Thursday, September 01, 2011

Why railroads must continue investing for growth

Written by  Jim Young, chief executive, Union Pacific

U.S. railroads are a vital link to our nation’s economic future. They serve nearly every agricultural, industrial, wholesale, retail, and resource-based sector of the economy. Our freight trains touch almost every part of American lives.

More specifically, Union Pacific runs through more than 7,000 communities and owns slightly more than 1,500 square miles of land. That’s roughly 50% larger than the state of Rhode Island.

You might not think of a U.S. railroad as an international company, but almost 40% of UP’s freight originates or terminates outside of the U.S. Our company serves every major West Coast and Gulf Coast port, connects with Canada’s rail systems, and is the only railroad serving all six major gateways to Mexico. We also interchange traffic with Eastern railroads through our gateways at Chicago, St. Louis, Memphis, and New Orleans.

Railroads provide good jobs for Americans. As an industry, we employ 175,000 people and plan to hire approximately 15,000 more this year. With about 67,000 employees eligible to retire over the next five years, hiring should remain consistent, depending upon how the economy performs. At Union Pacific, our 44,000 employees serve 25,000 customers and manage 32,000 miles of track.

While transporting goods and people in this country is manageable today, the world isn’t standing still. As part of an evaluation by the DOT and FRA regarding requirements to meet our country’s future needs and keep our global position intact, they made the following key points in their assessment:

• Population drives freight growth, and the U.S. population is expected to grow by more than 20% by 2035, to 380 million.

• Both freight and passenger rail are critical but must not interfere with each other.

• A healthy freight rail system translates into U.S. global competitiveness.

• U.S. policy should strive to expand rail competitiveness vs. trucks.

• Substantial rail capital is needed to support future growth.

Expanding freight rail will benefit American businesses and communities. Accomplishing this goal is a massive undertaking and will continue to require significant capital investment by freight railroads.

In fact, if rail were to carry 50% of the freight market that moves 500 miles or longer by 2035 as suggested by the FRA’s National Rail Plan, it will need to carry roughly 60% more containers than today, and that doesn’t include other types of growth, like boxcars and coal cars.

At Union Pacific, we’ve invested more than $31 billion in our rail network since 2000, including a record $3.3 billion in 2011. In fact, our company’s annual infrastructure spending is more than that of the highway departments in all but three states.

According to the Association of American Railroads, freight railroads today spend more than $20 billion in private funds each year and have invested $480 billion in maintaining and modernizing the national rail network since deregulation 1980. These investments keep our nation’s rail network the envy of the world and help American businesses compete in the global marketplace.

Union Pacific has a tremendous track record of creating logistics and transportation solutions for customers, large and small, that can mean new ways of doing business and extending their market reach. For example:

• Our Produce Railexpress is the only railcar service in the U.S. that is faster than single-driver refrigerated trucks. It runs from both Washington and California to New York and maintains a 98% ontime performance.

• Union Pacific’s Pipeline Express serves the natural gas transmission pipe market with the industry’s largest 89-foot flat car fleet, capable of hauling 100 tons of pipe. Our unit trains offer increased delivery speed and reliability, and improved efficiency for our customers.

• Our Union Pacific Distribution Services subsidiary provides border clearance, logistical expertise, and visibility throughout the supply chain, whether shipments move by rail or truck.

Union Pacific’s customer satisfaction levels are at all-time highs. That’s due in large part to our employees’ commitment to service, and also to the investments we have made in equipment, technology, and capacity.

Our strong value proposition, diverse franchise, and record service performance all position Union Pacific to deliver increased productivity and price. These efforts will translate into increased value for customers, improved financial returns for shareholders, and a stronger railroad for America.