Union Pacific to borrow from competition in its rail reforms

September 17, 2018 GMT

OMAHA, Neb. (AP) — Union Pacific plans to borrow some ideas from other major freight railroads as it works to improve its operations.

The Omaha, Nebraska-based railroad said Monday that it will incorporate some of the operating principles that have led to dramatic improvements in the profitability of rival CSX.

Former CSX CEO Hunter Harrison streamlined operations at that eastern railroad before his death last year. He had used the same model at CSX that he incorporated successfully at Canadian Pacific and Canadian National railroads.

Union Pacific CEO Lance Fritz said his railroad isn’t meeting customer expectations now, and these changes should help that.

Union Pacific said it will work to minimize its use of locomotives and reduce the time cars sit idle. It will release more details of its plan later this week.

UP spokeswoman Kristen South said the new plan is needed to continue improving the railroad’s profitability.

“Union Pacific’s financial performance is stalling, and we need to improve operational efficiencies,” South said.

At CSX, the new tightly scheduled operating model led to major changes in the way the railroad assembled trains at eight of its 12 railyards. Jacksonville, Florida-based CSX also idled hundreds of locomotives and eliminated roughly 4,000 jobs.

CSX experienced service problems and delays last summer after implementing the changes, but its operations have improved since then. Most recently, CSX said its second-quarter profit jumped 72 percent to $877 million and easily beat Wall Street expectations.

Union Pacific’s second-quarter profit grew 29 percent to $1.51 billion, but rail executives said at the time that the results could have been better if not for some operational problems.

Edward Jones analyst Dan Sherman said the changes should help Union Pacific become more efficient, but he said he wants to see more details of the plan and how the railroad plans to implement it.

Union Pacific operates 32,400 miles of track in 23 western states.