(The following story by Michael Hooper appeared on The Capital-Journal website on April 14.)
TOPEKA, Kan. — Matthew Rose, chairman, president and chief executive officer of the Burlington Northern and Santa Fe Railway, gave Washburn University students a glimpse of the challenges he faces running the second-largest railroad in the country.
Making presentations all day Tuesday as the Oscar Stauffer Executive in Residence, Rose discussed inefficient ports in California, rising steel prices, BNSF in Topeka, the company’s 155-year-old history, trade with China and free markets.
“It was interesting. He had lot to say,” said David Nimz, 22, a senior finance major. “I didn’t realize how much we still use the rail for transporting consumer goods.”
Rose said he was bullish on the U.S. economy and was confident BNSF will reach $10 billion in revenue this year.
“While we always have job contractions and job additions, I quite frankly have not seen the future as being this bright, not only for shareholders and customers, but also for employees,” Rose said in a news conference.
Rose, 44, was born in Salina and graduated from the University of Missouri. He has worked for about 23 years in the transportation industry and joined BNSF in 1993. He worked under former chairman Robert Krebs for several years before being promoted to the top position of the 36,644-employee company.
Rose, who meets regularly with employees, said he is expected to return later this year for a town hall meeting in Topeka. He told students it’s important for him to share his vision with employees and hear their concerns.
He said BNSF will be hiring 1,600 employees in 2004, more than double what it normally hires, because of an aging workforce and a rebounding economy. There are about 120 job openings in the Kansas City area.
Rose said BNSF will continue outsourcing some jobs, including information technology jobs to India. Several Indian nationals have been training in the company’s headquarters in Fort Worth, Texas.
BNSF has 4,800 employees in Kansas, including 1,000 in Topeka. Rose said that with the transfer of 46 employees to the Topeka locomotive shops from Burlington, Iowa, BNSF employment in Topeka should remain stable.
“We’re a very large employer here in Topeka and we plan to stay that way,” he said. “We’re one of the top 10 employers in the state.”
Unlike many employers, BNSF wants employees to spend their entire working careers with BNSF, he said.
“We like people who start with our company and finish with our company. We really like that continuity,” Rose said.
He said two ongoing themes have been driving change in the rail industry for as long as he has been in it: Reducing costs and improving service. Americans want quality products at a cheap price. As a result American business is forced to find ways to produce more at less expense.
“Jobs are going to lower-cost, more efficient markets,” he said. “Our economy is going to change and you’re going to be doing something different.”
Rose said intermodal trade, which includes movement of freight in truck containers on BNSF rails, grew more than 20 percent last year. Much of that growth can be attributed to trade with China. Rose gave a supply-chain example of “grandma’s pajamas” sold at Target in Topeka. Rose said cotton from the South is shipped by rail and boat to China manufacturers. The pajamas come to the United States in ship containers. Those containers are removed from docks in California and boarded on trains. The pajamas would travel by train to Kansas City, Kan., and then by truck to the new Target Distribution Center in Topeka before being delivered to the Target store.
Rose said the ports in California operate inefficiently compared to the ports in Hong Kong and Shanghai. At the Long Beach, Calif., port, dock workers work only during the day and stop working over the noon hour to each lunch, “which is crazy,” he said. In Hong Kong and Shanghai, the port workers don’t stop working or they have staggered breaks to continue moving freight. The ports in Shanghai and Hong Kong are five times more efficient than the California ports, he said.
“In some ways we are becoming uncompetitive,” said Rose, who plans to visit Shanghai later this year.
He expects service in the California ports to get worse before it gets better. He said Americans have to ask themselves whether they want to be job protectionists or if they want free markets.
Rose also said that because steel prices have risen 50 percent to 70 percent over the past six months, the railroad will have to pay another $15 million to $20 million for its capital improvements. The price of a $60,000 rail car will rise $5,000.
He expects steel prices to stabilize soon and the steel market will get used to China’s thirst for importing steel to supply its booming economy.
Rose noted BNSF has a dynamic history dating back to 1849. The company has been on the brink of bankruptcy a couple of times. The company is actually a collection of many railroads, including the Atchison, Topeka and Santa Fe Railway, which was founded in Topeka by Cyrus K. Holliday.
BNSF has survived because it has adapted to change and reinvented itself about every 10 years, particularly since the 1970s.
Real rail prices are actually down 40 percent since 1980, but volumes are up 30 percent. BNSF is handling more freight because of a 60 percent increase in productivity. Those productivity gains are due in large part to advances in technology. About 94 percent of shipping instructions last year came from electronic tools such as e-mail.
Washburn University has established two scholarships in honor of Matthew Rose. During a noon luncheon speech, Jerry Farley, president of Washburn University, presented Rose the Washburn Bible, a traditional gift to the executive in residence.
A past executive in residence was Richard Davidson, chairman of Union Pacific Railroad, the largest railroad in America.