Testimony of David Gunn, Amtrak president and CEO:
Before the Senate Committee on
Appropriations Subcommittee on
Transportation and Related Agencies
Thursday, June 20, 2002
Madame Chairwoman and members of the Subcommittee, I thank you for the
opportunity to appear here today. My name is David Gunn and I have been
Amtrak's President for the past five weeks. I want you to know that when I
accepted the position, I did so with both eyes open knowing that the company
had some very significant and immediate problems. The company had lost
credibility on many fronts and its management structure was ineffectual. The
company made bad decisions while pursuing an impossible goal of
self-sufficiency. Despite these problems, Amtrak and the service it provides
are well worth saving. How it has conducted its business over the last few
years is something that must be changed immediately if we are to survive.
I have been in one form or another in railroading all my adult life and I
firmly believe that rail service and public transit in general must assume a
greater role in our lives if we wish to avoid gradual loss of personal
mobility. I have run larger organizations than Amtrak, but I do not recall
in nearly 40 years of service taking the reins of a company with such
immediate and significant problems. Let me tell you exactly where we are in
getting through the immediate cash flow crisis and then I want to spend a few
short moments outlining whatI plan to do over the next 12 months.
As many of you know, we have been working since the beginning of the year
with our auditors to close the books for 2001 and receive an audit opinion
that will allow us to have access to short-term borrowing. At this time, we
have come to closure on Amtrak's FY01 financial statements with the auditors.
However, we have not come to closure with the auditors on a final opinion.
This fact plus the fundamentals of our business means that our ability to
obtain a short-term loan is in serious jeopardy.
We are pursuing other options at this time before the company runs out of
cash. Since time is of the essence, we notified the Administration that
securing a loan guarantee is the only real option available to us to obtain
short-term financing. On Monday, we took a proposal for a loan guarantee to
the Federal Railroad Administration and, since then, we have been working
closely with them to hammer out the details of this proposal.
If the Administration were unable, or unwilling, to give us a loan guarantee,
then the only other options would be for Congress to direct the Secretary of
Transportation to guarantee a loan or, as a last resort, to step in with
short-term bridge funding for the balance of the fiscal year. The window for
fixing this problem in this way is short. Unless we are able to secure
access to these funds either through a loan guarantee or another form of
funding, I will have no choice but to announce a shutdown of the entire
system. We are in the process of contingency planning and hope that it does
not come to that. However, I have to reinforce that our cash will run out in
July and we have but the next few days to find a resolution to this
Senator Murray and members of the Subcommittee, my home is on Cape Breton
Island. I do get the newspapers out of Halifax and Toronto and even with
just that source of information, I knew last summer that Amtrak was in deep
trouble. When you hav to mortgage your busiest station just to make payroll,
you are only a step or two before the precipice. The announcement in
February threatening to cut long-haul services was not based on reality,
since Amtrak's problems will not be solved by such an action.
My approach to running Amtrak hinges on the fact that I cannot imagine a
country such as ours without a national passenger railroad system. That
means, I would expect that Amtrak will be around for a while. Second, the
basic Amtrak model can and should work. Third, no passenger system in the
world operates without some form of governmental subsidy. That means that
Amtrak will never (a) be profitable, and (b) will always need, just like
every other mode of transportation, some form of public investment, or
subsidy. Lastly, no amount of councils, commissions, study groups, panels,
or symposiums will find a painless answer to what to do about Amtrak. Recent
proposals to privatize or restructure are exercises in problem avoidance.
The federal government must decide what role rail should play just as it does
with highways and air, even waterways.
Now about Amtrak. I am what most people would call a traditional manager. I
believe in a small technically competent management staff with clear lines of
authority and accountability.
Amtrak can be a good operator of rail passenger service. I have gotten
around a bit and have found the employees to be friendly and dedicated, but
very concerned about the railroad and their future. Despite years of
equipment and infrastructure maintenance deferral, our employees have
Unfortunately, the plant and equipment, for the most part, suffers from
neglect. Deferrals of maintenance and elimination of heavy overhauls have
resulted in a multitude of problems. In addition, we have nearly 100 cars
and locomotives in wreck repair status, the majority of which are cars used
on long distance trains. With a fleet of 1500 cars, that is about 1 in 15
cars out of srvice, some of which have been so since the early 1990s. This
Also, we have begun to reduce the number of consultants on the payroll. I
have never been a fan of using consultants. My approach has been to build a
strong management team that can solve and work through its own problems.
I will streamline the organization and establish clear lines of authority and
responsibility. The first thing I asked for when I arrived were organization
charts. I found we had nearly 85 people with titles of vice-president. Many
of these titles had adjectives like senior, executive, or regional in front
of the word vice-president. This is changing.
I found a budget process not based on the actual needs of the operation and
inefficient as a way to enforce discipline throughout the company. Rather
the budget was a document based on unrealistic assumptions regarding revenue
and expenses. There was inadequate control over staffing. Next year, we
will take a different approach by building the budget from the ground up, a
zero-based approach. It will be detailed, based upon authorized positions and
planned activities. If we are going to rebuild track, we will want to know
where and when. You may choose not to fund everything we ask for, but you
will know what is needed and what you are funding.
Driving the budget process, we will look at every route and service to
improve efficiencies and cost recovery. Most of our trains lose money and
they always will, but we can run them more efficiently. That is an
achievable goal. Pursuing self-sufficiency was not. We will share our
budget with you and we will report monthly on our progress.
I have found in life that anything worthwhile comes about through realistic
goals, dedication, initiative and loyalty, not by wishing it so. In pursuing
self-sufficiency, the company tried too many initiatives simultaneously and
pursued an array of financing arrangements to make up for budget shortfalls.
The debt the company ow carries is just under $4 billion and is
unsustainable. Obviously, we cannot rewrite history. What we can do is
learn from our mistakes, get back to basics, and move forward. I will return
Amtrak to the basics of running a railroad.
Finally, while all of our focus has been to resolve the immediate short-term
budget crisis, we have begun to plan for the fiscal year 2003 budget process.
To that end, I cannot emphasize how important it is for Congress to fully
fund Amtrak's $1.2 billion request for fiscal year 2003. This level of
funding should allow us to begin the work that I have outlined in this
testimony and start to rebuild the railroad. I also believe that during this
time period Congress, the Administration and Amtrak will grapple with and
hopefully come to closure on some of the larger fundamental issues that we
need to resolve about the level of service and the way that it is paid for.
Unless or until that occurs, we will always be living on the edge.
Therefore, I reiterate the importance of our budget request of $1.2 billion
for next year and to begin the work to resolve these larger fundamental
It is my hope that you will see significant positive change in the months
ahead -- better equipment, investment in infrastructure, a leaner
organization and an open straightforward approach. Our budget requests will
be transparent, realistic and understandable. We will build a better
railroad and leave the politics to you.
I will stop here because I know you have a number of questions you want to
Thank you for your attention.