Union Pacific CEO Lance Fritz at a press conference Monday, July 8, 2019 announcing a donation by the railroad to the Mosaic Templars Cultural Center in Little Rock, Arkansas. Photo: Michael Hibblen
It’s a rare opportunity to talk to the head of the largest railroad in the nation. Union Pacific President and CEO Lance Fritz was in Little Rock on Monday, July 8, 2019 to take part in a couple of events with Arkansas Gov. Asa Hutchinson. The two were at a luncheon marking the 60th anniversary of the Little Rock Port Authority, then spoke at a press conference announcing a donation by the railroad to the Mosaic Templars Cultural Center.
I covered the announcement regarding the museum’s fundraising campaign for KUAR. Afterward I spoke with Fritz for a few minutes about the state of the railroad industry, including the implementation of Precision Scheduled Railroading, which has led to job cuts, the retirement or storage of many locomotives and a reduction in the number of hump yards in use nationally. The hump at the Pine Bluff, Arkansas yard was idled earlier this year. You can hear the interview below or read a transcript of our discussion.
Fritz had met two weeks earlier with President Donald Trump, saying they had a long discussion about trade and other issues. While speaking at the Little Rock Port Authority event, Fritz said Trump is taking a very calculated gamble with trade tariffs which could end up hurting the U.S. economy. In his interview with me, Fritz said the railroad industry is feeling the impacts of U.S. trade disputes with customers hesitant to make investments at this time.
AUDIO: Hear my brief interview with Union Pacific President and CEO Lance Fritz.
I started by asking Fritz about changes at Union Pacific regarding the industry implementation of Precision Scheduled Railroading.
LANCE FRITZ: We are changing our transportation plan. We used to focus on movement of the train and, by default, that would incorporate movement of the car. And that’s what customers care most about, consistent, reliable movement of where the car was to where they want it to be. In Unified Plan 2020, which is our implementation of Precision Scheduled Railroading, we literally focus on the car, and the difference is we’re just relentless on removing the amount of time that a car sits or that we touch a car like in a yard. If it doesn’t have to be switched, we don’t want to switch it and the end result is our car velocity year over year is up by 10 percent-plus, while our train velocity is down a little bit. And the car velocity incorporates that decrease in train velocity. Now, at the end of the day, I expect all those KPI, all those key performance indicators, to move in the right direction, but that simple change has created a more consistent, reliable service product for our customers.
MICHAEL HIBBLEN: And you’re trimming down the workforce a bit…
FRITZ: Yeah, another thing that happens as we implement a plan like this, so if we’re going to switch cars like this fewer times, they move across us more quickly, we need fewer cars, so that means our car men, the people maintaining the cars, that workforce is declining. We have fewer locomotives moving our trains because we’re much more efficient in our train movement, so that means fewer people maintaining our locomotives, and because we’re switching cars fewer times, we need fewer people to do the work of switching. So a location like here in Little Rock has benefited by absorbing work from a location like in Pine Bluff.
HIBBLEN: And you’ve cut the number of hump yards, I understand.
FRITZ: Yeah, the industry has historically… when a company has implemented Precision Scheduled Railroading, one of their outcomes is, because they’re switching cars fewer times and touching cars fewer times, some of their hump yards close down. On our railroad, prior to implementation, we’ve had about 14 individual hump yards. At this point we’ve stopped humping at three of them and there very well might be one or two or three or four more. But the end game isn’t not to hump a car, because a hump – that is a terminal where cars go over a gravity-fed bowl – is the most efficient way to switch a large amount of cars. The issue is when you’re not switching cars as many times, that work tends to get concentrated in a place like Little Rock where the cars want to be.
A pair of boxcars go through the North Little Rock hump yard on October 5, 2012. Photo by Michael Hibblen.
HIBBLEN: Do you expect the North Little Rock [hump yard] to remain?
FRITZ: Yeah, right now North Little Rock is doing a great job of actually switching more cars than they did prior to our implementation of the Unified Plan 2020. So at this point, it looks like Little Rock is benefiting by having more work, not less work.
HIBBLEN: How’s the industry in general, the financial picture at this point?
FRITZ: So the industry is feeling impacts now of our trade disputes with China and the uncertainty that’s impacting some of the industries we serve. So the top lines, they’re okay, but they’re down a little bit year over year, and I see in the behavior of our customers base – and we serve virtually all of the U.S. economy – I see a hesitancy to make investment. I see a hesitancy to add to working capital, and I think that’s all about the uncertainty that some of the trade disputes created.
