Union Pacific

[MP173]

I really enjoy reading anything that Fred Frailey writes. He is a very talented writer. Any article that he pens is in depth and very informative. I must take exception with the article Rising Phoenix on a winged shield in this month's Trains. Not so much for the content, but for one line. BTW, I have not finished reading the article, but should tonight.

Frailey states "In the end, you are left to wonder how a company run by so many smart, savvy, experienced people could screw up so thoroughly."

Mr. Frailey....this is the THIRD TIME in less than 10 years that the "smart, savvy, experience people" dropped the ball.

How could he have included that line in that article about that company?

Other than that, this excellent article is his usual good stuff.

I am appalled by the accounting hocus pocus, razzle dazzle which went on during fiscal 2002 which enabled the company to "forgive and knock off the books a collective $31 million of the $47 million loaned" the excecutives for purchasing stock in the company. Further, the $5.05 mark was only reached by a 75 cent per share "extraordinary adjustments" that was made.

This story points out that there appears to be something very rotten in Omaha, and other points in the winged empire.

For management to completely disregard the future for current results is something we have learned to live with. But, when that total disregard is laced with 31 million personal reasons to do so, it borders on if not criminal, then at least a lack of fidicuary responsibilty to the shareholders.

Will someone please explain to me how *** Davidson has survived? Is the board of directors so weak to allow him to remain? Is the corporate culture so inbred that there is no one to stand up and disagree? Is his power in the company so concentrated that he is insulated?

Most telling, do the financial markets have such a low opinion of the railroad industry that they allow 3 massive meltdowns?

We have enjoyed very open discussion of the Canadian National situation. Yet, the UP's dilemma is considerable more critical than the CN's? Even on this board, Davidson enjoys a protective shield.


What gives?

Ed

[jeaton]

Ed

With regard to Frailey's sentence that you quoted, it seems to me that you WERE left to wonder.

Forgiving the loans made to senior managers to purchase UP stock was not accounting hocus pocus. There was nothing illegal or shady about that action. It had to have Director approval and as the article noted it was reported in the company prospectus. This is just another type of bonus and the kind of thing that is often offered to senior corporate managers as an incentive to meet specified goals.

That is not to say that it was necessarily a wise move on the part of the directors or top management. Clearly the railroad got screwed up pretty badly and service went in the tank. I think there was a forum topic or topics about UP's problems earlier this year. My own view was that no excuse for the labor shortage could have any merit, and had I been the Board of Directors, I may have been using Donald Trump's favorite phrase. Of course, I am not the Union Pacific Corporation Board of Directors and I don't have any direct ownership of UP stock, so I don't think I have any rights in that area.

So why didn't the UP Directors make some management changes. Here is my guess. The deal was set up. Bring in EPS at $5.00 or more and as a bonus we will forgive $31,000,000 worth of the loans. PERIOD. I am willing to bet that there were no provisions of the deal that said any service standards had to be met, or that there couldn't be a meltdown, or that only X number of customer complaints would be acceptable. Davidson went out and did what he committed to do. What then would be the basis for the board to fire him? You did what we asked you to do, but we just don't like how you did it, so we are going to fire you anyway?

In spite of all the problems the UP had the numbers haven't come out so bad. Here are the earnings per share from 1999 to 2003. $3.22, 3.34, 3.77, 5.07 (2002, the bonus year) and $5.02 for 2003. The unaudited results for 2004 through 3 quarters is $2.00 per share and Wall Street estimates $2.80 for the year. It would be impossible to do an accurate what if and come with a different set of numbers, but if the hiring had gone at a schedule to meet needs, 2002 EPS would certainly have been lower, 2003 may also have been lower and it is fair to say that 2004 would have come out better. Just how much better is impossible to say. Don't forget that the UP also has had to deal with the capacity problems, brought on in part by the extremely poor condition of the SP, and that may be just as much a constraint on earnings as anything else.

It is also not possible to say for certain, but the UP shareholders haven't faired so badly. 1999-2002 dividends per share were 80 cents and in 2003 the dividend paid was raised to 92 cents. Share prices? Closed at 65.80 today. The five year high was in late 2003 at just under $70. From 5 years ago UP is up 68% while the S&P 500 is down 12%. The three year change is UP up 15%, S&P 500 up 5%. I have seen much worse happen.

I happen to admire Frailey's work and I think he did as good as anybody could to explain just how the crew shortgage problem came about.

Jay

(I also know that Frailey gets some good help writting his stories).

[MP173]

Jay:

I admit I shot first and then looked. I have not investigated the finances of UP. I will today.

But, the "extraordinary" stuff in accounting is always very questionable. I have to get my son on the bus and go to work, but will respond later.

Fred's article was very well written. My basic point of this article and the UP situation is why do they keep falling down? Three times in 10 years seems a bit excessive.

SP I can understand, but in looking back, they did not do a good job. The CNW should have been simple, but it wasnt.

Let me ask this....how has UP's main competitor held up during this last period? What are operations like on the BNSF?

ed

[gabe]

Ed & Jay,

That was exactly what I was thinking. Of course, I have tempered my enthusiasm with my maxim of: For every complex problem, there is a simple cause and solution to the problem that a true outsider will see that is ALWAYS WRONG.

I am an outsider, and I will not definitively say “I am right.” But . . .

(1) How many times can someone drop the ball and get away with it?

(2) I think the reason UP execs have been allowed to get away with it is because of rail consolidation. As noted above, UP's bottom line hasn't been that bad. Highways are already overcrowded and there doesn't seem to be enough capacity competition to make UP management pay for their mistakes.

This scares me. I am not a capitalist or a socialist—but I do believe in being ideologically consistent. One of the very bed rocks of a free market economy is competition regulates the market and is the “invisible hand” that provides for the public good. I have to wonder if we are not seeing the “invisible finger?”

Like I said, I am an outsider, and there are at least five people on this forum alone who would only have to say, no Gabe, you are mistaken for me to shelve my belief. But, to quote a football great, "what the [heck] is going on out there?"

Gabe

[jeaton]

Ed

First of all, I am not trying to say that you are off base. The questions you raise are certainly valid and to be real, I can't say that my answers are any more than the opinion of a person with somewhat limited expertise on the subject. I am certainly not going to defend the UP to my last breath. Their screw ups, and I think that is an appropriate term, probably caused some economic damage to the shareholders, and most certainly caused economic damage to many of their shippers.

I think the cause of the problem stems from the somewhat nebulous thing called corporate culture. During my 2 years in the Army, I often heard that there is a right way, a wrong way, and the Army way. Almost any succesful business tends to adopt an attitude that (staying within the law) we can't do any wrong.

Again, I am not an absolute authority on this, but it seems to me that the UP has had a long history of success. Some of that success resulted in being at the right place at the right time, but the people running the place generally didn't loose the opportunity to reap the rewards. A history like that tends to build the mind set that we've got it right and if it ain't broke, don't fix it. As you say, you would think that after a couple of big screw ups, that attitude would change, but the culture gets very entrenched and becomes extremely difficult to change. No doubt there were some among the UP's management team that had second thoughts about a plan of action, but if a view runs counter to the company's convential wisdom, a person needs to take some care in pursueing an issue. That can be bad for one's career.

If you want to make comparisons, I think it is clear that the BNSF did a better job of dealing with the business growth. They certainly didn't completely ignore their own forecasts for operating employment needs.

By the way, all this only reinforces my own pleasure that I no onger have to find gainful employment with a company of large size. My "retirement" business goes well, but that is by my definition. I am sure that if I brought in someone to help me manage the business, my approach would be subject to some criticism. Of course, I would probably fire that person on the spot!!!

Your further comments will be welcome.

Jay

[co614]

I found Mr. Fraileys article very well written and even handed. I too have wondered how on earth has Davidson&Co. not been canned years ago??? This is the exact same team of senior managers that brought you the C&NW total screw-up, followed by Meltdown1(1997-99) and now Meltdown2 . And to add substantial insult to injury Davidson and his associates had the gall to engineer(pun intended) a phony spike in earnings so that they could be rewarded with HUGE cash bonuses and other rewards on the eve of the latest operating disaster.
The fascinating question is where have the "independant" members of the Board of Directors been?? In a coma??? Where have the institutional investors been???
The most illustrative example of how bad these guys have performed is to compare the UP's vital stats(dwell times,train speeds etc. etc.) to the BNSF's. The differences are HUGE and clearly show the tremendous difference competent management can make.
Seems to me that how Davidson&Co. have gotten away with this so far is worthy of an in depth article by Dan Malchalba of the WSJ??
There's got to be something here not apparent to us outsiders!

[jeaton]

May I reiterate a couple of my points.

Unless a person is very skilled at corporate finance and accounting, and have thoroughly reviewed all of the public documents, any arguement that the financial statements do not fairly reflect corporate condition is nothing more than a speculative bias. You have to remember that the annual report has been subject to review by the Board"s audit committee and by outside auditors and the annual report has been signed off by the CFO and by the Board by the CEO. People can go to jail for telling a lie about these things.

You can compare "vital" statistics and all you get is a comparison of "vital" statistics. From the viewpoint of the shareholders and their elected representitives on the board, the "vital' statistics can go in the tank and if the EPS, the dividend and the share price doesn't follow into the same tank, there is not going to be any dramatic action. Since we are not flies on the wall, we don't know what board members may have said to Davidson, but one thing is clear. They have decided that his mistakes didn't rise to the level that demands dismissal. I think it is reasonable to keep in mind that the guy you know may be better suited to resolve problems than the guy you might think you want to have. I have seen first hand the result of a top management change in a large corporation. It wasn't pretty for the customers, the employers or the shareholders. The last group wound up with zip, zero, nada.

Should Davidson be free from blame for the employee screw up? Of course not, and he has gotten it pretty good. I still think that Frailey gave an accurate account of what happened, why it happened and what is being done to fix the problem. Unless a retired director writes a "tell all" book at some time in the future, don't expect to get further factual insight as to what went on.

Jay

[BurlingtonJohn]

A friend of mine is the president of a large trucking company (1,000 + trucks). He made the comment to me, that thanks to the service problems at UP, he literally has more business than he can handle. And once that trucking company gets the business away from UP, they are going to bend over backwards to keep it.

Regards,
Burlington John

[jeaton]

Gabe

If I may throw my two cents at your comment. If I get it, you are wondering if Davidson and his top people said we have 31 mill in personal income at stake so screw the rest of the stakeholders in this operation. Obviously, I couldn't know for sure, but I think not. My view is that everybody there got trapped by the culture of rigid adherance to the budget. As Frailey notes, that was a disipline imposed by Drew Lewis some 20 years earlier.

I think you will agree that large corporations tend not to be very pragmatic. Over time the very large group of individuals may be going in lock step, but to get everybody to turn on a dime is almost imposible. That says something to the idea that society would be better off with a larger number of smaller companies, who could be more nimble in their response to changing conditions. That idea is probably part of the reason that short lines can do fairly well with a lot less. However, as we should realize, our relatively free enterprise system encourages growth from smaller to bigger.

Anyway, I guess we both could be right on this one.

Jay

[jeaton]

BurlingtonJohn

I certainly find no fault with your friend's postion. I would do exactly the same thing, with the same pleasure.

Jay

[daveklepper]

The UP will always get the Lion
s share of the business because of the location of the central corridor and its supplementary routes through El Paso. Sure it can loose something here and there to trucking companies and to the BNSF, but in the long run it will always have all the business it can handle. This kind of "franchise" allows a company to get away with making huge mistakes. But it also means smart management can really do wonders if given the opportunity. I think the UP will have smart management and will bring back customers they lost and be a credit to the railroad industry. I give them five years before people comment on the great improvement.

[gabe]

Jay,

I am not really saying there was any malicious/criminal intent on the part of top. I am merely dumbfounded that someone could drop the ball 3 times in a big way and still maintain leadership.

Gabe

[Anonymous]

It is corporate culture at UP that brought it down with the SP merger and could be on the brink of doing it again. UPs attitude at the time of the SP merger was we bought yuou and you do not know anything. We know it all and you cannot tell us anything. The know it alls did not listen to the SP operating people in Houston and closed some small yards. The rest is history-bad history.

UP has a corporate history of financial shenagans. Looking back over the years we had the Credit Mobilier (sp?), the eye doctor (Durant), Harriman, a few others that I cannot remember, and now Davidson. True, today's UP does not represent the actions of those of 100+ years ago, but one can only wonder.

I also have not finished Frailey's article, but plan to do it tonight.. I am not a financial analyst, so I cannot speak with authority on the workings of the "earnings" plateau reached that triggered the forgiving of the loans. It appears that all was perfectly legal, however, to an outsider it has a certain stench. Anytime you use "extradornary items" to reach a stated goal the question is raised as to ethics.

Only time will tell.............

[co614]

I have good reason to believe that the WSJ will be persuing this. If they end up doing a story I'm sure it will prove to be very interesting reading. Believe me, I've been around this game a long time and there's something very interesting missing here. By ANY normal corporate standards Davidson&CO. would have been gone after the C&NW foul-up and most definitly as a result of Meltdown1. To still be around(with huge undeserved rewards to boot!!!) as Meltdown2 unfolds-defies common sense and begs disclosure.
Good luck- WSJ!!!

[gabe]

I am surprised no one has run with—or against—my suggestion that there is something fundamentally wrong here—not just with UP but with the western rail market in general. I am not saying I am right or that my position is all that, but I am really dumbfounded.

Capitalism needs competition to regulate itself—or an army of regulators if the government allows companies to kill competition. I am fine either method. But are no alarm bells sounding that a company feels so secure in its lack of competition that it can survive with someone who drops the ball more than Oklahoma did against USC last night?

Without the threat of lost business to competition, capitalism does not work—in my opinion. I think this is a bad omen.

Gabe

[MP173]

Several points here, not necessarily in any order of importance:

1. I still have not reviewed UP's financials and after I do, will probably not know enough to comment. I know just enough to get around a balance sheet, income statement, and cash flow statement to get by, but I am not an accountant.

2. Still....75 cents of "extraordinary" income and just getting over the $5/share earnings threshold is very suspect.

3. The agreement should have been based on "operating income". Who is to know that UP did not sell off family jewels in order to reach that $5 figure? I would really like to know where that 75 cents came from. Part of the "extraordinary adjustments" included "tax credits".

4. How in the world would "tax credits" be a logical method for determining compensation (which is what the loan forgiveness really was)? Tax credits often come from tax loss carry forwards, which is the use of losses from companies purchased (SP?).

5. Regarding their corporate culture...I really have no comment on that since I am not a member of the company, but railroad industry seems extremely rigid in their methods. I am not saying that is bad, but it does not appear the local managers have the ability to make decisions to affect the service levels.

6. Isnt it amazing that Ike Evans had to approve all supervisory appointments in 2002? Here we have the President of the company, having to OK an Assistant Trainmaster or Yardmaster, or whatever they are called? What are Division Managers there for?

Hopefully we have a CPA in our midst that can add some financial assistance.

ed

[jeaton]

Sorry Gabe, I did misunderstand. On recent threads, several have suggested that railroads have monopoly positions in certain areas. I think more accurately, those situations could be described as market dominance and that is a condition that exists in many business areas. Does that result in management taking a screw the other stakeholders attitude. Maybe so.

The both the leaders and the general public in the European Union take that view. They are demanding much greater corrective action of Microsoft than our country did. Incidently making our friend The Anti Gates happier. And they also blocked the merger of GE and Honeywell. Those are just illustrations of their attitude on the subject, but it happens because the EU citizens are much more receptive to socialistic regulations than we are.

A little off topic here, but you might want to look at a recently published book by TR Reid "The United States of Europe". Perhaps some insight on what it might take to correct the kind of problem you have posed.

Jay

[ericsp]

I am hoping to find resumes or something that will tell about how much experience the executives and board of directors have with railroads, so far this is all I have found.

http://www.uprr.com/aboutup/exec/index.shtml
http://www.up.com/investors/direct_officers.shtml
http://www.up.com/investors/governance/index.shtml

[dldance]

Calls that the senior management of a company should be fired after a significant event has happened are common. However, those calls are often made without consideration of who would replace them and how do you execute a smooth transistion without further screwing up the company. An orderly, planned transistion of senior management is difficult enough to do while keeping the business operating smoothly. Adding the emotional content of "you're fired" does not make the transistion any easier.

Bottom line - a senior management change is underway at UP and in 2 or 3 years we should know if it is an improvement.

dd

[gabe]

QUOTE: Originally posted by dldance

Calls that the senior management of a company should be fired after a significant event has happened are common. However, those calls are often made without consideration of who would replace them and how do you execute a smooth transistion without further screwing up the company. An orderly, planned transistion of senior management is difficult enough to do while keeping the business operating smoothly. Adding the emotional content of "you're fired" does not make the transistion any easier.

Bottom line - a senior management change is underway at UP and in 2 or 3 years we should know if it is an improvement.

dd

dldance,

You raise a good point; but, how many times does one have to drop the ball before the process is “sped up a bit?”

Also, though your point can't be seriously disputed, might it be argued that this phenomenon is a bad thing in that it gives the people at the top that much more job security and lack of accountability? For my job, I know if I make certain mistakes, I will no longer have my job--and probably have a considerably more difficult time finding another in my chosen field. Accordingly, I endeavor to not make such mistakes.

Do you think, perhaps, it would benefit corporate America as a whole if corporations would try to overcome this obstacle to firing?

I am not arguing with your theory—as I think you are correct, I am just curious as to what you think as to my evaluation of the consequences of your theory.

Gabe

[oltmannd]

How corporations operate has certainly been a hot topic lately.

Here's a couple more thoughts to throw into the mix.

I think that part of the problem is human nature. People (all of us) have an incredible ability to believe their own BS! The most telling example of this on the corporate level was that one of the principles in the Enron fraud was building a new mansion based on future expected earnings! He wasn't trying to swindle the company and run away. He thought what he was doing was perfectly OK even though anyone on the outside could see it was obviously fraud.

Another example was the Dot Com bubble in the stock market. "Basic economic theory no longer applies blah blah blah..." POP! "Gee, what were we thinking!?!"

It's why we have prisons full of people who think "It really wasn't my fault".

This is not a character flaw in a few individuals, but a fundamental part of human nature.

Also, my limited view from the bottom looking up has led me to believe that the chairman has quite a bit of influence over the board. Not so much on their decision making power, but on the information they get that drives the decisions. The reports and presentations the part time board members are fed are colored and edited to support a certain point of view. Sometimes, I beleive it is done deliberately ("Oh, I don't think we should show them THAT!") , but some part of it is that human tendency to believe one's BS is the proper version truth

So, many times, it appears that the board is just rubber stamping the CEO's point of view.

The board meetings are private and there is no "checks and balances" in place to act as BS detectors. I wonder if providing transcripts of board meetings to the corporation's owners might make things a bit more transparent. Sure, it would make keeping corporate competitive secrets harder, but it would be a level playing field.

[gabe]

Oltmand/Don,

I completely agree with you--especially about the part concerning people believing their own BS. You only need to look at a few of my posts to say that arrogant idiot (AKA me/Gabe) actually believes that stuff he is spewing, his only legitimate question should be “would you like your groceries in paper or plastic.”

But, your point is kind of the foundation for my larger point. I think 98% of what keeps people from believing their own BS and developing god-complexes are external restraints. History is littered with tragic individuals who were otherwise good, brilliant people but their success caused their external restrains to be removed and—because they were not graced with humility—their inevitable and cataclysmic demise, facilitated by believing their own BS. Few people, if any, have the natural humility and strength of character to not believe their own BS absent external restraint.

That is why I am kind of jumping up and down over this UP thing. How much restraint can an individual have when he supervised over (arguably) the three largest rail meltdowns in the last decade and a half, and--yet--still has his hands on what is arguably the most powerful railroad in the world?

Given my sincere, heart-felt belief that railroads are an invaluable national asset, this really concerns me!

Gabe

[Anonymous]

Oltmand/Don/Gabe,

Agree with you 100%. Being an executive in the oil and gas consulting industry I have seen many managers of our client companies falling in love with themselves and actually believing their own BS. As Abe Lincoln so well said: If you repeat the same lie long enough people will believe it.

A comment on board of director makeup. The chairman usually packs the board with his cronies and yes men who go along with what he wants. I believe this is the case with UP. Yes, he will have board members from other companies or industries, but this is usualy a scratch my back and I will scratch yours. How many times is the chairman on the board of one of his cornies boards? True, the board is elected by the shareholders. However, name a time when the stockholders have not rubber stamped the slate put up by the Nominating Committee, AKA known as the Chairman. The same goes for resolutions submitted by shareholders. I can only think of one time when the board has endorsed a stockholder proposal. Many years ago a shareholder of Standard Oil of New Jersey, now called Exxon-Mobil, proposed a resulution that all shareholders buy Standard Oil products. There was no way the board could recommend a vote against this.

[daveklepper]

If the UP gets as good management as NS and BNSF have, they ought to be able to solve their problems and maximize income on the terrific "franchise" that they have. In that case, UP will the premier and most profitable of the Big Six. We will know two years from now about the quality of the management.

[Anonymous]

All very interesting and good points. I have to wonder if there is the pool of transportation executives out there that there were fifty years ago. All the bios of "successful" rail executives seem to have some railroading experience in them- Claytor on the Southern being an exception. It appears that back in the "good old days", railroads thought nothing about hiring VP's for Operations aways from each other "to fix problems".

Somehow I kinda doubt this would, or can, happen today. The board of directors at UP is not likely to hire a Ray Krebs away from BNSF. I don't think it's likely that some of the top execs at NS have gotton feelers from UP about coming over to the dark side to "fix problems".

In short, I wonder if there is any kind of available pool of successful railroad executives out there... who have the neccessary operations experience as well as the financial moxie to do what needs to be done.

Finally, I'm reminded of a quote I heard concerning the dotcom bust along with ENRON and MCI meltdowns: "Anyone who actually believes their own press releases is headed for an unhappy wakeup call."

Erik

[slotracer]

As I have related before, modern day class ones are a paramilitary environment to work in. The mindset is so self focused so entrentched that most canot see how far different theri mindset is from teh rest of teh industrial world that has to compete....and operate on thin margins, and keep customers happy to keep them from going away. Railroads for teh most part don't have to, they know they've got you. Truck costs considerably more in many cases, and many companies today have become so specific in raw materials, that changing material or source is not a quick and easy proposition. Shortlines give less releif than they once did as class ones that spin off branches dictate the traffic they handle can only go to the origianl aprent railroad. Class ones will tell you flat out that they are not interested in transloading, one exec at an eastern class one told us it would be a career ending move to pursue one we wanted. Competition is limited, the duopoly in each half of the nation has resulted in monopolistic attitudes.

UP will get theirs, we and every shipper I know hates tehm so badly at this point, we are helping them "demarket" in every way possible. Outrageous service and now they ask for 40-80% rate increases and state no gaurantee of service or equipment. They intend to shed a portion of business....hopefully the least profitable, but their upper management will eventually find that many shippers will continue to look to move every pound off of them they can for a long time to come....loosing more than they hoped for and not all low profit stuff. They will receive a cold reception when they come around looking to get back lost business.

[bobwilcox]

All-This is a very good discussion as is the article in this months trains.

Mark-Concerning the SP's high cost for a property with known problems. Phil Anschutz is a real good negotiator.

My guess is that the next decade will see Jim Young using his CFO experience to bring down the cost of capital with large chunks of federal money.

[Anonymous]

Gabe: That phrase, the "invisible finger" is a classic! Did you come up with that? If so, you should copyright it before Donald Trump nabs it and makes another million.

Mark and others: The notion that "length of hauls" is an indicator of business health, wouldn't it be more apt to analyze annual revenue car miles? It seems to me that railroads are shorting themselves of revenue potential by focussing too much on line haul length of a business opportunity to determine the worthiness of engaging in said prospective business. Does it really matter if a railcar achieves 100,000 miles per year via 40 cross country treks or by 400 regional treks?

It just seems that railroads have turned away a ton of short and medium haul opportunities to conform to the long haul predicate.

[edblysard]

From someone who pounds rocks.....

Up has a plan...
It wants to be the biggest, best and most profitably railroad in the world.

They will get there.

To accompli***hat, you have to hire and keep talent at the top, period.
Forgiving 31 mill in loans is peanuts in the CEO for hire world...
You should see what the top brass at most oil and energy companies make.

As for the SP merger meltdown, no one ever expected the SP to be in as bad shape as it was.
I dont mean just financial, but the physical plant itself.

Add in the cultural differences, and the way both railroads were structured, and the mess was going to happen no matter what.

At UP, you wanted to find your car, you called the customer service desk.

At SP, the last people you called was customer service....what you did was get to know the local trainmaster or hump master, maybe a yardmaster.

You made sure he got taken care of at Christmas...

You called him if you needed something, like where the heck is my car....
he would get ahold of the crew, and find out where they hid your car, and get them to deliver it.

At UP, you better dot your i's and cross your Tees...

At SP, you pushed your paper where it needed to go, but no one read what you put on it....they were too busy making sure their paper got to where it was supposed to go.

This last time around, BNSF were the only guys who ignored the experts who said the new 30/60 retirement contract wouldnt cause any problems.

UP, KCS, CSX and NS all failed to hire enough newbies to cover how many people were going to leave, and because they all missed the mark, they all suffered service difficulties...but because UP is so big, its failure stands out the most.

BNSF, on the other hand, guessed right, and kept on hireing crews, so when all the old heads left, they were pretty much covered.

Ed

[MP173]

I know that $17 million is not a lot of corporate money, but it is a lot of individual money.

Lets go back about 8 years when the big rage was that senior corporate executives were required by certain companies to "own the company". In other words...and this is where I would bet the UP issue came from...if you were going to be a VP or above at certain corporations you had to act as if you owned the company. You were required to purchase substantial amounts of stock. This was during the era of the rising stock market (30 percent per year). Often executives were borrowing millions to purchase stock.

My guess is that the carrot dangled was that if by year 2002 the earning reach $5.00 per share, we will forgive a HUGE amount of the loans, because "you will have done your job in increasing the net income of the company."


Well, would have been a hug temptation to slash expenses, defer as many new hires as possible, and to find create accounting to reach the $5 figure.

Well, congradulations! You did it! Attaboy!

I would like to see full disclosure of what really happened to get to that $5 figure.

The Wall Street Journal may not be a great railroading reporting paper, but they are the best financial reporting paper and would no doubt get answers.

ed