An afternoon session with Union Pacific's Lance Fritz: Optimism in the face of adversity

If you are in Omaha, Neb., and you have a convention of 1,250 of the railway industry’s leading suppliers and mechanical associations, then you invite Lance Fritz, Chairman and Chief Executive Officer for Union Pacific to be your keynote speaker.  That was that the Railway Supply Institute did Monday, and Fritz, who took his post in 2015, produced a most interesting and enlightening talk in one of the most perilous circumstances for any lecturer: He followed lunch, that period when even the most attentive listener is challenged. Besides the time of day, the era in which we are in is also a down time for the railroad business in general, and suppliers like those assembled here were certainly ready to hear some good news from one of their biggest customers.

Fritz did what any good CEO of a major railroad should do in the 21^st century. He took advantage of the situation presented to him and directed attention to someone deserving of praise.

First, he embraced diversity and congratulated the League of Railway Industry Women’s outstanding woman of the year, Anamaria Bonilla, assistant chief engineer in charge of track and structures for Metro-North commuter railroad, who received her award moments before Fritz went on. Our congratulations to Bonilla as well: our advertising sales representative, Mike Yuhas, and I, were fortunate to share breakfast with her earlier in the day. She has a difficult task, managing more than 800 miles of track, 385 bridges, and scores of stations. And as witnessed by observing attendees at the show, she’s still one of a handful of women in the industry that is still urgently seeking more qualified men and women.

Getting back to Lance Fritz, he talked about the company’s history (founded in difficult times in 1862 with the Pacific Railroad Act during the Civil War), its current situation (more difficult times with traffic in the pits), and its future (a place that will be better, achieved through innovation and hard work). That was all done with Power Point slides, but what he did in person was more impressive. He bragged on his people: He asked all of the members of the UP team in the hall – and there were a sizeable number -- to stand up and be recognized. Giving credit to others is a worthy trait among any business leader of the 21^st Century. Railroading is often a lonely, boring, solitary task, but being seen as a group dedicated to a common goal is tremendous.

Fritz also acknowledged the current environment in which UP operates. The industry’s life-long traffic staple, coal, is way down and will probably never be back to its former levels. “We’re in really difficult circumstances today,” he says. Still, there are bright spots; Americans are buying 17 million automobiles annually. Grain traffic is strong; August set a record for shipments; and grain in storage is moving to make way for yet another record crop.

Meanwhile politicians are promising things they probably can’t deliver, unemployment is low, consumer confidence is strong, but the gross domestic product is weak, and the number of Americans in the labor pool is off, way off.

Given all of this, UP, Fritz says, will remain optimistic, utilizing innovations, such as a machine visioning installation to scan and photograph passing freights at 70 mph, looking for defects; investing in the future by moving long sections of welded rail on a ship called the Pacific Spike to the port of Stockton, Calif., and thus reducing the number of welds on the railroad; and repairing railhead cracks with a thermal weld that preserves the non-defective portion of the rail. Drones, Fritz says, will help UP inspect its 700 cell towers and 17,000 bridges on its 33,000 track miles.

Of the company’s $3.67 billion capital expenditure budget for 2016, 50 percent will go to infrastructure replacement, and 25 percent to 230 new locomotives ordered in 2014 – long before traffic dwindled. Otherwise, they would not have been ordered, he says, but since they’re here anyway, they will continue to reduce environmental pollution and increase opportunities to run distributed power trains.

While Fritz’s talk was enlightening, there is more that we wish he would have said: UP’s thinking on replacing coal traffic and whether it will be encouraging the development of carload business. Words of praise for the heroic task his crews in California performed to replace a bridge lost on Cajon Pass after the Blue Cut fire. And any hint as to the company’s spending plans for 2017. Those are all welcomed topics. Still, it was good to hear a UP CEO cover all the bases that Fritz did, even in trying times for railroaders from coast to coast. He put a good spin on as he put it, “really difficult circumstances.”