Union Pacific Corporation (NYSE:UNP) Q2 2020 Earnings Conference Call - Final Transcript

Jul 23, 2020 • 08:45 am ET

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Union Pacific Corporation (NYSE:UNP) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Jim Vena

safety, asset utilization and network efficiency. Turning to the Slide 4, I'd like to update you on our key performance indicators, driven by continued improvement in asset utilization and fewer car classifications and car touches, freight car velocity improved 11% compared to the second quarter of 2019. Freight car terminal dwell improved 16% largely due to improved terminal processes and transportation plan changes to eliminate switches and touch points.

We continue to implement changes in order to run a more efficient network that requires fewer locomotors. In the second quarter, we achieved a quarterly record in locomotive productivity, a 12% improvement versus last year. Workforce productivity, which includes all employees was flat versus last year, reflecting the impact of the steep decline in volumes in April. As we've adjusted resources, realized productivity gains and seen volumes increase this metric has rebounded strongly.

In the quarter, the productivity improvements were boosted by reducing our train and engine workforce by 32%, which outpaced the volume declines. Trip plan compliance improved for both intermodal and manifest and autos during the quarter. This is a direct result of our focus on improving network efficiency and service reliability, as part of our operating model. We had a strong first half of the year and we expect to see continued improvements in our service product going forward.

Slide 5 highlights some of our recent network changes, increasing train size remains one of our main areas of focus, and we are making excellent progress. Capital investments to extend sightings allow longer trains to run in both directions and reduce the number of train starts. There are around 40 projects included in the plan and we have made good progress of sixteen 15,000 foot sidings have now been completed through the first half of the year. We plan to have another four completed by the end of this month.

In addition, by putting more product on fewer trains, we have increased train length across our system by 23% to over 1,600 feet since the fourth quarter 2018 to approximately 8,700 feet in the second quarter of 2020. This is a remarkable feat by the team to run longer trains with less volume while also making service gains. This indicates that we struck the right balance in prioritizing our actions during the quarter.

We are continually modifying our transportation plan including yard and local service to be more efficient. This contributed to our productivity gains by allowing us to reduce our daily crew starts while continuing to meet customer demands. We continue to make progress on our redesign of the intermodal network. As we've discussed before, we are completely redesigning our Chicago operations. In the second quarter, we closed Global 3 and additional changes will be completed by year-end.

We are also redesigning the Houston area. Construction is underway at Settegast to consolidate our intermodal facilities into one location. In addition, we recently initiated construction at Houston Englewood Yard to expand switching capability and improve our ability to run