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Union Pacific Execs Talk LA Rail Theft, Electric Freight ‘Game Changer’

Union Pacific Corp. executives tackled the recent rash of rail theft, labor concerns and electric rail vehicles during the Omaha-based company’s quarterly update call Thursday.

The wide-ranging conversation came as Union Pacific brushed off a quarter of lower volumes that still saw operating revenue growth of 12 percent from the prior-year period to $5.7 billion. The growth was driven, in part, by higher fuel surcharges. Meanwhile, net income in the quarter grew 6.3 percent to $1.7 billion.

Executive vice president of marketing and sales Kenyatta Rocker told analysts on a call Thursday, “we’ve got our arms around it” as it relates to the most recent rail theft situation, which took place in Los Angeles earlier this month.

“There’s been a lot of coverage about some thefts that are occurring in the L.A. basin specifically. I’ll call that a relatively unique situation where something that used to be a nuisance, call it two years ago members in a neighborhood would see a train not moving and might take advantage of trying to pop open a box and see what’s inside. Today, that’s more organized, and we have our arms around it,” Rocker said.

The executive added Union Pacific has increased its own policing and is also working with the Los Angeles Police Department and state officials. That’s in addition to Union Pacific pushing to have Los Angeles District Attorney George Gascón take a harder stance on prosecution of those caught stealing.

Barriers are expected to go up near the railway where the incident occurred in Los Angeles.

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“It’s unfortunate because they won’t be necessarily pretty,” Rocker said of the barriers, “but it will protect our property. And, more importantly, it will protect our employees.”

California Gov. Gavin Newsom on Thursday visited the site of last weekend’s incident, calling it “unacceptable. During his visit the governor confirmed California Department of Transportation workers would help Union Pacific clean up the area, strewn with litter from opened packages.

Theft has become another pain point adding to an already strained logistics system this year that’s strained the logistics companies’ workforce.

Union Pacific President and CEO Lance Fritz admitted inadequate planning around the impact of COVID to the workforce in the second half of the year was an issue with the company not anticipating third and fourth waves of the virus alongside a vaccine mandate.

“I look at that and I think ‘shame on us.’ That’s a risk factor that we did not adequately plan for,” Fritz told analysts. “And when I look into the future, we’re going to just be a whole lot more relentless about and deliberate about the assumptions that we’re building into our plans.”

The CEO overall remained upbeat on the company’s future planning around its workforce.

“At some point in the future, Covid is going to go away, or it’s going to be much less impactful. And I think at that point, that’s going to be a wonderful day. But until then, we have to plan for it as a contingency, and that’s what we’ve got built in,” Fritz said.

Amid industry headwinds, Fritz told analysts “our network is healing” and is also looking ahead to future initiatives, including Union Pacific’s approach to climate change.

The company said in December it aims to get to net zero greenhouse gas emissions by 2050, amid a major overhaul across the transportation industry to green fleets and leverage technology to boost efficiency.

Amazon ordered 100,000 electric delivery vans from Irvine, Calif.-based Rivian Automotive Inc. specifically for last-mile use. In November an autonomous, zero-emissions container ship, owned by Norwegian fertilizer company Yara International, took to the waters for the first time.

Last week Culver City, Calif.-based startup Parallel Systems said it raised nearly $50 million in a Series A round. The company, started by former SpaceX engineers, is developing autonomous, electric vehicles running on rail.

Union Pacific’s Rocker said Parallel’s technology is “of keen interest” to the company, but also tempered that sentiment.

“Candidly, there’s a lot of hurdles in front of that technology for deployment,” Rocker said. “Having said that, it could potentially be a game changer if it proves out to be effective and workable. So, I’d say keep your eye on it, and we’re keeping our eye on it.”