Union Pacific Corporation (NYSE:UNP) Q2 2020 Earnings Conference Call - Final Transcript
Jul 23, 2020 • 08:45 am ET
seem to be going up there. Are you referring more to rail to rail pricing competition, maybe just give a little bit of thoughts on pricing, you mentioned kind of pricing moving above inflation, maybe walk through a little bit more of the mix impact given the ARCs were down about 6% and give us some insight into the market. Thanks.
Lance M. Fritz
Yeah, Ken, let me start and then I'm going to turn it over to Kenny to talk a little bit about what he sees in the pricing world. When we're talking about a very competitive market, it reflects both still a relatively loose but tightening truck capacity market and strong competition from our rail competitors. So, that's a level set we're talking both worlds. From the standpoint of mix, bear in mind, we mentioned it, but the automotive business is very good high ARC business. And in the first half of the quarter, it literally went to about zero. Kenny mentioned 90% off. But that all by itself is a significant mix impact. And Kenny, you want to talk about the pricing dynamics?
Yeah. Look, Ken, first of all, thanks for the question. And I just want to really iterate something that Jennifer mentioned, which is one, we have a positive pricing results and that we're going to exceed the cost of inflation. So, it's critical we just kind of take that off the table. But as you look at the dynamics in the marketplace, I'll tell you, it was challenging to really price. What helps us is that we have a very strong service product. When you can walk in and talk to your customers about, we're moving costs from their side, we're moving assets, delivering on time, getting the equipment on time, you're able to go in and have some really tough conversations to fill [Phonetic] the price for the service that you're delivering on. So that's that.
To Lance's point, I do want to just talk about the automotive network coming back. If you look at the data points out there, the inventory are the lowest that they have been in the last nine years. So, we know the dealerships need to replenish. We've been talking to our OEM customers, and we'd expect retooling throughout the rest of the quarter, but maybe not as deep as what we thought it be or what we've seen in the past. We'll keep an eye on the fleet sales. But looking forward, we feel pretty optimistic. I feel pretty optimistic about how things are shaping up.
Thanks for the thoughts. Appreciate the time.
The next question is from the line of Tom Wadewitz with UBS.
Yeah, good morning. Wanted to see if you could talk a little bit more about some of the changes in the network. And how you think about, like, I guess, schedule and train starts and train lengths are kind of a good one to think about in terms of operating leverage. So, I don't