Union Pacific’s CEO upbeat for economy

Arkansas Democrat-Gazette/MELISSA SUE GERRITS 03/05/2014 -  Jack Koraleski, president and chief executive officer of Union Pacific Railroad speaks about the future of railroads and truck to rail opportunities in Arkansas to the Arkansas Economic Development Foundation luncheon March 5, 2014 at the State House Convention Center.
Arkansas Democrat-Gazette/MELISSA SUE GERRITS 03/05/2014 - Jack Koraleski, president and chief executive officer of Union Pacific Railroad speaks about the future of railroads and truck to rail opportunities in Arkansas to the Arkansas Economic Development Foundation luncheon March 5, 2014 at the State House Convention Center.

Union Pacific Corp. Chief Executive Officer Jack Koraleski believes the U.S. economy will see moderate growth in 2014 as lower energy prices combined with rising foreign labor costs boost domestic manufacturing.

Koraleski, also Union Pacific’s president, told those attending the Arkansas Economic Development Foundation luncheon Thursday that the railroad connects Arkansas to ports in the western two-thirds of the United States, linking the state to ports around the world.

“We are Arkansas’ largest railroad,” Koraleski said, with 1,327 miles of track in the state. The railroad maintains 32,000 miles of track in 23 states. “That means that anytime an Arkansan eats something, grows something,builds something, drives something or turns on a light to read something, Union Pacific has had a hand in that somehow, someway.”

In 2013, Union Pacific originated 222,570 carloads of goods in Arkansas and delivered 342,604 in the state, he said.

In Arkansas, Koraleski said Union Pacific hauls products for diverse industries, including food processing, poultry and lumber. It also delivers automobiles, consumer goods such as electronics and clothing, and the coal needed to run power plants.

“Our strategy is to create value for our customers,” he said.

Union Pacific employs nearly 2,900 people in Arkansas, most of them at two facilities in North Little Rock, a locomotive repair and assembly shop and a rail classification yard. Koraleski said the railroad had a $230 million payroll and spent $173 million in Arkansas in 2013. Union Pacific also spent $41.3 million on in-state purchases of items that included track ties, steel plates and other goods.

The railroad operates 8,000 locomotives and employs more than 45,000 people nationally.

Looking ahead, Koraleski said he expects U.S. agricultural markets will “be pretty darn strong” in 2014. At the same time, analysts are predicting strong automobile sales growth as well as growth in demand for plastics, fertilizer and industrial chemicals. And, even though coal shipments are down, they still constitute about 21 percent of Union Pacific’s traffic.

The railroad hauls more pipe and sand used in hydraulic fracturing, or fracking, than it does crude oil, Koraleski said, but North America’s shale boom is about lower energy prices, and that will be a factor driving renewed interest in manufacturing in the United States.

He said that means the demand for rail transport will rise as the nation’s economy grows. He said studies have shown that rail freight averages 40 tons per person in the United States, so that as the nation’s population grows, it will be matched by rail transport growth, given its ability to move large quantities of goods for less energy.

After his talk, Koraleski said weather is always a factor when it comes to the economy and Union Pacific rail traffic.

“A lot of our business is driven by consumer confidence,” he said. Over the past few years, consumers have been wary as leaders in Washington, D.C., debated issues such as the fiscal cliff, sequestration and the debt ceiling. “This year, the runway is looking pretty clear. Those issues aren’t going to be issues.”

Koraleski said he is less concerned about the slow pace of the economic recovery than some economists.

“I’m really happy with a nice slow, consistent improvement in the economy,” he said. “Anytime you have a spike you always kind of suspect you’re going to have a pitfall.”

While many businesses rely on railroads, Koraleski said members of the public - and not just in Arkansas - often don’t realize the role railroads play in their lives.

“Just for Arkansas, it’s soybeans, it’s rice, it’s cotton, it’s bauxite, it’s manganese, it’s glass.It’s all of those things that all either come in or leave on Union Pacific trains, ” he said. “We’re not very visible.”

Koraleski said Union Pacific is working with federal officials to improve the safety of crude oil shipments. He said regulators already believe railroads are safe but are asking them what else can be done with tank-car standards, inspection requirements, labeling and other issues.

Grant Tennille, executive director of the Arkansas Economic Development Commission, said Union Pacific’s presence in Arkansas sometimes passes under the radar when the state is considered for large industrial projects.

“Their investment here creates opportunities for us to pitch industrial sites to people who need that kind of activity,” Tennille said.

Tennille said eastern Arkansas has Union Pacific’s 600-acre intermodal facility in Marion, the junction of major interstates, Mississippi River port access and the FedEx hub across the river in Memphis.

“In terms of supply-chain logistics and distribution, that’s the geographical center of the universe,” he said. “We’re working hard to promote it.”

After meeting with Union Pacific’s economic development team Wednesday, Tennille said the commission has agreed to rededicate efforts to promote the state.

He said that the location is a factor in future efforts to attract suppliers from the auto industry looking to relocate from the Northern states so they can both modernize factories and be closer to Southern auto plants.

Business, Pages 27 on 03/07/2014

Upcoming Events