The Box - Marc Levinson [88]
The court rulings permitting lower rates made the economics of piggyback freight compelling. Trucking companies’ costs were still lowest for short journeys, and the rates charged to shippers were correspondingly lower. Over longer distances, though, trucks’ total cost per mile declined only slightly, because drivers’ pay and fuel, the most important costs, increased along with distance. Railroads’ total costs per mile, on the other hand, declined sharply with distance; once the trailers or containers were loaded on board, running the train came cheap. For distances exceeding five hundred miles, piggyback freight clearly was cheaper to provide than traditional truck service. Even private truckers, who had contracts with particular shippers, could not match the cost of trailer-on-flatcar service over long distances.16
TABLE 4
Cost of Moving 20,000 Pounds of Freight, 1959
The railroads were in the happy situation of being able to pass their lower costs on to customers and still earn better profits than they did carrying freight the traditional way, in boxcars. Freight forwarders took advantage of the rate difference, arranging to consolidate smaller shipments into full carloads, for which they could demand lower rail rates. Manufacturers such as General Electric and Eastman Kodak quickly discovered that there was money to be saved by organizing their production so they could fill trailers or containers and ship them to a single recipient by train, rather than sending a few cases or crates by truck. By 1967, three-quarters of all manufactured goods (excluding coal and petroleum products) left the factory in shipments of at least thirty thousand pounds. Processed food, fresh meats, iron and steel products, soaps, and beer made the switch to piggyback first, but large quantities of everything from oranges to wallboard were soon riding on rails for the first time in two decades.17
To be sure, there were still some regulatory oddities. The ICC let railroads carry trailers at a flat rate per mile so long as the cargo was mixed, but if a trailer contained more than a certain percentage of any single commodity, the shipper would have to pay the specific rate for that commodity. Big shippers, though, were accustomed to such regulatory impediments. They saw not only that piggyback could save money, but that lower transport costs would let them sell their goods in cities that had always been too expensive to ship to. As the railroads increased train speeds, the time needed to deliver a truck trailer from Chicago to California fell from five days to three. Goods spent less time in transit, so inventory costs fell as well. The number of piggyback carloadings doubled between 1958 and 1960, then doubled again by 1965. Flexi-Van provided an astonishing 14 percent of all revenue earned by the New York Central in 1964. Trailer Train, which had less than $1 million in revenue in 1956, became a $50 million business in 1965 and owned 28,000 freight cars.18
International trade was not remotely a consideration when American railroads began their aggressive pursuit of trailer traffic in the mid-1950s. Yet the potential for linking piggyback freight and container shipping was apparent from the earliest days. Most piggyback loads were truck trailers, complete with wheels, that would never travel by ship. About 10