Union Pacific (NYSE:UNP) CEO Jim Young spoke with FOX Business Network (FBN)’s Dagen McDowell about the impact that high gas prices and a slow economic recovery are having on the railway business. Young said that while high gas prices “make us more competitive” moving “freight from the highways to rail,” it might have a negative impact as a large portion of their business is “related to consumer spending.” He went on to stress the country’s problem with “transportation infrastructure” and that Union Pacific is committed to “put more money back into infrastructure” in an effort to help ease issues with “energy efficiency and the challenges with capacity that’s out there.” Excerpts from the interview are below.
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On how high gas prices impact their business:
“For us, it makes us more competitive. When you think about moving freight from the highways to rail. We’re not in a fight with truckers. We’re partners. A lot of our trucking partners, we work together in terms of they’ll handle it part of the move and then we’ll put it on a rail and handle it the rest of the way. The key is service. This is an industry that hadn’t been known for great service you look over the past several years. And in the trucking industry you talk about minutes in schedules. Not hours or days. And that’s what we’ve been able to do is put some very good service packages together that help us bring freight off of the highways. My concern is, does it hurt the consumer? A big part of our business is related to consumer spending. And I notice when I’m out on the field talking with our employees and you start talking about the price of gas, they clearly are starting to feel it in their pocketbook.”
On the company’s relationship with the government:
“I’m getting on an airplane when we’re done here and I’m going to go spend a day and half in Washington, talking to members of Congress about the state of our industry. As you know, there’s been some discussion about maybe new regulations in our industry. We’re already regulated when you look at it. My concern is you’re seeing the industry that is starting to report record profits, record return on capital and it seems to be a negative. That if you’re making money, there's something wrong with that. Our commitment is to put more money back into infrastructure. Every [Congress] member I talk to understands that in this country we’ve got a crisis with transportation infrastructure. They all want to see how we can move our business from highways to rail, particularly energy efficiency and the challenges with capacity that’s out here.”
On what he sees as the biggest challenges facing the company:
“The biggest challenge right now is anything related to the construction industry. You’ve read about housing. It doesn’t seem to appear to be there’s a bottom. Our business, and I’ll just give you an example, lumber, that we would haul is down almost 50 percent from the peak . So we still are waiting in the construction area to see, really, any signs of life there at this point.”
On the strength of their business:
“Our first quarter, all six business groups, we’re up. It’s everything from coal to our automotive business, chemicals, Ag business. We’re continuing to see some strength. It’s hard forecasting out how you see the future, we thought we would see good, consistent growth. Now, we’re still a long ways away from where we were at the peak in 2008, but we clearly are seeing some growth in the economy recovery.”
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