UP to raise rates even as volume falls
Union Pacific Corp.’s chief financial officer said the railroad would likely raise its shipping rates 5 percent to 6 percent this year over 2008 even as UP adjusts to reduced freight volume, Dow Jones reported Thursday.
Lower costs for fuel and increasing competition for available freight loads will hold down rate increases in 2009, CFO Rob Knight said at a transportation conference in Florida this week. He said trucking companies have stepped up pricing pressure in the intermodal business as companies lower their rates just to keep truck fleets in action during the economic downturn. He said UP is committed to maintaining returns on shipping work.
“In intermodal, there’s clearly going to be pressure,” Knight said. “We’re standing tall in making sure we get the returns on our business.”
UP's volume is down 19 percent from a year ago and its load factor is about 75 percent. To better balance demand and capacity, the railroad has idled 400 locomotives and furloughed about 3,000 employees, Dow Jones reported. The railroad also has announced it will reduce capital spending in 2009 to $2.8 billion from $3.1 billion in 2008.
“We are continuing to keep our network in place,” he said. “We haven’t cut it with the expectations of volumes going south.”
The report said that Union Pacific sees auto-related rail volumes growing before other sectors.
'Knight predicted the auto-related shipping volumes will gradually increase as automakers restart idle assembly plants in the coming weeks,' the report said. 'Union Pacific’s auto shipping volume since the start of the year has fallen 55 percent from the same period a year ago.'