Union Pacific 2002 Annual Report Download - page 30

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Rail
Operations – The Railroad is a Class I railroad that operates in the United States. It has over 33,000 route miles linking
Pacific Coast and Gulf Coast ports to the Midwest and eastern United States gateways and providing several north/south
corridors to key Mexican gateways. The Railroad serves the western two-thirds of the country and maintains coordinated
schedules with other carriers for the handling of freight to and from the Atlantic Coast, the Pacific Coast, the Southeast, the
Southwest, Canada and Mexico. Export and import traffic is moved through Gulf Coast and Pacific Coast ports and across
the Mexican and Canadian borders. Railroad freight is comprised of six commodity lines: agricultural, automotive,
chemicals, energy, industrial products and intermodal. The Railroad continues to focus on utilization of its capital asset base
to meet current operating needs and to introduce innovative rail services across every commodity line.
The Railroad is subject to price and service competition from other railroads, motor carriers and barge operators. The
Railroad’s main competitor is Burlington Northern Santa Fe Corporation. Its rail subsidiary, The Burlington Northern and
Santa Fe Railway Company (BNSF), operates parallel routes in many of the Railroad’s main traffic corridors. In addition,
the Railroad’s operations are conducted in corridors served by other competing railroads and by motor carriers. Motor
carrier competition is particularly strong for intermodal traffic. Because of the proximity of the Railroad’s routes to major
inland and Gulf Coast waterways, barge competition can be particularly pronounced, especially for grain and bulk
commodities.
Employees – Approximately 87% of the Railroad’s nearly 47,000 employees are represented by 14 major rail unions. National
negotiations under the Railway Labor Act to revise the national labor agreements for all crafts began in late 1999. In May 2001,
the Brotherhood of Maintenance of Way Employees (BMWE) ratified a five-year agreement, which included provisions for
an annual wage increase (based on the consumer price index) and progressive health and welfare cost sharing. In August 2002,
the carriers reached a five year agreement with the United Transportation Union (UTU) for annual wage increases as follows:
4.0% July 2002, 2.5% July 2003, and 3.0% July 2004. The agreement also established a process for resolving the health and
welfare cost sharing issue through arbitration and also provided for the operation of remote control locomotives by trainmen.
The Brotherhood of Locomotive Engineers (BLE) challenged the remote control feature of the UTU Agreement and a recent
arbitration decision held that operation of remote control by UTU members in terminals does not violate the BLE agreement.
In November 2002, the International Brotherhood of Boilermakers and Blacksmiths (IBB) reached a five year agreement
following the UTU wage pattern. In January 2003, an arbitration award was rendered establishing wage increases and health
and welfare employee cost sharing for the Transportation Communications International Union (TCU). Contract discussions
with the remaining unions are either in negotiation or mediation. Also during 2002, the National Mediation Board ruled
against the UTU on its petition for a single operating craft on the Kansas City Southern Railroad. The BLE is now working
on a possible merger with the International Brotherhood of Teamsters (Teamsters).
Trucking
Operations – The trucking segment includes the operations of OTC and Motor Cargo. OTC is a major interstate trucking
company specializing in less-than-truckload (LTL) shipments. OTC serves all 50 states and portions of Canada and Mexico
through 170 service centers located throughout the United States providing regional, inter-regional and long haul service.
OTC transports a variety of products including machinery, tobacco, textiles, plastics, electronics and paper products. Motor
Cargo is a western regional LTL carrier that provides comprehensive service throughout 10 western states. Motor Cargo
transports general commodities including consumer goods, packaged foodstuffs, industrial and electronic equipment and
auto parts. OTC and Motor Cargo experience intense service and price competition from regional, inter-regional and
national LTL carriers and, to a lesser extent, from truckload carriers, railroads and overnight delivery companies. Major
competitors include US Freightways and CNF Inc. OTC and Motor Cargo believe they are able to compete effectively in their
markets by providing high quality, customized service at competitive prices.
Employees – During 2002, OTC continued to oppose the efforts of the Teamsters to unionize OTC service centers. On
February 11, 2002, the United States Court of Appeals for the Fourth Circuit, sitting as a full panel, refused to enforce four
bargaining orders issued by the National Labor Relations Board (NLRB) that would have required OTC to bargain with the
Teamsters, even though the Teamsters lost secret ballot elections. Subsequently, the NLRB moved for a judgment against
itself to reverse the seven other bargaining orders it had issued, and the Fourth Circuit entered that judgment. On October
11, 2002, the NLRB’s General Counsel dismissed a charge the Teamsters had filed in August 2001 alleging that OTC had been
bargaining in bad faith. OTC has not reached any collective bargaining agreement with the Teamsters. On October 24, 2002,
the Teamsters ended the national strike they had called against OTC three years earlier.