The recent spate of stories in the press and in business publications concerning the current tight steel situation portends difficult times ahead for several years. It prompts ze to write this letter to you concerning the very adverse effect this situation is having on the Railroad Industry's efforts to obtain much needed additional rolling stock. In particular on the Chessie System, we have been quite concerned about our ability to meet the increased demands for coal in the energy and steel industries which have been placed upon us by recent events and which will be with us for some time. We are attempting to support our concerns with substantive actions which we believe are absolutely necessary to improve the nation's available energy. I think that soze of these actions will be of interest to you. Last fall the Chessie System Board of Directors authorized construction of 2,000 100-ton hopper cars for delivery as soon as possible. This past week, our Poard authorized the construction of an additional 5,000 100-ton hopper cars for handling coal, coke and ore traffic, again, for delivery as soon as possible. We are now making plans for these programs to be followed by construction of at least an additional 3,000 cars, a portion of which will probably be gondola cars for handling steel products. These new car construction programs are being accompanied by car repair programs which will maintain our existing coal car and gondola fleets at the lowest possible levels of bad order. In order to provide adequate power for these fleet additions, the past week our Board also authorized acquisition of 72 locomotive units for delivery in late 1974 and early 1975. Further locomotive acquisitions are under study for later in 1975 and in 1976. All of this represents for us a capital investment of well over $200 million. These actions have been taken rapidly as demanded by the rapid changes which have taken place within the energy and steel industries over the past year. Ironically, last year at this time on the Chessie System alone, we had approximately 20,000 idle coal hopper cars because of ecology restrictions on the use of coal and the overall low level of production within the steel industry. These cars were stored at numerous points throughout our System, The Chesapeake and Ohio Railway Company The Baltimore and Ohio Railroad Company loaned to other roads, and even used in grain service. What a marked contrast this past year has brought. Today we have no idle cars and shortages are mounting daily. The fleet additions we have authorized are needed now. But despite the fact that we have been trying to obtain thea since last fall, the first cars will not be produced until January 1975 at the earliest. This is due entirely to delayed deliveries of steel and castings. Our car building shop has the capability to produce 32 cars per day. Yet, it will stand idle for most of the second half of 1974 because of our inability to get suff1-· cient material. Even when we begin car construction in 1975, production will be limited by material availability to only 16 cars per day or 50% of our shop capacity. Adding to our concerns is the general uncertainty as to whether we will be able to obtain enough steel to even maintain a 50% production rate. The normal steel industry practice of not opening order books more than one quarter in advance of production, makes it virtually impossible for us to schedule any kind of construction program with any degree of confidence. I think the unusual nature of our current national situation calls for a reexamination of this practice. Our particular case is doubly difficult. We understand that steel is being informally allocated by the major producers on the basis of a customer's 1972 and 1973 purchases. Those are just the years when we had a continual surplus of coal hopper cars, our car building facilities stood idle, and our steel purchases were very low. The dual obstacles of low allocation levels and little advance comitment are most assuredly affecting the supply of coal hopper and gondola cars available to meet your critical needs. The Chessie System stands ready, willing and able to make the investments necessary to improve the current situation. But we must have the support and cooperation of the nation's major steel producers. This support must include some form of priority allocation for freight car construction in general, and hopper and gondola cars in particular. It must also include. a change in the current practice of making only short term material commitments. We would like to think that your steel company will demonstrate leadership in providing this support. Sincerely, s/ Hays |