Union Pacific 2009 Annual Report Download - page 29

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29
Automotive – Declines in shipments of
finished vehicles and auto parts and lower
fuel surcharges reduced freight revenue in
2009 compared to 2008. Vehicle
shipments were down 35% and parts were
down 24%. Core pricing gains partially
offset these declines. These volume
declines resulted from economic
conditions that reduced sales and vehicle
production. In addition, two major
domestic automotive manufacturers
declared bankruptcy in the second quarter
of 2009, affecting production levels.
Although the federal Car Allowance
Rebate System (the “cash for clunkers”
program) helped stimulate vehicle sales and shipments in the third quarter of 2009, production cuts and
soft demand throughout the year more than offset the program’ s benefits.
Double-digit declines in shipments of both finished vehicles and auto parts drove freight revenue lower in
2008 compared to 2007. Price improvements and fuel surcharges partially offset these lower volumes.
The manufacturers experienced poor sales and reduced vehicle production during 2008 due to the
recessionary economy, which in turn reduced shipments of finished vehicles and parts. In addition, a
major parts supplier strike reduced volume levels compared to 2007. Shipments of finished vehicles
decreased 23% in 2008 versus 2007.
Chemicals – Reduced volume and fuel
surcharges decreased freight revenue from
chemical shipments in 2009 versus 2008.
Pricing improvements partially offset
these declines. Weak market conditions
reduced shipments of industrial chemicals
in 2009 compared to 2008, driving
volume levels down 16%. High
inventories, production curtailments, and
delayed purchases combined to reduce
fertilizer shipments by 29% in 2009.
Additionally, business interruptions
resulting from Hurricanes Gustav and Ike
lowered volume levels in the third quarter
of 2008, contributing to a more favorable
year-over-year comparison.
Price improvements and increased fuel surcharges drove higher revenue from chemicals shipments during
2008, which were partially offset by a decrease in volume levels compared to 2007. Weak market
conditions and business interruptions in chemical producing areas resulting from Hurricanes Gustav and
Ike all contributed to lower industrial chemicals shipments. Plastics shipments also declined in part due
to the impact of Hurricanes Gustav and Ike.
2009 Automotive Revenue
2009 Chemicals Revenue
Finished
Vehicles
76%
Auto Parts
24%
Fertilizer
14%
Soda Ash
16%
Industrial
Chemicals
25%
Plastics
20%
Petroleum
& Other
25%