Union Pacific Corp. has mothballed more locomotives and
furloughed additional employees, as its transport volumes run 4%
lower so far this quarter, compared with a 2% dip in the first
quarter.
Much of the weakness stems from coal shipments, which have
fallen about 25% quarter-to-date because of milder temperatures and
as power plants switch from coal to natural gas. The railroad had
expected coal shipments to decline in the mid-single-digit
range.
The trend could continue, said Chief Executive Lance Fritz in an
interview. "The remainder of the year, we don't know what to
expect," he said.
As volumes drop, the company has furloughed 900 employees, "a
fairly sizable number of people," up from 500 in April, Mr. Fritz
said. Union Pacific also has stored 800 locomotives, up from 475 at
the end of the first quarter. That is about the same level as at
the end of 2013 before a boom in traffic last year, he added.
The situation is a sharp turnaround from last year, when Union
Pacific's cargo volume increased 7%, prompting the railroad to
increase its train, engine and yard workforce by about 10% to
18,000 employees and add 822 locomotives. The company had a
7,613-piece active fleet at the end of the first quarter.
While volume has dropped, it has enabled the company to
dramatically improve service levels, he added.
While the fatal Amtrak train crash in Philadelphia this month
has caused some government officials to call for faster
implementation of a new safety system known as positive train
control—or at least holding to the current mandatory
deadline in 2015—railroads won't be able to finish in
time, Mr. Fritz said. The system is designed to automatically stop
trains before certain types of accidents.
Union Pacific has already spent $1.7 billion and will spend a
total of $2.5 billion to make the system operational. It could take
years to work out all the bugs, Mr. Fritz said.
"We've been crystal clear we're not going to make the deadline,
and it's not for a lack of trying," Mr. Fritz added.
Write to Laura Stevens at laura.stevens@wsj.com
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