Welcome back. I hope you enjoyed the break. Becky Quick, thank you for that exceptional interview. Appreciate that.
Katie and Adam, great to have you on stage. I would note both the videos were extremely well done in that it gives us a great understanding of your businesses but also you as leaders. And I'm just going to start with a question for each of you, and then we'll go back to the question and answer.
I think Katie, you well, I know you did, you heard me speaking earlier. I talked to our owners and shareholders around our operating performance and where we are. Highlighted we were in fifth or sixth last year. We've now moved to fourth and we need to see, we also talked about needing significant improvement, a step change. But the one thing I didn't really touch on is I started talking about getting to that next level. But as you touched on, you have 35,000 employees and to move the organization to look externally and recognize where do we go? How do you take on that challenge?
Yeah, thank you, Greg. And first of all, thank you for the opportunity to speak today and talk about our great company. It's a pleasure to do that, Greg. So, thank you. You know, we absolutely recognize that it's important for us to run an efficient operation, to have a competitive cost structure, and to continue to further close the gap between us and our competitors. You know, we have an exceptional leadership team in place that understands the importance of aligning the entire organization, as you said, Greg, the 35,000 men and women of BNSF, aligning them around that operational excellence. You saw that we made progress, as Greg said, in 2025. We continued to make progress in the first quarter of 2026, but we know that we have more work to be done to drive that operational excellence across all areas of our company.
Thank you, Katie. And then Adam, when I was discussing your new role and thank you for taking on that role and also retaining your role at NetJets as the CEO there. So, a lot on your plate and all of us here appreciate that. But it's early going. You've been in the role since December as the president of consumer products and then service and retailing. What are your observations as your early observations across the 32 companies and how are you approaching that?
Yeah. And talking to the different CEOs. If you give me just one second before I answer, I just want to make just one brief comment. Really to both Warren and Greg, I have been CEO of NetJets for the last 10 years, but I've been with NetJets. This is my 30th year there. So only at Berkshire could you feel like the new kid on the block after being here for 30 years. But you know, Warren has taught us a lot. Charlie's taught us a lot. Greg's taught me a lot. One of the things that they've said over and over is that, hey, bad news takes the elevator and good news takes the stairs. And I really understood that many, many years ago. And until I became CEO, I found myself on the elevator a few times. And what they never told me was what happens after you get on that elevator. And I just want to point out as the CEO for the last 10 years, there's been many times I've had to make calls on things. We run a big business and I simply want to say that what happens after that is you have the most unconditional support and I echo all the CEOs that are in this portfolio. So I just want to say thank you for that because it's not easy delivering sometimes good or bad news but it's been phenomenal support.
As it relates to the actual the other 31 CEOs in our bucket, I have to sort of start with conversation with NetJets because people have been asking me a lot in the last 5 months. So, you're still CEO of NetJets, but how are you going to take on this other role? And I think the journey starts with the team at NetJets. So, many of them are here and they're incredible. I spent a lot of time over the last 10 plus years with them. I sat up on that stage in the arena in May of 2010 and it was a hard thing to hear but it was the truth and Warren talked about NetJets and stated that it was his toughest mistake that year and but for the backing of Berkshire that we would have been bankrupt. And I don't like repeating those words and probably shouldn't do it in front of an entire room but it's an important pause because then you have two choices. What are you going to go do? And so the team that's sitting with me today and many people back home, I do think we have a wonderful company as Warren talked about with Charlie in 2023. And I just want to say to them, thank you because it's been a rough road to do that and we've accomplished a lot which gets me in to answer your question.
And I, you know, I'll be honest with you, so thank God I have NetJets because I was able to fly around and see a lot of these companies. Unfortunately all 31 companies are not based out of Columbus, Ohio. So, I've been on our airplanes a lot. And if I'm honest, I was a little concerned about it. Many of the CEOs had reported directly to Warren. All of them reported to Berkshire and then here comes this guy, you know, that they're now going to be working with. And I will tell you, one of the things that struck me is how wise the CEOs are. They have the energy, intelligence, integrity that Warren always talks about. But I say wise because my concerns were quickly allayed when I started talking to them in the sense that they've been listening. I know many in this room don't know the names of those 31 other CEOs, but they know you and they've been listening. They absolutely understand the playbook that is the ownership manual. By the way, this is almost today the 30th anniversary. Warren wrote the owner's manual and in that was sort of our business bible on what we needed to do and I was really pleased every one of our CEOs understands that they've been living that and that's going to make the interaction much easier for me. So I feel really good. I feel really good about the form of the CEOs that we have and I know that they have ingrained in them the culture part of the culture certainly is the ownership thinking but the stewardship that is talked about. We feel a massive and deep responsibility to carry on the stewardship and the legacy of Charlie and Warren and work really hard for Greg and his team. So I feel good about it.
Great. Well, we're very fortunate to have Katie and Adam in these leadership roles. Again, it was very purposeful to have them on stage. We want them to have the opportunity to engage with our owners, our shareholders, and we really do look forward to the questions. So, thank you for joining us on stage again.
Becky again. Great to have you back. Thank you for that interview and if you'd like to start. Thank you.
Okay. Thanks, Greg. This question comes from Chris Fried in Philadelphia, Pennsylvania, who wants to know, 'How has the current geopolitical situation in the Middle East impacted Berkshire's subsidiaries?'
Sure. I'll touch on it and then I'll make sure because it impacts really in a variety of ways all our businesses, but what I'm most proud of are our businesses. We operate these businesses for the long run just like we do for obviously for our shareholders. We take a long-term approach there. There's not many days and I used to joke when I more had Adam's role. There wasn't a day I woke up where the phone wasn't ringing with good news. Yeah, that phone rang. You knew you're going to have a bit of a challenge and we have that portfolio, but that's okay. We'd be talking and we always worked our way through it. And we have a team that would lean in and we'd come through and it could be anything. And we never tried to use that as a reason we couldn't do something or get to the right place.
And what I've seen associated with obviously the war in Iran and the various conflicts in the Middle East is again a team that is very much taking the approach that that's the situation we're in. We can manage our business and we very much quickly move to what's the best solution for our customers. How can we deliver and continue to deliver what we've done to them and what's their expectations around that and our teams will work incredibly hard to come up with solutions. I touched on LSBI, the drag reduction agent on the pipeline company. They don't usually sell a lot of product into the Middle East as far as moving. It's more a domestic-based product for Canada and the US. When you think of a drag reduction agent on pipelines, literally being cargo planes of that chemical being moved in the Middle East to help free up supply and i.e. remove some of that constraint. So there's so many things that go on when they start trying to figure out how to solve the challenge.
Now what I would say is it doesn't mean there's not immediate impacts to our businesses. If you think of companies in America around the globe, petroleum and natural gas matter is such a fundamental input to so many products. And the reality is if you think I touched on our chemical group, their input is generally a petroleum product and the output is the various products they produce. Obviously that are byproducts of that, but their input costs have effectively doubled in a very short period of time.
But again, we'll manage through that and that's the beauty of being part of Berkshire. They know first we'll take care of our customer. We'll find the right answer. We'll manage the challenges and the value creation will be there in the end. So there's some short-term pressure on our chemical businesses. If you looked at their first quarter profits individually, they would be down because or flat to down because they've got some challenges. For example, on the input side, but they're delivering what the customer needs and that rebalances over a period of time where our prices will move up pursuant to our contracts. We'll be treated fairly in the end in that they'll reset and then may unwind a little bit slower. But the point is, unfortunate situation and we've got men of service and women of service over there and putting themselves at risk and that in itself is scary because a lot of our employees have family involved. But you know as far as running our businesses, it's really heads down. We'll get through this and we'll keep operating everything for the long run. And again, it includes how we'll operate our assets. We're not going to put the asset at risk to try to get to a short-term outcome because petroleum prices are higher. It's very much continuing to take that long-term perspective.
Katie, obviously it can impact demand and what's being brought in on the coast. Are you seeing that or what else are your observations?
Yeah, it's interesting and Warren has said this in the past before. You know, the railroad is a really good reflection of what's happening in the industrial and the consumer economies because our loadings really cut across all the various commodities. You know, we touch agricultural products, we touch coal, the industrial commodities like cement and steel and aggregates. You know, certainly our intermodal business, which is such a big part of our business, reflects what's going on with the consumer. And so we're seeing the impact from the conflict in the Middle East in a couple of different ways. First of all, I would say that if you look across our various commodities, it's created an opportunity for some of those commodities just because of the disruption in the supply chain. In addition to that, you know, we see commodities like aggregates and steel, things like that that are favorable and we're seeing an increase in those. But then some of the commodity areas that use energy in the manufacturing of those commodities are certainly being impacted by the increasing fuel prices.
The largest segment of our business, as I mentioned, is intermodal. And so as fuel prices increase, our intermodal business becomes more competitive. And so we're seeing an increase there relative to what's happening in the Middle East. I would say in general though as we think about it if fuel prices stay too high for too long it has an impact on consumer demand and when that happens that cuts across all of our businesses.
And have you started to see that yet? That obviously when you think of I touched on it being an input to many of our companies but really globally it's an input to so many things and as that price pressure moves up obviously the demand side is challenged. Are you seeing that yet?
Yeah, we're seeing some, we are starting to see that impact some of the businesses. I would also say, Greg, as we talk to some of our large intermodal customers, what they are telling us, some of the big retailers are the customers are having to make choices now. So, as fuel prices go up, they make choices about what they're buying. And so that's where I get back to if it is a prolonged higher fuel price environment, I do believe that we will see that customer impact across our businesses.
Thank you, Adam. Across your businesses, what are you seeing? What are you feeling?
Yeah, I mean certainly, you know, when you see the increases that have occurred and the instant spikes in some cases that occurred certainly on the consumer product side on the retail side, it has affected some of the demand on that side. I would also tell you that we have also faced multiple times at NetJets with $100 a barrel of pricing. We see those spikes, we see the demand. I haven't seen it on the Net side. We went from really the last two years from about $5 to $5.40 a gallon. We're seeing spikes up to $7 a gallon. I would tell you if I see that kind of sitting at $7.25, $7.50 a gallon then you'll start seeing impact even on the higher side on the NetJets side. So, we're feeling it. It's not the first time we've had to deal with this. You know, we're prepared to deal with those things and make adjustments where we need to, but it certainly is affecting, I would say, some of the retail businesses and some of the consumer product businesses.
Great. Thank you, Adam, and thank you, Becky, for the question. We'll now move to station five.
Good afternoon. Mjab Singh from Mountain House, California. Warren has spoken very highly of both you, Greg and Katie. So, I'm grateful to have you both leading our company and I'd like to ask each of you a question. Greg, as you know, the Berkshire system relies on decentralization. Each manager runs their own subsidiary. As CEO, which operating units do you think need more oversight, and how will you handle a manager who underperforms? And Katie, as Greg highlighted, BNSF's profitability lags its competitors. With eventual technology advancements and autonomous driving, trucking costs will continue to drop. How will BNSF maintain its competitive advantage from competitors and new technology?
Great. Thank you. So, associated with the letter I wrote to all of you as owners, I highlighted some important values. One of them was our decentralized model. I also touched on risk discipline, capital allocation. And when we think of our businesses, we have an exceptional group of leaders in businesses. And yes, they do own their businesses as Katie touched on it in her video, as Adam's alluded to it and talked about it. There is a great deal of ownership across each of our subsidiaries and that's absolutely how we'll continue to operate and see it as an extremely effective model that they're closest to their customers. They understand what needs to be done and if they think like an owner we get very good outcomes across the group of companies.
I would highlight though that with a decentralized model we do not take responsibility and I was one of those, I ran BHE, it's a great set of responsibilities where Berkshire Hathaway Energy, shouldn't be abbreviating, sorry, but when I ran it that autonomy meant you embraced it and there was a great amount of accountability that came with it and sheer pride that you wanted to do things right. We've got a clear set of when we talk about integrity and how I started it, we have a lot of expectations and that's where both on the integrity how they approach managing their business and servicing their customers and I've said there's a lot of external factors we can observe but our primary engagement is with their are they managing the risk and risk and foremost do they see themselves as that chief risk officer you've heard us discuss many times are they good allocators of capital with the capital they have there because even capital you have to manage your operating expense as well I view everything you know that when we're spending money on a it may be a capital expenditure it can be an operating expenditure you're deploying our shareholders capital are we doing that well and we focus on that so that's part of that equation of allocation.
And the reality is if we're seeing a situation where we're underperforming or we're seeing some potentially poor decisions, that's where we engage and have a discussion. And usually it's relative and I touched a bit on this with Katie, it's relative to what we see externally and just really trying to understand where our performance gaps are and then it quickly moves to how and we don't have the people at corporate to go in and quote help. So, it's not like we send in an army, but there's generally some people within our subsidiaries or maybe someone we know that could help them with that performance gap because we do treasure continuous improvement and strongly as you've heard believe in operational excellence and there's as I've said there's room for us to get better and that's how we would approach the situations where we see the gap and need to close it. Katie, maybe you can probably touch on both.
Absolutely. So, thank you for the question and as I said, we absolutely know that it's critically important that we continue to drive an efficient operation, that we continue to have a competitive cost structure, and that we continue to close the gap with our competitor relative to our profitability. There's a couple of specific things that we're working on and it's really about operationalizing the improvement that we saw in 2025 into the first quarter of 2026 and making sure that we're really institutionalizing that. So the first thing that we really focused on in 2025 was we knew that we needed to improve our single car operational efficiency. And when I say single car unit operational efficiency, we run a couple of different networks. We run our intermodal network. We run our agricultural and our coal network, our bulk networks. And then the balance of it is what we call our carload network or our single car network. And that's where we have non-unit train. It takes a lot of operational focus. It takes a lot of work effort and it consumes a lot of resources. And so anything you do to improve that single car network is good for all of your customers. It frees up resources. It creates capacity. It allows you to handle the same amount of volume if not more with fewer assets. And that translates through then to the improvement that you're seeing in the profitability.
An example of that is in the first quarter of this year, we handled more volume than we did in the first quarter of last year, but we did it with 260 fewer locomotives. That translates into a more consistent service product for our customers and it also translates into better financial results, which is what you saw in the first quarter of 2026. So we're spending a lot of time ensuring that we have operational excellence not in just all those other networks but in the network that frees up resources and drives improvement and operational excellence for all of our customers.
The second area and you heard Greg talk about this earlier was around our technological transformation. We really believe that in addition to driving that operational discipline that you saw in 2025 and into 2026, that working with the new BNSF tech organization to drive that next step level of improvement. And so you saw units dwell in our terminals less time that translated through to the financial results that I talked about. You saw velocity improve as well. And so how do we leverage technology then to take the next step level improvement? So I'm excited about what we're doing there. We're literally attracting data scientists, operations research folks, and we're putting them alongside of our operators in our network operations center. We're looking at things like digital twins, which gives us the opportunity to model how we run the railroad before we actually run the railroad. We're looking at opportunities to do predictive ETAs for our customers, which allows our customers to have a better product. It allows us to turn the assets faster.
And then last, what I would say is that we're just it's good old-fashioned going to work on attacking the largest structural cost buckets. We had a record for the first quarter in our fuel efficiency. That's the kind of thing we want to do because it makes us competitive with trucks. It is good for the environment and it's good for our financials. So those are the things we're doing to close the gap relative to profitability.
Now your question about competing with trucks. I would say a couple of things with that. First of all, we have the largest intermodal franchise of all of the railroads. We have a unique relationship with JB Hunt and we have been extremely successful in converting over the road freight. We've done more of that than anybody. So, we know how to compete with trucks. But your question about technology is a good one. And I would say that we in the past have invested in a system called positive train control, which is a safety overlay that allows us to operate the railroad efficiently. As you know, we operate in a closed circuit. And so we have the ability to your point ultimately to run the train with fewer people than we operate with today. And in fact, if you go way back in time, we used to operate the trains with five people on the train. Now we're down to two people on most of our trains. So the technology will continue just like most industries will continue to evolve and we're continuing to look at that as well.
The last point I would say with that though is that we also have to be allowed to innovate. And so we need regulation that supports the ability for railroads to be able to compete with trucks. As you said, we know that there are trucks out there running today in our state in Texas along I-45. We just there was just a pilot with autonomous trucks. What we have to be able to do is to be able to compete with that and to be able to innovate. And so we're going to need regulations that allow the railroads to be able to do that. So that's how I think about competing, ensuring that we're closing the gap as well as maintaining our competitive advantage with trucks.
Thank you, Katie. Adam on that point and Katie's point, you know, you came literally Adam had left for a very brief stint 10 years ago and had a very senior role in NetJets and had been effectively been recruited to be a CEO of another business that was going public and we were fortunate enough to convince Adam to come back but he came back to a challenging situation. The asset was underperforming. We had billions of dollars of debt like I back to ourselves to the parent company but it was debt that had been incurred and some real challenges. When you think about how we address underperformance and how do we get a business back on track? Maybe you just want to touch on that period of time and bringing the business back and how you achieved that.
Yeah. Well, I one I will tell you, you know, one of the I came back on June 1st of 2015 and that Monday afternoon and many of the team that's up here today we got in a room and I asked a question about how many people really understand sort of the bookends of our business. NetJets is complicated. We're ad hoc. We're unscheduled. We fly to thousands of airports. Commercial airlines will fly to 50 to 100 airports. We fly 150 countries around so it's a very complicated business and I asked a question to the team how many people do you think really understand the bookends of our business and I didn't like the answer I won't tell you what the answer was but it was too few and it sort of started there and what we did was we really said you know to build this culture the way we want it if I understand what you're doing you understand what I'm doing at deeper and wider levels we're going to do good things together so it sort of started on that Monday afternoon and when we started building that back.
I will tell you it was also a reinforcement from probably from Greg. I remember my first board meeting prep and I was excited and we were starting to kind of move and I was talking about growth and we're going to get this right. We're going to grow and Greg pulled me aside in a very kind way and he said, 'Why don't you pay $1 back to Warren and work on getting your debt down?' That was a teaching lesson. I took that to heart. I heard it clearly and I actually already knew that. And so we just started really putting our blinders on and we said safety and service, safety and service. Warren bought NetJets after becoming a customer in 1995. Bought NetJets in 1998 and he did a video for us that we still use and he said I want safety and I want service. And we've been really focused on making sure everybody stays in that alleyway. That in large part plus a lot of hard work is why we were able to pay our debt back. We're able to pay cash back to Berkshire Hathaway and move our way as I said in the video out of the other column and be first in the service business and I'm proud of that.
Great. Thank you, Adam. Thank you, Katie.
