Union Pacific Says Congestion Woes Are Ending

Union Pacific Railroad said Tuesday that its massive congestion problems in Southern California are over and that nationwide it’s continuing to recover from a breakdown in service that sparked a shipping crisis last spring.

“UP is no longer suffering from congestion in California,” the railroad said in its biweekly filing with the U.S. Surface Transportation Board. Nationwide, “UP achieved its highest level of performance in more than a year.”

Southern California’s two huge ports, in Los Angeles and Long Beach, agreed that Union Pacific is back on track. “From what we can tell, yes, the delays they were experiencing early this year have been resolved,” said Port of Los Angeles spokesman Jeff Leong.

The railroad’s rebound came just in time for the ports, which are grappling with their busy pre-holiday season. And this year, the volume of imports from Asia is more crushing than usual because of the dollar’s strength against Asian currencies.

“We were afraid that with the [U.S. grain] harvest being so strong this year, that they [Union Pacific] would have problems handling both our peak-season import cargo and the harvest, but so far they’re doing pretty well,” said Art Wong, a spokesman for the Port of Long Beach.

Union Pacific’s service logjam, which stemmed in large part from its 1996 merger with Southern Pacific Rail Corp., caused gridlock throughout the nation’s shipping system earlier this year.

Besides clogging Southern California ports and Union Pacific’s big train yard in Colton, the problems stranded Midwest crops and disrupted shipments of such basic materials as coal, chemicals and lumber.

The railroad’s parent company, Dallas-based Union Pacific Corp., suffered losses totaling $633 million during the nine months ended June 30. The losses reflected not only the company’s lost revenue, but millions of dollars spent trying to fix its service problems.

Union Pacific Chairman Richard Davidson said Tuesday that the costly effort is paying off. “The lessons have come at a terrible price, but we are now in the process of change,” he told shippers at a meeting in Houston.

At the height of the gridlock, the railroad was under intense federal scrutiny by the Surface Transportation Board. But in late July, the agency said it would ease its oversight because Union Pacific was gradually improving.

In its latest biweekly filing, Union Pacific said that “it has been current on intermodal shipments from Southern California, despite the fact that steamship lines are operating at their capacity for imports.” Intermodal shipments refer to the box-like containers that can be moved on ships, rail cars and trucks.

Union Pacific said it’s still working off a backlog of inbound cars in California and Arizona, “but these cars are not causing congestion.”

Meanwhile, the company is regaining favor on Wall Street. Last week, analyst James Higgins of Donaldson, Lufkin & Jenrette Securities reiterated his “buy” recommendation on Union Pacific’s stock, saying he’s “been pleasantly surprised at the relatively consistent pace” of the railroad’s recovery.

The stock closed Tuesday at $44.13 a share, down 38 cents, in New York Stock Exchange composite trading.