Still Bullish on UP. :)
Always enjoy greyhounds analysis of the industry! He seems to always be able to cut through the 'hype' of the P.R. side ofthe business;, particularly, in this era when everything seems to 'play' to the simpler side of explanations.
Currently, the 'suits' seem to need an easy stick to measure how they are doing [O.R] seems to be the metric they have chosen(?). Sounds kinda sexy, particularly, when delivered as a statement, without elaborate explanations.
I grew up in a family of 'salesmen', the kinds of people who could 'sell ice boxes to eskimos'. Their favorite axiom was "..Nothing happens, until someobody sells something..."
It seems that E.H.H. sold his postulation of P.S.R. to an industry that was looking for some thing or some one, to a industry looking for some explanation that would lead them out of what had become a lack of 'new' ideas, [moribund(?)].
In the 1960's the buzz word was ' rationalization'; to reduce the era of ' overbuilding; that existed in the 40 or 50 years surrounding the turn of the 20th century. Then, along came E.H.H. , his 'gimmick' PSR . The industry had maybe, found a new P.T. Barnum ?
greyhoundsThe UP has all kinds of track is doesn’t need. Get rid of it. The Coast Line, the D&RGW, the KP. Sell them if you can. Otherwise rip them up from the earth. They’re not economically justifiable as part of the UP.
Although I agree with most of your original post, I disagree with the portion copied here. With their "All your base are belong to us" growth strategy, they made decisions that affect other people. For that reason I don't mind seeing them choke on a little overhead. Let's just consider it "spoils of war". If they can sell it to a viable competitor? Sure then, let them sell it (or even lease it) without restriction. But allow them to pull it up? Never in a million years.
samfp1943 I grew up in a family of 'salesmen', the kinds of people who could 'sell ice boxes to eskimos'. Their favorite axiom was "..Nothing happens, until someobody sells something..."
Convicted One greyhounds The UP has all kinds of track is doesn’t need. Get rid of it. The Coast Line, the D&RGW, the KP. Sell them if you can. Otherwise rip them up from the earth. They’re not economically justifiable as part of the UP. Although I agree with most of your original post, I disagree with the portion copied here. With their "All your base are belong to us" growth strategy, they made decisions that affect other people. For that reason I don't mind seeing them choke on a little overhead. Let's just consider it "spoils of war". If they can sell it to a viable competitor? Sure then, let them sell it (or even lease it) without restriction. But allow them to pull it up? Never in a million years.
greyhounds The UP has all kinds of track is doesn’t need. Get rid of it. The Coast Line, the D&RGW, the KP. Sell them if you can. Otherwise rip them up from the earth. They’re not economically justifiable as part of the UP.
Euclid How can they not be allowed to pull it up?
We'll have the knight of a thousand torches and pitchforks pay them a visit.
When you allow a private entity to exploit eminent domain (or any instrument of public conveyance), I believe there is an expectation that the public good must be served? I don't see how allowing the RRs to buy competitors just to pull up their rails for scrap value serves the public good?
greyhounds jeffhergert Our new incoming CFO said reaching the 55 OR goal is achievable, that the goal really should be an OR of 50%. What the new CFO is saying is that the UP sould average a 100% mark up on what it hauls. I regard this as one of the stupidist things I've ever heard anyone in a position of authority say. If it cost the UP $1,000 to produce the transportation they'd have to sell it for at least $2,000 to get a 50% OR. That's a 100% mark up, or margin. It's good to have large margins, but making so large a margin a requirement is going to leave a whole lot of profit dollars to your competition by default.
jeffhergert Our new incoming CFO said reaching the 55 OR goal is achievable, that the goal really should be an OR of 50%.
What the new CFO is saying is that the UP sould average a 100% mark up on what it hauls. I regard this as one of the stupidist things I've ever heard anyone in a position of authority say. If it cost the UP $1,000 to produce the transportation they'd have to sell it for at least $2,000 to get a 50% OR. That's a 100% mark up, or margin.
It's good to have large margins, but making so large a margin a requirement is going to leave a whole lot of profit dollars to your competition by default.
I wonder how much of UP's freight is directly competitive with trucking or BNSF. Maybe they've got a lock on some markets. Even so, I would not go for a 50% OR as that would surely antagonize shippers who would amp up their efforts to bring back economic regulation of the industry. And speaking from personal experience, juicing up the OR is a great way to attract competitors. In trucking we have the opposite problem.. people all too ready to run for a 95% OR to keep hungry competitors out... not that many have achieved a sub 90% OR anyway.
greyhounds charlie hebdo 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.
charlie hebdo 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).
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 of the two big cereal manufacturers, to load containers at Beverly yard. All it would've required is getting a mobile "piggy-packer" to lift the containers on and maybe some more gravel on an access road next to an existing track. (For our Cedar Rapidians, it sounded like they were going to load on the southern most track on the south yard.) From numbers posted by Fred Frailey once, the volumes I heard would've brought in a net profit of about 6 to 8 million dollars. Supposedly, the marketing department told the local officers we aren't going to do it and to mind their own business.
While they may not know how to be competitve, they often seem like they don't want to be competitve. They don't want the business unless it brings in very large amounts of money. It's like if they were a baseball team and they only counted the home runs.
Jeff
jeffhergertIt's like if they were a baseball team and they only counted the home runs.
Interesting you say that, because that is how major league baseball pretty much operates these days. If on offense, just try to hit homers. Don't worry about strikeouts, they don't matter - the statisticians say so. Singles aren't good for much, unless you happen to get one just before someone hits a home run.
UP Marketing "offense" sounds like the same thing. Swing for the fences all the time, it doesn't matter how many times you make no contact at all. It's the opposite of short lines, who try to keep their sales "rallies" going by just getting a lot of singles.
Here's a slide presentation for UP in the Houston market from 2013. Under Jim Young the pieces were starting to be put into place.
http://www.gcrd.net/docs/union_pacific_presentation_11-12-13_1.pdf
jeffhergert greyhounds charlie hebdo 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 of the two big cereal manufacturers, to load containers at Beverly yard. All it would've required is getting a mobile "piggy-packer" to lift the containers on and maybe some more gravel on an access road next to an existing track. (For our Cedar Rapidians, it sounded like they were going to load on the southern most track on the south yard.) From numbers posted by Fred Frailey once, the volumes I heard would've brought in a net profit of about 6 to 8 million dollars. Supposedly, the marketing department told the local officers we aren't going to do it and to mind their own business. While they may not know how to be competitve, they often seem like they don't want to be competitve. They don't want the business unless it brings in very large amounts of money. It's like if they were a baseball team and they only counted the home runs. Jeff
That's really quite the head-scratcher in my mind.....I know Greyhounds has brought this particular item up more than once and I've thought about this countless times. If UP is reluctant to do something like this, where's the CN? Talk about missed opportunities.
And I disagree that a 3-system west would not be sustainable. And while UP-SP might've been a natural "fit" back in the day, the dynamics changed considerably once UP acquired both MP & WP. Again, I would have had SP being independent and part of another system like CPRS.
Los Angeles Rams Guy jeffhergert greyhounds charlie hebdo 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 of the two big cereal manufacturers, to load containers at Beverly yard. All it would've required is getting a mobile "piggy-packer" to lift the containers on and maybe some more gravel on an access road next to an existing track. (For our Cedar Rapidians, it sounded like they were going to load on the southern most track on the south yard.) From numbers posted by Fred Frailey once, the volumes I heard would've brought in a net profit of about 6 to 8 million dollars. Supposedly, the marketing department told the local officers we aren't going to do it and to mind their own business. While they may not know how to be competitve, they often seem like they don't want to be competitve. They don't want the business unless it brings in very large amounts of money. It's like if they were a baseball team and they only counted the home runs. Jeff That's really quite the head-scratcher in my mind.....I know Greyhounds has brought this particular item up more than once and I've thought about this countless times. If UP is reluctant to do something like this, where's the CN? Talk about missed opportunities. And I disagree that a 3-system west would not be sustainable. And while UP-SP might've been a natural "fit" back in the day, the dynamics changed considerably once UP acquired both MP & WP. Again, I would have had SP being independent and part of another system like CPRS.
PSR as currently being practiced - to steal the baseball analogy is a Grand Slam Home Run or strike out. With no middle ground.
PSR roads overlook the fact that to hit the Grand Slam you have to get men on base and to get men on base you have to work at it. PSR road don't want to do the work of having customers with less than Grand Slam levels of traffic.
Never too old to have a happy childhood!
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.
kgbw49 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/
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/
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.
Curt
UlrichI wonder how much of UP's freight is directly competitive with trucking or BNSF. Maybe they've got a lock on some markets
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.
1) International intermodal. Except for San Diego (minor), both BNSF and UP serve the same west coast container ports. It's competitive.
2) 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.
3) 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.
4) 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.
5) 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. serve the ethanol belt. Such business can be reasonably competitive given enough push. UP is in a good, strong position for business to/from the petrochemical produces in Texas and Louisiana. But there's only so much of such freight.
Overall, the UP operates in competitive markets but doesn't know what to do about that.
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.
jeffhergertIowa 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. Jeff
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.....
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.
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