Many hold that private enterprise is most efficient and that is largely true, but only when there is some competition. When there is none, companies tend to become complacent, improving their outlook by trimming the easiest items (costs) rather than growing the business (revenue streams).
Just what does this have to do with the Union Pacific?
I detailed in the OP about how competiing transportation was making the UP look terrible. They can, and should be, competitive in many markets they now serve, i.e. breakfast cereal from Cedar Rapids.
There are two major cereal production facilities in Cedar Rapids. The Quaker facility is proclaimed to be the largest cereal factory in the world. It produces 100 truckloads of output per day and the UP doesn’t haul one box. General Mills also has a major production facility for cereal in Cedar Rapids and I doubt it uses UP for outbound either. This cereal is in addition to the things I mentioned in my OP such as potatoes, fruits and vegetables, red meat, poultry, coal, etc. It’s not that the UP doesn’t have competition, it’s that they don’t know how to be competitive.
This is an interesting discussion and I wish you’d stay on topic.
Many hold that private enterprise is most efficient and that is largely true, but only when there is some competition. When there is none, companies tend to become complacent, improving their outlook by trimming the easiest items (costs) rather than growing the business (revenue streams).
Just what does this have to do with the Union Pacific?
I detailed in the OP about how competiing transportation was making the UP look terrible. They can, and should be, competitive in many markets they now serve, i.e. breakfast cereal from Cedar Rapids.
There are two major cereal production facilities in Cedar Rapids. The Quaker facility is proclaimed to be the largest cereal factory in the world. It produces 100 truckloads of output per day and the UP doesn’t haul one box. General Mills also has a major production facility for cereal in Cedar Rapids and I doubt it uses UP for outbound either. This cereal is in addition to the things I mentioned in my OP such as potatoes, fruits and vegetables, red meat, poultry, coal, etc. It’s not that the UP doesn’t have competition, it’s that they don’t know how to be competitive.
This is an interesting discussion and I wish you’d stay on topic.
Either late last year or early this year, I heard that local management over there was working with one, and maybe both
Hear what you’re saying Balt. I liken it to the retail grocery business where you carry slow selling items because your best customers demand them. If you don’t have them, those customers will take all of their business lock, stock, and barrel to someone who has them.
Not necessarily that the west end will become busy. Utah’s portion of the Uinta Basin holds a high wax petroleum which is not sought outside the SLC market. At best maybe a train a day of heavy crude will originate, and some phosphate loads. Hardly an investment to keep the DRGW at that or this point. Refiners want light sweet petroleum. Heavy crudes’s more expensive extraction, and upgrading only generates returns with high petro prices due to limited drilling. We’re not seeing that now, and with continued exploration of the; Bakken, Permian Basin, and Wyoming. Petro prices will be depressed for some time…
I was a UP customer for many years prior to my retirement in 2019. I’ll state up front that many of the sales and customer service people with whom I dealt were conscientious and tried to do a good job.
BUT; the fine people with whom I worked always seemed to have at least one hand tied behind their backs due to UP’s cultural indifference to customers and apparent lack of interest in seeing the relationship with their customers as a partnership rather than a railroad / captive shipper shotgun marriage.
Service issues were typically dealt with by pointing fingers either at connecting railroads or at our receiving customers for not doing something the right way. Switching failures at our plants were reviewed with corrective actions proposed only to have the same service failures continue to occur over and over. And despite recurring service issues, contract renegotiation time was always a frustrating experience. We would point out all the failures UP committed and how costly that was to us in terms of lost production or in having to backstop rail deliveries by truck. The standard response to this generally was “we believe we’re providing a value and our price reflects that value.”
I was fortunate in that I pulled the pin at the beginning of UP’s psr implementation so at least I didn’t have deal with a further degradation in an already shoddy product. Based on prior experience though, I can’t imagine any customer with viable alternatives choosing to do business with UP.
That’s a fair question, but I’ll change it a little before I answer it to the best of my ability. Here’s what I’ll respond to: “I wonder how much of UP’s freight market is directly competitive with trucking or BNSF…” I’ll answer by segments.
International intermodal. Except for San Diego (minor), both BNSF and UP serve the same west coast container ports. It’s competitive.
Domestic intermodal. This is pretty much by definition a truck competitive market. For example, apples regularly move by truck from Washington State to Florida. And, again, BNSF and UP largely serve the same markets so there is also rail to rail competition. The exceptions on rail to rail competition appear to be Reno, Salt Lake City and Las Vegas. Those are truck competitive.
Coal, what’s left of it. The UP dominant mining regions in Colorado and Utah are all but gone. The UP competes head to head with the BNSF for Powder River coal and the BNSF wins when it wants to. It’s competitve for the UP.
Carload, non bulk. Again, the two railroads serve the same major areas and compete for the business. Exclusively serving a shipper or receiver can limit rail to rail competition in this segment, but such traffic is usually amenable to truck competition. It’s largely competitive.
Carload, bulk and unit trains. These seem to be UP’s greatest strength. But they can’t play their hand too strongly here. For example, if they push the price too much on ethanol the grain can be diverted to a distilling location located on another nearby railroad. The BNSF, and other railroads such as the CP, CN, IAIS, etc.
Iowa Northern has opened a container facility north of Waterloo/Cedar Falls. UP supports this and crowed about it’s partnering with IANR and a third party contractor at the facility. (I don’t know that it will be handling containers for the cereal companies. I think it might be more for import/export business.)
It’s relatively in the middle of nowhere, railroad speaking. They have to handle the containers from the facility over the IANR to the UP. I think it’s through Manly IA, the north end of the IANR which is the closest UP interchange. (It would probably be better to interchange at Cedar Rapids. Less swapping between trains to get to the west coast bound trains.)
Don’t get me wrong, if anyone can make a go of this operation it will be Dan Sabin and his Iowa Northern. Unlike UP or most of the other class ones, he looks for opprotunity to grow their business. It’s just that maybe UP should be the one doing a mini-container operation on it’s main line.
Class 1’s wont’t do anything that has costs in additon to revenue generation if they can’t foist a large share of the costs onto a ‘short line partner’.
Here’s a portion from Trains news wire about a UP C-suite change
Vena, 62, joined Union Pacific in January 2019, overseeing all aspects of operations including the railroad’s transition to its version of precision scheduled railroading, Unified Plan 2020. The announcement of UP’s hiring of the former Canadian National executive led to an 8.7% jump in Union Pacific’s stock price in the 24 hours after his hiring was announced [see “Jim Vena: Union Pacific’s $9 billion man,” Trains News Wire, Jan. 9, 2019]
Now this part…
“Jim’s contributions to Union Pacific over the last two years have been tremendous,” UP CEO Lance Fritz said in a press release announcing the move. “He helped our team achieve efficiency savings of over $1 billion and deliver the best service product in the company’s history. Jim’s time at the helm of our Operations has positioned Union Pacific well for 2021 and beyond.”
The stench from this last paragraph is mighty strong…
“Jim’s contributions to Union Pacific over the last two years have been tremendous,” UP CEO Lance Fritz said in a press release announcing the move. “He helped our team achieve efficiency savings of over $1 billion and deliver the best service product in the company’s history. Jim’s time at the helm of our Operations has positioned Union Pacific well for 2021 and beyond.”
I concluded years ago the most valuable attribute in a potential CEO candidate is the ability to say BS like this and keep a straight face.