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Rail News Home Union Pacific Railroad

January 2008

Rail News: Union Pacific Railroad

Union Pacific: The unmaking of a reputation, incrementally (Pat Foran, Context, January 2008)

Shedding a “slow moving” tag is no mean feat for any organization, much less a railroad, so it’s encouraging to hear that the Union Pacific Railroad leadership team feels good — enthusiastic, even — about the progress the Class I’s making on the fluidity track, as Managing Editor Jeff Stagl reports this month (see story).

Not that UP execs are satisfied with the capacity they’ve created, or that capacity in and of itself is the goal. As UP President and CEO Jim Young told Stagl, the chief challenge facing North America’s largest freight railroad is figuring out how to “maintain the railroad with this level of density” — i.e., to become a consistent service provider. There will be no short cuts to Consistencyville; such is life in the incremental improvement lane. But for the UP leadership team, it seems “incremental” isn’t a euphemism for “slow moving.” It’s a recognition of reality ... as in it’s simply gonna take time to learn how to be consistent — and then, to actually be consistent.

More evidence of that recognition is Young’s apparent desire for UP to step it up on the environmental stewardship front. (That customers see value in such stewardship isn’t lost on him, either). Steps taken range from buying 144 “green” switchers to becoming the first railroad to join the American Wind Energy Association to investing $300 million to transform the Los Angeles Intermodal Container Transfer Facility into what Young terms the “greenest terminal in the world” by 2009. The greening of the railroad will continue a step at a time, UP execs say. So will the tag-shedding.

Of Buffett, bullishness and big-time buy-ins
Warren Buffett’s bullishness on rail isn’t limited to the Class I set. Late last month, Buffett’s Berkshire Hathaway announced plans to purchase 60 percent of privately held Marmon Holdings Inc. for $4.5 billion. Marmon Holdings’ Marmon Group L.L.C. owns more than more than 125 manufacturing firms and service providers, including such transportation-related holdings as Railserve Inc., Intermodal Transfer L.L.C., WCTU Railway Co. and Union Tank Car Co. During the next five to six years, Berkshire Hathaway plans to acquire Marmon’s remaining 40 percent stake through staged acquisitions.

Berkshire Hathaway, which also owns significant stakes in BNSF Railway Co., Norfolk Southern Corp. and Union Pacific Railroad, hasn’t been the only investor buying into the Rail Renaissance. An array of hedge funds and private equity firms are investing big time in Class Is, and their interest in the industry continues to generate speculation and angst in board rooms as well as rail-pundit circles. “Who are these guys and why are they buying in?” we’ve heard more than a few observers wonder, and not always rhetorically.

Next month, we’ll pose the “who” and “why” questions to Wall Street analysts, investors and railroad execs, and attempt to present their answers — as well as the various why-ownership-matters issues — in an appropriate context.

Thanks, Rich ...
They’ve become an exhibit hall staple — the conversation-starters that come in question form from trade-show walkers as they approach the Progressive Railroading booth: “You seen Richie? … “How’s Rich doin’?” … “Can you tell him I stopped by?” But those questions will resonate a bit differently this year. After 43 years in the rail industry and 22 with this magazine, Associate Publisher Rich Zemencik is retiring (see letter).

Rich has been a key cog at Progressive Railroading for all of my 11 years here. His attention to detail is legendary, and not just in a publishing sense. Tell Rich something about your life, or talk with him about something that matters to you, and he’ll never forget it. On the road somewhere several years back, Rich, a few railroaders and I were talking baseball, and he must have noticed my eyes light up when the topic turned to the 1960s era in general, and the late great Roberto Clemente in particular. Several weeks later, I received a cylindrical package with a Pennsylvania postmark. Inside? A poster of #21 (which is staring me in the face as I write this). That was but one of many mailings I’ve received with that telltale postmark over the years. And countless other current and former colleagues, as well as rail-industry professionals, can relate similar tales of Rich’s thoughtfulness.

Thanks, Rich, for your dedication to this magazine, your willingness to share and your support — of this industry and of me, personally. The information delivery business won’t be the same without you. But you’ll be with us every time we hear those “You seen Richie?” questions, or catch a glimpse of our Clemente posters. Enjoy the next phase ...



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