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4Q letter from UP Chairman to employees
Author: OPRRMS
Date: 01-24-2011 - 13:34
This recent letter from UP Chairman Jim Young to employees may be (or may not be) of some interest.
Fellow Employees:
Today we reported the most financially successful year in Union Pacific's history, the result of great service performance, infrastructure investment and the commitment of employees. We didn't miss a beat as carload volumes started to recover, efficiently providing our customers with safe, reliable service they have come to expect. Thank you for everything you did to ensure this success, further enhance our image and set a sound foundation for the year ahead.
We gained strength as 2010 progressed, ending with several fourth-quarter records. Operating income was $1.3 billion, up 31 percent. Net income rose 41 percent to $775 million.
As volumes rose, among shareholder expectations was that we keep costs down, which also significantly improves our competitive position. Operating ratio was 70.2 percent, 3.2 points of improvement over fourth quarter last year. When we began Project 75-0 less than four years ago, I know many of us thought 75 was an aggressive goal possibly beyond our reach – however, just look at where we are today.
Customer expectations also are high. The fourth quarter Customer Satisfaction Index (CSI) of 90 tied with the preceding quarter for the best-ever quarterly score.
Full-Year Results Set Stage for 2011
For the year, all six business groups reported both volume and freight revenue growth. Carloads increased 13 percent compared to 2009, and freight revenue grew 20 percent to $16.1 billion. Both operating and net income were up 47 percent.
Operating ratio was 70.6 percent in 2010, which was 5.5 points better than 2009, while the year's CSI rose 1 point to 89.
Most important, 2010 was the safest year on record for employees. Each effort to identify and eliminate risk helped us achieve an incident rate of 1.96 per 200,000 manhours, making 2010 the first year in our history with a sub-two incident rate. A decrease in the FRA reportable derailment rate shows we are delivering freight more safely even as volumes increased across the network.
While we achieved our goal of zero fatalities in railroad operations, we mourned the loss of two employees fatally injured in on-duty, highway-related accidents. Among all of the accomplishments we have, none would be so rewarding as everyone returning safely home from work to their families.
Confidence, Not Arrogance; Urgency, Not Complacency
As we begin 2011, the challenge will be to continue our momentum. I mentioned in my December letter that a recent third-party customer satisfaction survey showed Union Pacific was No. 1 compared to other railroads. Now, the biggest mistake we can make is to become arrogant or complacent with our performance.
I'm convinced it's easier to become No. 1, than to develop the mental toughness needed to stay there. In fact, the New Orleans Saints' coach talked about this exact challenge after the reigning Super Bowl champs recently lost to the underdog Seattle Seahawks. When you're at the top, he said, it becomes more difficult to maintain the excellence needed to beat every team, every time, especially when all of your opponents are highly motivated to defeat you.
We must become critical of our success in a positive way, finding opportunities to make what's good, even better. For example, we have a network interruption every 8 to 9 minutes, due to a variety of track and equipment issues. By continuing to standardize work and eliminate failures, we'll develop the additional consistency required to grow the business and compete in a truck-like, door-to-door world.
Service Drives Growth, Growth Drives Jobs
Last year's performance shows we can meet customer expectations; however, this isn't a one-time challenge. Every day is an opportunity to re-sell our service to existing customers and earn new business by demonstrating the truck-like, competitive value we offer. Committing across all departments to on-time, consistent transportation solutions is the key to our success and the primary way we will grow our company, and in turn, our work force.
What to Expect in 2011
Even the best economists can't predict what the economy will do this year; but looking to the future, we plan to increase our capital spending to roughly $3.2 billion. This is a vote of confidence that our business will grow to support the investment, but only if we continue to provide first-rate service.
We expect to bring back nearly all furloughed employees in the first two quarters, and we also plan to hire about 4,000 employees, primarily to offset attrition but also to support volume growth.
Although I can't guarantee what lies ahead, you can bet all eyes are on us. Shareholders have a sharp focus on our performance, customers are analyzing our service, competitors wouldn't mind if we faltered, and the regulatory and legislative world will continue examining every move. It is up to each and every one of us to understand our role in Union Pacific's commitment to exceed last year's successes in 2011.
Fellow Employees:
Today we reported the most financially successful year in Union Pacific's history, the result of great service performance, infrastructure investment and the commitment of employees. We didn't miss a beat as carload volumes started to recover, efficiently providing our customers with safe, reliable service they have come to expect. Thank you for everything you did to ensure this success, further enhance our image and set a sound foundation for the year ahead.
We gained strength as 2010 progressed, ending with several fourth-quarter records. Operating income was $1.3 billion, up 31 percent. Net income rose 41 percent to $775 million.
As volumes rose, among shareholder expectations was that we keep costs down, which also significantly improves our competitive position. Operating ratio was 70.2 percent, 3.2 points of improvement over fourth quarter last year. When we began Project 75-0 less than four years ago, I know many of us thought 75 was an aggressive goal possibly beyond our reach – however, just look at where we are today.
Customer expectations also are high. The fourth quarter Customer Satisfaction Index (CSI) of 90 tied with the preceding quarter for the best-ever quarterly score.
Full-Year Results Set Stage for 2011
For the year, all six business groups reported both volume and freight revenue growth. Carloads increased 13 percent compared to 2009, and freight revenue grew 20 percent to $16.1 billion. Both operating and net income were up 47 percent.
Operating ratio was 70.6 percent in 2010, which was 5.5 points better than 2009, while the year's CSI rose 1 point to 89.
Most important, 2010 was the safest year on record for employees. Each effort to identify and eliminate risk helped us achieve an incident rate of 1.96 per 200,000 manhours, making 2010 the first year in our history with a sub-two incident rate. A decrease in the FRA reportable derailment rate shows we are delivering freight more safely even as volumes increased across the network.
While we achieved our goal of zero fatalities in railroad operations, we mourned the loss of two employees fatally injured in on-duty, highway-related accidents. Among all of the accomplishments we have, none would be so rewarding as everyone returning safely home from work to their families.
Confidence, Not Arrogance; Urgency, Not Complacency
As we begin 2011, the challenge will be to continue our momentum. I mentioned in my December letter that a recent third-party customer satisfaction survey showed Union Pacific was No. 1 compared to other railroads. Now, the biggest mistake we can make is to become arrogant or complacent with our performance.
I'm convinced it's easier to become No. 1, than to develop the mental toughness needed to stay there. In fact, the New Orleans Saints' coach talked about this exact challenge after the reigning Super Bowl champs recently lost to the underdog Seattle Seahawks. When you're at the top, he said, it becomes more difficult to maintain the excellence needed to beat every team, every time, especially when all of your opponents are highly motivated to defeat you.
We must become critical of our success in a positive way, finding opportunities to make what's good, even better. For example, we have a network interruption every 8 to 9 minutes, due to a variety of track and equipment issues. By continuing to standardize work and eliminate failures, we'll develop the additional consistency required to grow the business and compete in a truck-like, door-to-door world.
Service Drives Growth, Growth Drives Jobs
Last year's performance shows we can meet customer expectations; however, this isn't a one-time challenge. Every day is an opportunity to re-sell our service to existing customers and earn new business by demonstrating the truck-like, competitive value we offer. Committing across all departments to on-time, consistent transportation solutions is the key to our success and the primary way we will grow our company, and in turn, our work force.
What to Expect in 2011
Even the best economists can't predict what the economy will do this year; but looking to the future, we plan to increase our capital spending to roughly $3.2 billion. This is a vote of confidence that our business will grow to support the investment, but only if we continue to provide first-rate service.
We expect to bring back nearly all furloughed employees in the first two quarters, and we also plan to hire about 4,000 employees, primarily to offset attrition but also to support volume growth.
Although I can't guarantee what lies ahead, you can bet all eyes are on us. Shareholders have a sharp focus on our performance, customers are analyzing our service, competitors wouldn't mind if we faltered, and the regulatory and legislative world will continue examining every move. It is up to each and every one of us to understand our role in Union Pacific's commitment to exceed last year's successes in 2011.
4Q letter from UP Chairman to employees