Railroader Blog's  Instablog

The Union Pacific Railroad just posted their 2009 Q1 earnings that reflected an 18% drop from last year. Jim Young, the UP CEO/President was rewarded with a 20% raise for, er, well…nothing!  Should bonuses and pay raises be in proportion with how the company is doing?  

 CSX and the Norfolk Southern Railroad released their 2009 1st quarter earnings.  CSX reported that they had “a better-than-expected first-quarter net profit, due in part to continued strong pricing”, while the NS said it was “aggressively cutting costs in order to offset the drop in freight volumes”.  Better than expected, according to CSX, is a 23% drop from 2008 (I would hate to see what they thought a bad quarter would be).  On Thursday BNSF and the Union Pacific Railroad will release their 1st quarter earnings, but will Wall Street continue to celebrate their lackluster performance?

It is apparent that the  Class 1 railroad network had a dismal 1st quarter, however who is really to blame for their sluggish start?  The Union Pacific, CSX, BNSF, and the NS rolled the dice a few years ago in an attempt to eliminate what they saw as a drain on their budget — their manpower.  They experimented with their investors money in an experiment that has failed miserably over the past 3 to 5 years.  They threw billions of dollars in the Remote Control Locomotives industry that not only slowed their car count to a crawl, but spent more in technology than they did in a human being with full benefits.  

The theory of the Remote Control Locomotive (RCO) was good, but the execution and reality was a complete failure.  The railroads wanted to eliminate the cost of a locomotive engineer by eliminating the cost of a benefit package, as well as the threat of personal injury lawsuits.  However, the investment to eliminate those costs proved to be grossly underestimated.  

 CSX and the Norfolk Southern Railroad released their 2009 1st quarter earnings.  CSX reported that they had “a better-than-expected first-quarter net profit, due in part to continued strong pricing”, while the NS said it was “aggressively cutting costs in order to offset the drop in freight volumes”.  Better than expected, according to CSX, is a 23% drop from 2008 (I would hate to see what they thought a bad quarter would be).  On Thursday BNSF and the Union Pacific Railroad will release their 1st quarter earnings, but will Wall Street continue to celebrate their lackluster performance?

It is apparent that the  Class 1 railroad network had a dismal 1st quarter, however who is really to blame for their sluggish start?  The Union Pacific, CSX, BNSF, and the NS rolled the dice a few years ago in an attempt to eliminate what they saw as a drain on their budget — their manpower.  They experimented with their investors money in an experiment that has failed miserably over the past 3 to 5 years.  They threw billions of dollars in the Remote Control Locomotives industry that not only slowed their car count to a crawl, but spent more in technology than they did in a human being with full benefits.  

The theory of the Remote Control Locomotive (RCO) was good, but the execution and reality was a complete failure.  The railroads wanted to eliminate the cost of a locomotive engineer by eliminating the cost of a benefit package, as well as the threat of personal injury lawsuits.  However, the investment to eliminate those costs proved to be grossly underestimated.  

The close relationship between federal taxpayer money and railroads doesn’t seem to phase the mindset of the Class 1 rail carriers. Each year the federal government sinks billions of dollars into the rail industry; however, the railroads seem to be more expectant of this money to pad their pockets. The funny thing is that the thought of a private individual using government assistance (or welfare) is considered taboo. My question is: Which is worse – Abusing food stamps or taking billions of dollars to help pay for a $15 million salary for a CEO? I feel that it is more despicable for a Fortune 500 company to abuse corporate welfare than a single individual to use welfare to survive.

When the federal government sets aside money for Railroad Rehabilitation and Improvement, I have to wonder how the taxpayers can tolerate this type of government welfare fraud. Lets look at the salaries for the CEO’s in 2007:

The Union Pacific Railroad’s “Building America” ad Campaign is brilliant. The smooth rich voice of Sam Elliott saying, “The road to the future may not be a road at all”, while the camera pans through the most majestic vistas of western America makes you well up with pride and admiration. No kidding, I had a lump in my throat and a tear in my eye. Is this commercial just “hype” for the Union Pacific; moreover, is the railroad industry producing commercials to make them feel like they are doing something greater than what they are doing?

I was talking to one of my colleagues the other day and I said: “If you took the initials and logos off of every railroad in the country…no more UP, BNSF, CSXT, NS, KCS – no labels of any kind, you couldn’t differentiate one railroad from another.” I’m talking about management/employee relations, dispositions and overall arrogance. Railroad corporations and their management styles mirror each other throughout the industry. Railroads have not evolved into the 21st century. They have a 19th century attitude with a 21st century portfolio.

Think of the technology the railroads have today: Remote Control Locomotives, Distributed Power and Hybrid Locomotives to name a few. Some of the most advanced systems created to date; however, the advancement of the railroad screeches to a halt due to the stagnation of the railroad management. Everyone knows the reputation of Norfolk Southern’s hardcore management philosophy. Their corporate headquarters are situated on the Military Highway in Norfolk, VA, which is really appropriate due to their “drill sergeant” management mentality. CSX doesn’t have a stellar reputation either. Their Manage With Intimidation style causes resentment and lower productivity.

The Union Pacific Railroad does take the trophy with their management style. When they started hiring managers off the street and expected them to understand how trains move, that’s when the trouble ensued. I’ve heard instances of managers who would write-up a conductor because he was using a four-point stance on a boxcar. The manager’s excuse was: “The rule book said to use a three point stance”. How humiliating is it for a conductor to be chastised because after throwing a switch he didn’t point hard enough at the switch point? So, the UP’s Manage with Ignorance wins the award for Railroad Excellence.