Dear Jay:
Thank
you for your letter of July 19th regarding the continued business slump in the
Portland area as well as across the entire northern part of our system. I’ll
specifically address the four concerns outlined in your letter as follows:
1)
You are correct in that some areas our business have not grown and this,
combined with improved operating efficiencies, has lead to fewer train starts. We have
reduced deadhead and held away payments by 28% and relief crews by 50% from prior year
levels. Train size is higher than last year due to our use of distributed locomotives,
which has also reduced our need for helper crews in many locations.
However,
let me reassure you that we are doing everything possible to attract business across the
entire BNSF network including the northern sectors of our franchise. As an example, we
just recently filled a newly created marketing position that is dedicated to maximizing
traffic moving in the I-5 corridor. Because of improved efficiencies and transit times,
our year-to-date I-5 growth is over 10 percent and we’re confident there are
additional I-5 opportunities in this market area. We’re also increasing our I-5 train
starts from 2 to 3 trains per day beginning this week. As always, we will continue to
concentrate and invest resources in areas that will bring new growth opportunities to
BNSF.
2)
While there has been some coal market share shifting between BNSF and UP, no
contracts have been lost to the UP that have lowered coal traffic on the Glendive or MRL
West routes. In fact, BNSF recently increased traffic in the north by winning a contract
from the UP to move coal from the PRB to Portland General Electric. Additionally, in 1998
BNSF added a substantial amount of coal business to Detroit Edison which, depending on the
mine of origin, can move over the northern Glendive route.
We have
redirected some of the coal trains destined for the upper mid-west over the central
corridor. As you know, the central corridor route over Alliance has greater siding
capacity to handle long trains and in some instances provides shorter route miles to
certain destinations than the northern route.
Finally, our
coal loadings have been softer overall compared to the UP because we serve mainly the
northern tier of the U.S. (east of Ohio) which has enjoyed a very mild summer. In
contrast, UP has more exposure to Texas, Louisiana, and Arkansas, where temperatures have
been much less moderate.
3)
Your comment regarding Dave Dealy’s conversation with a Great Falls
Local Chairman appears to be a misinterpretation of a discussion regarding the injury rate
of employees working in that area. While there have been more than "just a couple”
of injuries in this area, neither Dave nor anyone else on my team is going to route around
this area. We do not make routing decisions based on personal injuries; they are made
based on cost and service. Dave’ s comments were made because of his concern for the
safety of our employees and I believe his message has been taken out of context.
4)
The September 1 St Ag rate reduction was a competitive response to match UP
rates that move grain to eastern grain millers and to the center gulf markets. Unlike our
domestic market for grains, the PNW export market is largely driven by world economic
factors that are out of our control. U.S. rail transportation rates are a much smaller
component of the total transportation cost to deliver grain to the Far East and are not
the primary driver in the creation of an export market for U.S. grain. Simply put, world
economic conditions, crop prices, etc., are such that lowering our rates to the PNW export
market, would not be sufficient to create an export market.
On a more
positive note, the forward-looking picture for grain exports is looking much better. While
the last couple of years have seen disappointing PNW grain export traffic, USDA is
currently projecting an all time record corn crop harvest this fall. As a result of this
potential bumper crop, we are forecasting increased grain business to the PNW ports
beginning in the fourth quarter of 2000.
Again, thank
you for taking the time to share your concerns with me. In many ways, the issues and
situations I mentioned in my letter of June 1 7, 1 999 have come true or are still true
today. On some parts of our system, traffic levels are up over 20 percent. Unfortunately,
our Pacific Northwest train starts have been and continue to be largely driven by grain
exports and the world economics for grain has not favored such exports.
As always, I
look forward to the opportunity to discuss issues like these with you.
Regards,
/s/ Matthew K. Rose