Thoughts on the Union Pacific

Trains Magazine General Discussion
1

I always viewed the Union Pacific as fat and happy. Too fat and happy. They don’t seem to have had any significant financial problems since the 19th century. E. H. Harriman took over in the 1890’s and set things straight. After that, they just rolled along in continuous good financial condition.

This meant they didn’t learn how to pinch pennies and hustle for business as many other railroads did. Those are mighty good skills to have when things go south. The UP just never had to significantly develop such skills, and it seems they still lack them. They also never had to worry about having really good management that had those skills. They did, at times, get some good folks to run things, such as Jim Young. But, in general, it didn’t take exceptional ability to keep the dollars coming in at the UP.

One story, which I believe to be true, is that a yard (maybe Hinkle, OR) needed two operating locomotives to function properly. So, they kept four locomotives. Now, you can’t do that. You can’t keep a 100% back up contingency unless you’re just too fat and happy. If finances go bad such extravagances will bite you in the ass big time. They needed a plan for a locomotive failure, but they really couldn’t waste resources as they were doing.

The story goes on to say that a new operating official off the Missouri Pacific was put in charge of the territory that included the yard. The MoP had been through plenty of financial trouble and didn’t waste money like that.

So, what did the old UP people do at the yard do when the new honcho came through on an inspection trip? They “Hid” the back up locomotives. They figured that if he saw the locomotives he’d make ‘em get rid of ‘em. That’s sabo

2

Here’s my thoughts on UP. When I was a young kid growing up in a small town in NE Iowa (in Milwaukee Road and ICG territory), I looked up to the UP as the kind of railroad you aspired to be. Seeing their run-through power on both MILW and CNW back in the day was always a treat and I can still feel the hurt and pain of when the world-famous UP-MILW “Cities” trains were discontinued on the eve of Amtrak. But I digress. Two things stand out in my mind: (1) The UP simply got too big for its britches. It was one thing for them to acquire MP and WP back in the early 80s and WHY in God’s name it took them until 1995 for them to acquire their natural Overland Route partner, CNW, is beyond me. But for UP to have BOTH the MP and MKT? For them to have BOTH the WP and SP/DRGW? To me, something’s inherently wrong with that. I’ll always contend that you need to have a THREE-system west; not two. Towards that end, I’d have the STB force the UP to divest itself of SP and for the former SP to become part of CPRS. One could probably make a similar argument for UP having to divest itself of MKT. The whole thing just got so unwieldy and I don’t think I have to bring up the meltdown that occurred after the SP acquisition. (2) PSR. I’ve seen what it’s done; not only to my employer but to other railroads as well and if UP is going to rejuvenate itself, it needs to kick PSR to the curb and adopt a new mentality. You can keep some elements of it (not saying you can’t) but you need to start thinking outside of the box here when it comes to attracting new business.

3

UP is among the last to adopt PSR. As such they’re focussed on the OR, cost cutting and plant rationalization. Once that’s done they’ll move on to the next stage. It’s a process…they’ll get through it.

4

I pay very little attention to the business side of railroading. But I’ve always thought of UP as The Big Dog of current-day US railroads.

Not so? Are they actually in trouble?

Who is most profitable? BNSF? CN? CSX?

Very interesting comments, guys.

5

For several years now, BNSF has been the largest railroad in the US in terms of loads and revenue. In terms of OR, they are a few points above 60 but back in the day that would have been considered astounding.

BNSF has some great marketing programs with BNSF-certified business development sites and BNSF logistics parks. They compete for Canadian grain by developing an elevator just across the border from Northgate. They run intermodal trains right in to Atlanta via both NS and CSX from Memphis, and run intermodal trains right in to North Baltimore. They also run intermodal trains with CSX between NYC and LA. They continue to invest in the capacity of their system, in particular to eliminate bottlenecks, as exemplified most recently by:

The second bridge across Lake Pend O’Reille on the Northern Transcon

Double tracking of “The Funnel” from Sandpoint down to Spokane on the Northern Transcon

Double tracking through La Crosse, WI, Becker, MN and hundreds of miles in North Dakota and eastern Montana on the Northern Transcon

Triple and quadruple tracking key sections of the Southern Transcon at Amarillo, Belen, Needles and Cajon Pass

Double tracking the Flint Hills section in Kansas on the Southern Transcon

From Rob Krebs through Matt Rose through Carl Ice and now hopefully with Katie Farmer, BNSF has had some very visionary leaders, and just as importantly, being owned by Berkshire Hathaway, Warren Buffett.

I will never forget Matt Rose speaking at The Economic Club of Minneapolis and mentioning how upon acquiring the BNSF, Warren Buffet told him (paraphrasing from memory - not a verbatim quote) something of the nature to build the railroad to run 100 years.

That is one heck of a story.

6

So is it more the case that by being privately held, BNSF is largely unshackled from the restraints imposed on publicly traded companies? Or is it that UP has never consistently had the right leadership to take advantage of whatever advantages its network has?

7

Unraveling SP from UP wouldn’t accomplish anything. UP and SP are a natural fit. To be quite frank the ICC back in 19

8

If - IF - the Uinta Basin Railway gets built, the west end of the DRGW could become very busy, and even more valuable. I don’t see UP giving it up any time soon.

Again - if. There will be many hurdles yet to be surmounted before grading will start on the Uinta Basin Railway.

https://www.railwayage.com/freight/short-lines-regionals/uinta-basin-railway-green-lighted/

9

I trust older members of this forum will smile and nod with respect when they see who the indicated senior vice-president of the railroad development company Rio Grande Pacific is.

10

Roger that.

11
12

I guess I qualify as an “older” member of the forum [sigh], but I can’t find the name of the person you allude to.

13

Mark Hemphill was the editor of Trains Magazine from 2000 to 2004.

14

. Thank you. That was my guess but I couldn’t find that looking up DRG on the internet.

15

This stumped me. I went to: https://rgpc.com/management/

and I did not see a senior vice-president. I saw Vice Presidents of Finance; of Marketing and Sales; and of Administration. Also Brent M. Burns Senior Finance Executive. So I need a clue as to what you are hinting about.

And now that others have said Mark W. Hemphill, and Railway Age had an article in August

https://www.railwayage.com/freight/short-lines-regionals/hemphill-heading-uinta-basin-railway-project/ indicating that he is “leading the team”. He not listed on the railroads webpage. So for what company is he vice-president? What is the railroad development company’s name?

16

Read the linked Railway Age story until you come to a name in boldface type…

17

DISCLAIMER:
“Originality”: ideas I’ve pushed for since I started posting on TRAINS years ago: 100% (or very high) tax credits for all infrastructure improvements; modernizing archaic rights of ways; and strategic intermodal terminal locations. Other thoughts inspired by others…… just being careful….

PUTTING UP VS. BNSF IN PERSPECTIVE:
BNSF is in a meltdown on Northern Transcon; crew shortage and ability to take trains at west coast ports and Seattle-area ramps. BNSF only looks good in comparison because the bar at UP is so low.
BNSF capacity investment is “nice”, but still too slow on Northern Transcon and LA Basin. Bump up by 50%, reduce $ going to B-H for a while. Fix Sea-Tac domestic ramp problem. Short-term pain, but builds that 100-year railroad!
BNSF also has Southern Transcon congestion problems at ramps in LA Basin: trains held far too long waiting ramp space. Barstow has helped, but not enough: they must accelerate Colton project. At least they did double Phoenix ramp!
Beyond Northern & Southern Transcons, and Chicago-Alliance, BNSF intermodal lanes are not successful or are only marginally so. PNW to TX good example. Denver area another. Opportunities are limited.

UP:
Where to start? UP needs entirely new creative, out-of-the-box C-suite team, and has for a long time. Jim Young was a shining star who was brilliant, customer- and service-centric: a major loss. The takeover by MoPAC management did far more damage than OP gives credit (or blame) for.
UP capacity investment: not at all what it should be. Stop the excessive distributions and stock buybacks (and debt}. Complete the Sunset 2MT project, add more elsewhere. Finish LA Basin 2MT. Streamline 19th- and early 20th-Century alignments, both for current and future traffic (that they are not now purs

18

When rail infrastructure has to be maintained by private business, maybe you can justify two railroads for competitive reasons and back-up. However, three railroads serving the same lanes would now be unsustainable.

I agree that the D&RGW and WP should have been spun off in the UP/SP merger, and I would liked to have seen them land on BNSF, however, I don’t know if BNSF would have wanted such a second tier corridor which is only 50 miles shorter than their own route to the Bay Area via the Southern Transcon.

19

I remember a discussion in a recent thread about UP vs BNSF in LA Basin intermodal, and how everyone thought UP was throwing away business since they would not run bare-tables to LA to help with an intermodal surge, and charged $5000 (?) extra fee. Nevertheless a recent Trains NewsWire article showed that last quarter, while BNSF intermodal was down a bit, UP was up 6 points. I think this goes along with the OP’s observation that good fortune seems to flow to UP without much effort.

https://trn.trains.com/news/news-wire/2020/10/14-despite-intermodal-gains-class-i-volume-slumps-in-third-quarter

20

I disagree about PSR. Yes, it doesn’t have to be a recipe for diaster but the way most practice it, it is. Because it colors every decision made. It leads to walking away from opprotunities and/or pushing away existing business. It leads to cuts where the remaining business can’t be properly serviced at times.

One of Uncle Pete’s tenents for the Unified Plan 2020 is “secure appropriate business.” More and more because of PSR it seems that means business that doesn’t raise the OR. They pushed away business before PSR, but once they got on that bandwagon it became worse.

Our new incoming CFO said reaching the 55 OR goal is achievable, that the goal really should be an OR of 50%. Their having a tough time reaching 55%, cutting and gutting where ever possible and now someone wants to cut some more. Because that’s all they seem to