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RailAmerica Inc. is applying its geographic-cluster strategy – under which the short-line holding company tries to acquire railroads in close proximity to roads it already owns to cut costs – in Michigan.

The company reached an agreement with The Straits Corp. to acquire the assets of Central Michigan Railway Co. (CMGN), which operates 100 track miles from Midland to Durand, Mich., and is within a 90-mile radius of five RailAmerica short lines. The deal is expected to be completed within 60 days pending regulatory approval and closing conditions.

"We expect to derive significant benefits from operating CMGN within our Michigan cluster of railroads," said RailAmerica Chairman, President and Chief Executive Officer Gary Marino in a prepared statement. "Once this transaction is consummated, we will have six railroads in Michigan operating approximately 500 miles of rail line, [doubling] our freight carloads in the state to over 60,000 annually and further solidifying RailAmerica's presence in Michigan."

In 2002, CMGN moved 30,000 carloads and earned $11 million in annual revenue. The short line interchanges with Canadian National Railway Co., CSX Transportation and four other short lines to move agricultural products, lumber, automotive parts, heavy machinery, chemicals, sugar beets, fertilizer, military hardware, fuels, stone, cement and coal.