Union Pacific: Problems Persist

Train speed at UPRR is even slower than in September when congestion started

For those that have not followed the story, Union Pacific has had seven deaths in five fatal accidents since the summer. The Federal Railroad Administration launched an investigation into UP and found train dispatchers working 80-hour weeks. Damage to the system has caused congestion which has been costing Texas businesses $100 million per month, according to an estimate by the Texas Railroad Commission.

The TRC wants the Surface Transportation Board to force UP to give up 400 km (250 miles) of track to other operators, as a way of easing congestion. It is unlikely that the STB will comply as it recently put its own plan to work, a temporary extension of trackage rights allowing other railroads to operate on UP's tracks. But the TRC's move illustrates the frustration the business community feels over the UP's inability to meet its own targets.

In August, UP said that things would get better starting September 16th, the day when the former Southern Pacific was to be integrated with UP. Train crews were pooled and parallel rail lines were made into two-way double track systems. A few weeks later, UP hoped that congestion would be cleared by november, and now they say after New Year's. It will be better tomorrow but tomorrow just never seems to come.

Having the vast UP network cease to function for months on end is of course damaging the economy. (Too much demand at UP is symptomatic of inflationary pressures, but Alan Greenspan now says the economy is finally slowing.) Trade watchers say that delays were ruining things for producers, but that problems now are reaching the consumer level. Woe betide the company that stands in the way of people's Christmas shopping.

Shareholders are now also showing signs of ire. They are suing UP on grounds that it intentionally glossed over the difficulties involved in merging SP. UP stock has tumbled by 20% since July. Maybe UP was overoptimistic about the benefits of buying SP, but the benefits are certainly there: running two partially overlapping networks as one is plainly much more efficient. Pooling cars, engines and tracks makes rescheduling of trains much simpler and problems can be dealt with faster and more effectively.

The online magazine Slate suggests that UP should not have shed 1000 workers without having a plan for increasing productivity, but the merger is nothing if not an enhancement to productivity. The article claims that the people UP let go of were mostly from SP, and this left UP people running unfamiliar SP lines and equipment. This of course sounds like a dumb thing to do, but it is a fast if brutal way of dealing with different corporate cultures. The state of SP's famously dirty engines does not indicate a culture worth preserving, and UP's program of making "front of train devices" work -- ie fixing headlights and horns -- hints that the safety problems are not coming from routines established at the UP part of the merged company.

The merger should have made UP more efficient. How they screwed it up is an unanswered question.