(Dow Jones Newswires circulated the following story by Bob Sechler on July 23, 2009.)
OMAHA, Neb. — Union Pacific Corp. (UNP) has begun returning to service some of the thousands of freight cars and locomotives that it idled in the slow economy, a sign of the railroad’s confidence that conditions have stabilized.
Chief Executive Jim Young stopped well short of forecasting an imminent rebound, saying in an interview that he’s not “overly bullish” on the second half. But he also said some recent trends are showing improvement and he wants to be prepared.
“We’re going to be aggressive on bringing resources back in,” Young said. ” There are some signs of a potential upturn (in freight trends) going forward.”
Union Pacific reported a 22% drop in second-quarter freight volume Thursday, and the company declined to provide an overall volume forecast for the third quarter.
But the railroad has brought back into service about 11,000 of the peak 71,000 freight cars it had in storage in May, and 200 of the 2,100 locomotives. Despite the moves, Union Pacific still has about 21% of its rail-car fleet and 23% of its locomotive fleet in storage.
Top U.S. railroads – considered a barometer of overall economic activity – have idled thousands of rail cars and locomotives as the broad downturn has dried up demand for freight transport. By some estimates, upwards of 25% of the U.S. rail-car fleet has been put into storage.
Young said Thursday that his move to return some resources to service is based upon a number of factors, including the potential for sequentially improving coal shipments, as well as positive signs in the automotive and agriculture sectors. He said federal stimulus spending also could help volumes late in the year.
“We are going to protect service” by being prepared, he said, adding that ” things have stabilized” and it’s important that adequate resources are available to handle any improvement.
Omaha, Neb.-based Union Pacific said it currently has about 4,400 train-and- engine employees on furlough, down from a peak of 5,300.
Young said some of the reduction in furloughs is the result of employee retirements, summer vacations and a new federal safety requirement restricting consecutive work hours. But he said the company’s view of volume trends also has played a role.
Earlier Thursday, Union Pacific posted second-quarter earnings of $468 million, or 92 cents a share, down from $531 million, or $1.02 a share, a year earlier. Excluding a land-transfer gain, earnings were 78 cents a share. Revenue dropped 28% to $3.3 billion.
Analysts polled by Thomson Reuters projected per-share earnings of 76 cents on revenue of $3.51 billion.
Revenue at the company’s energy segment, its largest, fell 22% as volume declined 16%. The automotive segment posted a 54% decline in revenue, as auto makers continued to post weak results, amid a 47% drop in volume.
Union Pacific shares recently were trading at $60.27, up about 1.8%.