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Posted by jeaton on Thursday, January 6, 2005 10:23 PM
ed


Well, you could look in the annual report.

Seriously, looking at some numbers for 1999-2003, I found that amounts identified as "cost of sales"-roughly operating expense-were running at approximately 34% of sales. In 2002, the year of the big bonus, the percentage dropped to about 32% which for that year represented a drop of about $200 million from what might be called the normal expense level. That was worth about 75 cents per share. Based on the story that Frailey told, that most of that $200 million could probably be attributed to the hold down on new hires. At a payroll cost of $75,000 per (wages AND benefits), that would be about 26 to 27 hundred employees.

To me "creative accounting" implies an illegal activity. Believe me, neither the UP nor any other Class I has to employ any creative accounting work to make a quick improvement on the earnings. As you note, defering hireing will get it and the last I knew that is neither creative, shady, gray or illegal. As I have indicated The UP's action "saved" $200 million. That represents about 5% of the $4.026 billion in operating expense for the year 2002. I'm sorry, but I can't characterize that as a slashing of expenses.

Jay

"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics

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Posted by dldance on Thursday, January 6, 2005 10:44 PM
QUOTE: Originally posted by 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


Many of the points I would have added have already been contributed by others on this thread. I did fail to mention one point - the pool of qualified, experienced railroad executives is quite thin these days.

There are times to bring in executive talent from outside of an industry - but during an operational crisis such as UP's is not one of them.

CEO's tend to leave companies for one of three reasons:
1 - retirement (the most common)
2 - opportunities at a larger company (next most common)
3 - regulatory insistance (very uncommon)

UP has broken no laws - thus #3 is out. I don't see Davidson moving to BNSF so #2 is out. That leaves #1.

Yes - it is a self-perpetuating system that is full of many flaws. But it does provide the stability and predictability that Wall Street demands. In the end, when Wall Street loses confidence in a company -they signal by selling and downgrading. Too much of that and the CEO is generously given the opportunity to retire.

dd

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Posted by gabe on Friday, January 7, 2005 8:06 AM
dldance: I can tell I went to law school and not business school, because that kind of lack of accountability scares the heck out of me and shocks me. Once again, I am not saying you are wrong.

futuremodal: yes, I did think of the "the invisible finger" on my own. Thanks for the compliment. I am kind of surprised that with the recent revival of Adam Smith in scholarly work no one has made more of a big deal about this and the importance of competition in Smith (or even Ricardo’s) business model. It seems like there are a lot of short-cited cafeteria capitalists out there.

Ed: Did NS really do that bad of a job with hiring? Don Phillips in the second to last Trains Magazine gives them high praise for "getting it right." It also seems like there are a lot of people pointing at NS as the example of “good management.” I often wonder if NS and BNSF are really that good, or—in reality—UP and CSX are just that bad and NS and BNSF have made a cottage industry off of the former’s flaws.

All: Please give a look at a new thread I will be posting, regarding SP and UP's purchase of it. I will continue to read and respond to this thread, but I think there is a related topic that might shed some light on this topic: "Could have SP survived without being absorbed into UP?"

Thanks

Gabe
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Posted by oltmannd on Friday, January 7, 2005 8:09 AM
A tangential issue is executive compensation. The US is way out of whack with the rest of the industrialized world and with our past history. Compensation is based on comparisons for similar positions - which sounds reasonable - except there has been an unreasonable upward spiral and the "comparison method" does nothing to stop it. This may be evidence of the "board crony packing" theory, too.

My mother always said, "If everybody jumped off the Brooklyn Bridge, would you?" Just because everyone is doing it, that doesn't make it a good idea.

Maybe compensation should be based on "how little can we pay them before they leave". On this basis, what should *** Davidson be compensated? Who, other than the UP would want him and for what?

Also, NS, and probably some others, have "no compete" clauses in their exec's contracts so that they have a waiting period of several years before they can go work for another RR. NS appartently let Tony Ingram out of this clause when he left for CSX.

-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/

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Posted by dldance on Friday, January 7, 2005 8:40 AM
Gabe - Sarbanes/Oxley is the goverment's latest attempt to restore some of the accountability that is obviously lacking. But I have worked with sufficient companies to know that many corporate law departments are focused on ways to get around the law rather than ways to comply with the law. So far, I am seeing a lot of window dressing to comply with S/O. However, this law does have teeth and CEO can go to jail. After we see the first Fortune 500 CEO do time for S/O violations, we will see the real impact of the law.

Don - Executive non-competes are standard. But just like baseball players are traded - executives can be traded as well. Sometime a trade improves both teams - but I still don't expect any migration between UP and BNSF!

Great thread - I have enjoyed all the discussion.

dd
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Posted by edblysard on Friday, January 7, 2005 9:02 AM
Gabe,
Your question about NS hireing might be better answered by some of the NS guys here, my railroad dosnt serve them, so I havent seen any of them in person.
On the other hand, UP and BNSF are members of the assocation, and I can tell you that the BNSF trains hit the yard running hard, most of them had at least one newbie training with them.
The conductors were happy with it, and for the most part, happy with the way their railroad was being run.

The UP guys all looked like death warmed over, and were some kinda POed because they told upper management from the get go that a lot of the old heads were going to bail out.

Both railroads had outside research done to determine if the new contract would leave them short handed, and both did internal surveys of their T&E employees...
Both got the same results from the external sources, not that many would leave.
BNSF listend, and guessed a little better than UP, their employees did the math, and figured out that right now was the best time for them, the employees, to get out of it, and they said so to the upper managers.

UP's T&E said the same thing, but somewhere in the translation, UP missread what they meant.

Part of that is the difference in the SP and UP cultures...UP is basicly a huge extra board, lots of guys excerise their seniority on a regular basis...

At SP, above a certain seniority level, the guys pretty much owned their job, they had been there so long in that one slot that even senior guys wouldnt bump them, because all the real old heads already had the job of their choice, and no one wanted to upset the apple cart, everybody already had what they wanted.

Along comes the 60/30, and bam!

All the old head SP guys packed it in.

I think a lot of the old SP guys tended to stick together..we had a lot of crews come in that had worked together for years and years on the SP, and even though the locomotives now were all yellow now, the crews were still Scarlet and Gray...
They viewed the UP as bad guys for trying to change "their" railroad, and felt no loyality towards it...and when the chance to leave appeared, they all bailed out at once.

One heck of a hard hit for any railroad, having that many of its T&E employees jump ship at once.
It was so bad UP took anyone in their employee that held a engineers license and stuck them on a train.
We really had guys in slack and ties running transfer trains and yard to yard runs down here....slacks, ties, borrowed work boots and a cheat sheet on signals in their hands.
With brand new conductors on top of that.

Not that the old SP guys were wrong for what they did, remember, down along the third coast, when you said railroad, you meant SP...they were, and still are a clan of sorts...they cover their backs and the other SP guys backs first.

Now, had UP not cleaned house at the SP mid manager level, and had they kept some of the senior SP guys in place, the word would have made its way to the right people about what was going to happen.

They didnt, of course, but a lot of that is due to the railroad mentality, "we will do it this way, period, and screw anyone who dosnt like it..."which, by the way, exsist at a lot of railroads, not just UP.

Could UP have prevented the loss?

Maybe...after all, when BN took Santa Fe, they were smart enought to hang onto senior SF guys, (we jokingly call BNSF the Brand New Santa Fe) so they kept a great deal of talent and continuity in the way they do business.

Thats not to say UP is the only road with problems, to a certain degree, every other railroad has had the same screw ups...but because UP is so big, it stands out more.

BNSF has had its share of lost business too...

You know why I bought both UP and BNSF stock?

Because if it moves west of the Mississippi, one or the other will, at some point, handle it.

Thats a pretty big piece of the pie.

And I am betting on UP getting, and keeping, a little larger slice than BNSF...

Ed

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Posted by oltmannd on Friday, January 7, 2005 2:39 PM
dd

Agree on SOx. Lot's of paperwork - no real changes. Lets the legislators take credit for having done "something".

One consequence around here is that projects are getting broken into small chucks to get out of all the SOx overhead that "comes with".

Another "board" story I have is that I have seen the theme for the annual report be set before anybody checked to see if the numbers supported it. In the end, the numbers lined up pretty well, but it was a classic case of horse/cart misalignment!

-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/

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Posted by oltmannd on Friday, January 7, 2005 2:43 PM
Ed-

You are probably right about UP's natural advantage over BNSF. CSX has one over NS, too, but they never seem to live up to it.

UP may eventually win out over UP, but, another round of mergers could set that day back another decade!

-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/

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Posted by edblysard on Friday, January 7, 2005 3:48 PM
Dan,
I will refer to Mr Frailey's article..
See page 36, far right, under the bold head line...

The new TEXAS rail corridor

According to him, since merger...UP has invested 15 billion in its physical plant....
And there are people who are upset over the forgiving of a collective 31 million stock debt...key word here, collective.

Couch change compared to what was put back into the railroad....

These guys are playing to win.

They most likely will bang their head on the door frame a few more times...but in the end, they plan on being "THE" railroad in the US.

Ed

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Posted by MP173 on Friday, January 7, 2005 7:12 PM
Ed B:

Thanks for the great explanation on the labor situation with SP. Will you please do me a great favor and explain the 60/30 and what it meant in real situation.

I know the amount of the loan forgiven was small, in a corporate sense. But, when I see the word "extraordinary" with "earnings" the hair on the back of my neck rises.

I will back off of suggesting that there was anything suggesting criminal activity going on at UP. At least not in the sense of Enron, etc. However, anytime a company uses special earnings or restructuring or anything like that they are using a method of accounting that allows them to make general cleaning up of the books.

I would like clarification from Fred Frailey, who is a very gifted financial writer, regarding how the $5.05 was reached.

That's all I want.

Thanks to everyone for great input on this subject. Unlike the CN bashing of Hunter Harrison, this has been handled well, perhaps I went overboard a bit, but hey, nothing personal, it is just business.


ed
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Posted by edblysard on Friday, January 7, 2005 7:51 PM
ed...
Basicly, 60/30 boils down to :
If you have 30 or more years of service in, you can retire at age 60 with full RR Retirement Board payments.

Part of the reasnoing behind the carriers agreeing ot this is it allows the pre 85 contract guys to leave...

And depending on the local union contract, most of the pre 1985 T&E were what we refer to as protected men...they get productivity pay, (a piece of the pie, in a way) and a lot of perks those hired after '85 dont get...air pay, short hand pay, and a few others perks...basicly, the payroll for them is almost twice what the payroll for post '85 employees...

The carriers expected to save a great deal on payroll, adding in the guys who had already qualified for retirement, and natural attrition by death and injury.

What they didnt expect was so many employees to take advantage of it, after all, the external research said most of the guys close or right on the line wanted to stay on a few more years to increase their retirement package.
(a lot of what you get depends on if your spouse works, how much the spouse earns or get from SS,,,its a pretty complicated formula).

LC can explain that in a little more detail and a little more clearly.

Hope I made it clearer...
Ed

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Posted by jeaton on Friday, January 7, 2005 10:46 PM
ed

Sometimes extraordinary earnings can reflect a change in some aspect of accounting. For example, a company can make a change in accounting for the value of inventory on hand for resale and make a difference on the profit margin. Also total earnings might include something like a profit made on the sale of an idle company asset. The idea of flagging an extraordinary charge or income item is to make a note that the results don't reflect "business as usual".

The Fair Accounting Standards Board (FASB) sets the rules for accounting methods and procedures. The objective is to provide a person who needs or wants to know the financial results and condition of a company confidence that there is a consitancy from year to year or from one company to another.

I just think that if there was a story in how the books were kept, Mr Frailey would have had that as part of his article.

Jay

"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics

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Posted by MP173 on Saturday, January 8, 2005 12:14 PM
Jay:

My feelings after reading the article was that there was a huge possibility that those extraordinary numbers were factored in to get to the $5 figure in order to forgive the loans.

I would certainly hope there was no intentional "cooking" of the books which would denote fraud. My original and continued feelings were the use of the extraordinary numbers would be immoral.

The original agreement between the railroad and the managers should have been clear that the $5 threshold would not include extraordinary numbers or a change in accounting, etc.

I would have thought the agreement would have been based on operating income.

ed
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Posted by jeaton on Saturday, January 8, 2005 1:05 PM
ed

Actually I was thinking of starting this thread with the title "Memo to the UP Directors Compensation Committee-Be careful how you structure the bonus contracts."

It is sort of out of favor now, but for a time politicians were using "unintended consequences" to apoligize for doing something that produced bad results. I think that term might have fallen out of favor when it dawned on someone that it could also mean we weren't very smart when we set this up.

Mistakes were made, corrective action is being taken and attitudes are changing. One can't possibly say that other choices would have automaticly produced better long term result. Will this be the end of bad business calls by the UP, any other Class I, shortlines, trucking companies, airlines or any other business? Don't think so.

Jay

"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics

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Posted by PNWRMNM on Sunday, January 9, 2005 6:16 AM
MP 173, CO614, and Jeaton,

MP 173, you expressed concern about extraordiary items contributing to earnings in 2002. I thought you were going to check it out and tell us. You did not so I did.

Jeaton is correct that we are looking for $200 million, but it is after tax, not pretax as labor expense reduction would be.

This is all from uprr.com, Investors, Annal Reports, 2002, 10-K. The 10-K is 76 pages. On page 49 there is a $67 million tax adjustment for the years 1995-1998. On Page 57 we find total shares to be 276 million, fully diluted. In table and text Page 59 are two major asset sales. Utah Transit $141 million gain $88 million after tax, and Santa Clara Transit $73 million gain, $45 million after tax. The tax adjustment and two sales add up to $200 million which is $.722 per share fully diluted.

That is, I suspect, the $.75 per share in extraordinary items Mr. Frailey refers to. There is nothing illegal, immoral or fattening about extraordinary items. Given their nature, I suspect the transit sales were reasonably predictable before the incentive level was selected. The tax item could also have been reasonably predictable before the incentive level was selected.

If I was a stockholder, my concern would be this "Are we selling the birthright for a mess of pottage?", refering specifically to the asset sales to the transit operators. I do not know enough of the facts to have an informed opinion on that question.

Mac
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Posted by MP173 on Sunday, January 9, 2005 11:38 AM
Mac:

Thanks for looking into it. I checked on Morningstar and found nothing that went into the detail that you addressed.

I seem to be out here on a ledge by myself on this, so I am going to let it go. I am not a shareholder and dont plan on it.

I agree with your statement of not knowing enough to be knowledgeable about the sales of the properties and the tax adjustment. Those are very vague explanations and we do not know the situations involving those.

Nor do we know if those sales and adjustments were specifically timed in order to hit the $5 level.

We do know from reading the article that there were very strict disciplines in place that restricted the hiring of personnel. Those disciplines, whether in conjunction with the $5 situation or not, seem to be the major issue with UP not having enough oxygen at this time.

I read a book which outlined various quantitative and qualitative methods for analyzing a company (for selecting as a stock purchase). One of the qualitative methods was the management's ability. I sort of discounted that, saying to myself "how can you measure a managment's ability to communicate and make decisions?" It is so much easier to analyze the numbers.

Well, this is a great example. Most everyone seems convinced there was nothing illegal or immoral done here.

For me, the management failed and has been rewarded for it. This is not a view held only by me.

I quote Jonathan Schrader of Morningstar:

"Investors have suffered since Richard Davidson took charge in early 1997. Because of poor performance in Davidson's first two years, total free cash flow during his tenure is close to negetive $500 million. This situation has improved significantly in the past few years, but the market value of the firm is still just about the same as when he took over. This is despite several different schemes by UP's board to align management's long term interests with shareholder's. Shareholder returns ahve dramatically trailed those of the general market and UP's peers during Davidson's tenure. While shareholders havnt made much money while he's been there, Davidson sure has, to the tune of $18 million (including options) in 2003. This seems too high to us."

Ok, so there you have it. A deal was made between the board and the management that rewarded the management handsomely. The board failed to tie those rewards with the interests of the shareholders.

Unless someone can come up with compelling reasoning, this is my stance. Mac, Jay, Gabe and everyone else, thanks for a great discussion.

ed


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Posted by jeaton on Sunday, January 9, 2005 9:31 PM
ed

Just in closing, I wasn't trying to say that Davidson and his people weren't due some heavy criticism. I was just trying to say that their actions, while having some pretty severe impact on stakeholders, weren't outside the law.

Thanks to Max for getting those numbers out of the annual report. I was running my estimate off the MSN Money five year income statement. 01 to 02 sales jumped $500 million while "cost of sales" dropped $29 million. On the basis of "cost of sales" being the operating expense, I would submit that there was some extraordinary hold on expenses. I say that realizing that the marginal cost of added business can be very modest and an increase in sales dollars can be due to rate increses, which in turn may have actually resulted in a drop of physical volume.

By the way, in addition to the standard public corporate reports, a considerable amount of additional information and detail is reported to the STB, which in turn places the reports on their web site for public viewing. Sometimes, a person with a fairly high level of expertise in railroads might see some clues to potential mistakes in the data.

Jay

"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics

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Posted by PNWRMNM on Monday, January 10, 2005 1:18 AM
MP 173

To me the essence of the story is the "rigid" financial controls on the cost side. Another word for "proud and stubborn"(Pg 32) is hubris, excessive pride or self confidence. That, I think, was and perhaps still is the problem.

I can remember when the UP was a proud railroad becuase they earned it and deserved it. I think that is part of the reason that those who care are so shocked, is that UP tried to go too far on pride.

I think Verhall, page 34, just took that pride one more step in refusing to hire in the Western Region.

I know they shot themselves in the foot in Eugene, which was much reduced in scope with the Roseville rebuild. The reduction at Eugene was appropriate. What was not smart was the departure yard, which they had been using to both arrive and depart trains. They tore out 6 of 10 tracks. That left them with no place to land trains. That resulted in having the sidings full for 50 to 100 miles in each direction at times. That ran up car hire and recrews and made everyone form the Division Manager on down very cranky.

They would have been a lot smarter to spike a couple of switches for a year to see how it worked, but no they pulled the track out. That, to me is hubris. "We are the great and powerful UP and we know what is best". They probably spent 100 times the net scrap value of that track in equipment hire and crew costs, plus destroyed the quality of service. I know it is a small example, but sometimes the small ones are easier to understand.

The real question is whether Jim Young can fix this and if the stock is a buy today. Maybe, maybe.

Mac
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Posted by MP173 on Monday, January 10, 2005 6:56 AM
Jay and Mac:

Great points. I dont have the time to get into the numbers at STB, although I sure would like to!

Mac - you have hit it squarely on the head with that example at Eugene. Now, the only unanswered question is "Why?".

Why in the world would you pull out those tracks? Your idea of beta testing for a year is excellent.

ed
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Posted by PNWRMNM on Monday, January 10, 2005 4:44 PM
MP 173

Fraileys answer, and I would agree, is arogance. See first paragraph of my previous post.

Mac
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Posted by Anonymous on Tuesday, January 18, 2005 1:49 AM
I came upon the latest issue of Trains at my local grocery store today and was mildly surprised to see the cover devoted to my former employer. For a little over five years (January 11, 1998 to September 13, 2003), I was a minion/manager within the ranks of the UP Loco Dept. I live in the land of Brand X (BNSF) now, and seeing as how I no longer have an ear to the proverbial Grapevine, I purchased an issue to see how things were progressing without me.

I was not surprised to hear that the same trials, tribulations and woes I dealt with are still present at Uncle Pete's Rabbit Ranch (a clever moniker I picked up from a good friend at Pocatello). I chose to leave the UP for a multitude of reasons but mostly because I wanted to put a smile on my face again. I started out as a fresh-faced college kid; eager, ready and ever-willing to do my duty for Mr. Davidson and Country. However, as the years progressed, I found my eagerness and naivety being rapidly replaced with pessimism and indifference. There were many times that the satisfaction I gained from a hard day's (or night's) work could be shattered in an instant by a call from Omaha or Roseville. The entire management culture was something akin to a prison in French Guiana. General Grand Poobahs would come out from Omaha to talk to the troops about winning the good fight and espousing a kinder, gentler style of management. Then, behind a closed conference room door, the Poobah would proceed to reduce the local management (myself included) in to a pile of sniveling and shattered humanity. Then, they would proceed to take us out to lunch at the local Chinese place, all the while with a smile.

The arrogance that Mr. Frailey noted knows no bounds and is somewhat understated. It varied from manager to manager in the amount they spewed but really, to survive, you had to act accordingly. You had to belittle and derate your fellow managers in order to keep them from using you as a mat upon which they would wipe their trademark penny loafers. (Penny loafers in a locomotive shop never made sense to me; I preferred steel-toed Red Wings and was the black sheep for it.) The management trainees that were coming out of Omaha were, by far, the worst. It was as if they took an intravenous injection of evil-and-nasty first thing in the morning; they were a strange bunch, to say the least.

In the end, I had had my fill. The bloody conference calls, the daily semi-recorded pep-talk from the Grand Poobah in Omaha, the lack of initiative to make the company a better place and the careful maintenance of the status quo; they all came together to form a single straw that broke the camel's back. I had always wanted to work for Union Pacific since I was a 'little' LostMTKid. However, the UP I had dreamed of was long dead and perhaps nothing more than the idyllic dream of a 5 year kid that was carried over into adulthood. I left the UP in Sept. 2003 with no regrets. I abandoned my business degree and decided to pursue a longtime interest in the social sciences. I now have what I would selfishly describe as an all-around good life. I learned alot from my time with the Union Pacific but I would never return (i've had my collective fill of railroading for a living), nor would I ever recommend a management position to another eager and ever-willing college kid. Someone at the shop once told me that there are bigger and better things in this world than the Union Pacific Railroad...and he was right.

My kudos to Mr. Frailey for a well-written article.

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Posted by Anonymous on Sunday, January 15, 2006 12:48 AM
UP is just to big and needs to down size. Rember when the feds looked to break GM an industiral giant?
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Posted by beaulieu on Sunday, January 15, 2006 1:07 PM
Not mentioned yet but Fred Frailey did say in another forum that the ceeding of the CEO title from *** Davidson to Jim Young was at the insistence of the Board of Directors. Mr. Davidson had intended to keep the designation CEO until he reached manditory retirement age in 2007. It took long enough, but the Independent Directors finally were roused to action.
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Posted by samfp1943 on Sunday, January 15, 2006 2:18 PM
QUOTE: Originally posted by edblysard

Gabe,
Your question about NS hireing might be better answered by some of the NS guys here, my railroad dosnt serve them, so I havent seen any of them in person.
On the other hand, UP and BNSF are members of the assocation, and I can tell you that the BNSF trains hit the yard running hard, most of them had at least one newbie training with them.
The conductors were happy with it, and for the most part, happy with the way their railroad was being run.

The UP guys all looked like death warmed over, and were some kinda POed because they told upper management from the get go that a lot of the old heads were going to bail out.

Both railroads had outside research done to determine if the new contract would leave them short handed, and both did internal surveys of their T&E employees...
Both got the same results from the external sources, not that many would leave.
BNSF listend, and guessed a little better than UP, their employees did the math, and figured out that right now was the best time for them, the employees, to get out of it, and they said so to the upper managers.

UP's T&E said the same thing, but somewhere in the translation, UP missread what they meant.

Part of that is the difference in the SP and UP cultures...UP is basicly a huge extra board, lots of guys excerise their seniority on a regular basis...

At SP, above a certain seniority level, the guys pretty much owned their job, they had been there so long in that one slot that even senior guys wouldnt bump them, because all the real old heads already had the job of their choice, and no one wanted to upset the apple cart, everybody already had what they wanted.

Along comes the 60/30, and bam!

All the old head SP guys packed it in.

I think a lot of the old SP guys tended to stick together..we had a lot of crews come in that had worked together for years and years on the SP, and even though the locomotives now were all yellow now, the crews were still Scarlet and Gray...
They viewed the UP as bad guys for trying to change "their" railroad, and felt no loyality towards it...and when the chance to leave appeared, they all bailed out at once.

One heck of a hard hit for any railroad, having that many of its T&E employees jump ship at once.
It was so bad UP took anyone in their employee that held a engineers license and stuck them on a train.
We really had guys in slack and ties running transfer trains and yard to yard runs down here....slacks, ties, borrowed work boots and a cheat sheet on signals in their hands.
With brand new conductors on top of that.

Not that the old SP guys were wrong for what they did, remember, down along the third coast, when you said railroad, you meant SP...they were, and still are a clan of sorts...they cover their backs and the other SP guys backs first.

Now, had UP not cleaned house at the SP mid manager level, and had they kept some of the senior SP guys in place, the word would have made its way to the right people about what was going to happen.

They didnt, of course, but a lot of that is due to the railroad mentality, "we will do it this way, period, and screw anyone who dosnt like it..."which, by the way, exsist at a lot of railroads, not just UP.

Could UP have prevented the loss?

Maybe...after all, when BN took Santa Fe, they were smart enought to hang onto senior SF guys, (we jokingly call BNSF the Brand New Santa Fe) so they kept a great deal of talent and continuity in the way they do business.

Thats not to say UP is the only road with problems, to a certain degree, every other railroad has had the same screw ups...but because UP is so big, it stands out more.

BNSF has had its share of lost business too...

You know why I bought both UP and BNSF stock?

Because if it moves west of the Mississippi, one or the other will, at some point, handle it.

Thats a pretty big piece of the pie.

And I am betting on UP getting, and keeping, a little larger slice than BNSF...

Ed



It is pretty hard to argue with any of these posts, when taken together they offer a good range of explanations for the rationales listed for the "successes" of Union Pacific and what some might be considered "failures" at BNSF. I would offer this, that the one thing the Union Pacific seems to do best is publicity, and maintain a pubicly hig profile, in the vein of " If it walks like a duck, quacks like a duck, it must be a duck" It is the impressions that Union Pacific has created in the minds of Americans, the conotation of success. The BNSF on the other hand keeps an essentially low profile low profile, does not seem to be able to continue the successful conotation of the public image that Santa Fe brought to their house. They run a respectable railroad [mirrored in their statistics], but seem to be able or unwilling to "blow their own horns". The one exception to this anomaly was the return of the Red and Silver Santa Fe heritage paint, an instantly recognizable icon of American Transportation history.
Finally, was the Rock Island really " A mighty fine road?"
Publicity and image is what stands in the public consciousness, not reality.

 

 


 

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Posted by Anonymous on Sunday, January 15, 2006 2:53 PM
QUOTE: Originally posted by LostMTKid

I was not surprised to hear that the same trials, tribulations and woes I dealt with are still present at Uncle Pete's Rabbit Ranch (a clever moniker I picked up from a good friend at Pocatello). I chose to leave the UP for a multitude of reasons but mostly because I wanted to put a smile on my face again. I started out as a fresh-faced college kid; eager, ready and ever-willing to do my duty for Mr. Davidson and Country. However, as the years progressed, I found my eagerness and naivety being rapidly replaced with pessimism and indifference. There were many times that the satisfaction I gained from a hard day's (or night's) work could be shattered in an instant by a call from Omaha or Roseville. The entire management culture was something akin to a prison in French Guiana. General Grand Poobahs would come out from Omaha to talk to the troops about winning the good fight and espousing a kinder, gentler style of management. Then, behind a closed conference room door, the Poobah would proceed to reduce the local management (myself included) in to a pile of sniveling and shattered humanity. Then, they would proceed to take us out to lunch at the local Chinese place, all the while with a smile.

The arrogance that Mr. Frailey noted knows no bounds and is somewhat understated. It varied from manager to manager in the amount they spewed but really, to survive, you had to act accordingly. You had to belittle and derate your fellow managers in order to keep them from using you as a mat upon which they would wipe their trademark penny loafers. (Penny loafers in a locomotive shop never made sense to me; I preferred steel-toed Red Wings and was the black sheep for it.) The management trainees that were coming out of Omaha were, by far, the worst. It was as if they took an intravenous injection of evil-and-nasty first thing in the morning; they were a strange bunch, to say the least.

In the end, I had had my fill. The bloody conference calls, the daily semi-recorded pep-talk from the Grand Poobah in Omaha, the lack of initiative to make the company a better place and the careful maintenance of the status quo; they all came together to form a single straw that broke the camel's back. I had always wanted to work for Union Pacific since I was a 'little' LostMTKid. However, the UP I had dreamed of was long dead and perhaps nothing more than the idyllic dream of a 5 year kid that was carried over into adulthood. I left the UP in Sept. 2003 with no regrets. I abandoned my business degree and decided to pursue a longtime interest in the social sciences. I now have what I would selfishly describe as an all-around good life. I learned alot from my time with the Union Pacific but I would never return (i've had my collective fill of railroading for a living), nor would I ever recommend a management position to another eager and ever-willing college kid. Someone at the shop once told me that there are bigger and better things in this world than the Union Pacific Railroad...and he was right.


It just goes to show, you can't spell stUPid without UP... [:D]
  • Member since
    September 2003
  • From: Mp 126 on the St. Louis District of NS's IL. Div.
  • 1,611 posts
Posted by icmr on Sunday, January 15, 2006 4:21 PM
One word : stUPid.



Victor

Happy Railroading.[swg][swg]
Illinois Central Railroad. Operation Lifesaver. Look, Listen, Live. Proud owner and user of Digitrax DCC. Visit my forum at http://icmr.proboards100.com For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life. Let every thing that hath breath praise the Lord. Praise ye the Lord. Dream. Plan. Build.Smile, Wink & GrinSmile, Wink & Grin
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Posted by Anonymous on Monday, January 16, 2006 3:13 AM
maybe i've missed the answer to this somewhere so i'll take the lazy way out, but how could UP not have possibly known about SP's supposed 'bad' physical plant? wasn't anything looked at, toured, figured out, thought out? or did UP just roll over out of bed one day and decide "hey, i'm gonna buy the SP" the next day cut the check and later on that afternoon pick up the title.

it just seems hard to swallow the excuse of 'no one knew how bad the SP really was'. maybe the answer is indeed the whole corporate culture deal. the cheifs wouldn't listen to the indians.

maybe if someone has some extra time, could you explain the post-CNW merge meltdown? i wasn't aware of anything happening then. a preemptive thanks..
  • Member since
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Posted by Anonymous on Monday, January 16, 2006 7:54 AM
QUOTE: Originally posted by farmer03

maybe i've missed the answer to this somewhere so i'll take the lazy way out, but how could UP not have possibly known about SP's supposed 'bad' physical plant? wasn't anything looked at, toured, figured out, thought out? or did UP just roll over out of bed one day and decide "hey, i'm gonna buy the SP" the next day cut the check and later on that afternoon pick up the title.

it just seems hard to swallow the excuse of 'no one knew how bad the SP really was'. maybe the answer is indeed the whole corporate culture deal. the cheifs wouldn't listen to the indians.

maybe if someone has some extra time, could you explain the post-CNW merge meltdown? i wasn't aware of anything happening then. a preemptive thanks..


Insider Trading laws make it very difficult to involve the people who really know what the problems are prior to a merger or acquistition, while the board and management of the company being acquired do everything they can to get the best price. Few mergers go smoothly according to plan, the Board may be judging performance based on how well the organization recovers. Consider how NS & CSX have done with Conrail or in another field the HP merger with Compaq.
  • Member since
    July 2005
  • From: CSXT/B&O Flora IL
  • 1,937 posts
Posted by waltersrails on Monday, January 16, 2006 9:16 AM
Don't know .............
I like NS but CSX has the B&O.
  • Member since
    April 2003
  • 305,205 posts
Posted by Anonymous on Sunday, March 5, 2006 9:36 PM
UP will go the way of Con rail!

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