Back on track: Short-line railroad overcomes bad times, looks to future
Sunday, May 12, 2002
By Melissa Burden, FLINT JOURNAL BUSINESS WRITER

Owosso - Nestled along the Shiawassee River and behind a cement facility, workers repair and inspect locomotives and handle traffic assignments for 400 miles of state railway. The Tuscola & Saginaw Bay Railway Co. Inc. isn't a big player in the grand scheme of railroads, but the short line not only has survived but also has done pretty well over the years. Owned by Jim Shepherd, who lives near Howell, the company operates tracks from Ann Arbor to Petoskey, with many stops and branches in between. The business employs about 45 people and operates 12 diesel locomotives and a switcher. "When we came here 10 years ago, we were (handling) 7,000 carloads (a year)," said Shepherd, whose two major business partners own a combined 39 percent of the company. "Now we're up to about 10,000 carloads a year."

TSB was formed in 1976 in Vassar with 44 miles of track. In 1982, the company signed an agreement with the state to operate 124 miles of the Ann Arbor Railroad, from Osmer to Alma and from Owosso to Swan Creek, near Saginaw . It added three more segments in 1984, taking over a bankrupt line from Alma to Mesick and lines from Cadillac to Petoskey and Cadillac to Traverse City . The company later moved its headquarters to Owosso and sold off the Vassar-area track. Shepherd bought the railroad in 1991, when its retained earnings equaled zero. "We've made money since," said Shepherd, who is TSB's board chairman and chief executive officer.

The business' retained earnings are now a healthy $2 million. But it hasn't always been easy. After Sept. 11, shipments squealed to a halt. "Half of my business went away," Shepherd said. "It was an extremely difficult time." The company never has laid off employees. But in January, managers and other workers - except for train crews and dispatchers - took a 20 percent pay cut for eight weeks. Business started to pick up again in January and is now, literally, back on track, he said.

In 1992, TSB was faced with tough financial times and was able to make $20,000 to cover payroll by collecting and selling scrap. "In the short line, you're either creative or you die," said Shepherd, who has more than 30 years experience in the railroad business. "Everyone wears more than one hat. It's the only way a short line can survive."

Small and regional railroads such as the Tuscola & Saginaw Bay Railway are the growth of the rail industry, says the American Short Line and Regional Railroad Association in Washington , D.C. Since the Staggers Rail Act of 1980, which revised laws for rail line sales and abandonment provisions, small railroads have grown from 220 to more than 500 today. Short lines and regional railroads own and operate 29 percent of U.S. rail mileage, or 50,000 miles of track, according the association. The association says local, regional and switching and terminal railroads operate about 2,200 miles of track in Michigan . That's nearly the same amount as the Class I railroads - those with revenues of at least $261.9 million - that operate in the state.

The local and regional railroads, such as TSB, often serve rural communities. TSB has small branches of track north of Owosso to Chesaning and St. Charles and west from Ashley to Middleton, where stops are frequently made at grain elevators. The company moves 10 million bushels of agriculture products outbound a year and 300,000 tons of industrial sand from a Yuma sand facility. The sand is shipped to Cleveland to use in making engine blocks at a Ford plant, its single largest customer. TSB railcars also haul such products as lumber from the Pacific Northwest or Canada and ABC coke from a Birmingham , Ala. , foundry, which is then transferred to trucks at a TSB-owned coke transload station in Cadillac.

One of the TSB's successful business strategies has been working with local trucking firms, including from TSB's plastics holding facility in Clare, Shepherd said. The freight trains haul the heavy loads over long distances, and local trucks take smaller loads to businesses. The railway's Owosso facility, which it bought from Canadian National Railway in January 1998, includes a car work area and elevated train line so mechanics can work under locomotives. Management recently moved from the Matthews Building at Main and Water streets in Owosso to the shops, after a $130,000-expansion of the second story for offices. The transportation manager works in the lower level of the office building. The manager gives track assignments and handles the radio and telephone controls with railroad employees, all to "make sure no one gets headlight to headlight," Shepherd said.

Renee Holbrook, TSB's first woman mechanic, recently was busy checking over a GP35 diesel locomotive's eight, 74-volt batteries. The inspection and cleaning of battery cables was part of the 1960s-era locomotive's 36-month inspection, which includes inspecting the entire train and testing its major systems. "I've been working almost every day for a month (on 36-month inspection)" said Holbrook, 25, of Owosso . Some days, Holbrook tears an engine apart. On others, she works on fueling or other checks. She has been a mechanic at the rail yard since October 1998. Holbrook said she got interested in engines and auto racing when she was 14. "That's when I decided I wanted to be a mechanic," she said. Holbrook and other mechanics inspect everything from air equipment and a car's brakes to locomotives' engines daily. Inspections are required before daily departures. Maintenance and safety also are top priorities. All 400 miles of track must be inspected every week.

This article was from the Flint Journal. Melissa Burden covers business issues. She can be reached at (810) 766-6316 or mburden@flintjournal.com.

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