The Farmer Rail Car Coalition plans to begin replacing some 1,700 worn-out grain hopper cars with new ones within the next 10 years, according to the group’s business plan.
It also expects to get rid of more than 2,100 low-capacity aluminum cars and replace them with fewer, bigger steel cars during the same period.
The replacement program will be financed by big savings the coalition says it will realize by having maintenance work done by independent contractors.
The coalition’s proposal would see the entire fleet of some 12,400 hopper cars replaced over the next 30 years, at a total cost of about $1.5 billion at today’s prices.
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Coalition president Sinclair Harrison said the group’s financial plan, prepared with the assistance of Macquarie North America, has already been subjected to intensive scrutiny by an independent consultant hired by Transport Canada.
“We haven’t seen the result, but we understand that Deloitte Touche felt that yes, our financial plan will do what we say it will do,” he said.
The coalition has sent a summary of its business plan to more than 30 farm, grain industry and government groups in advance of a Nov. 1 meeting in Winnipeg organized by Transport Canada to discuss the fate of the government fleet.
The 96 page document provides more detail than has previously been available on the farmer-controlled FRCC’s proposal, including information on such areas as internal organization and management, rail car leasing strategies, operational plans, maintenance and replacement strategies, financing and risk management.
Replacing the aging hopper car fleet has been a major concern of some critics of the FRCC’s plan to take ownership of the cars for a nominal sum and then lease them to the railways on a not-for-profit basis.
According to the business plan, the roughly 1,700 steel cars built prior to July 1974 have a 40-year lifespan, while the 10,700 or so built after that date have a lifespan of 50 years.
That means that after replacing those 1,700 cars in the first 10 years, there will be a breathing space of another decade or so before the rest of the fleet would have to be replaced.
About 70 percent of the fleet is 20-30 years old, 29 percent is 10-19 years old and one percent is less than 10 years old.
The average remaining useful life per car is 26 years.
A 2002 inspection report by Transport Canada described 57 percent of the steel cars as being in good condition, 37 percent average and five percent fair.
Harrison said the aluminum cars could be sold for salvage to finance the purchase of used higher capacity steel cars from other leasing sources.
The business plan notes that a number of factors will affect the car replacement strategy:
- Improved car cycle times, which would reduce the number of rail cars needed.
- Increased domestic processing, again reducing the need for cars.
- Increased shipment of crops in packaged units or container cars.
