Amtrak's new president, David Gunn, announced June 6 that
unless Amtrak received a $200 million loan, the cash-strapped
carrier would be forced to stop running ALL service, not just the
long distance trains.
Here is the story from the Washington Post:
http://www.washingtonpost.com/wp-dyn/articles/A2438-2002Jun5.html
Amtrak Faces Shutdown in July, Says New Chief
By a Washington Post Staff Writer
Thursday, June 6, 2002; Page E01
Amtrak's financial condition is so bad that the national
passenger train
system will have to shut down in July unless it gets a $200
million loan in
the next three weeks, its new president said yesterday.
David Gunn, while expressing optimism that the loan will come
through, said
any shutdown would involve the whole system – not just the
long-distance
trains but "all of them."
Gunn, who has been on the job for three weeks, has basically
abandoned
former president George Warrington's position that long-distance
trains
will be halted if Congress fails to appropriate $1.2 billion for
Amtrak
next fiscal year.
Gunn also said he will propose a massive reorganization of Amtrak
management today to the Amtrak board of directors, reducing the
number of
"vice president" titles in the company from 84 to about
20 and eliminating
three business units while concentrating management in Washington
in a
"traditional railroad structure." As a part of the
process, he said he is
establishing a policy of total openness on Amtrak's finances,
with detailed
monthly updates that will be open to the public.
But before he can do anything else, Gunn said, he must deal with
a serious
cash crunch that threatens an imminent shutdown.
"If we can't borrow $200 million, we can't make it through
this fiscal
year," Gunn said. "We must have a loan in place by the
end of this month."
In the past, Amtrak has threatened to discontinue individual
trains as a
way to create political pressure on Capitol Hill for more money.
But for
the past year it has become clear to everyone, including
Congress, that
Amtrak's financial problems are real.
Gunn said he is optimistic that he can negotiate a short-term
loan, using
as collateral $200 million from the expected federal
appropriation at the
beginning of the fiscal year Oct. 1.
Amtrak has obtained loans in the past using an upcoming
appropriation as
collateral.
Railroad spokesman Bill Schulz said Amtrak is advising people
holding
reservations in July to "continue to hold that
reservation." He said the
company is working hard to arrange the loan and "we're
optimistic."
Gunn, with longtime railroad and transit operating experience
including
heading Washington's Metro system, said he realized when he
agreed to take
the job that Amtrak was in financial trouble. But he indicated
that after
digging through Amtrak's confusing financial accounting, he
discovered the
situation was worse than he expected.
Amtrak has already mortgaged almost everything it owns, including
New
York's Pennsylvania Station, and its debt has ballooned to $3.76
billion.
That includes a $700 million debt increase this fiscal year that
was used
mainly just to keep the system running.
"What did we get for that investment?" Gunn said.
"We got to survive
another year – maybe."
Gunn said previous Amtrak management " should have blown the
whistle on
this thing much sooner."
His new management plan effectively dismantles almost every
management
change made during the Warrington era.
"The old structure did not foster rapid decision-making
– did not clearly
assign authority and responsibility to individuals, and it was
cumbersome,"
he said. "It lacked in the levels of more technical
expertise that is
required in this business."
He also said the former administration made a "bad
mistake" in not
presenting a clear picture of Amtrak's finances.
Gunn said his new organizational plan will eliminate separate
business
units set up in Philadelphia to run the Northeast Corridor, in
Chicago to
run long-distance trains, and in Oakland, Calif., to run service
on the
West Coast. Those offices will remain open to handle local
matters and
operations, but they will no longer make final decisions on
operations.
Gunn said if the crisis is overcome, he and his new management
team will
concentrate on stabilizing the worn-down Amtrak property and
equipment,
getting wreck-damaged cars back on the track and setting up a new
and more
realistic budget system.
He said that, for now, he is sticking with the request for $1.2
billion in
congressional appropriations next fiscal year. He said he thinks
that will
be enough to at least stabilize the situation and start
rebuilding, but he
cannot say for sure because Amtrak's accounting and budgeting are
not in
shape for him to make a final judgment. If necessary, he said, he
will ask
for more.
"But before you go around asking for megabucks, you need to
know what you
want to know," he said.
Gunn said he does not favor spinning off the Northeast Corridor
to some
non-Amtrak entity, as the Amtrak Reform Council recommended
– at least
until it is put back into good shape. The corollary idea of
having some
entity own the corridor and another entity operate it is
"loony," he said.
Gunn has started building relationships with members of Congress.
In a
personal letter to Sen. John McCain (R-Ariz.), who was critical
of the last
Amtrak management, Gunn said the responsibility for Amtrak's
failures can
be spread around.
He said Congress should never have demanded that Amtrak should be
"operationally self-sufficient," and Amtrak management
should have never
pretended that was possible.
"For the past few years, Amtrak pretended it was on a glide
path to
self-sufficiency and maintained that fiction far too long,"
Gunn told
McCain. "No passenger railroad system in the world operates
without some
form of public support. Why Congress thought Amtrak could somehow
become
free of public support escapes me."
As a result, he said Amtrak is now doing no heavy overhauls and
maintenance
of the Washington-Boston Northeast Corridor "has been
deferred to the point
where there is the real risk of losing the ability to run
marketable
high-speed rail service."
"This is not a way to run a railroad and not the way I will
run the
railroad. Too many happy words have hidden some very dismal
financial
results."
Gunn's rapid and sweeping moves – and his candor – are
consistent with a
management philosophy which in the past has created trouble for
him in
political circles. But he said bold moves are necessary to put
Amtrak back
on a sound footing, and if the political system decides that it
doesn't
like what he's doing, he can return to retirement in Nova Scotia.
"If I were 10 years younger, I wouldn't take this job on a
bet," said Gunn,
65.
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