Rapids residents to attend the marriage of George Callson and wife Judy. The car was added to the back of an AmTrak running from Denver to Grand Junction Colo. The 1926 Southern Pacific private car made quite a show with the AmTrak customers. The photos were added to this story from that trip.)
What would you expect of a man who resurrected an ailing regional railroad and is now its chairman, chief executive officer, and majority stockholder? You’d expect that man, Larry R. Parsons, to stay close to the action.
Late on a November 2000 day, Parsons looks out his third-floor office window in Brewster, Ohio, to see an empty ore train. The train, he knows, is supposed to have been on its way to Huron, Ohio.
Parsons picks up his telephone and gets busy signals on the first two numbers he tries. On the third, he reaches the voicemail of Jim Northcraft, vice president of transportation of the Wheeling & Lake Erie.
"Northcraft!" Parsons bellows into the phone. "What about that ore train!"
He drops the receiver onto the phone, fishes a cigar from a box, and lights up. "This is a good cigar, not a cheap cigar-some people can’t tell the difference."
Twice a day, Parsons meets with his managers to "micromanage the railroad," as he likes to deadpan. Jeff Davis, Parsons’ director of transportation, jokes that he and his fellow managers sometimes wish Parsons’ office was on the other side of the building, where he couldn’t see the tracks.
Spun-off from Norfolk Southern in May 1990, the 800-mile Wheeling has not had an easy time of it. In 1992 its coal business was cut in half when a large mine closed. Its steel business fluctuates because U.S. steel-makers are having increasing difficulty holding market share against imported steel. The breakup of Conrail between Norfolk Southern and CSX gave the two big roads an opportunity to route interchange traffic around the Wheeling. What’s saved the Wheeling is the ability of Parsons and his team to build new traffic to replace the old, to keep customers away from the Class 1’s with better service, and, when necessary, to micromanage.
A crashing sound outside catches Parsons’ attention. "Good joint!" he says. "Either that or he’s started out of Brewster." He looks out the window. "Yeah, it’s the ore train, but he’s going the wrong way. He’s probably picking up more empties."
Parsons watches the train make its moves, then trundle past on its way to Huron. "There goes the rear-end device. Now I feel better."
I had no idea where or what it was
Today’s Wheeling & Lake Erie incorporates much of the original W&LE, a railroad built to haul coal from mines near Wheeling, W.Va., to Lake Erie docks at Toledo and Huron. Also included in the new Wheeling is most of the former Akron, Canton & Youngstown, in years past a small Class 1 whose major customers were tire and rubber plants in Akron.
In the regulated era the W&LE formed one segment of the Alphabet Route, an East Coast to Midwest gateway route that competed modestly with the four Eastern trunk lines. Its core business, however, was locally originated and terminated-coal, steel, auto parts, and manufactured goods from Ohio’s industrial cities. The W&LE turned a profit every year after 1920, even paying dividends during the Great Depression. Both it and AC&Y disappeared into big roads in the modern merger movement. The Nickel Plate took over W&LE in 1949, and AC&Y became part of the Norfolk & Western in the 1964 NKP merger.
The reincarnated Wheeling & Lake Erie began operating in May 1990. Purchased from Norfolk Southern for $42 million (the price included some equipment) were most of the pre-merger W&LE and AC&Y, as well as the Pittsburgh & West Virginia, another of the old Alphabet roads. NS retained the former W&LE from Bellevue to Toledo, and Norwalk to the docks at Huron, but gave the W&LE trackage rights. NS had in 1988 sold the former W&LE line from Harmon to Zanesville to short line Ohio Central.
Of the old AC&Y, the new W&LE got 114 miles, from Mogadore to Carey. The west end of the AC&Y, from Carey to Delphos, is abandoned. Added by W&LE in 1992 (from CSX) was a remnant of a former Baltimore & Ohio north-south line through Canton, from North Canton to Sandyville, and a short B&O segment from Martins Ferry across the Ohio River to Benwood Yard, W.Va.
The Wheeling’s new managers had anticipated that coal would pay most of the bills. But between the Clean Air Act, reclamation problems, and because some of the better deposits were simply worked out, high-sulfur Ohio coal wasn’t an attractive mining play in the 1990’s. One-sixth of the Wheeling’s traffic disappeared when the Saginaw Mine (near Adena) closed in 1992, and just before its second anniversary, the Wheeling defaulted on its loans. The directors fired most of the managers and hired Parsons.
Parsons was known as an operating and marketing whiz. After college, he rose rapidly at the Denver & Rio Grande Western. Starting as a market analyst in 1968, by 1976 he had become superintendent of the Colorado Division and, by 1989, vice president-operations. Parsons was heir-apparent to Rio Grande’s president and chief operating officer, William J. Holtman, but with D&RGW’s purchase by entrepreneur Philip Anschutz and subsequent merger with the Southern Pacific, the path of succession was interrupted. Parsons left for a similar job at the Kansas City Southern.
There his aggressive style wasn’t well-received and he was fired shortly before Christmas 1991. "I got fired early in the morning. By the time I got home, I was being recruited for the Wheeling. I had no idea where or what it was."
Shortly after Parsons arrived, the Wheeling lost more coal traffic (some has since returned). But Parsons saw something better on which to build-steel mills, including Wheeling-Pittsburgh Steel at Mingo Junction, Steubenville, Martins Ferry, and Yorkville; Republic Engineered Steel at Canton; The Timken Company at Canton; U.S. Steel near Pittsburgh; and LTV Steel at Cleveland.
"This company was doing nothing with the steel mills. So I knew there was a great potential for growth. I also saw a group of fairly dedicated employees who I felt would make things work."
The original investors later sold the W&LE to Parsons, and the banks agreed to restructure its debt. Yet scarcely had the Wheeling achieved stability when in October 1996 steelworkers struck Wheeling-Pittsburgh, which by that time accounted for 25% of W&LE’s $39 million annual revenue.
The railroad took draconian measures, slashing spending and laying off employees. Some new business developed, but not enough to offset the more than $6 million lost during the strike, which ended in August 1997.
I’d say we’re in the middle of the novel
"This situation is not unlike where I’ve been all my life," says Parsons of the Wheeling, which is encircled by Class 1’s CSX and Norfolk Southern. "Your friend is your enemy; your enemy is your friend-we’re a networked industry."
Being surrounded is not necessarily a problem, insists Parsons. "We live on the big railroads’ mistakes. We did that on the Rio Grande; we did that on the KCS; we do it here." Mistakes from which the Wheeling profits include how the big railroads treat their customers, and the level of service they provide-or fail to provide. When trains almost froze in place on NS and CSX following the Conrail breakup, customers found the Wheeling waiting.
What matters most, says Parsons, is not the business your competitor takes away, but the business you have with your competitor. "And that’s what you’ve got to focus on-it’s for the benefit of the customer. A lot of the people here have what I would call a ‘Rio Grande point of view’ in how you serve customers and run a railroad."
The Rio Grande differed from the Wheeling in two important respects: it wasn’t capital-constrained, and it was considerably larger. Yet the Rio Grande faced similar challenges. Like the Wheeling, it was surrounded by big railroads with better routes, and it was highly dependent upon coal traffic. When CSX and NS split up Conrail, Parsons feared the Wheeling would take a huge hit because Conrail lines at most places where W&LE and Conrail had competed went to NS. The Wheeling feared NS would keep to itself much of the traffic it had previously interchanged to the W&LE. That traffic accounted for 25% of Wheeling’s revenues.
It hasn’t happened-yet. First, the Conrail breakup resulted in huge problems on NS. Parsons says shippers he feared would go to NS called to say, "Thank God you’re around, ‘cause you’re keeping our plants open"-and the Wheeling ran extra trains to speed up delivery of shipments delayed elsewhere.
"The thing I didn’t believe would happen-in light of everything that had happened with the [Union Pacific-Southern Pacific] merger-is that service levels would fall to where they did. That forced traffic onto the Wheeling that we never dreamed we would see."
Now, interchange traffic with CSX and NS is even up slightly. Parsons expects NS and CSX to eventually pursue the business they lost, however. "I’d say we’re in the middle of the novel. We don’t know for sure what the Conrail split-up is going to do to us in the long-term."
At work on the Wheeling
A week before Christmas in the dead of a bitterly cold night, two mammoth wheel loaders at Huron finish filling 60 hopper cars of W&LE train 640 with taconite pellets for the Wheeling-Pitt mill at Mingo Junction.
Light snow flies through the locomotive’s headlight beam as engineer Jason Davies notches out the throttle. The engines shudder as they labor to start the 7800-ton train. On the point are Montana Rail Link SD40-2XR’s 253 and 260 (the Wheeling makes extensive use of leased power). The cars still carry lettering for the defunct (since 1992) Lake Erie, Franklin & Clarion, but carry "WE" reporting marks. It all looks like someone else’s railroad, and therein lies a problem.
About one-third of Wheeling’s 800-mile system is on other railroads’ track, and W&LE crews know all too well the mischief that can occur on a foreign line. At Shinrock, where train 640 gets onto the old NKP to go to Bellevue, delays can be deadly to a crew’s hours of service. At Shinrock, after a westbound NS auto-rack train passes, NS’s Cleveland District dispatcher gives 640 a signal to proceed onto the main track. It looks to the crew there will be no delays on the NS tonight.
Engineer Davies credits the cooperation to the presence of Wheeling assistant trainmaster Ken Malone, who has followed 640 to close the switches behind it. If a Wheeling engineer thinks he’s getting stiffed, all he can do is complain to the NS dispatcher. But Malone can take the complaint higher up in the NS chain of command.
Davies and conductor Jerry Tate are a half hour away from violating the maximum 12 hours-of-service law. After a re-crew at Avery, 27 miles away, 640 becomes 340 and slips past Bellevue Yard on a bypass track.
At Yeomans, just outside Bellevue, 340 picks up more power for the grades ahead, SD40 4018. Without it, 340 might not make it up Hartland Hill, at 1.07% the third-steepest on the Wheeling.
Hartland Hill doesn’t look like much from the ground; most of the surrounding terrain is flat farm country. It’s different from the cab: "There’s been times I’ve come up this hill doing 2-3 mph the whole way," says Engineer Mark Cline, who took over from Davies at Avery.
The Wheeling is dispatched from "the Brick," its four-story headquarters in Brewster that resembles an old high school. CTC controls the main line between Bellevue and Spencer, but elsewhere the Wheeling is unsignaled. Its maximum speed is 40 mph. Most of the sidings from the steam era between Bellevue and Brewster, the Wheeling’s busiest leg, no longer exist. To avoid long delays for meets, the Wheeling operates many of its trains on schedules to provide predictable meets. Still, Cline notes, the railroad can get congested.
Finding new customers to replace old
Ore trains have been a bountiful source of revenue for W&LE. But Wheeling-Pittsburgh Steel is in its second bankruptcy and now plans to import ore from South America, bypassing the Wheeling. The last Wheeling ore train ran on January 27, 2001. But Parsons isn’t waiting for new customers to appear; his people are already looking.
Parsons attributes much of his success with the Wheeling to finding new customers to replace ones that have found a different route, ceased shipping by rail, or gone out of business. For example, a Home Depot distribution center near Cleveland and a new lumber yard near Canton have boosted the once meager forest-products business. Polymers are a growing commodity, and three plastics manufacturers have built plants served by the Wheeling. A frozen foods warehouse at Solon has added perishables; its business includes all the French fries served by Burger King restaurants in northeast Ohio.
Steel, including scrap metal and ore, is still the Wheeling’s top commodity, with stone second (the stone business has nearly doubled in Parson’s tenure).The former AC&Y route’s principal business is stone, and its crews call themselves "stone cowboys." Until recent years, grain traffic was virtually non-existent; now it’s a fairly sizeable business. Much of it is sent to Hagerstown, Md., where it’s handed off to NS, and winds up in Virginia’s Shenandoah Valley as turkey feed. Coal traffic includes a CSX unit coal train picked up at Benwood for a power plant at Brilliant.
Some traffic is seasonal. W&LE’s stone trains do not run during winter. This might lead to furloughs on some railroads, but the Wheeling tries to avoid that. Those lacking enough seniority to hold a scheduled job go to the extra board, where Mark Cline usually works no more than three days a week. On the Wheeling, says Cline, "You earn your money in the summer."
Intermodal traffic has been less impressive. Hoping to attract more, in 1996, the Stark Development Board opened a $12 million intermodal facility at Navarre, Ohio. From it the W&LE was moving an average of 30 cars a day to CSX, but the business ceased shortly after the Conrail breakup. The terminal sat idle until Canadian National reopened it last year.
Also, the Wheeling expects to gain overhead intermodal traffic upon completion of a joint venture between CN and the Southwest Pennsylvania Railroad to develop a former Volkswagen plant at New Stanton, Pa., into an intermodal and bulk terminal. Traffic will move over the Wheeling between Everson, Pa., and Toledo. Parsons says its relationship with CN represents the Wheeling’s greatest growth opportunity.
Trying to be a good citizen
Outside Parsons’ office, amid Harriman safety awards and photos of Wheeling trains in action, is a framed child’s crayon drawing of a locomotive and passenger car. An attached note thanks Parsons for a train ride.
The Wheeling has hosted passenger excursions for the Orrville Railroad Heritage Society, the regular Elderberry Line tourist train between Carrollton and Minerva, and Santa Claus and Operation Lifesaver trains. But brace yourself: "I hate passenger trains," says Parsons, repeating it for emphasis. "All they can do is bring you misery. And they make no money."
As far as Parsons is concerned, the Wheeling doesn’t operate passenger trains for public-relations-he believes the less publicity the Wheeling gets, the better. "I mean, there’s no transportation function involved here. All these things are against my basic nature."
Then why does Parsons allow varnish on his railroad?
"It works both ways. Occasionally, we’ll need to run a train for politicians or some customers, and [this allows us to borrow passenger equipment so] we don’t have to own anything. We can have access to first-class equipment. It’s a good business relationship."
The existence of these passenger trains also says something about the personality of the Wheeling and Parsons’ on-the-ground approach toward running a railroad: "I think trying to be a good citizen is always proper."
What about Wheeling’s success? Is it all Parsons’ doing?
"I believe our success has been driven by a combination of a lot of good people working hard, 100% of the cash flow going back into the property, and a lot of good luck." 2
CRAIG SANDERS, an instructor of journalism at Cleveland State University,
lives in University Heights, Ohio. This is his third Trains byline.