Letter From Jack Koraleski

May 4, 2004

To Our Customers:

This is the third in a series of letters to help you stay informed about our efforts to improve our rail service at Union Pacific.

The velocity data released by the Association of American Railroads last Wednesday, showed that system velocity appears to have stabilized and our terminal dwell time has improved by 2.1 hours. The improvement in dwell time reflects generally less congestion at a number of yards.

Hiring and training remain strong:

  • We met our targets for April for hiring and training of new train service employees. We expect that 622 people will complete their training and enter train service in May. This will enable us to increase the number of people who can begin locomotive engineer training this month to 156. As a result, the number of locomotive engineers in training is nearly 400. Our labor agreements specify that engineers come from the ranks of experienced conductors, so we have had to wait until the number of conductors increased before we could begin full scale engineer training. We are at that point now. The increase in train service employees also means that engineers who have been working as conductors can return to engineer service.

Our supply of power continues to increase:

  • We exceeded our April target for acquisition of additional locomotives, with 118 new and leased units joining the fleet. Our plan for May is to add 87 units.

A work stoppage by independent truckers disrupts the West:

  • A work stoppage by about 400 independent truck drivers in Northern California forced us to embargo shipments of trailers and containers to two intermodal facilities: Lathrop and Oakland. These drivers, who work for our customers and not for Union Pacific, haul trailers and containers to and from these facilities. They began to picket the Lathrop facility early in the week and their protest spread to Oakland by this weekend. A one-day job action by these drivers at the end of last week caused us to announce an additional embargo at ICTF, LATC, East Los Angeles, City of Industry, and Montebello. That embargo was lifted on Monday when it appeared that the drivers had ended their job action in Southern California.

  • A permit system is now in place to help meter the flow of containers in and out of the embargoed facilities to prevent gridlock at these busy locations. The embargo will be lifted as soon as we can be assured that the drivers will resume normal operations. Customers with their own drivers are able to access the facilities.

Other developments:

  • The inefficient utilization of locomotives in other areas has left Houston short of power, resulting in congestion and this will receive a great deal of our attention this week. Rock trains in the Southern Region are a particular problem. Delays continue in portions of the Pacific Northwest, and a derailment in the Feather River Canyon forced a number of detours, slowing the system.

  • Several weeks ago, we curtailed expedited transcontinental service for a key customer on the busy Sunset route. This week, after analysis of the impact of that train on our network, we decided to end that particular service. This step was taken after careful consideration and a great deal of discussion with the customer affected by this decision.

  • We are continuing to work with customers to manage the flow of business into the most capacity constrained parts of our system.

Finally, in a conference call with investors and analysts following the release of our first quarter financial results, our chairman Dick Davidson reiterated our commitment to continue to do whatever we can to improve our service and to continue to use these letters as a way to keep you informed of our progress.


 


Executive Vice President-Marketing and Sales