Intermodal and the Invisible Man: Autonomous Trucks vs. the Railroads

Autonomous trucks could spell the end for railroads' intermodal cost advantages — but the jury on self-driving vehicles is still out. For any number of reasons, the image of driverless trucks rumbling down the nation's highways doesn't sit well with many people. For the railroads, whose intermodal operations do battle each day with truckers for shipper dollars, the notion of autonomous vehicles could be well-nigh intolerable.

The rails' competitive aces in the hole have long been superior equipment utilization, a smaller carbon footprint, and more-efficient use of fuel. Over-the-road truckers haul faster and with more flexibility, but those benefits come at a higher cost than rail. Autonomous trucks could threaten intermodal's advantages by significantly reducing the cost of shipping by truck.

The theory: over-the-road truckers can use the technology to reduce labor costs, cut greenhouse-gas emissions, and slash insurance premiums if insurers conclude autonomous trucks are safer than human-piloted vehicles. Given that labor and fuel alone account for around 70 percent of a typical trucker's operating cost, the potential exists for a meaningful shift in the cost equation between the modes.

Across-the-board adjustments

If the railroads are worried about the competitive threat, they aren't publicly letting on. Of four rails operating along east-west routes that were contacted, only BNSF Railway offered a comment, saying it is "watching the developments occurring with autonomous vehicles and what their development could mean for our business."

Yet it's hard to imagine the railroads sitting by. The Association of American Railroads, a powerful lobbying force, could persuade lawmakers and regulators to delay regulations or mitigate their impact. Railroads could also cut labor costs by reducing train crew sizes or by leveraging investments in Positive Train Control (PTC) technology as a step toward building a fully autonomous train.

Foster Finlay, head of the transport practice at consultancy AlixPartners, said rails' intermodal services have improved to the point where they can challenge over-the-road trucks at any level, regardless of how autonomous truck technology evolves. Rails have shed the old "toothpaste tube" mindset to become more service-sensitive and customer-focused. A just-in-time delivery service, or one as close to it as is practical, is "well within reach," Finlay said.

Autonomous trucks will force change to both highway and rail modes, said Craig Dickman, chief executive of Breakthrough Fuel. For trucks, the potential changes are profound. For rails, it would mean an end to selling intermodal services based primarily on lower costs. As the scales begin to balance, rails will need to strengthen customer relationships, become more data-driven, and operate more efficiently than ever.

"It won't be a situation where one segment wins and one loses in a world transitioning to autonomous trucks. Both segments will change."

Trials under way

Shippers pay the bills, and some are bullish about autonomous trucks. Ties Soeters, North American vice president of logistics procurement for Anheuser-Busch InBev, told an industry conference that self-driving technologies are poised to deliver across-the-board benefits — most critically by mitigating human error, which causes up to 90 percent of all big-rig accidents.

The question for everyone, especially the railroads, is how many big shippers feel that way and whether they are waiting to see how regulators lay out the rules of the road.

The distant future

A fully autonomous vehicle with no driver — known in federal safety lingo as a "Level 5" operation — is years away, if it ever happens at all. A more feasible near-term scenario is "Level 3," where a driver turns over control but remains ready to take over. Or it could be something less daring, such as driver-assisted platooning, where trucks travel in close formation and communicate electronically to coordinate speed and braking, which supporters say will reduce drag and save fuel.

Marc Althen, president of Penske Logistics, reckons platooning could become a reality within a few years. Lee Clair, a consultant who has worked extensively with the railroads, said platoon operations beyond 1,000 miles could "strike at the heart" of intermodal's value proposition of cost-effective long-haul service.

Clair said the effect of autonomous trucks would first be felt through lower motor-carrier insurance premiums as insurers fold safety improvements into underwriting. But Todd Denton of insurance giant Aon cautioned against a black-and-white assumption. Automated braking and collision avoidance are positive developments, he said, but overreliance on technology could create new safety concerns and liability issues if a driver in the cab can't react fast enough in the critical seconds before a collision.

An accident involving autonomous trucks could open a Pandora's box of liability disputes involving truck manufacturers and deep-pocketed technology providers if a system error, not driver error, is the cause. There are also unanswered questions about fault if a cyberattack causes a truck to malfunction.

For now, there is only one safe assumption: autonomous truck technology will be ready before many in business and the public are prepared to embrace it. The Federal Motor Carrier Safety Administration has already assigned task forces to study the issue, including whether hours-of-service rules should be adjusted to account for a driver effectively becoming a passenger for most of a trip.

Yet labor savings may be capped if drivers still need to be hired and retained, even if it means having them seated in the cab. Drivers accompanying autonomous trucks may also need training in a new, sophisticated type of roadside maintenance should a system glitch occur far from any mechanic — a skill set that will come at a cost to truckers and drivers alike.