OMAHA, Neb. — Union Pacific’s decision to shift its local switching operations in Eugene, Ore., to Genesee & Wyoming short line Central Oregon & Pacific could be a model for improving carload service and turbocharging growth elsewhere on UP’s system, CEO Jim Vena says.
The deal, announced last month, combines a Class I’s strength of long-haul service with short lines’ advantage of providing more frequent and more flexible local service. “It’s a given that we’re real good at some things and … the short lines are local carriers that do a better job in certain things,” Vena said in an interview on Thursday.
“They can attract more business,” Vena says.
G&W CEO Michael Miller says its short lines typically exceed the Class I carload growth rate by a couple of percentage points in any given year.
Eugene was a natural location to hand off local operations, Vena says, because CORP was already interchanging with UP at Eugene Yard. The move will eliminate double-handling of cars, shaving 24 hours off transit time.
“We think that it’s a win for the customers, it’s a win for Union Pacific, and it’s a win for G&W. It really is. And we’ll look at other places too,” Vena says.
CORP will serve 22 customers on nearly 28 miles of trackage leased from UP, including Eugene Yard. UP will retain trackage rights. Customers include those shipping or receiving forest products and paper, grain, propane, and scrap metal.
The UP-G&W deal is reminiscent of one between Canadian National and Watco in Louisiana. In 2021, CN handed off local switching at a nine-plant petrochemical complex to the new Watco short line Dutchtown Southern. Thanks to Dutchtown Southern providing service seven days per week — up from five — and offering customers multiple switches per day, traffic grew 47% in the 1.76-mile short line’s first year of operation.
The CORP lease is scheduled to take effect on Feb. 8, according to regulatory filings with the Surface Transportation Board. This type of transaction is typically exempt from board review. But the SMART-TD union, which represents some of the UP workers whose positions will be cut when operations are handed to CORP, opposes the deal. Opposition to what otherwise would be an exempt transaction can prompt an STB review.
Jeremy Ferguson, president of the SMART-TD union that represents conductors, blasted the transaction. “This lease is a blatant example of hedge fund-driven railroading, where the financial interests of Wall Street investors outweigh the safety and wellbeing of workers and communities,” he said last month.
UP has said its Eugene employees can transfer to other locations or apply for a job with CORP.
Will the UP change their slogan to “We Can’t Handle It)?
“Growth” (?)
In what exactly. You just offloaded your customers to someone else.
The only near term growth that I can see is if the Port of Coos Bay gets a major customer. Otherwise is same stuff, a different day.
The question is what shape will the lease be in in 20 years? Will G&W maintain the track or will it deteriorate? How is the profit going to be driven? Yes there will be better service but will the government need to provide assistance because the margins are that type.
This is a case where I think UP wins in the short term and everyone looses in 25 years.
the union can complain all they want but the fact is the shortlines provide much better service than the class ones.
The large RRs and the unions need to rethink how to get more short line service. With a large RR the workers who provide service are sooner or later going to desire a transfer. The vacancy then will be an outsider who knows nothing of the area where he is assigned and may want to transfer out as soon as possible.
With a local short line, the local workers stay. 7 day service is also important. They are more likely to hustle up new businesses that will feed the adjacent Class 1. Several short lines will end up providing enough traffic that another crew will be needed to be hired on the class 1.
This is a win-win. Yes, there will be short term pain as far as the union goes. But service will improve, traffic will grow and UP will slowly need more employees.
I say this is a win. CORP and UP own several branches in the area. By shutting a couple to CORP it clears the backlog on their system. In Idaho all of our branches are owned by Watco who has interchange points at every single stop along the OSL. The only exception to this is Oregon and Eastern who is not owned by Watco and the former Idaho Northern and Pacific. Union Pacific needs the branch lines but sending all their heavy diesels down there takes revenue away from the railroad. This is why handing a few of them over to CORP is a win for both of them.
Am I the only one who thinks the accompanying photo looks like it’s of an HO scale layout?
Could not find the filing. Is CO&P leasing 2 separate lines? Is This lease part of the Amtrak line? Is UP going to maintain the track or is CO&P going to maintain it? There are some 10 MPH locations on some track.
Needless to say, it wouldn’t have been as attractive if the short line had connections with other class 1’s and any customers *UP willingly gave up switching directly* became open to competition.
Double edge: UP customers may/will get better service. UP employees get run over because of losing their jobs and homes. Its just another deal where the main line railroad gets rid of expense of employees. That has been going on for some time and probably won’t end until the class ones get rid of switching. The “run around ” of labor will not cease and that is a doggone shame.
UP employees can transfer or hire on with CORP/G&W, this is a program that has been a long time coming. Class 1’s should have started doing this years ago, because as the shortline/regional increases traffic they will have to hire more crews, more crews = more jobs for union members(for those shortlines/regionals with union contracts).
The short-lines can’t afford union membership. They are able to be flexible because they don’t have to follow all of the op and labor regs the Class Ones must follow. Their people do more than one job, something which would never be allowed on the unionized class one. Because they are small and tight knit, they can make money on branch lines the CL 1’s can’t make money on. This makes it possible for customers on these “sparse” lines to continue to receive rail service when it might otherwise be abandoned, to trucks no less. This is a great service even if the unions don’t like it. They get the results…those cars are being moved long distance by their people. They should cooperate and see this as good for everyone, which it obviously is…
Tom Stamey & Jeremy Ferguson:
“…Dutchtown Southern providing service seven days per week and offering customers multiple switches per day, traffic grew 47%…”
Guess who is hauling those additional 47%? It’s not WATCO or G&W. It’s the Class I. BUT, WATCO is producing more loads.
Perhaps if the unions would actually require their members to act like they work for the customer rather than the union this wouldn’t occur. Class I traffic is stagnant while trucks are growing mightily. Any guesses as to why?
I worked for WATCO at two industrial switching operations. At one, traffic increased 50% when the Class I was exchanged for a true customer-oriented company. And WATCO hired more people, too. At the other location traffic DOUBLED. There isn’t a Class I in North America that can pull that off. Nor can their unions.