Union Pacific takes a drastic step to reduce congestion

OMAHA, Nebr. - Union Pacific, the largest U.S. railroad by sales, will turn away potential cargo traffic and reduce the number of trains it operates in another effort to reduce congestion, according to an article in the Oakland Tribune from the Bloomberg News, plus other news sources. According to an open letter to its customers by Jack Koraleski, UP’s executive vice president-marketing and sales, actions include an allocation system to limit some shipments through "key terminals" by limiting carloadings as well as reducing the overall inventory of railroad cars.

These key corridors and terminals include the so-called I-5 corridor between Seattle, Wash., and Roseville, Calif. (near Sacramento); the Sunset Route between Los Angeles, Calif., and El Paso, Texas; the Los Angeles and Salt Lake City, Utah, route; and the Illinois-Iowa portion of the central corridor, or “Overland Route,” between Chicago and Omaha.

Examples of specifics include “temporarily limiting” the number of rock and aggregate materials carloads handled in Texas; consolidating selected automobile and chemical trains; regulating the volume of selected agricultural commodities; and capping the number of incremental train starts. Union Pacific said the moves are needed to prepare for a peak season starting this month, when total freight is expected to exceed last year's record volumes.

UP stopped running three trains in March for United Parcel Service and cut back other customers' shipments. The railroad has added almost 2,500 people to train service employment ranks, and by the end of September expects to have another 1,250 finish their introductory training. The average train speed for Union Pacific, which cut its second-quarter profit forecast in June, has slowed more than 10 percent compared with last year.

"This is likely to send panic into the minds of some shippers," said James Valentine, a Morgan Stanley analyst in Chicago who rates the company an "underweight" and does not own its shares. "There are no alternatives because of tight capacity at other trucking and rail companies. This is further confirmation that it is going to take Union Pacific longer to fix its problem."

UP spokeswoman Kathryn Blackwell wouldn't say which customers will be affected or how many of the railroad's 2,500 daily trains will be cut. She said the targets for cuts are the most congested terminals such as Los Angeles, Houston, and Portland, Ore. Traffic that moves by a rail-truck combination is the biggest business in Southern California, and Houston is a center for chemical shipments.

Total Union Pacific shipments this year have risen 2.5 percent, the slowest growth rate among major U.S. railroads, and CEO Dick Davidson said last month that the company had to forgo some shipments because of lack of train crews that contributed to delays. Competitor Burlington Northern Santa Fe (BNSF), the second-largest U.S. railroad by sales and the other major railroad in the West, has increased shipments more than 10 percent.