Union Pacific CEO Sees Strong Economy Ahead
OMAHA, Neb. – As CEO of Union Pacific, Lance Fritz had to find ways to keep freight moving during the coronavirus pandemic as the economy nearly came to a halt and then came back to life. Now it is working to clear a large backlog of imported shipments.
In the spring of 2020 – at the height of the pandemic restrictions – the volume of shipments fell by more than 20% before rebounding sharply later in the year. The railways had to quickly downsize their staff while ensuring they had enough people to cover virus-related illnesses and quarantines before rehiring at a rapid pace to handle the volume comeback.
Current shipping volumes are almost equal, with 2019 signaling that demand has returned to pre-pandemic levels and the economy is strong, although it has weakened somewhat recently as cases of the virus have increased. increase.
The Associated Press interviewed Fritz, 58, who is also president and chairman of the Omaha, Nebraska Railroad. His answers have been edited for clarity and length.
Q: What do you think of the bipartisan infrastructure plan that is making its way to Congress?
A: The main attribute is that it roughly doubles the rate of infrastructure spending for the next five years, to a total of about $ 1 trillion. And that includes things that we think are vital to the economy: things like broadband being much more widely available, real infrastructure spending on highways, electricity distribution, airports and waterways.
We believe that all of this supports a more vibrant economy, and anything that’s good for the US economy – which helps the US economy to grow and prosper – is very good for Union Pacific.
Q: What does the overall economy look like from what you hear from railway customers?
A: He still feels strong. The underlying dynamic is that consumers are still sitting on a lot of money. Lending rates are still historically low. There is still a good and strong demand for housing. The demand for automobiles is strong, but automobile production is impacted by the shortage of chips. We continue to see decent strength in plastics and steel and things like soda ash going into very large parts of the economy and food and refrigerated products.
We get the impression that the delta variant has reduced the top of demand a little. It looks firm, the underlying demand, but the real heat – the very high end – seems to have cooled down a bit, but that doesn’t really worry me as long as the fundamentals stay in place and they have l ‘looks pretty good right now.
Q: How many shipments does the railroad currently handle?
A: At the start of the third quarter and at the end of the second quarter, we were at the level of 2019 or better. More recently we have started to dive below 2019 again and that seems to be due to a lot of different reasons: maybe a small impact from the delta variant of COVID, a bit of congested supply chains that are holding back the capacity of some from our customers to produce and ship. But I think it’s short term. I don’t feel like it’s long term.
Q: Canadian National and Canadian Pacific Railways made headlines this year with their efforts to acquire Kansas City Southern. What do you think are the implications of the Surface Transportation Board’s decision to reject part of CN’s acquisition plan?
A: STB’s language in its rejection of CN’s search for a voting trust to acquire KCS seemed to be quite negative about future mergers and consolidations in the rail industry. It doesn’t look like the STB is going to encourage him.
What we are focused on is making sure that the process that the STB takes anyone through merger assessment … that it is a fair and transparent process that includes solutions to concerns that we have and that it keeps everyone at the same level of rules and standards. go through this process.
Q: Why are there currently so many backlogs in intermodal container delivery of imported goods arriving on ships before being transported across the country by railways and delivered to their final destination by trucks?
A: The intermodal supply chain is not just the railroad. We are the middle miles. The supply chain goes from factories, say in Asia, to a distribution warehouse in Chicago somewhere.
Where we’re seeing real bottlenecks right now is on the distribution side where there isn’t enough capacity to meet the demand for boxes and get them out of our intermodal ramps and make them. enter a distribution warehouse. This is both the labor in distribution warehouses and the capacity of the trucks.
This will be resolved when each element of the supply chain has sufficient capacity to handle the total volume of demand. Right now it isn’t, and that’s why you see ships parked outside of Long Beach and LA.
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