About Lance Fritz
Lance Fritz, former Chairman, President, and CEO of Union Pacific, has discussed the company's operational and financial performance in several media appearances. In October 2022, Fritz stated that the company made "sequential improvement" in network fluidity from the second to third quarter, and he anticipated a return to normal operations in the fourth quarter. He attributed volume pullbacks to cooling consumer demand, particularly in domestic intermodal and parcel shipments, while noting strong demand in coal, grain, and some industrial segments. Fritz also addressed labor negotiations, saying he was "less comfortable" after the BMWED Maintenance of Way employees failed to ratify a contract, but he anticipated closing agreements by the end of the year.
In 2023, Fritz described the hiring picture as "very difficult" in 2022, particularly in rural areas, and noted that Union Pacific was using hiring bonuses and a referral program to attract workers. He discussed the company's implementation of Precision Scheduled Railroading (PSR) to lower costs and improve the operating ratio. Regarding the regulatory environment, Fritz said the Surface Transportation Board (STB) had done "a very good job" of balancing its decisions with the health of the freight rail network. Earlier, in 2022, Fritz addressed supply chain disruptions, citing high import demand, a shortage of truck drivers and warehouse labor, and the impact of COVID-19. He also described organized train theft in the Los Angeles area as a "real problem," stating that the company was working with law enforcement and investing in security measures.
Source: AI-verified profile updated from Lance Fritz's recent appearances.
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✨ AI-enhanced transcript with speaker attribution
D
David0:00
I know you don't like to blame anything for this, but how much of it was weather, Lance?
L
Lance Fritz0:03
The weather had an impact, particularly very late in the year, but bigger than that for us was our network was not fluid enough through the year. Our service product was not good enough. We left some volume on the table. Having said all that, David, we still grew in the fourth quarter one percent, and we grew in the full year two percent, and that outperformed our markets for sure.
D
David0:28
How much are you getting hit with increased cost because of inflation across the board?
L
Lance Fritz0:33
Inflation's quite real. You saw our tentative agreement has been signed and ratified by all of our labor force, and that has some significant pay increases, something like a 24% pay increase in the entire package for five years. So inflation on that side's real. We're seeing it in service providers to us, and we're seeing it in commodities. Having said that, some of the commodities like fuel are a little cheaper now than they were at their peak. Steel has come down, but pricing is still elevated compared to three or four years ago.
D
David1:09
One specific question about that agreement, the labor agreement that was sort of imposed on the unions. There was some speculation that people might take their bonuses and leave. Are you seeing any of that?
L
Lance Fritz1:18
It's a little early. We have not seen that. The last back pay checks went out January 13th, so we're about a week and a half after that. We'll see what happens. I would guess by the early part of February we should know if we have a little spike in attrition. I don't anticipate if we do see it that it would be very big. The population of retiree eligible that have received those checks is still relatively small.
D
David1:47
As you go forward with increased costs, how much pricing power do you have? I've seen some reports that perhaps some of the cargo demand is going down, and trucking is cutting costs. How much pricing power do you have?
L
Lance Fritz1:58
Price is still a difficult conversation with our customers, but we typically talk about two things. One, inflation is real, and we need some price to cover the inflationary costs. Our customers understand that because they're having those same conversations with their customers. The second is, as our service product is improving and the network is much more fluid, we sustain that, and the conversation is much more about the value that we deliver to our customers. So there's still opportunity, but again, none of those conversations are easy, and certainly in the current truck environment, it's a harder environment than it was a year and a half or two ago.
D
David2:36
Lance, how much is the Surface Transportation Board getting into your business? I've seen some complaints about the service.
L
Lance Fritz2:43
The Surface Transportation Board has been quite active. They're our primary commercial regulator. All through last year, they were taking the industry to task on being too tight on a crew base and not delivering great service. We had a lot of conversations with them about the cause and what we're doing about remedy. The remedy is real and it's occurring. If you look since summer of last year, we've basically been improving our car velocity and network fluidity. It's been in fits and starts, and there are a few things that got away late in the year, but right now we're operating at a very fluid level. The STB is also looking at specific issues inside the industry. They took us to task on our use of embargoes, for instance.
D
David3:29,
Lance, finally, one of the reasons we love talking to you, besides the fact that it's you, is as a railroad you can give us some sense of where the economy is headed. As you look forward to 2024, what do you see?
L
Lance Fritz3:40
When I look into 2023 and beyond, the railroads are set up to really thrive. Certainly the Union Pacific story: consistent, reliable service. We're in the process of recovering that service product, and it's looking pretty good right now. We need to sustain that for the year. Sustainability, speaking of which, is a big story for us. We help all of our customers achieve their sustainability goals, and Union Pacific was just added to the Dow Jones Sustainability Index. That's a marker for how real our work is in that environment. Then, with the infrastructure bill passed and the attractiveness of North America for manufacturing again and the industrial economy, I think the future is quite bright for us.
D
David4:29
So what's the biggest increase that you're anticipating? Where's the demand going to come from?
L
Lance Fritz4:33
I think probably the biggest is going to be in the intermodal space, probably domestic intermodal, taking trucks off the highway directly. After that, it's going to be driven by different segments: the industrial economy, housing, infrastructure, probably nearshoring of product that's been far short, and the supply chains have proven themselves to be a little fragile.
