Union Pacific Heavily Criticized at Hearing

Union Pacific Corp. Chairman Richard Davidson on Monday set an ambitious timetable for correcting disruptions in rail service in the West, which have now rippled across the country, saying the crisis will be “substantially” solved by shortly after Thanksgiving.

The major Union Pacific rail union and the Federal Railroad Administration confirmed that they have seen progress in the railroad’s effort to get back to normal.

Davidson’s statement came at a hearing of the Surface Transportation Board, during which he sat through a chorus of spokesmen for major industries describing how they had been harmed by his railroad’s meltdown in service, which began early this summer just months after it absorbed rival Southern Pacific Railroad to form a giant 36,000-mile system.

Major shippers said improvement is not coming fast enough, and a U.S. Agriculture Department official warned of a potential disaster if the railroad does not pay more attention to grain shipments in this record harvest year.

“I got the message,” said Linda Morgan, chairman of the STB, which approved the merger of the Union Pacific and Southern Pacific railroads last year and now grapples with the aftermath.

Dozens of witnesses spent a long day testifying to the STB about a crisis that started at a clogged rail yard in Houston but quickly spread through Texas and the West as the newly merged system proved it lacked the locomotives and crew members to handle booming traffic in a booming economy.

Since all railroads are interconnected, the problems have spread to the East, where shippers report shortages of rail cars, which are bogged down in the West.

Meanwhile, trucking companies quickly reached maximum capacity, and many raised rates.

The STB has the power to take action to help keep rail traffic moving, ranging from a “directed service” requirement for other railroads to move into Union Pacific’s markets to simply setting up a mechanism to process shipper claims against the railroad. Traditionally, the board has taken the approach that business decisions are best left to the private sector.

However, the board is under tremendous pressure to take action, particularly by major industries that say they are losing millions of dollars a day. Dow Chemical Co. reported Monday that it had paid a “premium” of $18 million so far because of Union Pacific’s problems.

Many major companies want the board to open the Texas-Louisiana area to service by other railroads and to order Union Pacific to relieve shippers from provisions of private contracts under which they give certain traffic to Union Pacific in exchange for lower rates.

Davidson and E. Bradley King, the railroad’s executive vice president for operations, said an emergency recovery plan implemented Oct. 1 is having an impact. King went through a line-by-line status report, indicating most of the railroad is near normal and progress is being made on problems in the band stretching from New Orleans to Houston and Los Angeles.

James Brunkenhoefer, legislative director for the United Transportation Union, praised the railroad for its efforts to recover and to open better communications with employees after the Texas “meltdown” and a series of wrecks that has killed nine crew members.