UP: On the 'value proposition' path

During Union Pacific Railroad’s fourth-quarter earnings conference held the morning of Jan. 21, senior executives talked about the Class I’s ongoing efforts to provide shippers an optimal “value proposition” by improving operational performance.

Vice Chairman-Operations Dennis Duffy provided evidence that those efforts paid off in 2009. Safety performance metrics show that from 2006 to 2009, personal injuries per 200,000 manhours dropped 24 percent, grade crossing accidents per million train miles fell 26 percent and customer incidents per million train miles decreased 26 percent. UP achieved record levels in all safety metrics for the second-straight year in 2009, said Duffy.

In terms of full-year service metrics, velocity increased to a record 27.3 mph — an increase of nearly 2 mph from the previous record set in 2002 — average terminal dwell time decreased slightly to 24.8 hours, freight-car utilization improved to 8.6 cycle days and the service delivery index reached a robust 92 mark.

UP is excelling at managing volume variability, said Duffy. As of Jan. 16, the Class I had 4,200 furloughed train and engine-service workers available, and still had 1,600 locomotives and 44,000 rail cars in storage. The railroad had adjusted its resources in 2009, when gross ton miles dropped 17 percent and train starts decreased 20 percent.

UP also continues to manage train capacity, primarily by operating longer trains, enhance its surge capabilities, instill process discipline and upgrade infrastructure condition, said Duffy. Of $2.5 billion spent on capital improvements in 2009, $1.7 billion went toward “engineering replacement” work, $375 million toward capacity and commercial facility projects, and $375 million toward locomotives and equipment.

Slow orders on the network declined 30 percent last year because of several key projects, including the Boone High Bridge and increased tunnel clearances on the Donner Pass. Opening the Donner Pass route to double-stack containers “saves us 75 miles and up to three hours for our customers, making our route the shortest and fastest from Oakland to Chicago,” said Duffy.

UP is driving toward “best in class” safety performance, service excellence, “strong” infrastructure, and the ability to handle more carloads with fewer assets, said Duffy. The ultimate aim: to be resilient, agile and a volume-variable operation, he said.

“Above all, we will be ready for whatever demand comes our way, up or down,” said Duffy. “Cyclical demand changes, seasonal variations and hopefully a strengthening economy, all require that we stay agile and resilient.”

  • LK, at the time I heard UP's pursuit of the Rock likened to a young man's courtship of a beautiful young lady, but by the time her father approved of the marriage her hair had fallen out and she was wearing a wig, her face was wrinkled, and she had a wooden leg.

  • While exchanging comments about the CRIP, remember the statement of CEO John Ingram on the morning in 1975 when she filed for Section 77 bankruptcy: The Northeast rail crisis just reached Tucumcari.  Those younger than 30 may not understand that one, but if someone were to ask nicely, I'm sure one of us could explain it.  If you go back to the UP-RI case, you'll find that all of the western carriers, with the possible exception of the BN, participated in the case.  They all were pecking out the eyeballs and nibbling the flesh in their own self-interest.  SP, which would have taken the Amarillo-Little Rock-Memphis line, lost more than 100,000 cars in interline business over Tucumcari.