BusinessWeek now gives BNSF the twelfth spot in the “50 Best Performing Corporations” rankings because
- It currently enjoys “unmitigated pricing power”
- Can pass on increased fuel costs
- Has a 15% cost advantage over trucks, and many items can’t be carried by truck at all.
Link to BNSF story (requires subscription)
Since many don’t subscribe to BW, here are some highlights:
Customers are squawking about “unreasonable” rate increases along with bad service.
CEO Matt Rose thinks that increased investment will eventually address these issues.
“As the peak summer shipping season draws near, Rose is also pushing his workers, launching a productivity drive that he has dubbed ‘velocity.’ Burlington Northern now ties 30% of employee bonuses to improvements in the number of railcars shipped per mile. In Los Angeles, terminal superintendent Charles J. Potempa used to send trains out to Memphis with 180 cars, figuring they could pick up a few more along the way. Now he’ll hold the train until he can come up with a full load of 250 cars; a full load can then run nonstop to its destination, saving time.”
On the other hand, some securities analysts take a dim view of the increased investment so late in the business cycle:
“Burlington Northern shares rose 250% in five years, but have slid 13% in the past three months. If the economy turns down, railroads will suffer – and that investment will have been wasted. Donald Broughton, a transportation analyst at A.G. Edwards Inc., told his clients to sell train stocks earlier this year. He says: ‘If they were behaving like rational duopolists [presumably with UP], they wouldn’t invest a dime.’”
Not unusually for a railroad, BNSF is between a rock and a hard place.