Perhaps some of the blame falls on us-the shipper-in that we need specialized equipment to move certain types of freight. However, the carriers cannot and must not lose sight of the fact that specialized equipment applies to only a relatively few shippers. While one large shipper can use special equipment, there are many thousands of small shippers and receivers who can only use the plain boxcar.

While it is a well-known fact that it is cheaper to rent a car than to build one, we believe that some solution must be reached so that carriers in all parts of the continental United States will provide their share of equipment. It is quite unfair for a midwestern railroad to build a car, then to get only one trip before the car goes off line. In most cases the midwestern carrier does not get this car back until the car is ready to go on the repair track or must be retired.

We believe that such legislation as is proposed under S. 1098, that would allow the Interstate Commerce Commission to set the per diem charges would encourage all carriers to build more cars and help to insure an adequate supply of equipment for all regions of the United States. We support S. 1098 and urge its enactment at the earlier possible date.

REMARKS BY BENJAMIN F. BIAGGINI, PRESIDENT, SOUTHERN PACIFIC CO., BEFORE THE AMERICAN PLYWOOD ASSOCIATION, PORTLAND, OREG., OCTOBER 12, 1965 I welcome this opportunity to speak to you today. We at Southern Pacific are vitally interested in the plywood industry, and we like to think that we have contributed substantially to your growth through our efforts to provide a fast and efficient means of transporting your products to the distant corners of the country at rates that have kept you competitive in the national marketplace.

We have both come a long way in the postwar period, and to illustrate what your industry means to us, to Southern Pacific-let me recall that back in 1947 our total handling of plywood and veneer was fewer than 7,400 carloads. Last year this figure reached 111,500 carloads. By any of our new electronic computers that figures out to be an increase of over 1,400 percent in just 18 years. Plywood and veneer now represent 38 percent of our entire volume of forest products traffic.

By your own figures, plywood production has increased from 1.2 billion square feet in 1945 to an estimated 12.7 billion square feet to be turned out this year. We are, indeed, in a changing and rapidly growing America. Our railroad, and the railroad industry as a whole, have accepted the challenge of change and are eager to have a dynamic role in shaping the America of the future, just as the railroads were a vital force in the development of our present-day industrial society.

In any rapidly expanding industry, growth has its problems as well as its rewards, and we share with you your urgent desire that the railroad transportation system upon which you so heavily depend will in the next 35 years help you literally to build a second America, as President Johnson has forecast. With your continuing help and understanding, we will do everything possible, in the words of your executive vice president, Jim Turnbull, to "get you where the action is," because our interests are exactly parallel to yours.

Right now the prime concern of your industry is getting enough cars, and I can assure you we are as much concerned with this matter as you are. So let's talk about it. I'm sure you didn't invite me here to talk about anything else. Let me say first that we appreciate your recognition that Southern Pacific has made and is making a vigorous effort to relieve this problem. We have attempted to attack this problem from a variety of directions, and I am proud of our accomplishments.

I think it is important, however, that you understand in some detail how many sided our efforts have been, because I think a more complete understanding will serve to bring into better focus some of the elements of the overall problem on which there is presently a considerable amount of confusion.

I also want to tell you about the completely new per-car rates which we are now proposing, which we think, with your cooperation, can be a major step toward meeting your car requirements. I will discuss this in more detail a little later.

We have, of course, undertaken a tremendously ambitious new freight car program in recent years, especially of wide-door cars which cut loading and unloading costs for you and your customers.

In the 6 years from 1961 to 1966, Southern Pacific has accepted or will accept delivery of 21,149 new freight cars at a cost of more than $362 million. Of these, 8,791, over one-third, are boxcars costing over $152 million, and all of them are of this wide-door design.

To supplement our vigorous new car purchase program and to provide fast, direct help to the plywood industry, we are now more than halfway through a program of rebuilding and putting wide doors that provide openings of 10 feet, 3 inches on 7,500 older boxcars. These provide you with the equivalent of doubledoor boxcars. This program, costing $9.3 million, will be completed before the end of next year. It was the first big-scale effort launched by any railroad to widen the doors of older, conventional boxcars, which, because of changes in loading techniques and increased dimensions of products like plywood, no longer meet the convenience of many forest products shippers.

This is an outstanding example of what can be achieved through joint effort of a carrier and its customers. Many of you will recall that this conversion program was the direct result of talks between Southern Pacific and your organization when it was still the Douglas-fir Plywood Association, and with what is now the Western Wood Products Association.

Thanks to our new car purchases and our conversion program, Southern Pacific ownership of wide- and double-door cars has increased by more than 68 percent since 1959-from 19,000 then to more than 32,000. These cars now account for more than two-thirds of our boxcar fleet, and they represent 10.3 percent of the industry's total ownership of wide- and double-door cars.

Our efforts to increase the supply of new boxcars has not been limited to our own fleet, however. In March of 1964, Southern Pacific acquired Bankers Leasing Corp., because we felt there was a definite need to help other roads obtain new cars, where they were not in a position to finance the purchase. Bankers Leasing now has on lease to eastern and southern roads and individual shippers some 2.500 new freight cars costing over $38 million. We are about to consummate a lease with a midwestern road for a thousand additional cars, these generalpurpose cars costing over $17 million. We have offered the services of Bankers Leasing to all American railroads, as a means of augmenting their car acquisitions.

Expansion of our own fleet and our efforts to help other roads acquire more cars, however, are only part of our efforts to meet your car needs. Another part is the question of getting those cars here where they are needed, and we are moving heaven and earth to accomplish this.

We have long been operating as many as 40 trains per week into Oregon, made up of nothing but empty boxcars and flatcars. Many of these trains come from our gateways 3.000 or 4,000 miles distant-as far away as New Orleans, Houston, and San Antonio. Some of the cars are gathered from St. Louis and Memphis. We were able to open these distant gateways in 1961 as a means of substantially expanding our ability to reach out for our empty cars, although this has also substantially increased our cost.

Up to the end of September this year, we had delivered to the Pacific Northwest 122.488 empty boxcars, more than half of wide- and double-door design, and 38,262 flatcars, for a total of 160,750 cars.

You are all familiar, I am sure, with the yellow stripes we have put on the doors of the older boxcars whose doors have been widened. These stripes are a signal to railroaders to speed the return of these cars to this area.

Another factor in speeding the return of cars is the revolution which has taken place in every detail of our railroad plant. Of the $20 billion spent by the railroad industry since World War II, for new plant and equipment, Southern Pacific has spent nearly $2 billion, or about $1 out of every $10. The point is that today's modern railroad plant-electronic classification yards, centralized traffic control, microwave, television, computers-has speeded up the whole tempo of our operations. The results are clearly evident in the 28-percent increase since 1959 in daily mileage of freight cars moving over our lines, particularly into loading areas, with corresponding increase in car availability. Boxcars and flatcars on Southern Pacific are now averaging over 85 miles per day, loaded and empty, as compared with the national average of 50 miles per day.

Looking to the future of this problem of getting cars back to where they are needed. Southern Pacific is now implementing first units of a new $20 million computer system specifically designed to improve freight car utilization. First units of our total operations processing system, or TOPS for short, will be operative in 1967, and the system will be completed in 1970.

We will then have available at all times information on the current location of every freight car on the railroad. This will provide a far more efficient system of car control for minimum lost time than is now possible.

In addition to expanding our wide- and double-door fleet and our efforts to speed the return of empties, we have also been successful in getting more use out of the cars we have by encouraging heavier loading.

The incentive rate system we pioneered has resulted in $70 million in rate savings in the past 6 years to you and other forest product shippers in the Northwest. Incentive rates have raised the average loading per car on lumber products by over 5 tons-from 33.9 to 39 tons-in the past decade.

But equally important, without these heavier loadings, we would have needed some 200 more cars, available for forest products loading each working day, in order to handle the same amount of traffic. When you realize that 200 cars represents almost 20 percent of our more than 1,000-car-a-day requirements for all kinds of forest products loadings you can appreciate the significant contribution incentive rates have made in better utilization of the available car supply. Now I want to talk about the new rate proposal we are just now making. This is the new schedule of per car rates which we plan to place in effect from Oregon and northern California points as far distant as Tucson, Ariz., as the ultimate extension of the incentive rate principle. If this initial stage of the program is successful, a study will be made as to its possibilities on transcontinental traffic.

We have two purposes in proposing these new per car rates. One purpose is to encourage you to accept narrow-door boxcars and flatcars by giving you a rate savings to balance your extra handling or packaging costs. The other purpose is to encourage even further the loading to maximum capacity of all types of equipment-wide and double door as well as narrow door and flatcars. Per car rates call for a set charge, depending on the type of car, with the privilege of loading to the full capacity stenciled on the side of the car furnished. For example, using the Portland group to San Francisco as a destination, a narrow-door, 40-foot boxcar of 3,500 cubic feet or less calls for a rate of $270, which is $48.50 less than the alternate incentive rate of 70,000-pound loading and provides still greater savings as more weight is loaded. A 40-foot, narrow-door car with more than 3,500 cubic feet capacity calls for a $295 rate-a savings of $23.50 for 70,000-pound loading, or a saving of $114.50 if the car is loaded, for example, to 90.000 pounds. Per car rates for wide- and double-door cars and larger narrow-door cars also offer savings over the alternate incentive rates, if loaded to capacity. This is also true of per car rates on flatcars, which vary according to the length of the car.

One of the points of confusion in the car supply problem here is that it is frequently referred to as a car shortage. Most often this is not the case, but only a shortage of one kind of car, the wide-door variety. Except in emergencies such as military movements or acts of God such as floods or storms, we would be able to supply a narrow-door boxcar or a flatcar if we knew it would be acceptable.

This I can promise you-that if the new per car rates are as acceptable to you as we expect they will be in encouraging your use of other than wide, and doubledoor cars for a marginal part of your shipments, we will have overcome the major part of your car supply difficulties.

This. gentlemen, is what we have done and are doing to relieve the car supply problem. I assure you we will continue to do much more than our share in providing adequate cars to meet the expanding needs of your industry and the Nation.

But I would caution that there are no simple solutions--no shortcut to salvation. In fact, I feel there is real danger in attemping to oversimplify either the causes or the solutions, because this tends to obscure the basic issues.

As you may know, we have not supported the current per diem legislation. It has been for this very reason that we think that adjustments in per diem are only a part of the answer.

In the frustrations of attempting to solve the car supply problem, too many have come to regard the bill as a shortcut to salvation. If we felt this proposed legislation would do what its proponents think it would do, believe me we would embrace it heart and soul.

Southern Pacific was the chief proponent of the principle of graduated per diem rates, and certainly we think they are important. But we don't think they are

the whole answer. Beyond this, we don't think anything can be gained by placing control of per diem in the hands of the Interstate Commerce Commission when the railroads themselves are making a study of per diem adjustments to stimulate maximum car acquisitions. Giving the authority to the Interstate Commerce Commission would, in our opinion, merely saddle the roads with additional regulation at a time when the national administration and our customers are joining us in urging less, rather than more, regulatory redtape.

I must call your attention also to the amendments which were made to Senate bill 1098, without hearing, before it was passed by the Senate. One of these amended provisions makes the bill inapplicable to railroads terminating a substantially higher percentage of interline traffic than they originate. In other words, this amendment makes the bill completely self-defeating in exempting those very roads whose car acquisitions it purports to stimulate.

There is also a question of whether the Interstate Commerce Commission needs additional authority affecting car supply. It now has the authority to direct foreign lines to return promptly our wide- and double-door cars, as in the order it issued October 1.

I feel the tendency to oversimplify also runs through much of the promotional material produced by your association in support of Senate bill 1098. For example, we do not share the view that the decline in the total number of standard boxcars in the national fleet since 1946, while it makes an impressive graph, is a reliable indicator of today's car supply situation, nor does it indicate the railroad industry is shirking its responsibilities.

For one thing, it overlooks entirely the fact that many new specialized cars introduced in recent years are now doing the jobs that used to require boxcars. Take the new construction of multilevel flatcars for transporting automobiles from assembly plants to the dealers. Introduction of this new equitment released 3,000 double-door boxcars from auto traffic requirements on the Southern Pacific alone, and we made these available for forest products use. In effect, from your standpoint, this added 3,000 cars to meet your requirements, yet this would not be reflected in a graph dealing in cold and sometimes faceless statistics.

The same could be said for other boxcars made available for forest products and general-purpose use by the shift of grain and other bulk products to cov ered hopper cars, much general freight to piggyback traffic and even many forest product items to flatcars.

Furthermore, the overall decline in the number of boxcars does not give any recognition to the increasing capacity of modern cars, which has gone hand in hand with the lower rates we have been able to offer you for heavier loadings and greater car utilization.

While, just in the last year, the national car fleet was practically unchanged in absolute numbers, it gained more than 1.3 million tons in capacity. The effect is almost the same as 26,000 additional 50-ton cars. While only some of these are boxcars, here, again, the effect is to release many other boxcars from other assignments.

Nor does the overall decline in the number of boxcars reflect the increased daily mileage per freight car, which I have already mentioned.

I think that sometimes we get caught up in the same predicament as Chicken Little in the fable I remember from my childhood days. One day Chicken Little was in a field picking corn when an acorn fell on her head. She decided to go to the king to tell him that the sky was falling. On her way she met various animals, and they all asked her where she was going. She told them, and they followed. Then they met the fox and told him they were going to tell the king the sky was falling. He said he would show them a shortcut and led them all to his den, where he ate them. The moral, of course, is investigate carefully before you become alarmed. Avoid shortcuts and stay out of the fox's den.

Before we may all be consumed by our own alarm, I think we have to recognize what the basic causes of our plight actually are. The basic cause of today's tight supply of modern wide- and double-door boxcars is simply this-that a very substantial part of the railroad industry, up to very recently, has not been financially able to afford the purchase of new cars in sufficient numbers. From 1961 through 1964, as railroad earnings improved, capital expenditures for equipment almost tripled-from $427 million to more than $1.1 billion, and carbuilders are now working to capacity. Others placed today will take 6 to 9 months for first deliveries.

The fortunes of the railroad industry have improved somewhat in very recent years in good part as the result of the roads' own efforts to modernize and cut their costs in the face of spiraling prices of materials and wages and while thwarted by a code of regulation that gives heavy competitive advantage to all other forms of transport.

You note, in your large advertisement which appeared in the Washington Post 3 weeks ago in support of the per diem bill, that President Johnson has said: "In the next 35 years we must literally build a second America."

But President Johnson also said early this year in his economic report that “our national transportation policy should be revised * * * by placing greater emphasis on competition and private initiative in interstate transportation." The President has repeatedly cited the need for reduced Government regulation of transportation pricing and in his statesmanlike tax message of May 17, called for the establishment of adequate charges for the use of Government-built road, air, and water facilities so that commercial users would pay their fair share of the mounting cost of these facilities-which this year will consume $16.2 billion in Government outlays. Also, increasingly acknowledged, is the need to relieve railroads of the destructive burden of discriminatory property taxation. The basic answer to your car supply problem is a financially healthy railroad industry, and this health can only be achieved by less, and not more, regulation. The industry has lifted itself a tremendous distance by its own bootstraps in the past lean years. It has found ways to cut its costs drastically and pass the savings on to you to regain the traffic volume it needs to operate at greater efficiency.

With your help, the future is bright, and your prospects are also bright for an adequate supply of the kind of cars you require.

I must emphasize the "with your help" part of this. We need it every time we attempt to make a major step toward greater efficiency and economy. We need it in the case of our applications for mergers to reduce needless and costly duplication. We need it when we apply for abandonment of passenger services that have outlived their usefulness and no longer serve any public need. We need it in achieving greater freedom to price our competitive services. We need it in support of a principle that adequate user charges should be made for publicly provided transportation facilities. We need it in helping remove the obstacles to transport diversification.

These goals are basic to the long-range job of strengthening the ability of our industry to serve you most effectively, and I ask your continuing support. Before closing, however, I would also like to suggest some immediate things you can do right now which will assist greatly in the problem of car supply. You can help us to gain more control of our own cars and speed their turnaround to you, by loading Southern Pacific-owned cars, especially wide- and double-door cars, to destinations on our lines, and utilizing the cars of other ownership for points off our lines. We'll see that our cars get right back to you. When you have shipments to come from the East or Midwest, you can order them in wide- or double-door cars.

In your contacts with eastern and midwestern railroads which participate in the line haul of your eastbound movements, you can use your own influence to have them return our Southern Pacific equipment promptly and to direct as much of their own wide- and double-door cars to the Northwest as possible.

You can give us the most accurate possible estimates of your requirements, ineluding specific instructions as to whether you can accept a narrow-door car or flatcar when a wide- or double-door car is not available.

In return for your help in both the long and short range, we, in turn, can assure you of our continuing dedication to the principle of providing you with the best equipment and service and the lowest rates it is possible for us to provide.

STATEMENT BY WENDELL B. BARNES, EXECUTIVE VICE PRESIDENT, WESTERN WOOD PRODUCTS ASSOCIATION, PORTLAND, OREG.

Mr. Chairman and members of the committee, my name is Wendell B. Barnes, I am executive vice president of Western Wood Products Association with headquarters in Portland, Oreg.