Letter From Jack Koraleski
June 27, 2006
To our customers:
I want to call your attention to our recent press release highlighting the unprecedented volumes Union Pacific has experienced during the second quarter. While these business levels are an encouraging sign of continued strength in the economy, we are even more encouraged by the performance of the UP network as it handles these record volumes.
Interestingly, since our June 16 press release we've broken our record for any seven-day period two more times, peaking at 201,467 for the seven days ended June 17. May's all-time record seven-day average for any month and the seven-day records set in June are the first time either record has been set outside of the traditional August - December peak season and the first time carloadings have topped 200,000 cars in seven days.
Capital investment and network initiatives are making a difference
May's record seven-day carloading average was more than 10,000 cars per week higher than May of 2004 and 14,000 higher than May of last year when problems with the Joint Line in the Southern Powder River Basin significantly impacted loadings. While strong demand across the board was the driving force of these volumes, record capital spending over the past few years and improved network efficiency has enabled us to handle this demand. Overall, the network handled the higher volume without any deterioration in service. It's another encouraging sign that our strategy of capital investment and network management initiatives is resulting in a stronger railroad.
Union Pacific has invested more than $5 billion over the past two years in maintenance, track capacity, locomotives, freight cars and technology, with approximately $2.8 billion planned for 2006. Our Unified Plan has created a more efficient transportation plan, generating capacity by making better utilization of resources and track space, while our Customer Inventory Management System (CIMS) has helped to drive significant improvement in terminal performance. CIMS, which matches the track capacity at customer locations with the flow of rail cars to and from the location, creates capacity and fluidity in our yards. Customers play a key role in the success of CIMS, as we work together to match the flow of cars with the physical capacity of a terminal. We appreciate that some customers have also opted to extend their hours of operation or made investments to process cars more quickly. The result is fewer cars in rail yards, decreasing terminal dwell time and improving throughput and local service. In terminals where CIMS has been implemented, we've seen dwell time improve by 20-25 percent and switching performance improve by 35-50 percent. We've implemented CIMS for about 60 percent of the to/from industry movement and we are on track to have 75 percent covered by year-end.
More resources are on the way for peak season
Our capital plan was designed to maximize capacity going into what now looks to be a record-setting peak season. Over the next several weeks, in addition to continued track work and capacity expansion projects, we expect to receive the final 134 of the 200 new road locomotives ordered for 2006 and 800 of the 2,700 freight cars. Implementation of our Unified Plan across our Southern Region and the continued maturing of our CIMS process should drive further improvement.
We appreciate your business and your willingness to work together with us to create added capacity and drive velocity improvement, allowing us all to grow.