Railcar 101 The Basics of Railcars: Car Types, Components and Rules

1. Railcar 101 The Basics of Railcars: Car Types, Components and Rules Overview and BasicsKen Henman DTE Rail Services, Inc. Railcar 101

2. The Cost of Railcar Maintenance • *According to the Surface Transportation Board 2004 Railway Operating Expenses Annual Report the Class I railroads spent $1,145,888,000 on freight car repairs and maintenance • $305,898,000 was for repairs billed to others *2004 STB Form R-1 Schedule 410 DTE Rail Services, Inc. Railcar 101

3. Why Do You Need to Manage Railcar Maintenance? • Regulatory requirements for U.S. freight cars • Federal Railroad Administration • Association of American Railroads DTE Rail Services, Inc. Railcar 101

4. Why Do You Need to Manage Railcar Maintenance? • This is purely “Corrective Maintenance” to your equipment per the FRA and AAR Rules • The current hourly rate for repairs done by railroads is $94.81 • But Class I railroads are in the transportation business, not the repair business DTE Rail Services, Inc. Railcar 101

5. A Shift in Ownership and Maintenance Responsibilities • In the past everyone called them “railroad” cars • Ownership of today’s railcar fleet has shifted to private car owners • *As of January 1, 2007 freight car ownership by Class I railroads is only 35.3% of all freight cars in U.S. • *1,346,507 Freight cars in service, all U.S. owners • *475,415 Freight cars in service, Class I railroads • Railroads have encouraged customers into ownership of railcars in exchange for reduced freight rates *AAR Policy & Economics Dept, 1/15/2008 DTE Rail Services, Inc. Railcar 101

6. The Standards by Which Railroad Cars Must Be Maintained • The AAR Equipment Engineering Committee, which is made up primarily of railroad officials, sets the mechanical requirements for cars in interchange service • Car owners are required to maintain their equipment to this standard DTE Rail Services, Inc. Railcar 101

7. The Future and Why You Need to Manage Railcar Maintenance? • A change of philosophy • As far as the railroads are concerned equity interests and financial liabilities no longer need to be balanced against railroad operating efficiencies and/or capital improvements • A new plan • Implementation of Advanced Technology Safety Initiative • A proactive approach and opportunity to perform railcar maintenance for car owners DTE Rail Services, Inc. Railcar 101

8. The Future and Why You Need to Manage Railcar Maintenance? • Owners who ignore the trends in today’s industry do so at their own peril • Again- The current hourly rate for repairs done by railroads is $94.81 • Thus the need for proactive maintenance management DTE Rail Services, Inc. Railcar 101

9. Industry Terminology • AAR (Association of American Railroads)- Association made up of railroads • AAR Field Manual- The AAR Interchange Rules which specify inspection, repair and handling requirements of interchange freight cars • AAR Office Manual- The AAR Interchange Rules which specify labor and material pricing, sale, acquisition and settlement for interchange freight cars • ABD- Acoustic Bearing Detectors • ATSI- Advanced Technology Safety Initiative • Bad Order Car- An interchange freight car which is in need of mechanical attention DTE Rail Services, Inc. Railcar 101

10. Industry Terminology • BRC (Billing Repair Card)- Detailed repair record/invoicing • CBA (Counter Billing Authority)- A document that issues authorization to collect or deduct an overcharge from a bill • Contract Shop- A repair facility designated by car owner to perform repairs • Data Exchange System- The AAR’s system of collecting, sorting, analyzing and distributing freight car repair information • Defect Card- A document accepting responsibility for damage to an interchange freight car DTE Rail Services, Inc. Railcar 101

11. Industry Terminology • Delivering Line- Subscriber offering a freight car in interchange • Depreciated Value- The reproduction value of a freight car adjusted for depreciation up to the date of damage according to AAR rule 107 • Early Warning- A directive issued by the AAR for interchange freight cars having mechanical defects or potential safety problems • EHMS- Equipment Health Management System • Foreign Car- Any car not owned by the subscriber DTE Rail Services, Inc. Railcar 101

12. Industry Terminology • Foreign Repair- Any repair performed to an interchange freight car by a company other than the car owner or owner’s agent (contract shop repairs) • FRA- Federal Railroad Administration • Handling Line- The railroad of record having possession of the interchange freight car • Home Shop- A repair facility designated by the car owner DTE Rail Services, Inc. Railcar 101

13. Industry Terminology • Interchange Service- A freight car placed in the North American interchange system that meets all interchange requirements • InteRRIS- Integrated Railway Remote Information Service • Jacking- Raising the car body by any means necessary to safely accomplish repairs • Job Code- A four digit number that identifies the inspection, repair or testing performed on the car component applied or removed DTE Rail Services, Inc. Railcar 101

14. Industry Terminology • JIC (Joint Inspection Certificate)- A document detailing unfair usage damage or loss or extensive owner’s defects as outlined in AAR Rules 95, 108 and 103 • Maintenance Advisory- An informational notice issued by the AAR for cars having minor mechanical defects or which preventative/corrective maintenance is to be performed • Opportunistic Repair- Specific authorized repairs identified in Section A of any AAR Interchange Rule DTE Rail Services, Inc. Railcar 101

15. Industry Terminology • Private Car Owner- Any non-railroad owner of an interchange freight car • Private Marked Cars- An interchange freight car registered in the Umler file with stenciled reporting marks assigned by the AAR ending with the alpha character “X” • Railroad Marked Cars- An interchange freight car registered in the Umler file with stenciled reporting marks assigned by the AAR ending with the alpha character other than “X” DTE Rail Services, Inc. Railcar 101

16. Industry Terminology • Running Repair- Any repair performed to an interchange freight car according to AAR Interchange Rules • Service Interruption- A train delay that is caused by a specific AAR condemnable defect that causes a delay on the line of the road • THD- Truck Hunting Detector • TPD- Truck Performance Detector • Universal Machine Language Equipment Register (Umler)- A computer file which contains specific details such as internal and external dimensions • WILD- Wheel Impact Load Detector DTE Rail Services, Inc. Railcar 101

17. Concept of AAR Rules “The Association of American Railroads has played a continuous role in developing and maintaining a comprehensive set of industry rules and standards aimed at ensuring a safe and efficient freight rail network in North America” • *Safety, Interchangeability Go Hand-in Hand, • Railway Age, • July 2000, • Pat Ameen, Association of American Railroads DTE Rail Services, Inc. Railcar 101

18. Concept of AAR Rules ”AAR's Rules of Interchange, commonly known as the "Field Manual" and "Office Manual," provide a common set of mandatory practices for the proper handling of interchange freight traffic.” • *Safety, Interchangeability Go Hand-in Hand, • Railway Age, • July 2000, • Pat Ameen, Association of American Railroads DTE Rail Services, Inc. Railcar 101

19. Concept of AAR Rules ”These rules include the basic mechanical requirements, conditions governing delivery and acceptance, responsibility for unfair usage/damage, disposition of defective equipment, and a requirement that cars be equipped with AAR approved components that affect car interchangeability. The AAR Interchange Rules prescribe standard repair practices, define the cost recovery procedure, and include an arbitration process.” • *Safety, Interchangeability Go Hand-in Hand, • Railway Age, • July 2000, • Pat Ameen, Association of American Railroads DTE Rail Services, Inc. Railcar 101

20. Concept of AAR Rules • In essence the Rules provide safe seamless railcar interchange throughout the North American rail system, outlining responsibilities for mechanical condition while setting equal standards for all equipment providers • *Safety, Interchangeability Go Hand-in Hand, • Railway Age, • July 2000, • Pat Ameen & David Meeks DTE Rail Services, Inc. Railcar 101

21. Field Manual of the AAR Interchange Rules • Rule A • Outlines the Rules, responsibilities and who must subscribe • Rule B • Qualifies the standards for component manufacturer and reconditioning • Rule 1 • Care of Freight Cars, Inspection, repairs to foreign cars, disposition for unacceptable cars, gages and publications required and car classification • Rules 3 – 82 • Specific to components and repairs, Air Brakes through Welding • A. Cause for Attention • B. Correct Repairs • C. Reconditioning Requirements • D. Welding Requirements • E. General Information • F. Billing Repair Car Requirements • Job Codes DTE Rail Services, Inc. Railcar 101

22. Field Manual of the AAR Interchange Rules • Rule 83 • Preparation of Repair Records • Car Part Codes • Why Made Codes • Responsibility Codes • Car Symbols • Repair Facility Symbol • Rules 84 and 85 • Use of Advertisements and Routing Cards and Furnished Material • Rules 88, 89 and 90 • Mechanical Requirements for Acceptance • Conditions Governing Delivery and Acceptance • Acceptable in Interchange • Cars and/or Car Parts Prohibited In Interchange • Rule 91 • Service Interruption DTE Rail Services, Inc. Railcar 101

23. Field Manual of the AAR Interchange Rules • Rule 92 • Transfer or Adjustment of Lading • Rule 95 • Handling and/or Delivering Line Responsibility • Rule 96 • Owners Responsibility • Rules 102 and 103 • Defect Cards and Joint Inspection Certificates • Rule 107 • Handling of Damaged or Destroyed Equipment • Rule 108 • Cars Requiring Extensive Repairs • Rule 120 • Rule Compliance and Enforcement • Appendix A – H • Various definitions, specifications DTE Rail Services, Inc. Railcar 101

24. Office Manual of the AAR Interchange Rules • Price Matrix • Qualifies every Job Code for • Why made • Responsibility code • Condition code • Material value • Labor time standard and labor value • Applicable credits • Provides information concerning specific Job Codes not covered in the Field Manual • Rule 88, Mechanical Requirements For Acceptance • Specifies the requirements for new, newly acquired, rebuilt, modified, increased gross rail load, extended service status, increased life status and the documentation required for all rail equipment in interchange service DTE Rail Services, Inc. Railcar 101

25. Office Manual of the AAR Interchange Rules • Rule 93 • Train II and UMLER Reporting Procedures, Equipment Management Information System - EMIS • Rule 94 • Equipment Health Management System - EHMS • Rule 102 • Defect Card procedures • Rule 103 • Joint Inspection Certificate, format and procedures • Rule 107 • Handling of Damaged or Destroyed Equipment • Disposition/Settlement, depreciated value or settlement value • Rule 111 • Car repair pricing procedures, basis for labor and material values DTE Rail Services, Inc. Railcar 101

26. Office Manual of the AAR Interchange Rules • Rule 112 • Car repair billing requirements and procedures, invoicing and auditing • Rule 113 • Data Exchange • Rule 120 • AAR Rule Compliance and Enforcement, covers inspections and investigations • Rules 121 and 122 • Arbitration and Rules Committee, Interpretation and Settlement of Disputes • Rules 123 and 124 • Revision of Rules and participation in “AAR Interchange Agreement” • Rule 125 • Early Warning/Maintenance Advisory System • Appendix A – H • Definitions and procedures DTE Rail Services, Inc. Railcar 101