The TRAINS Newswire of Jan.11th,2023[ by Bill Stephens] has story that seems to indicate that The Surface Transportation Board, is about to take 'Uncle Pete' to its' 'woodshead'. .
Apparently, The Foster Farms (from last month. is again,running out of feed for their chckens). AMTRAK has some large issues with UP's handing of their Sunset Ltd.(late, over 90% of time?),not to mention there are a number of other's, lining up to complain, about their service 'failures'. FTA: "... If Amtrak trains are the canary in the freight railroads’ coal mine, they’re giving plenty of warning about the state of UP’s overall operations and the service it provides.
Yes, like the other three big U.S. railroads, UP has experienced crew shortages, as it’s become harder to hire conductors amid the tightest job market in decades. But CEO Lance Fritz admits UP was already running too lean when crew shortages cropped up. So when harsh winter weather raked the railroad in early 2022, UP coagulated and never fully recovered..."
Seems to building up to lots of weeping, and gnashing of teeth; when the STB's hearings take place. The pursuit of a 55% O.R. and P.S.R. will likely get the blame? Should be some interesting comentary?
I would opine that Fritz's "running too lean" comment definitely ties back to PSR, etc, although I'd bet the financial folks won't admit it.
The other side of the issue - not finding people who want to work, should indicate to UP (and the other railroads) that they need to rethink how they schedule crews.
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
Wait until UP has to roll over its debt issues for stock buybacks at higher interest rates than the original issue. They won't be able to get the OR low enough to offset the increased interest expense hit to the bottom line.
They have laddered maturities of debt - some coming due each year - so it will not happen all at once, but it is coming.
samfp1943 Seems to building up to lots of weeping, and gnashing of teeth; when the STB's hearings take place. The pursuit of a 55% O.R. and P.S.R. will likely get the blame? Should be some interesting comentary?
It, like the other STB hearings, will be political theater.
An "expensive model collector"
The push to the 55% OR precedes the PSR push. G-55+0, IIRC, means the goal of an OR of 55 with no injuries. It started about the time PSR was being extolled by EHH at CN. It was kind of a PSR-lite regimen. That was bad enough, but it wasn't enough for some major interests that started buying into us.
Once PSR came to town, then the big cuts started. Just when it seems that they can't find anything to cut, and say they are going to pivot to growth, they find some way to cut somemore.
They think that they can keep getting away with business (or lack thereof) as usual. I feel they will get a rude awakening when they will discover that their clout with the government doesn't equal the clout that all their major customers have. The problem will be that any reregulations will affect the entire industry.
Jeff
UP management decided to inflate the stock price by borrowing heavily to do stock buybacks. That only works when interest rates are low. Their interest expense will be climbing heavily over the next decade as laddered maturies need to be refinanced at higher rates.
Capacity expansion to attract more traffic pretty much stopped when they stopped double tracking the Sunset Route. Blair Cutoff work between Missouri Valley and Fremont stopped dead in its tracks about the same time.
Debt issuances have not been invested in assets that can grow the company. Debt has been used to finance stock buybacks which give the stock a one-time temporary boost that will be paid for into eternity. As interest payments rise and take more cash, capital spending will drop. It will take 10 years to make a significantly noticeable impact because UP is so large, but look how long it took the Pennsy and NYC to get to the point of bankruptcy, for example.
NYC and Pennsy went bankrupt because of a declining traffic base and lack of pricing power to raise rates on remaining rail-captive customers.
UP has pricing power right now to captive customers, but if service levels continue to deteriorate and the common carrier obligation is not being fulfilled in the eyes of Congress, reregulation will result in a loss of pricing power.
For a number of years now UP has said they have returned more than 100% of free cash flow to shareholders. They have done that through a combination of dividends from earnings but the majority of it has been via borrowing for share buy backs. All that is, really, is pulling future profits and free cash flow to the present day, so future levels of both will be lower than they otherwise will be as the interest on the debt will have to be paid into infinity.
In 2010 UP's long term debt was $9.003 billion. Revenue was $16.965 billion and net income was $2.780 billion. The operating ratio was 70.6%.
The whole decade of the 2010s was a decade of Federal-Reserve-Bank-subsidized low interest rates with the Fed Funds Rate at 0% for most of the decade.
In 2021 UP's long term debt was $27.563 billion. Revenue was $21.804 billion and net income was $6.523 billion. The operating ratio was 57.2%. Cash returned to shareholders was $10.1 billion or 46% of revenues.
Like any financial model, it works until it doesn't. It will be interesting to see how UP fares when the paradigm changes.
Meanwhile, BNSF is double and triple tracking all over the place, eliminating bottlenecks for faster transit times, building more logistics parks, investing in BIG, buying back MRL for more Northern Transcon capacity, replacing major bridges, etc.
Warren Buffett told Matt Rose to build the railroad for the next 100 years, and Carl Ice and Katie Farmer have continued to do so as well.
Interesting times in the west are ahead.
jeffhergert The push to the 55% OR precedes the PSR push. G-55+0, IIRC, means the goal of an OR of 55 with no injuries. It started about the time PSR was being extolled by EHH at CN. It was kind of a PSR-lite regimen. That was bad enough, but it wasn't enough for some major interests that started buying into us. Once PSR came to town, then the big cuts started. Just when it seems that they can't find anything to cut, and say they are going to pivot to growth, they find some way to cut somemore. They think that they can keep getting away with business (or lack thereof) as usual. I feel they will get a rude awakening when they will discover that their clout with the government doesn't equal the clout that all their major customers have. The problem will be that any reregulations will affect the entire industry. Jeff
How far back though? EHH became CEO of CN back in 2003 leaving in 2009. He immediately began his quest to "PSR" the network. I was noticing changes as early as 2004 when trains started to be combined and other traffic annulled.
Euclid If railroads are so focused on cutting employees, is it really true that they can’t find new people to hire? Or are they just saying that as an excuse for cutting so deep that it is hurting service?
There is a difference between cutting employees and doing the same with less.
Transportation jobs (rail and trucking) are not considered desirable by the upcoming generation since the nature of the work interferes with the lifestyle they want. They seem to view work as a nuisance that they need to provide income.
Are you really trying to pull logic out of corporate doublespeak?
Greetings from Alberta
-an Articulate Malcontent
CSSHEGEWISCH Transportation jobs (rail and trucking) are not considered desirable by the upcoming generation since the nature of the work interferes with the lifestyle they want. They seem to view work as a nuisance that they need to provide income.
Ok boomer.
In general, young people don't have a problem with working. There are plenty of us on the railroad and other things like farming, the oilfield and other supporting fields in 'traditional' blue-collar jobs.
People, not just young people, have a problem with doing nothing but working. And that's what the Class I's and other big corporations with hiring issues are trying to squeeze out of their employees. And the work environment continues to become ever more stressful and toxic. All in the name of 'sweating the assets', to use one of Hunter's favourite sayings.
Don't worry, labour doesn't contribute to profits. They should be able to manage fine without us.
SD70Dude CSSHEGEWISCH Transportation jobs (rail and trucking) are not considered desirable by the upcoming generation since the nature of the work interferes with the lifestyle they want. They seem to view work as a nuisance that they need to provide income. Ok boomer. In general, young people don't have a problem with working. There are plenty of us on the railroad and other things like farming, the oilfield and other supporting fields in 'traditional' blue-collar jobs. People, not just young people, have a problem with doing nothing but working. And that's what the Class I's and other big corporations with hiring issues are trying to squeeze out of their employees. And the work environment continues to become ever more stressful and toxic. All in the name of 'sweating the assets', to use one of Hunter's favourite sayings. Don't worry, labour doesn't contribute to profits. They should be able to manage fine without us.
I'll second that.. There's no problem with the work ethic of today's young people. The transportation industry has always been alot of hard work for young and old, but young people coming up today are more educated and less likely to put up with unsatisfactory conditions; in part, perhaps, because they don't need to...the market is such that they can pick and choose for whom to work for, and that will likely be the case for some years to come.
Terms that mean different things to corporations and employees.
Flexible hours--you work when and for however long we want you to.
Fast paced environment--we work you to death and spit you out.
Competitive wages--we pay the same crappy wages as the competition.
Backshop Terms that mean different things to corporations and employees. Flexible hours--you work when and for however long we want you to. Fast paced environment--we work you to death and spit you out. Competitive wages--we pay the same crappy wages as the competition.
Agreed. The one I've taken most issue with is "fast paced", especially in the context of safety and risk management. I've always preferred "slow and deliberate".. for load securement, hooking/unhooking stuff, moving about on heavy equipment etc.. slow and deliberate is the better setting..and check it.. check it again.. and then check it yet again..
I'll add one to your list.. "paid weekly".. sounds too much like "paid weakly"..
kgbw49 For a number of years now UP has said they have returned more than 100% of free cash flow to shareholders. They have done that through a combination of dividends from earnings but the majority of it has been via borrowing for share buy backs. All that is, really, is pulling future profits and free cash flow to the present day, so future levels of both will be lower than they otherwise will be as the interest on the debt will have to be paid into infinity.
The borrowing money to finance stock buybacks is one of the worst features of the stock market. A big part of the problem is that most stock is now owned by institutional investors, who generally are focused on making a good quarterly report. With a stock buyback, they get their money and they don't have to worry about the company going bankrupt afterwards.
Euclid It does not ring true for the industry to be complaining to the world that they can’t hire enough people to move the trains while, at the same time, they are on a mission to cut labor by laying people off. A lot of comment here is that they are not able to hire because they have made the working conditions so bad, and potential new hires are driven away by that. I would say the reason they can’t hire is that they don’t actually want to hire. But they have to pretend otherwise, or else they will be held responsible for failing to meet shipping demand due to a lack of labor. So the supposed lack of new people willing to work is a ruse to cover up what is actually an unwillingness to hire new people. Maybe the Government will have to step in and show the railroads how to hire new people, so they have enough to do the job.
They can't hire because three of the class ones' make it into the top tiers of the lists of the worst companies to work for. I think one list had us at the #1 worst for a few years running.
It's also hard to get people to apply when they keep saying they want to eliminate those positions in the near future.
At least in my area, they aren't getting very many people to come to hiring sessions. When I hired out, at the tail end of the big expansion, they would have weekly hiring sessions where they would get about 20 to 30 people a day for the first three or four days of a week. About half of those each day left after hearing a description of the job and lifestyle it entails. At the end of the week, they would have about 10 or so people that they would extend job offers to. This went on almost every week for a few years. Then intermittantly every six to eight months until the economy sank in 2008.
Now they are lucky to get 10 people over one week to just show up. I've heard they were going to try having walk up interviews at a local job fair.
Right now, my seniority district has something like 52 borrow outs from other parts of the system. We've had, and have, people from Proviso, Louisiana and Texas. Some of the borrow outs have been working off their home districts for over a year or two, here and on other parts of the system. (The northern parts of the system seems to have more problems hiring.)
Currently, they are offering a $20K bonus if you live within 300 miles of my home terminal. If you live farther than 300 miles, they offer an extra $5K. If you let me (or any employee) submit your name as a prospect and they hire you, I (they) can get a $500 bonus.
They are willing to hire. And they are still more than willing to fire. We were discussing how many new hires we've lost. Not the ones that have quit, although there are some, but the ones who've gotten into trouble for various reasons. Maybe that accelerated training program needs to be reexamined.
On a side note, we got our back pay today. So far, not too many people laying off, which I guess was a worry by some in management. And no one's quit, and I haven't heard too many talk about doing so for some time.
kgbw49 UP management decided to inflate the stock price by borrowing heavily to do stock buybacks. That only works when interest rates are low. Their interest expense will be climbing heavily over the next decade as laddered maturies need to be refinanced at higher rates. Capacity expansion to attract more traffic pretty much stopped when they stopped double tracking the Sunset Route. Blair Cutoff work between Missouri Valley and Fremont stopped dead in its tracks about the same time. Debt issuances have not been invested in assets that can grow the company. Debt has been used to finance stock buybacks which give the stock a one-time temporary boost that will be paid for into eternity. As interest payments rise and take more cash, capital spending will drop. It will take 10 years to make a significantly noticeable impact because UP is so large, but look how long it took the Pennsy and NYC to get to the point of bankruptcy, for example. NYC and Pennsy went bankrupt because of a declining traffic base and lack of pricing power to raise rates on remaining rail-captive customers. UP has pricing power right now to captive customers, but if service levels continue to deteriorate and the common carrier obligation is not being fulfilled in the eyes of Congress, reregulation will result in a loss of pricing power. For a number of years now UP has said they have returned more than 100% of free cash flow to shareholders. They have done that through a combination of dividends from earnings but the majority of it has been via borrowing for share buy backs. All that is, really, is pulling future profits and free cash flow to the present day, so future levels of both will be lower than they otherwise will be as the interest on the debt will have to be paid into infinity. In 2010 UP's long term debt was $9.003 billion. Revenue was $16.965 billion and net income was $2.780 billion. The operating ratio was 70.6%. The whole decade of the 2010s was a decade of Federal-Reserve-Bank-subsidized low interest rates with the Fed Funds Rate at 0% for most of the decade. In 2021 UP's long term debt was $27.563 billion. Revenue was $21.804 billion and net income was $6.523 billion. The operating ratio was 57.2%. Cash returned to shareholders was $10.1 billion or 46% of revenues. Like any financial model, it works until it doesn't. It will be interesting to see how UP fares when the paradigm changes. Meanwhile, BNSF is double and triple tracking all over the place, eliminating bottlenecks for faster transit times, building more logistics parks, investing in BIG, buying back MRL for more Northern Transcon capacity, replacing major bridges, etc. Warren Buffett told Matt Rose to build the railroad for the next 100 years, and Carl Ice and Katie Farmer have continued to do so as well. Interesting times in the west are ahead.
The Blair work stopped when the economy tanked in 2008. I think it was about 2012 when they were going to start laying track on the roadbed that was in place. That didn't happen because of flooding of the Missouri River valley that year. The work gangs were diverted to raising tracks at various places at and between Council Bluffs and Missouri Valley.
They have recently built a new bridge and line change over the Elkhorn River at Arlington NE, just east of Fremont. It's been said the government forced the issue because of the condition of the old bridge now bypassed. The new bridge is single track with no provision for another bridge to be placed next to it. I've heard that the old roadbed, that had a 40 mph restriction due to curves, will be retained so that in the future a new bridge and trackage can be used if they decide to extend the double track.
I doubt that will happen any time soon. While even just laying track where they can would help, we're down about 20 trains a day from pre2008 days. That's not because of doubling up trains or making manifests longer, but because of the loss of coal traffic.
From where I sit in west suburban Chicago near the UP mainline, the number of freights, many with DP, has increased greatly over the past five years. Less coal, more IM.
Check out Railway Age breaking news.Anheuser Busch ,Union Pacific,Doll Distributing partner for wholesale delivery.
Russell
Drink it when the mountains are blue.
Oh wait, wrong one.
Head to the mountains.
csxns Check out Railway Age breaking news.Anheuser Busch ,Union Pacific,Doll Distributing partner for wholesale delivery.
I think the big news is really that A-B is starting to ship more by rail again. When I was working the Des Moines terminal as a switchmen many years ago, Doll Distributing was one of the industries I regularly helped switch.
About the time A-B sold of their Manufacturers Railway, they curtailed their use of shipping by rail. I talked with guys after it happened, by then I was in engine service and no longer working out of Des Moines, and they said they rarely had anything for them.
I smell another meltdown coming at Union Pacific. It's not only the operating department*. The whole company is anything but nimble. The downsizing and dumbsizing has created an ugly situation where the survivors are burning out at a frightening rate (seeing similar things at CSX) and corporate cannot handle what was previously no problem with in-house workload.
The feds (FRA and STB) are going to step-in and only make things worse.
Hopefully nothing tragic comes of this management fail and capitulation to the deaf-dumb-blind spreadsheet culture led around by the financial and Wall Street trash who do not care about the long term health of the company and the communities it serves.
(*) engineering, Contract & Real Estate, and other parts of the company are in a bad way as well.
kgbw49 Drink it when the mountains are blue. Oh wait, wrong one. Head to the mountains.
Ssssh! The mountains are gonna change colour!
mudchicken I smell another meltdown coming at Union Pacific. It's not only the operating department*. The whole company is anything but nimble. The downsizing and dumbsizing has created an ugly situation where the survivors are burning out at a frightening rate (seeing similar things at CSX) and corporate cannot handle what was previously no problem with in-house workload. The feds (FRA and STB) are going to step-in and only make things worse. Hopefully nothing tragic comes of this management fail and capitulation to the deaf-dumb-blind spreadsheet culture led around by the financial and Wall Street trash who do not care about the long term health of the company and the communities it serves.
It's a shame a company that was once at the forefront of railroading has devolved into the leading advocate of a transportation farce. But this scene has been developing for quite a number of years (with only a brief interlude) going back to the chaotic 90s leadership (sic) that brought us "meltdown" and litanies of excuses as the replacement for "We Can Handle It". Only UP's immense traffic base has allowed it to survive various incarnations of disasterous management and, now that that base is being systematically eroded, there may be little cushion to insulate a cavalier board and executive dept. from what may be their inevitable accountability.
Your first paragraph is telling, and reminiscent of the 90s, once again. UP would be well advised, in the interest of propping up their stock and downsizing, to abandon their huge office center in Omaha that nowadays looks like a vacant warehouse and relocate to a for-rent strip mall.
Interesting point on the Omaha HQ. CP relocated out of an office tower in downtown Calgary to a "more horizontal" four-story 220,000 square-foot headquarters building constructed adjacent to their Ogden Yard in southeast Calgary a number of years ago.
https://www.elanconstruction.com/cp-railway-network-operations-centre
charlie hebdo From where I sit in west suburban Chicago near the UP mainline, the number of freights, many with DP, has increased greatly over the past five years. Less coal, more IM.
Ed Kyle charlie hebdo From where I sit in west suburban Chicago near the UP mainline, the number of freights, many with DP, has increased greatly over the past five years. Less coal, more IM. Last I checked, mid-2022, UP was around 30-35 per day through Rochelle, IL. It was more like 45 per day 10 years ago, and more than 50 per day prior to 2008. Coal and the Proviso hump shutdown, along with the diversion of some IM to the Sunset Route and - going back to 2008 - the closing of numerous Midwest automotive plants, slashed the numbers of trains during the PSR era. Numbers may be ticking up more recently. In my mind, coal is the key factor. UP feasted on PRB coal, then the Obama administration pulled the rug out. Now UP is suffering, though its shareholders don't yet know.
10 years ago there was less use of DP. Now UP has many longer trains, what are essentially two trains counted as one. Definitely more than five years ago when I moved within sight of the mainline. I also see the saily moves from Belvidere which would not be seen in Richelle of course. Coal is declining and that trend will continue.
Our community is FREE to join. To participate you must either login or register for an account.