Thoughts on the Union Pacific

[mvlandsw]

kgbw49

Mark Hemphill was the editor of Trains Magazine from 2000 t0 2004.

 

What was Mark Hemphill able to accomplish during his time in Iraq. We haven't heard much about him since he left Trains. I think he was the best Trains editor since DPM.

Mark Vinski

[jeffhergert]

SD60MAC9500

 

 

 

 

 

 

Last thing PSR is not to blame. It's the lip service given that doesn't amount to any increase in service quality, nor changes to said service to increase service quality. PSR is just a recipe not the outcome. How you use that recipe to make a great dish is on your dime..

I think the the problem with UP is they have little competiton in most lanes west of the Mississippi with BNSF. They are very comfortable sitting on that idea, hence no need to improve service, just raise rates. BNSF only dominates the CHI-LA lane. If UP didn't have the market penetration that it enjoys over BNSF. I believe the picture would be quite different.

 

 

 

I disagree about PSR.  Yes, it doesn't have to be a recipe for diaster but the way most practice it, it is.  Because it colors every decision made.  It leads to walking away from opprotunities and/or pushing away existing business.  It leads to cuts where the remaining business can't be properly serviced at times. 

One of Uncle Pete's tenents for the Unified Plan 2020 is "secure appropriate business."  More and more because of PSR it seems that means business that doesn't raise the OR.  They pushed away business before PSR, but once they got on that bandwagon it became worse. 

Our new incoming CFO said reaching the 55 OR goal is achievable, that the goal really should be an OR of 50%.  Their having a tough time reaching 55%, cutting and gutting where ever possible and now someone wants to cut some more.  Because that's all they seem to know-cut, cut, cut.  (It's floating around that a manager, possibly a service unit superintendent, left because higher ups asked for a 25% reduction in head count and that person said it couldn't be done.  There wasn't any where left to cut.)    

Late last year or early this year, BNSF offered UP some coal contracts they were (at the time) hard pressed to service.  UP said no.  UP wasn't going to take that business for what BNSF negotiated for. 

After all (attributed to someone in UP management), "UP is the Macy's of railroads, the others (BNSF) are the Walmarts of railroads."  The last time I heard, Macy's was in trouble while Walmart wasn't. 

Jeff  

[MidlandMike]

I remember a discussion in a recent thread about UP vs BNSF in LA Basin intermodal, and how everyone thought UP was throwing away business since they would not run bare-tables to LA to help with an intermodal surge, and charged $5000 (?) extra fee.  Nevertheless a recent Trains NewsWire article showed that last quarter, while BNSF intermodal was down a bit, UP was up 6 points.  I think this goes along with the OP's observation that good fortune seems to flow to UP without much effort.

https://trn.trains.com/news/news-wire/2020/10/14-despite-intermodal-gains-class-i-volume-slumps-in-third-quarter

 

[MidlandMike]

Los Angeles Rams Guy

I'll always contend that you need to have a THREE-system west; not two.

When rail infrastructure has to be maintained by private business, maybe you can justify two railroads for competitive reasons and back-up.  However, three railroads serving the same lanes would now be unsustainable.

I agree that the D&RGW and WP should have been spun off in the UP/SP merger, and I would liked to have seen them land on BNSF, however, I don't know if BNSF would have wanted such a second tier corridor which is only 50 miles shorter than their own route to the Bay Area via the Southern Transcon.

[Bruce D Gillings]

DISCLAIMER:

“Originality”: ideas I’ve pushed for since I started posting on TRAINS years ago: 100% (or very high) tax credits for all infrastructure improvements; modernizing archaic rights of ways; and strategic intermodal terminal locations. Other thoughts inspired by others…... just being careful….

 

PUTTING UP VS. BNSF IN PERSPECTIVE:

BNSF is in a meltdown on Northern Transcon; crew shortage and ability to take trains at west coast ports and Seattle-area ramps.  BNSF only looks good in comparison because the bar at UP is so low.

BNSF capacity investment is “nice”, but still too slow on Northern Transcon and LA Basin.  Bump up by 50%, reduce $ going to B-H for a while.  Fix Sea-Tac domestic ramp problem. Short-term pain, but builds that 100-year railroad!

BNSF also has Southern Transcon congestion problems at ramps in LA Basin: trains held far too long waiting ramp space. Barstow has helped, but not enough: they must accelerate Colton project. At least they did double Phoenix ramp!

Beyond Northern & Southern Transcons, and Chicago-Alliance, BNSF intermodal lanes are not successful or are only marginally so. PNW to TX good example. Denver area another. Opportunities are limited. 

 

UP:

Where to start? UP needs entirely new creative, out-of-the-box C-suite team, and has for a long time. Jim Young was a shining star who was brilliant, customer- and service-centric: a major loss.  The takeover by MoPAC management did far more damage than OP gives credit (or blame) for.

UP capacity investment: not at all what it should be. Stop the excessive distributions and stock buybacks (and debt}. Complete the Sunset 2MT project, add more elsewhere.  Finish LA Basin 2MT. Streamline 19^th- and early 20^th-Century alignments, both for current and future traffic (that they are not now pursuing….).  I-5 from Oakridge-Cascade Summit and Sacramento River Canyon belong in Model Railroader. Tehachapis need major re-alignment and 2MT. On the “Northwest Corridor”, redo Hinkle-Nampa. LA&SL Moapa-Crestline; miscellaneous curves throughout the Midwest and TX-AR.

 

UP INTERMODAL RAMP STRATEGY:

A few wins (SLC, Global 4, DIT for international traffic) overshadowed by multiple misses that may not be recoverable from or downright failures: Seattle-Tacoma; Portland-Brooklyn over Albina????; Lathrop-expansion halted; LA Basin-largest blunder in UP history with failure to move forward with IE ramp; Phoenix-abandoning market and not getting a westside ramp; Denver-failure to move forward with Brighton, now almost boxed in; Laredo-expansion halted; San Antonio-located on wrong side of town = higher cost drays in SA-Austin DC corridor; Houston fiasco with Settegast/Englewood and/or failure to procure land near Bush Airport; DFW-failure to have either a central huge ramp (ie: Grand Prairie) or westside ramp in Fort Worth (west end of Davidson could have worked, not now); Global 3 (build it because of cheap land, not strategic DC location, and they did not come…..); ESL-Dupo (poor location operationally and relative to markets). These are strategic mistakes that have long-term impacts.

 

UP INTERMODAL SERVICE:

Lengthen schedules to “better” its service metrics, only to fail to meet those schedules. UP keeps “May Trucking” customers. Truckers try UP, then leave or cut back after service failures. Wilson, Central Transport, ABF are the latest giving it a big go: will UP do to them what SP did to May and what UP has done to others? Probably. UPS and FedEx keep threatening UP, so far they’ve dodged the bullet, but for how long? UnPredictable service means more equipment, crew and terminal costs.  It does not grow the business. OTR truckers can’t count on when trains arrive, so they pad draymen staffing, holding lots, or use UP’s ramps as holding lots. The number of trailers needed to move freight goes up, usually by a day per trip, sometimes more, to move the same amount of freight. Intermodal’s advantage shrinks or disappears on all but the longest of lanes only. Trucker costs and rates UP can charge both are hurt. The culture has to change!

 

GENERAL PROBLEMS THAT HURT BOTH ROADS, BUT UP MORE:

Until the risk is taken out of capex of adding capacity (2MT/3MT, intermodal terminals including land purchasing) and modernizing/re-aligning noted above) will continue with a compromised ability to compete with OTR on all but a handful of heavy-traffic lanes. The only solution: tax credits on such investments between 75% and 100%.

 

LABOR AND MANAGEMENT:

BNSF and UP are both at fault here: their attitudes towards rank and file are terrible, abusive. Management for both has too many college degrees, not enough operating knowledge = animosity, poor decisions, blame.

Dispatching: Dispatchers are over-worked: too much territory, unable to properly monitor traffic. Dispatchers have no choice to “play it safe”, knowing that many trains are underpowered, non-fitting, etc. This should be one of the key investments and probably the most under-acknowledge aspect of railroading. Spend more $ on dispatchers; reduce overall costs.

 

OPERATING SILOS:

Affects both roads, but UP more. The Spokane-Hinkle fiasco is an example of how UP is not operated like an integrated railroad. Managers have a gun to their heads on THEIR costs, not the overall operating cost/service impact.  Railroads are managed in a way that creates kicking the can down the line.

 

WHOLESALE VS. RETAIL:

Mostly UP: get out of the retail business.  Give carload last-mile to shortlines/regionals who live or die on their marketing/service; give intermodal retail to truckers/IMCs.  Intermodal retail is an asset-heaving mess: let truckers deal with that and imbalanced lanes. BNSF: all those JB Hunt stacked boxes during downturns must be a collective sigh at BNSF: all those EMP stacked boxes must have UP with a big lump in their throats.

 

ABOUT THAT IMAGE:

Quite being the poster children for “Escape From New York”: railroads LOOK terrible. They are moving blights in the communities they serve/run through. Wash the damn locomotives; put in a car-washer at the top of every hump. Paint graffiti off of locomotives immediately. Same day. Look at graffiti-proof paint (which doesn’t really exist, but it does make removing graffiti easier). Do what you can to minimize it on cars. Have a graffiti task force.

 

FINALLY:

“Sweat the assets”: George Orwell must be smiling from the grave….

[Overmod]

Electroliner 1935

So I need a clue as to what you are hinting about. 

Read the linked Railway Age story until you come to a name in boldface type...

[Electroliner 1935]

Overmod

I trust older members of this forum will smile and nod with respect when they see who the indicated senior vice-president of the railroad development company Rio Grande Pacific is.

This stumped me. I went to: https://rgpc.com/management/

and I did not see a senior vice-president. I saw Vice Presidents of Finance; of Marketing and Sales; and of Administration. Also Brent M. Burns Senior Finance Executive. So I need a clue as to what you are hinting about. 

And now that others have said Mark W. Hemphill, and Railway Age had an article in August

https://www.railwayage.com/freight/short-lines-regionals/hemphill-heading-uinta-basin-railway-project/ indicating that he is "leading the team". He not listed on the  railroads webpage. So for what company is he vice-president? What is the railroad development company's name?

 

[Murphy Siding]

kgbw49

Mark Hemphill was the editor of Trains Magazine from 2000 t0 2004.

 

. Thank you. That was my guess but I couldn't find that looking up DRG on the internet. 

[kgbw49]

Mark Hemphill was the editor of Trains Magazine from 2000 to 2004.

[Murphy Siding]

Overmod

I trust older members of this forum will smile and nod with respect when they see who the indicated senior vice-president of the railroad development company Rio Grande Pacific is.

 

I guess I qualify as an "older" member of the forum , but I can't find the name of the person you allude to.

[diningcar]

kgbw49

Roger that. +1

 

[kgbw49]

Roger that.

[Overmod]

I trust older members of this forum will smile and nod with respect when they see who the indicated senior vice-president of the railroad development company Rio Grande Pacific is.

[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/

[SD60MAC9500]

 

Los Angeles Rams Guy

Here's my thoughts on UP.  When I was a young kid growing up in a small town in NE Iowa (in Milwaukee Road and ICG territory), I looked up to the UP as the kind of railroad you aspired to be.  Seeing their run-through power on both MILW and CNW back in the day was always a treat and I can still feel the hurt and pain of when the world-famous UP-MILW "Cities" trains were discontinued on the eve of Amtrak.  But I digress.  Two things stand out in my mind:  (1) The UP simply got too big for its britches.  It was one thing for them to acquire MP and WP back in the early 80s and WHY in God's name it took them until 1995 for them to acquire their natural Overland Route partner, CNW, is beyond me.  But for UP to have BOTH the MP and MKT?  For them to have BOTH the WP and SP/DRGW?  To me, something's inherently wrong with that.  I'll always contend that you need to have a THREE-system west; not two.  Towards that end, I'd have the STB force the UP to divest itself of SP and for the former SP to become part of CPRS.  One could probably make a similar argument for UP having to divest itself of MKT.  The whole thing just got so unwieldy and I don't think I have to bring up the meltdown that occurred after the SP acquisition.  (2) PSR.  I've seen what it's done; not only to my employer but to other railroads as well and if UP is going to rejuvenate itself, it needs to kick PSR to the curb and adopt a new mentality.  You can keep some elements of it (not saying you can't) but you need to start thinking outside of the box here when it comes to attracting new business. 

 

 

Unraveling SP from UP wouldn't accomplish anything. UP and SP are a natural fit. To be quite frank the ICC back in 1913 with its poor investigation of anit-trust at the time dislodged a perfect combination costing UP billions 83 years later.. I do agree on MP, WP, and DRGW being disconnected from UP. We can blame ex Santa Fe president John Reed for not jumping on the MP. Just imagine how much more revenue BNSF would have today. Instead of the monopoly of gulf coast chemical traffic held by UP. A condition of the SP merger with UP back in 96. Should have included spinoff of the; Rio Grande, WP, and a large divestment of MP to BNSF to equal competiton in the region. Last thing PSR is not to blame. It's the lip service given that doesn't amount to any increase in service quality, nor changes to said service to increase service quality. PSR is just a recipe not the outcome. How you use that recipe to make a great dish is on your dime..

I think the the problem with UP is they have little competiton in most lanes west of the Mississippi with BNSF. They are very comfortable sitting on that idea, hence no need to improve service, just raise rates. BNSF only dominates the CHI-LA lane. If UP didn't have the market penetration that it enjoys over BNSF. I believe the picture would be quite different.

 

 

[adkrr64]

So is it more the case that by being privately held, BNSF is largely unshackled from the restraints imposed on publicly traded companies? Or is it that UP has never consistently had the right leadership to take advantage of whatever advantages its network has?

[kgbw49]

For several years now, BNSF has been the largest railroad in the US in terms of loads and revenue. In terms of OR, they are a few points above 60 but back in the day that would have been considered astounding.

BNSF has some great marketing programs with BNSF-certified business development sites and BNSF logistics parks. They compete for Canadian grain by developing an elevator just across the border from Northgate. They run intermodal trains right in to Atlanta via both NS and CSX from Memphis, and run intermodal trains right in to North Baltimore. They also run intermodal trains with CSX between NYC and LA. They continue to invest in the capacity of their system, in particular to eliminate bottlenecks, as exemplified most recently by:

The second bridge across Lake Pend O'Reille on the Northern Transcon

Double tracking of "The Funnel" from Sandpoint down to Spokane on the Northern Transcon

Double tracking through La Crosse, WI, Becker, MN and hundreds of miles in North Dakota and eastern Montana on the Northern Transcon

Triple and quadruple tracking key sections of the Southern Transcon at Amarillo, Belen, Needles and Cajon Pass

Double tracking the Flint Hills section in Kansas on the Southern Transcon

From Rob Krebs through Matt Rose through Carl Ice and now hopefully with Katie Farmer, BNSF has had some very visionary leaders, and just as importantly, being owned by Berkshire Hathaway, Warren Buffett.

I will never forget Matt Rose speaking at The Economic Club of Minneapolis and mentioning how upon acquiring the BNSF, Warren Buffet told him (paraphrasing from memory - not a verbatim quote) something of the nature to build the railroad to run 100 years.

That is one heck of a story.

[MMLDelete]

I pay very little attention to the business side of railroading. But I've always thought of UP as The Big Dog of current-day US railroads.

Not so? Are they actually in trouble?

Who is most profitable? BNSF? CN? CSX?

 Very interesting comments, guys.

[Ulrich]

UP is among the last to adopt PSR. As such they're focussed on the OR, cost cutting and plant rationalization. Once that's done they'll move on to the next stage. It's a process..they'll get through it. 

 

[Los Angeles Rams Guy]

Here's my thoughts on UP.  When I was a young kid growing up in a small town in NE Iowa (in Milwaukee Road and ICG territory), I looked up to the UP as the kind of railroad you aspired to be.  Seeing their run-through power on both MILW and CNW back in the day was always a treat and I can still feel the hurt and pain of when the world-famous UP-MILW "Cities" trains were discontinued on the eve of Amtrak.  But I digress.  Two things stand out in my mind:  (1) The UP simply got too big for its britches.  It was one thing for them to acquire MP and WP back in the early 80s and WHY in God's name it took them until 1995 for them to acquire their natural Overland Route partner, CNW, is beyond me.  But for UP to have BOTH the MP and MKT?  For them to have BOTH the WP and SP/DRGW?  To me, something's inherently wrong with that.  I'll always contend that you need to have a THREE-system west; not two.  Towards that end, I'd have the STB force the UP to divest itself of SP and for the former SP to become part of CPRS.  One could probably make a similar argument for UP having to divest itself of MKT.  The whole thing just got so unwieldy and I don't think I have to bring up the meltdown that occurred after the SP acquisition.  (2) PSR.  I've seen what it's done; not only to my employer but to other railroads as well and if UP is going to rejuvenate itself, it needs to kick PSR to the curb and adopt a new mentality.  You can keep some elements of it (not saying you can't) but you need to start thinking outside of the box here when it comes to attracting new business. 

[greyhounds]

I always viewed the Union Pacific as fat and happy.  Too fat and happy.  They don’t seem to have had any significant financial problems since the 19^th century.  E. H. Harriman took over in the 1890’s and set things straight.  After that, they just rolled along in continuous good financial condition.

 

This meant they didn’t learn how to pinch pennies and hustle for business as many other railroads did.  Those are mighty good skills to have when things go south.  The UP just never had to significantly develop such skills, and it seems they still lack them.  They also never had to worry about having really good management that had those skills.  They did, at times, get some good folks to run things, such as Jim Young.  But, in general, it didn’t take exceptional ability to keep the dollars coming in at the UP.

 

One story, which I believe to be true, is that a yard (maybe Hinkle, OR) needed two operating locomotives to function properly.  So, they kept four locomotives.  Now, you can’t do that.  You can’t keep a 100% back up contingency unless you’re just too fat and happy.  If finances go bad such extravagances will bite you in the ass big time.  They needed a plan for a locomotive failure, but they really couldn’t waste resources as they were doing. 

 

The story goes on to say that a new operating official off the Missouri Pacific was put in charge of the territory that included the yard.  The MoP had been through plenty of financial trouble and didn’t waste money like that.

 

So, what did the old UP people do at the yard do when the new honcho came through on an inspection trip?  They “Hid” the back up locomotives.  They figured that if he saw the locomotives he’d make ‘em get rid of ‘em.  That’s sabotage.  But it made their lives easier and that’s what they cared about.   It comes from a corporate culture that is just too fat and happy.   A culture that doesn’t worry about efficiency.

 

So, the UP just rolled merrily along living off Powder River coal and other lucrative business.  Well, that coal business is now dying.  The BNSF helps itself to what’s left at the UP’s expense.  The BNSF seems to know what it’s doing.  

 

The UP has a lot of marketing opportunities but it has no idea as to how to develop such opportunities.   Hell, they can run with the BNSF between Chicago and the West Coast.  They can match BNSF minute for minute.  They once did it with their Falcon Service.  And to operate that service they had to cooperate and coordinate with the C&NW.  Both the Santa Fe and UP offered 50-hour intermodal service Chicago-LA.  The UP appears to have just given UP.  Maybe that’s what we should now call it:  the “We've Given UP”.

 

The UP is setting on a gold mine with the temperature-controlled traffic moving long distances between west coast/Idaho points and the eastern concentrations of the US population.  Do you think they’ve got a plan to develop that business?  I don’t think so.  And don’t forget the westbound red meat and poultry needed to feed the west coast population.  That’s two-way loading.  The UP remains clueless.  The large quantity of trucks moving potatoes out of Idaho long distances to population centers is, and should be, an embarrassment to the managers in Omaha.  They should be ashamed of their performance.

 

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.

 

I could go on, but enough said for now.  They can’t just focus on the operating ratio.  It’s not the only number that counts.  Good management must be able to balance conflicting metrics.  The UP people don’t seem to be able to do that.  But again, enough said.