(The following column by Andrew Leckey appeared on the Chicago Tribune website on June 7, 2009.)
CHICAGO — Model train tracks once filled the basements and surrounded the Christmas trees of American homes.
I’m not sure youngsters wanted to grow up to be engineers, but collecting colorful locomotives, box cars and model train stations was irresistible. Children could control the miniature transportation system, if only for a short distance going around and around.
Model train buff and mobster Bobby Baccalieri of “The Sopranos” TV series proudly wore an engineer’s cap when enjoying his garage-based train collection, to the chagrin of boss Tony Soprano.
Sadly, childlike Bobby met his demise in a hobby shop as he looked for more trains. A more distinguished rail buff in recent years is Warren Buffett, chief executive of Berkshire Hathaway Inc., whose move into railroad stocks as growth investments helped lead to their revival.
Trains, Buffett said, offer greater energy efficiency than trucks. Other advantages: More import goods need to be transported, it will be years before the nation’s rail capacity can be increased and it is possible to raise prices as contracts ran out.
Though the housing and automobile slowdown has hurt these companies, the long-term outlook still makes sense to Buffett. He has added to his portfolio holdings of Union Pacific Corp. and Burlington Northern Santa Fe Corp. this year, according to his most recent filing with the Securities and Exchange Commission.
Union Pacific, based in Buffett’s hometown of Omaha, is the largest North American railroad in route miles and has 80 percent of rail traffic crossing the Mexican border. It has improved operating margins by reducing expenses. To be prepared for an economic rebound, it has kept one-third of its 5,000 furloughed workers on retainer with full benefits and partial wages.
Burlington Northern Santa Fe, based in Ft. Worth, is the second-largest North American railroad in route miles and transports more grain than any other U.S. railroad. It also has worked hard to control costs. Both railroads operate primarily in the Western two-thirds of the country.
Railroads were once a premier growth industry, with nine railroad stocks on the initial 11-stock Dow Jones index in 1884. Eventually, changing transportation trends and deregulation hit railroads. Most recently, the economy has taken its toll, yet trains retain a place in our future.