Union Pacific 2009 Annual Report Download - page 8

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resources and, when necessary, have access to capital to meet any daily and short-term cash requirements,
and we have sufficient financial capacity to satisfy our current liabilities.
Competition – We are subject to competition from other railroads, motor carriers, ship and barge
operators, and pipelines. Our main rail competitor is Burlington Northern Santa Fe Corporation. Its rail
subsidiary, BNSF Railway Company (BNSF), operates parallel routes in many of our main traffic
corridors. In addition, we operate in corridors served by other railroads and motor carriers. Motor carrier
competition exists for five of our six commodity groups (excluding energy). Because of the proximity of
our routes to major inland and Gulf Coast waterways, barges can be particularly competitive, especially
for grain and bulk commodities. In addition to price competition, we face competition with respect to
transit times and quality and reliability of service. While we must build or acquire and maintain our rail
system, trucks and barges are able to use public rights-of-way maintained by public entities. Any future
improvements or expenditures materially increasing the quality or reducing the costs of these alternative
modes of transportation, or legislation releasing motor carriers from their size or weight limitations, could
have a material adverse effect on our business.
Equipment Suppliers – We depend on two key domestic suppliers of locomotives. Due to the capital
intensive nature of the locomotive manufacturing business and sophistication of this equipment, potential
new suppliers face high barriers to entry in this industry. Therefore, if one of these domestic suppliers
discontinues manufacturing locomotives for any reason, including insolvency or bankruptcy, we could
experience a significant cost increase and risk reduced availability of the locomotives that are necessary
to our operations. Additionally, we utilize two suppliers of rail (one domestic and one international) that
meet our specifications. Rail is critical for both maintenance of our network and replacement and
improvement or expansion of our network and facilities. Rail manufacturing also has high barriers to
entry, and, if one of those suppliers discontinues operations for any reason, including insolvency or
bankruptcy, we could experience cost increases and difficulty obtaining rail.
Employees – Approximately 85% of our 43,531 full-time-equivalent employees are represented by 14
major rail unions. Current labor agreements became subject to modification on January 1, 2010. In
January 2010, we began the next round of negotiations with the unions. Existing agreements remain in
effect and will continue to remain in effect until new agreements are reached or the Railway Labor Act’s
procedures (which include mediation, cooling-off periods, and the possibility of Presidential intervention)
are exhausted. Contract negotiations with the various unions generally take place over an extended period
of time, and we rarely experience work stoppages during negotiations.
Railroad Security – Operating a safe and secure railroad is first among our critical priorities and is a
primary responsibility of all our employees. This emphasis helps us protect the public, our employees,
our customers, and operations across our rail network. Our security efforts rely upon a wide variety of
measures including employee training, cooperation with our customers, training of emergency responders,
and partnerships with numerous federal, state, and local government agencies. While federal law requires
us to protect the confidentiality of our security plans designed to safeguard against terrorism and other
security incidents, the following provides a general overview of our security initiatives.
UPRR Security Measures – We maintain a comprehensive security plan designed to deter and to respond
to any potential or actual threats as they arise. The plan includes four levels of alert status, each with its
own set of countermeasures. We employ our own police force, consisting of more than 220
commissioned and highly-trained officers. Our employees also undergo recurrent security and
preparedness training, as well as federally-mandated hazardous materials and security training. We
regularly review the sufficiency of our employee training programs for ways to increase preparedness and
to improve security.
We have an emergency response management center, which operates 24 hours a day. The center receives
reports of emergencies, dangerous or potentially dangerous conditions, and other safety and security