1. Railcar 101 The Basics of Railcars: Car Types, Components and Rules
Acquisition and Maintenance Options Carol Scarborough

2. So you need some Railcars…
What are my options?
Order railcars from the railroad
Buy railcars
Trip lease (or borrow) some railcars from others on a temporary basis
Lease railcars
Full service lease
Net lease
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

3. Railcars Who Provides the Assets
Shipping By Rail Increasingly Means Owning/Leasing Your Own Cars
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

4. Acquisition of Railcars by Railroads and Private Car Owners
2006 total new cars = 74,729. The most cars acquired since 1998 (75,685)
Source AAR Policy and
Economics Department
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

5. How the U. S. Freight Car Fleet Changed
Source AAR Policy and
Economics Department
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

6. Railcars Ownership/Maintenance
Railroads are pushing capital investment in cars to their customers
AAR will increasingly implement stricter standards on railcar maintenance with higher penalties
Wheel impact load detectors
Acoustic bearing detectors
Truck hunting detectors
Revised Car Repair Billing Rules allow for specific pricing of repairs based on responsibility and why made codes
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

7. Railcars Ownership/Maintenance
Railcars represent a new set of factors for the shipper
Acquiring/subleasing/disposing of railcars
Lease/ownership strategies
Maintenance
Administration
Fleet planning, distribution and management
Analyzing and controlling these costs is a key factor in rail economics
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

8. Components for Furnishing Railcars
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

9. What does my railcar really cost?
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

10. DTE Rail Services, Inc Maintenance Management Seminar
Auditing Rental
Lease Invoices
Monthly Rental Charges
Delivery (on rent) dates
Termination (off rent) dates
Shop Credits (rental abatement)
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

11. DTE Rail Services, Inc Maintenance Management Seminar
Auditing Mileage
Mileage Credits
For loaded miles paid by railroads
Apply as offset against rental
Excess Mileage Charges
Vary according to lease
Limit of miles for calendar year
Offset increased maintenance expense
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

12. Auditing Mileage (continued)
Mileage Equalization
Apply to tank cars only
Cars usually return in reverse of loaded movement
Charges apply if empty miles exceed loaded miles by 106% on annual basis
Verify that railroads are not running up excess empty miles
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

13. Auditing Transportation
Transportation Charges
Delivery into service
Use prior lessee’s last free empty move
Lease Termination
Be sure to follow loaded movement for free empty return
Negotiate termination location at the beginning of the lease
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

14. Auditing Transportation (continued)
Transportation Charges
Costs to / from shops
If net lease use shops on loaded route
If full service lease work with lessor to use shops on loaded route
Use empty move after loaded move when possible
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

15. Auditing Transportation (continued)
Transportation Charges
Out of route charges
Use free empty repositioning movements when possible
Verify that the route charges is for the route that was issued to the railroad
Try to negotiate contract rates with railroads
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

16. Maintenance Responsibilities
Net Leases
Lessee responsible for all maintenance
Full Service Leases
Not always “full”
Usually AAR running repairs and FRA requirements
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

17. Maintenance Responsibilities (continued)
Lessee’s responsible repairs:
Linings
Cleaning
Removable car parts
outlet caps, valves, dome covering, fittings, gates and hatches
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

18. Other Administrative Tasks
Possible Lessee’s responsibilities:
Net lease
UMLER registration
Remarking of equipment
Ad Valorum tax reporting
Insurance
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar

19. DTE Rail Services, Inc Maintenance Management Seminar
Conclusion
Railcar fleets are expensive
There are several options for obtaining railcars
Be sure to compare all options and responsibilities:
Does your company want to invest in assets long term or have a short term need?
Do you have the manpower and expertise to manage the assets?
Do you want to outsource some or all of the management?
Do you have a strategy for disposing of assets at end of term?
May 21, 2008
DTE Rail Services, Inc Maintenance Management Seminar