When a steel company shut down its blast furnace at its plant near Birmingham, Ala., 18 months ago, it didn’t just impact the 1,100 employees that lost their jobs. It impacted Watco Companies, as well: the Customer comprised 80 percent of Watco’s business on the 76-mile Birmingham Terminal Railway.
The nearly 100-year-old plant, located in the suburb of Fairfield, once thrived as it provided steel to ship builders during World War I. But in recent years, cost and efficiency had proved challenging.
With the closure came no more need for the railroad to move raw materials, like ore from Minnesota and coke from the port that came in from China and Japan.
“It was pretty tough,” recalled David Tarwater, now general manager and a 27-year veteran of the railroad.
It meant reducing forces.
“A lot of our Team found homes in other Watco properties — we did our best to take care of them,” Tarwater said.
It also meant looking at how Watco does business.
“We started looking at Birmingham as a whole and we knew we needed to diversify our revenue so we were not dependent on one source,” Tarwater said.
An immediate solution was to add storage to the line of services.
“That brought in new Customers right away,” he said. “Customers like Olin — a chemical company — and Ineos. We started doing transloading with Interchem — a sulfur-based product we transload here. And we brought on American Steel Processing Company, which deals in scrap.”
The coal mines rebounded going into the third quarter of 2016, which also helped. Serving a range of Customers with varying commodities and needs meant if the industry fluctuated, revenue still would be coming in.
Those commodities include synthetic gypsum — formed when fossil-fueled power plants use a “scrubbing” process to remove sulfur dioxide from gas pollutants — which is brought into port, loaded to rail, and delivered it to Customers across the U.S. The product is used in cement, drywall, glass manufacturing, plaster, and soil amendments.
Those commodities also include chemicals brought by rail into Birmingham, loaded into trucks for delivery.
And they include lumber, brought in by rail and stored at the Port of Birmingham for delivery by truck to Customers.
“The commercial Team has been working hard to diversify the commodities,” said McKenzie.
Next up, they’re focusing on a promising opportunity with the City of Birmingham and Jefferson County.
“Diversifying has really given us a shot in the arm,” Tarwater said.
Birmingham was chosen as the site of Watco’s new safety training center, and leadership moved there, meaning People Services, the CMO, chief engineers, and Commercial Manager K.R. McKenzie all office out of the same building on the railroad.
“That’s a huge plus,” Tarwater said. “We can all put our minds together. And if we have a need to visit with a Customer or attend a meeting with a potential one, there’s no travel time.”
Port Birmingham was facing similar challenges after the loss of the plant, so was repurposed and now works hand in hand with the railroad and the City of Birmingham in a private-public partnership.
At the time of the closure, the railroad at its highest employed 180 Team members. At its lowest, it hit 65.
“Today, we’re up to right at 100, so we’re gaining back our strength,” Tarwater said.
The Team employed strategies based on the premise that the budget had to mimic the rails of a track.
“If you look at a railroad track, the rails run parallel and they have to stay that way. The top rail would be our revenue, the bottom would be our expenses. If the revenue falls, expenses have to fall. If we make money, we spend money,” Tarwater said. “That’s how we looked at it from the get-go.”
While Tarwater gave credit to the Team for sticking with Watco, trusting leadership and maintaining morale during adversity, Vice President of Operations Bill Goldsberry praised Tarwater for his style of leadership.
“When the downturn took place, he had relationships with a lot of these guys from the steel company — 20 to 25-year relationships, to where they were considered part of his family,” Goldsberry said. “So there were pretty tough conversations we had. He had to run Watco like it needed to be run to get costs under control, to focus on efficiency. Now, he’s doing more with less, regaining revenue but keeping costs to a minimum.”
On the safety side, derailments and human error incidents are now few and far between.
Goldsberry says the BHRR is doing better than when revenue was higher: “Because we’re not solely dependent on one Customer,” he said. “We have the security of knowing we can touch a lot more people and grow the business for the long term.”
The ABWR
Similarly, the Alabama Warrior Railway, of which Tarwater also is general manager, has bounced back.
The 24-mile stretch of railroad began as a Watco short line in August 2009. But in 2015, Customer Walter Coke, which provides coke for blast furnaces, filed for bankruptcy. At 95 percent of ABWR’s revenues, the loss was felt immediately.
Last year, ERP bought Walter Coke and signed a 10-year contract with Arcelor Mittal, the world’s leading integrated steel and mining company, to provide coke to their facility. This opened the door for Goldsberry and Tarwater to meet with the new owners and negotiate a new — and better — contract.
As a result, revenues have increased by 35 percent from 2015.
Tarwater said Anthony Hoyte played a huge role in keeping the ABWR Team members focused.
“At a time when the Team was worried about having a job, Anthony assured them that Watco would take care of them and kept them motivated,” he said.
About the ABWR: Products such as aggregates, pipe, scrap steel, cement and various other commodities also ride the rail on this line. In addition to rail service, mechanical and transload services are also provided to Customers.
About the BHRR: The railroad has the distinct advantage of access to barge traffic via Port Birmingham Terminal on the Black Warrior River. The river is part of the Tenn-Tom Waterway, which empties out into the Gulf of Mexico at Mobile, Alabama, providing the BHRR with the ability to ship commodities to and from all parts of the world. In addition to providing freight service, the railroad also boasts a mechanical and locomotive shop.
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