Negotiating with Class I Railroads: Insights from the Inside Track
When I started working in the rail industry, one of the first things I bought was a railroad dictionary. That may sound odd, but I approached learning “rail” like learning a foreign language. I knew I needed to prioritize key words and phrases—the basics—and build from there.
Over nearly 24 years working at one of the Class I railroads in various commercial roles, I saw what worked—and what didn’t—when it came to negotiating with railroads. My job, of course, was to make customers believe we wouldn’t negotiate. But here’s the truth:
There is always room to negotiate.
The key is understanding the unique mindset of your rail provider. And it all starts with one fundamental question:
What Drives Class I Railroads?
Unlike traditional service providers, Class I railroads are network operators. They’re not customer-centric in the way many logistics providers are. Instead, their focus is on:
Maximizing asset utilization (locomotives, cars, crews, infrastructure)
Driving operating ratio (OR) as low as possible
Avoiding re-regulation by operating with financial discipline and control
These companies are under constant pressure from Wall Street to protect profit margins. They "print money" when their networks are efficient—and they reinforce the idea that customers have few competitive options to keep leverage on their side.
Understanding this is essential if you want to negotiate effectively. You have to position your business in a way that aligns with their goals.
Start by Knowing Where You Fit
If you're using rail, you need to ask:
Does your business help or hinder their network efficiency?
Is your facility designed for rail volumes and equipment?
Are your shipments consistent and predictable?
Do your cars—or theirs—turn efficiently?
Railroads don’t just value revenue—they value reliability, efficiency, and simplicity. If your freight fits into their network in a clean, repeatable way, you have leverage.
Use Public Earnings to Your Advantage
Because Class I railroads are public companies, you can gain insights into their current strategy just by reviewing their quarterly earnings calls. Let’s take a quick look at what stood out in Q1 2025:
Most railroads missed expectations, citing economic uncertainty.
Intermodal volume grew in the West, but this growth came from less profitable freight, leading to a negative mix shift.
Several carriers reiterated their push to grow volume without increasing capital spend.
The operating ratio remains a sacred metric—with many striving to stay below 60 (yes, that means they’re making 40 cents on every dollar).
So what does this mean for you?
Crafting Your Strategy: Align with Their Goals
Negotiation starts long before you talk rates. You need to tailor your pitch around how your business helps the railroad:
Can they move your freight without disrupting their network?
Is your freight directionally aligned with their capacity?
Does your facility enable fast turnarounds and minimal dwell?
Are you helping them grow volumes in strategic lanes or commodities?
The more you position yourself as a network enabler—not a cost center—the more seriously they’ll take you.
It’s Not Supposed to Be Easy
Negotiating with railroads is intentionally hard. The system isn't designed to be flexible or transparent. But that doesn't mean you have to go it alone.
Whether you're just beginning to build your “rail fluency” or you're deep into strategic procurement, remember: competency breeds confidence. And confidence is key to being treated fairly.
Need help navigating the complexities of Class I rail negotiations? With a combined 50 years of industry experience, we've more than earned our fluency—we know the dictionary front to back. We’re here to support you—whether it’s crafting your value story, analyzing rates, or just demystifying the language of rail. Let’s make sure your voice is heard at the table. Reach out at info@russellkroese.com to learn more.