1. <CBM_Overview_Nov05 © Transportation Technology Center, Inc., a subsidiary of the Association of American Railroads, 2005 TM Firdausi Irani – TTCI(UK) Ltd. and a host of others Condition Based Maintenance (CBM) and Advanced Technology Safety Initiative (ATSI)

2. TM <CBM_Overview_Nov05 - 2 © TTCI/AAR, 2005 Fundamental Rules of Interchange u Rule 1 – Care of Freight Cars a.Each handling line is responsible for the condition of all cars on its line. a.Each handling line is responsible for the condition of all cars on its line.

3. TM <CBM_Overview_Nov05 - 3 © TTCI/AAR, 2005 Fundamental Rules of Interchange u Rule A.1. a. Making car owners responsible and therefore chargeable with the repairs to their cars necessitated by ordinary wear and tear… a. Making car owners responsible and therefore chargeable with the repairs to their cars necessitated by ordinary wear and tear… b.Placing responsibility with and providing a means of settlement for damage to any car, occurring through unfair usage…

4. TM <CBM_Overview_Nov05 - 4 © TTCI/AAR, 2005 Issues u When the Fundamental Rules of Interchange were written, railroads owned virtually all freight cars in interchange service; now they own less than half u Railroads want to reduce the stress state imposed on the infrastructure, but costs to car owners may exceed benefits to car owners.

5. TM <CBM_Overview_Nov05 - 5 © TTCI/AAR, 2005 Energy of Train Strength of Track Potential for Failure Stress 263K286K315K What is the Purpose of ATSI? Potential for Failure Where Equipment Places Stress on the Track at a Level Higher than the Localized Track Strength

6. TM <CBM_Overview_Nov05 - 6 © TTCI/AAR, 2005 Reactive 70% Proactive 30% Current State Reactive 20% Proactive 80% Emergency Breakdown Repairs 20% Preventative Maintenance 50% Predictive Maintenance 30% Future State Maintenance Practices

7. TM <CBM_Overview_Nov05 - 7 © TTCI/AAR, 2005 Condition Based Maintenance u Condition Based Maintenance is scheduled and planned maintenance based on actual (or predicted) condition of equipment, benefits include: l Derailment Reduction l Planned Maintenance l Lower Maintenance Expense (track & vehicle) l Improved Performance of Railcars Across the System l Reduced Service Interruptions – Higher Throughput l Improved Overall Reliability

8. TM <CBM_Overview_Nov05 - 8 © TTCI/AAR, 2005 Wayside Detector Data Wayside Detector Data Used to: l Remove Bad Actors from service immediately l Identify poor performers before they trigger an alarm l Move from Reactive to Preventive to Predictive l Plan maintenance for car series by measuring equipment performance and degradation over time l Derailment Investigation

9. TM <CBM_Overview_Nov05 - 9 © TTCI/AAR, 2005 Wayside Detector Technology u Bogie Curving Performance Detectors u Wheel Impact Load Detectors u Bogie Stability Detectors u Acoustic Bearing Detectors u Warm Bearing Trending u Low Air Hose Detectors u Wheel Profile Detectors Wayside Detector Technology is an integral part of our Condition Based Maintenance Strategy...Strategically placed to protect critical corridors

10. TM <CBM_Overview_Nov05 - 10 © TTCI/AAR, 2005 Journey to Excellence Time Line Reaction Detection Prediction Prevention Derailments Bad Order Set-outs Defects found in Trainyard Level 3 Alarms WILD, TPD, etc. Hot Journal Detectors Condition Based Maintenance Trackside Detectors Predictive Indices Six Sigma Root Cause Analysis 12345 Continue to drive science and technology

11. TM <CBM_Overview_Nov05 - 11 © TTCI/AAR, 2005 Wheel Impacts Wheel Impacts HS Stability Bogie Performance Detector Bearing Acoustic Bearing Acoustic Industry DataBase(s) Industry DataBase(s) Messages to Car Owner or Handling Line Car Histories Future Detectors Future Detectors Car Owner Handling Line Queries Car Owner Handling Line Queries New and Existing Detectors

12. TM <CBM_Overview_Nov05 - 12 © TTCI/AAR, 2005 Improved Car Maintenance with CBM u Focusing Limited Mechanical Maintenance Resources on Worst Performing Cars Resources on Worst Performing Cars u Evaluations Conducted in Multiple Areas: l Safety l Car Condition l Economic Operation u Car Condition-Based Maintenance Less Disruptive Than Component Failure Maintenance Than Component Failure Maintenance u Detector Data used to Develop Shopping Program

13. TM <CBM_Overview_Nov05 - 13 © TTCI/AAR, 2005 Time AAR Car Repair Billing Threshold Predictive Event Notification Notification to Pull Car Car Owner Threshold 90 80 70 Advance Warning Region

14. TM <CBM_Overview_Nov05 - 14 © TTCI/AAR, 2005 Trend Analysis for Predictive Maintenance

15. TM <CBM_Overview_Nov05 - 15 © TTCI/AAR, 2005 Distribution of Benefits

16. TM <CBM_Overview_Nov05 - 16 © TTCI/AAR, 2005 Distribution of Benefits

17. TM <CBM_Overview_Nov05 - 17 © TTCI/AAR, 2005 Wheel Impact Load Benefits u Track l Reduced Rail Breaks due to fatigue l Fewer Broken Welds l Reduced damage to Frogs u Fuel l Reduced Rolling Resistance u Car Components l Broken bearing Cages, Brake Beams;Safety Appliances; Walkways; Car body

18. TM <CBM_Overview_Nov05 - 18 © TTCI/AAR, 2005 Wheel Impact Load Benefits u Safety u Delays u Reduced accidents caused by tread damage, flat and built- up treads – 50% u Reduced accidents due to broken rails – 10% u Reduce Train stops due to impacts over 140 KIPS

19. TM <CBM_Overview_Nov05 - 19 © TTCI/AAR, 2005 Stress State Cost Model u Car equipment damage associated with high impact wheels l Brake beams - 80% l Hot Bearings - 15% l Burned-off journals - 30%

20. TM <CBM_Overview_Nov05 - 20 © TTCI/AAR, 2005 WILD Removal Economics

21. TM <CBM_Overview_Nov05 - 21 © TTCI/AAR, 2005 WILD Removal Economics

22. TM <CBM_Overview_Nov05 - 22 © TTCI/AAR, 2005 u WILD Savings Stress State Cost Model

23. TM <CBM_Overview_Nov05 - 23 © TTCI/AAR, 2005 Summary of Benefits Note: 64% of cars are owned by Private Car Owners

24. TM <CBM_Overview_Nov05 - 24 © TTCI/AAR, 2005 Who Gets the Benefit u Operator/Railroad - $68 per car per year * u Car owner - $11 per car per year l Assuming Operators will give them car for repair l Less potential present value of performing maintenance sooner * Excludes cost of existing networked detectors - Stress State Cost Model

25. TM <CBM_Overview_Nov05 - 25 © TTCI/AAR, 2005 Stress-State Management Identification of Stress State u u Wayside systems feed InteRRIS TM after identifying the car with AEI systems u u InteRRIS TM identifies a Stress-State Condition u u InteRRIS TM communicates with Railinc Systems for processing Carrier Wayside System AEI Raw Data EquipmentIdentification Stress State Condition Carriers Outside of Stress State Condition Via Industry Systems Car Owners Industry Systems InteRRIS

26. TM <CBM_Overview_Nov05 - 26 © TTCI/AAR, 2005

27. TM <CBM_Overview_Nov05 - 27 © TTCI/AAR, 2005 Window of Opportunity L1 L2 L3 Final Alert Level L4 AAR Billing Opportunistic Repairs Window of Opportunity 0 25 50 75 100 125 150 175 200

28. TM <CBM_Overview_Nov05 - 28 © TTCI/AAR, 2005 Thank You Questions?