Western Railroad Discussion > UP's plan stirs up STB

UP decision to  implement scheduled railroad,  AKA EHH,  stirs up STB who does not want repeat of CSX problems. STB demands weekly reports
https://www.progressiverailroading.com/union_pacific/news/STB-wants-regular-updates-from-UP-as-it-phases-in-scheduled-railroading--55675?utm_medium=prdailynews&utm_campaign=prdailynews9/21/2018



Edited 2 time(s). Last edit at 09/21/18 14:33 by tomstp.

STB filings/decisions etc are dominated by shipper rate disputes/service disputes and not mergers/abandonments and the like.
All they need is another plethora of outraged shippers similar to what EHH and CSX caused.

Out

This would be hilarious were it not such a sorry situation.

TAW

A good friend of mine called me yesterday and said teh UP dropped that idea.

Bob Krieger
Cheyenne, WY

callum_out Wrote:
-------------------------------------------------------
> STB filings/decisions etc are dominated by shipper
> rate disputes/service disputes and not
> mergers/abandonments and the like.
> All they need is another plethora of outraged
> shippers similar to what EHH and CSX caused.
>

The really bizarre part of all of it (UP, CSX, CP, CN) is that the operation starts out being chaotic and gets worse instead of better when it becomes "scheduled." That's what propaganda buzzwords are all about, like snake oil salesmen claiming to cure anything or alchemests claiming to turn base metal into gold. Throw in a few sophisticated-sounding words and watch the suckers clamoring to buy. Precision Scheduled Railroading has nothing to do with Precision or Scheduled, and the Railroading part is questionabnle.

TAW

TAW I often wondered what you thought of that.    To me a bad part is reducing the physical plant and tayloring everything to a certain lenght train. When business booms it tears precision railroading all to hell. This says nothing about running off customers, running the legs off operating employees and all the hell it causes families.

Back in the 1950s, New York Central ripped out much of its four track water level route on the promise of CTC.

Where they screwed up was also reducing towers and dispatchers to manage the much more concentrated traffic flow.

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Lackawanna484 Wrote:
-------------------------------------------------------
> Back in the 1950s, New York Central ripped out
> much of its four track water level route on the
> promise of CTC.
>
> Where they screwed up was also reducing towers and
> dispatchers to manage the much more concentrated
> traffic flow.
>

That was the result of falling for the propaganda of the snake oi....uh, CTC salesmen advertising CTC that allows you to tear out tracks, cut employees, and have capacity for more trains than ever.

There are new flavors of snake oil now.

TAW

 

Woops.  They reacted to the analysts and the STB came calling.  Don't talk about it, just do the quarterly earnings drill.  The term "Presession Scheduled Railroading" just got buried with EHH.

Bob Wilcox
Charlottesville, VA
My Flickr Shots



Edited 2 time(s). Last edit at 09/21/18 13:58 by bobwilcox.

I have said it many times but, again.  Manage the railroad for the benefit of the railroad not Wall Street.  The O R is only a partial indicator of how a railroad does.  The man thing is did you make a buck hauling the freight!   Your cost might be 60 cents of a dollar with low O R.on most traffic.   But, if you can haul even more freight and have a little higher cost but still MAKE MONEY on a portion of your business  with .70 cents  cost on a certain segment, YOU STILL MADE MONEY and put MORE to the bottom line.

Changing executive   salary, bonuses and stock options by  removing stock options would go a long way to curing Wall Street pressure..

After 30+ years on the rails I have noticed a few things. Dispatchers sit down with a plan in mind for the situation at hand. The plan starts to unravel just as soon as it is put in motion. Then there are two types of dispatchers to work the desk. One tries the whole shift trying to pound the square pegs of reality into the round holes of the plan. After 8 hours of frustration that DS goes home leaving the plan as someone else's problem. The other dispatcher takes a deep breath and treats the plan as a piece of clay to roll it and mold it to work as the situation evolves. That is the dispatcher who goes home with the more relaxed mind.

Precision execution is just a master plan which must be followed without exception no matter how big the square peg nor how small the round hole.

tomstp Wrote:
-------------------------------------------------------
> I have said it many times but, again.  Manage the
> railroad for the benefit of the railroad not Wall
> Street.  The O R is only a partial indicator of
> how a railroad does.  The man thing is did you
> make a buck hauling the freight!   Your cost
> might be 60 cents of a dollar with low O R.on most
> traffic.   But, if you can haul even more freight
> and have a little higher cost but still MAKE MONEY
> on a portion of your business  with .70 cents
>  cost on a certain segment, YOU STILL MADE MONEY
> and put MORE to the bottom line.



>
> Changing executive   salary, bonuses and stock
> options by  removing stock options would go a
> long way to curing Wall Street pressure..

Yes, that's a good example of positive leverage. Once the fixed costs are covered, you can run an immense amount of business at a relatively low variable cost.

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TAW Wrote:
-------------------------------------------------------
> callum_out Wrote:
> --------------------------------------------------
> -----
> > STB filings/decisions etc are dominated by
> shipper
> > rate disputes/service disputes and not
> > mergers/abandonments and the like.
> > All they need is another plethora of outraged
> > shippers similar to what EHH and CSX caused.
> >
>
> The really bizarre part of all of it (UP, CSX, CP,
> CN) is that the operation starts out being chaotic
> and gets worse instead of better when it becomes
> "scheduled." That's what propaganda buzzwords are
> all about, like snake oil salesmen claiming to
> cure anything or alchemests claiming to turn base
> metal into gold. Throw in a few
> sophisticated-sounding words and watch the suckers
> clamoring to buy. Precision Scheduled Railroading
> has nothing to do with Precision or Scheduled, and
> the Railroading part is questionabnle.
>
> TAW

Exactly.  The real, truthful concepts of Precision Scheduled Railroading would be a great thing for railroads, if they could and were willing to do it.  Customers would be (mostly) pleased and long term investors (ie REAL investors), would be pleased with long term gains and dividends.  However, EHH's concept of Precision Scheduled Railroading is anything but this.  EHH's PSR's fundamental base and entire drive is cutting costs and over working assets passed their maximums (and that includes people), all to drive up profits in the short term and make Wall Street happy for a short time.  By the time EHH's concepts come back and implode the railroad (driven away the customers, massive deferred maintenance, extremely low employee moral, assets gone or in poor shape, etc), all those upper managers involved with it and shareholders have jumped ship, sold their stock at huge gains, and headed for sunny beaches in the Bahamas.  Meanwhile, the customers, employees, and communities of that railroad are left with a huge mess to clean up and a massive task to "right the ship" again, if it is even possible by then.

As a reminder,
"The whole railroad is for sale if it will benefit the shareholders."
Per Lawrence Cena, ATSF President and 1981 Railroader Of The Year.

Any mention of the customers?  And this shareholder philosophy wasn't
forgotten after it was pronounced. 
 

Here is my prediction about the future of Union Pacific.  Interest rates will continue to rise and stock prices across the market will eventually fall to match the increased cost of leverage. Whenever the next financial crisis hits (could be tomorrow or 10 years from now) UNP shares will drop dramatically as the company will not have any money left to repurchase shares to prop up the price any further.  A large hedge fund or holding company will come in, similar to Berkshire Hathaway with BNSF and buy a controlling interest.  UNP will cease to be a publically traded stock, as it will be a part of a larger organization.  Only then will the railroad reinvest back into its infrastructure to compete with BNSF. Without the high pressure for low operating ratios and high stock valuations, maybe we could get back to actually running a railroad for the long term..  The name of the game should be long term, sustainable business grown and regular, predictable dividends.  

That's a good summary, hogheadmike. But it needs a little more context.

An asset intensive company like UP (or Verizon, Exxon, etc) will borrow and add debt because it's cheaper than equity, and debt is deductible. Equity dividends aren't deductible, and are still double taxed.

UP debt is about 2/3 the value of its equity. Above average, but solid investment grade.

UP has a coverage ratio of adjusted income earned to interest payable of about 13. That means every dollar of interest payable in 2018 has about $13 of income behind it. That's important because higher interest rates won't sink the company, on their own.

UP has done a good job managing assets.

Just my opinion, of course.

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