Report: UP CEO Vena Focused on ‘Safety and Service’
Written by Carolina Worrell, Senior Editor
“When you’re operating the railroad, you don’t make one big mistake normally and you cause yourself to impact the system and you slow down and then you can’t provide the service,” UP CEO Jim Vena told investors on Sept. 12.
In some of his first public comments since taking the helm at Union Pacific (UP) on Aug. 14, CEO Jim Vena told investors Sept. 12 at Morgan Stanley’s 11th Annual Laguna Conference that he’s focused on “improving safety and service at the railroad,” according to an Associated Press report.
“While he’s willing to invest in that, mostly he wants to make sure UP’s day-to-day operations are steadily improving,” AP reported.
“When you’re operating the railroad, you don’t make one big mistake normally and you cause yourself to impact the system and you slow down and then you can’t provide the service,” Vena told investors on Sept. 12.
“What happens is you make a lot of small mistakes, and if you make small mistakes, they come back all of a sudden and add up and you wake up one day and you go, Wow! So that’s what I want to make sure that we’re on top of,” added Vena, who was hired “after a hedge fund that was disappointed in the results under previous CEO Lance Fritz put pressure on UP,” according to the report. Fritz had held the role of CEO since 2015.
According to the AP report, initially, that means Vena is “looking closely over the shoulder” of UP Executive Vice President Operations Eric Gehringer, whose role he previously held at the Class I in 2019 and 2020. Vena also served as a Senior Advisor to UP’s Chairman in 2021. Prior to UP, Vena spent 40 years at CN, starting his career as a brakeman and rising through the ranks to senior management positions across operations, marketing and sales. He most recently served as Executive Vice President and COO from 2013 to 2016. (Vena decided not to pursue returning to CN as President and CEO to replace the retiring JJ Ruest in 2021.)
According to the AP report, Vena says he is also “working to speed up decision making at the railroad to help make UP more responsive to customers,” adding that he is not “changing from the lean operating principles” he honed during four decades at CN, so more cuts are likely coming. But, he said they won’t be “as drastic” as in his first tenure because “UP already made most of the big moves” when it first adopted the ‘precision scheduled railroading’ model and slashed thousands of jobs and shut down a number of railyards across its 23-state network in the West.”
Going forward, Vena told investors that UP will also be focused on “attracting new business and boosting rates to cover higher costs” like the raises and sick leave the Class I agreed to give workers over the past year to address some of their quality of life concerns, according to the AP report. “Both those things will also help the bottom line,” Vena said.
UP has paid sick leave agreements in place with all 13 of its labor unions, a milestone the Class I reached on Aug. 2, following its ratification with the International Association of Sheet Metal, Air, Rail and Transportation Workers (SMART-TD).
“I promise you this: we’re going to be the best,” Vena added. “We’re going to have the best margins. We’re going to have the best service, and we’re going to have the best safety record. And if we do that, customers will want to come with us.”
But, AP reports, “The current weak consumer demand amid the uncertain economy and inflation has translated into a 3% drop in volume so far in the third quarter, even though most industrial shipments have remained steady,” putting pressure on UP’s profits.
According to the AP report, Vena’s comments about continuing to improve safety will “likely be welcomed” by Federal Railroad Administrator Amit Bose, who sent a letter to UP to “express serious concern about specific and significant risk to rail safety.”
“Compliance of the rolling stock (freight cars and locomotives) on the UP network is poor, and UP was unwilling or unable to take steps to improve the condition of [its] equipment,” Bose said in the letter addressed to Vena, President Beth Whited and Executive Vice President Operations Eric J. Gehringer—and copied to Surface Transportation Board (STB) Chair Marty Oberman and six union officials.
Following a phone call with Bose on Monday, Vena responded with a polite but firm letter “stressing UP’s commitment to addressing the concerns and making any needed changes or repairs.”
According to the AP report, railroad safety has been in the spotlight this year ever since a Norfolk Southern (NS) train derailed in East Palestine, Ohio, back in February.
That crash, AP reports, “prompted temporary evacuations, calls for reforms and months of cleanup that still isn’t complete,” as well as lingering health worries among many of the area’s residents.
Vena and CFO Jennifer Hamann addressed the conference on Sept. 12 via a live webcast of the 35-page presentation (download below), highlighting the CEO’s strategy for the railroad.
