Union Pacific's Cure for Congestion: Imitate a Rival
19 9월 2018 - 7:59PM
Dow Jones News
By Paul Ziobro
Union Pacific Corp. never hired Hunter Harrison to run its
sprawling network. But with congestion clogging its system, the
company is now adopting the late railroad maverick's strategy to
speed its freight trains.
The railroad, which until recently had been adding locomotives
and crew, plans to use less equipment in a bid to improve its
financial performance. The strategy was espoused by Mr. Harrison,
who was running CSX Corp. when he died last December.
Union Pacific will shift its focus from moving trains to moving
the individual railcars, with the end goal of providing a tighter
delivery window for customers. It also will try to minimize
downtime for railcars, reduce the number of times cars are sorted
at facilities called hump yards and blend different types of cargo
on one train.
Such changes are part of Mr. Harrison's so-called precision
scheduled railroading model, which he honed at two large Canadian
railroads before he took the helm of Jacksonville, Fla.-based CSX
last year. During a nine-month stint at CSX where he battled
undisclosed health issues, Mr. Harrison quickly idled hundreds of
locomotives, eliminated thousands of jobs, closed facilities and
overhauled train schedules.
Mr. Harrison's plan was disruptive at each stop, resulting in
thousands of layoffs and jolting changes to railroad schedules that
led to complaints from shippers. But the strategy drastically cut
costs, resulted in faster train times and lifted stock prices.
Union Pacific executives hope the changes will ease congestion
that has lingered on the 32,000-mile railroad for nearly a year.
"We are not currently meeting customer expectations," Chief
Executive Lance Fritz said earlier this week. The plan, to be
detailed on Wednesday, will start to unfold along the Union Pacific
corridor between Wisconsin and Texas, and be put in place across
the network by 2020.
Executives have long said that Union Pacific would borrow ideas
from other railroads to improve its performance. Some of them
recently adopted an informal name for weekly meetings aimed at
helping trains run more smoothly: "WWHHD," or "What would Hunter
Harrison do?," two people familiar with the matter said.
Union Pacific's service problems have stemmed from a number of
issues. New technology called positive train control that is meant
to prevent accidents has caused slowdowns, including inadvertent
stops, as it has been rolled out.
The strength in the economy has pushed additional volume onto
Union Pacific's rails, especially in the Southern region of a
network that spans the Western two-thirds of the U.S. Crew
shortages exacerbated the issues. Union Pacific has responded by
bringing locomotives out of storage, adding railcars to handle the
additional cargo and enticing new hires with bonuses of $25,000 or
more.
The network is still facing gridlock. In its second quarter,
Union Pacific's average train speed was 24.7 miles an hour, down 3%
from a year earlier, while average time spent at terminals rose 4%
to 29.5 hours. The company has spent tens of millions of dollars on
extra equipment, labor hours and fuel to unclog the network.
The problems have pushed up Union Pacific's operating ratio to
64% in the second-quarter from 61.9% a year earlier. An operating
ratio represents the percentage of revenue consumed by operating
costs, so a decline is an improvement. Investors have demanded
more.
The Omaha, Neb.-based company has faced questions from analysts
as to whether it should follow CSX's strategy to operate with fewer
workers and equipment. It has already made changes, including a
shake-up of its management team last month that included the
retirement of its chief operating officer and the addition of a
chief strategy officer.
The company said the changes being implemented will help its
operating ratio hit 60% by 2020 and 55% longer-term.
Analysts wondered if Union Pacific would need outside help to
implement the changes, or if there is someone capable of
overhauling the company's operations and culture. "That's going to
be critical in order to implement this," Credit Suisse analyst
Allison Landry said.
A Union Pacific spokeswoman said the new strategy will be
implemented using the company's "best practices and expertise from
every layer of the organization."
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
September 19, 2018 06:44 ET (10:44 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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