This is obviously the topic of the day, with lots of different aspects to it. Given this is an operations and service report, here’s the past 75 years of industry service and how Union Pacific + Norfolk Southern would fit into this picture:
1950s: OK the war’s been over for a while, Elvis just invented rock and roll, and the economy is ripping. Let’s modernize operations and service!
Rails: We dig it and would love to rock our customer’s worlds on service, but Mr. Eisenhower has started building these things called “interstates” and we’re hemorrhaging business to trucks. We could compete against horses and carts. It’s not fair.
1960s: It’s the age of peace and love man. How about giving us some love on service?
Rails: That would indeed be groovy, but these interstates are still killing us, and we’re so overregulated by the Man that we can’t even set our own prices, which is a major bummer.
1970s: Stayin’ alive, rails?
Rails: Barely. A quarter of the track is run by companies in bankruptcy protection and return on capital has collapsed to 4%. We hear there’s some dude in Congress called Harley Staggers that might have a solution, however.
1980s: OK you’ve just been rescued by the Staggers Act. NOW, can we please get serious about service?
Rails: Well look, we’d love to do that, we really would, but with 26 Class I’s we’re obviously waaay too fragmented. Let us do a little bit of consolidation first then we’ll get to service after that. Promise.
1990s: We’re now in the era of grunge, which is how your customers are describing your service. Can we finally get with the program?
Rails: No can do, bucko. Still consolidating. And if you see any headlines mentioning things like “Crisis in the West ’96” or “Conrail Debacle,” that wasn’t us. Totally different industry.
2000s: Well Y2K was a bust and the world didn’t end. With the apocalypse apparently on hold for another millennium, maybe we can circle back on service?
Rails: Improving service sounds like hard work, and why would we do that when we’ve consolidated away so much competition that it’s triggered a pricing explosion starting in 2004? Didn’t you see our big win in the Duke Energy rate case? We’re off to the races, Brohamski.
2010s: I’m still here.
Rails: Damn dude, you’re like a dog with a bone. You started this convo talking about Elvis, and one of his Memphis bros called Hunter invented this thing called “PSR” that lets us fire a third of our people and still keep a few trains running. THAT’S the way you grow earnings. Ka-Chink! Once we get this implemented it’s guaranteed to improve service. Hunter said so.
2024: How’s that PSR thing working out for you?
Rails: Well, and you’ll find this funny, it turns out that firing a third of our train crews wasn’t exactly optimal and we, um, might have had 11 crew-driven meltdowns in the past ten years. But we’ve totally figured it out now and it will never happen again. Promise.
2025: OK, the interstates are increasingly congested, stifling regulation is ancient history, you’ve whittled competition down to three regional duopolies, the surge in pricing has come and gone, PSR is done, and you talk about improving service at every single public appearance. There’s no more distractions or excuses and we all know what we need to do: Staff up and improve commercial teams and customer service, limit furloughs and build redundancy into crew districts, and finally give customers the ability to track a darn railcar. At this point, it’s probably the only thing on the planet that can’t be tracked. Sure, it will cost a bit of money, but with 40% operating margins and tons of cash, you’ve got it covered. This is exciting. LET’S GOOOOOOOOOO!
Rails: Union Pacific is in early-stage discussions to acquire Norfolk Southern, “according to people familiar with the matter,” The Wall Street Journal reported July 17.
