Freight congestion has spread across the Union Pacific Railroad system, especially in Southern California and the southwestern United States, raising concern about the effects on America's trade with Asia.
If a solution is not found before the rail freight rush begins in the late summer and autumn, the slowdown could disrupt trade through the ports of Los Angeles and Long Beach, just two years after a West Coast port strike caused chaos.
Railroad officials say that has not happened yet and add that they are working to prevent such an outcome. Exacerbating the stresses on the system, Asian traffic has taken an unexpectedly strong upturn in the past few months, with a spike in shipping containers arriving from Asia and a new flow of American grain to China.
In Southern California, some railroad officials are calling the situation a mini-meltdown, similar to - but not as bad as - the freight chaos that spread from Houston across the Union Pacific system in 1996. Dozens of trains daily are parked on sidings because they cannot get into or out of the Los Angeles Basin.
Union Pacific's busy line from Los Angeles to El Paso, Texas, is sometimes referred to as a parking lot, as trains have stalled there because their crews have reached the federal maximum of 12 hours on duty. Often, relief crews are not available.
At the root of the problem, Union Pacific concedes, is its failure to accurately gauge its hiring needs and unexpectedly strong traffic brought on by changes in regulations governing work hours for truckers. Union Pacific and Burlington Northern Santa Fe, the two largest U.S. railroads, handle all long-distance rail freight traffic to and from the West Coast.
Officials said Burlington Northern Santa Fe, which shares port traffic with Union Pacific, is still fluid but has been forced to begin operating more heavily loaded container trains on its busy Los Angeles-Chicago main line.
Almost all Asian trade now moves by rail from U.S. West Coast ports to midwestern, southwestern and eastern states, and not enough trucks and drivers would be available to handle even a small portion of it. "At current delay levels, it's not having an effect on trade," said James Valentine, a railroad analyst for Morgan Stanley. "But keep in mind, this is a slow time of year. If UP doesn't get its problems straightened out before the rush, then it will have an effect on freight flow."
Normally the rush from Asia begins in late summer and continues through the autumn as retailers gear up for the Christmas season. Robert Turner, Union Pacific's senior vice president for corporate relations, said the railroad intended to be ready for the rush.
He said 965 new train crew members were graduating this quarter from the railroad's training center, 1,400 were beginning training, and 1,600 were scheduled for training in the third quarter. "We're pretty sure our crew base will be adequate by the fall rush," he said.
Morgan Stanley last week downgraded Union Pacific to an "underweight" rating in model portfolios from "equal weight," partly because of its operational problems. The firm's latest freight customer survey ranked the company near the bottom in service among seven major North American railroads, giving it "the sharpest drop of any railroad" since a June survey.
Only CSX Transportation, one of two big railroads in the eastern states, ranked below Union Pacific.
"The low scores, significant negative feedback from customers and no signs of improvement in the weekly operating metrics were key catalysts" for the downgrade, the firm said. Operational data, reported by the rail companies to the Association of American Railroads, give evidence of the railroad's problems.
Freight cars on line, which can be used as a measure of congestion, were at a historic high of 325,634 in the week that ended on March 19. The average amount of time that a car spends in terminals has also surged. That measure in West Colton, the major yard for Southern California, was up from 30.8 hours in the first quarter of 2003 to 49.0 hours in the latest week.
Average train speed, which was 24.8 miles per hour, or 39.9 kilometers per hour, in the first quarter of 2003, was down to 21.5 miles an hour in the week that ended March 19. This is a far more important measure than the slight differences might indicate.
Turner said Union Pacific estimates that each decrease of one mile an hour decrease required 250 extra locomotives, 5,000 extra freight cars and 180 extra employees to absorb the decrease in efficiency. If the problem grows worse, many maritime shipments from and to Asia will be locked in a ground transportation problem at each end of their journeys, as the problem is mirrored on the other side of the Pacific.
The New York Times reported on March 5 that China's ports had become clogged because of a lack of rail cars and trucks to haul goods. Rapid economic growth, complicated by a government crackdown on overweight trucks, is straining China's rail system and highway transportation system.
The Union Pacific problems result partly from a surprising growth in rail traffic brought on by a sustained economic upturn and by federal rules on truck driver rest that went into effect early this year. "It seems as though the economy is a lot stronger than it was, and it got better faster than anyone expected," Turner said.
The upturn is strong across all business lines from agriculture to intermodal traffic including ship containers delivered to ports. But the main reason for the railroad's problems is a serious miscalculation on how many engineers and conductors would retire when Railroad Retirement rules were relaxed early last year.
"We admit we got caught short of people," Turner said. "We're not contesting that. What we're doing is fixing it." He said the railroad had tried to predict the number of retirements, convening focus groups, taking surveys and even hiring the Gallup organization to poll employees.
At first, he said, the predictions seemed to be correct. "Then when June rolled around and everyone was vested for vacation in 2003, the attrition rate took off," Turner said. The shortages led to overworked crews and poor labor relations that further exacerbated the problem, according to union officials.
James Brunkenhoefer, national legislative director of the United Transportation Union, said Union Pacific had been "operating on the very edge" for two years, ignoring union warnings of coming shortages. When the traffic increase began last fall, the railroad pushed its employees to work harder and punished those who tried to take time off, he said.
"The railroad took a punitive attitude toward people who had already worked to exhaustion," Brunkenhoefer said. "You're threatening people to go to work who have already worked too much."
"If people are not working or following the labor agreements, we'll deal with them," Turner replied. The severity of the problem in Southern California and the Southwest, oddly, can be traced partly to a Union Pacific effort to provide premium service to one of the largest U.S. rail shippers, United Parcel Service.
UPS has begun a coast-to-coast premium service that requires consistent high-speed train service to Dallas, Atlanta and New York. The New York train dispatched from Los Angeles on Tuesday is particularly time-sensitive because it is scheduled to arrive in time for package delivery on Friday rather than Monday. To keep the train on time on the busy and mostly single-track segment between Los Angeles and El Paso, called the "Sunset Route," railroad dispatchers clear other trains onto sidings far ahead of the hot UPS train, sometimes hours ahead.
Often, crews can't make their next terminal within the federal on-duty limit of 12 hours, and no other rested crews are available. It sometimes takes a week to sort out the resulting mess. "The hot trains are a challenge, particularly on the Sunset," Turner said.
Sources said Union Pacific and UPS were discussing possible solutions, but neither company would comment. "Union Pacific is a valued rail partner, but we don't discuss the performance of individual railroads," said Norman Black, a UPS spokesman.
