(Dow Jones circulated the following on April 16.)
CHICAGO — U.S. railroad operators will benefit from chronic road congestion, according to the head of CSX Corp. (CSX), which along with its peers is lobbying for an investment tax credit to boost existing spending on new lines, tunnels and bridges.
Michael Ward, chairman and chief executive of the third-largest U.S. railroad by revenue, said he was confident investment in ports would keep up with the pace of global trade.
“(But) the roadways are a much bigger challenge,” he told Dow Jones Newswires Wednesday after CSX reported record first-quarter operating earnings.
Ward, who is calling for a wide national debate on the country’s infrastructure challenges, said the appetite for investment in roads lagged that for railways and ports. He cited a U.S. Department of Transportation study forecasting the need for $5 trillion to improve highways between now and 2025.
“People are going to have a hard time coming up with that money,” he said. ” That can be a positive for our industry.”
“You are seeing trucking companies changing their business model,” he continued, pointing to truckers’ increasing emphasis on local markets as they struggle with rising fuel prices and driver shortages.
U.S. rail traffic has surged since 2003, and though total shipments dipped last year, rising export traffic and buoyant commodities markets have boosted earnings across the industry.
CSX hasn’t been immune, though, to some of the challenges facing trucking companies, notably weakness in the U.S. auto and construction markets, and high fuel prices.
The company said Wednesday that its fuel costs rose 55% year-on-year in the quarter to March 30, offset in part by efficiency measures and surcharges.
The surcharges have prompted a class-action lawsuit against CSX and three other railroad operators, which are alleged to have colluded to coordinate and inflate rates from 2003 to mid-2007.
Ward said the litigation was “unfounded”, and had no impact on discussions with shippers regarding repricing new contracts.
CSX reported net profits of $351 million in the March quarter compared with $ 240 million a year earlier, with revenues up 12% to a record $2.7 billion.
Ward said rising export volumes, notably of coal and agricultural commodities, “helped pick up the slack from autos and construction”.
CSX shares were 4.2% higher at $60.22 recently, having hit a 52-week high of $ 61.16 earlier in the session.