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tv   Railroads Commerce  CSPAN  July 13, 2018 4:47pm-5:51pm EDT

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this i'm just looking into it. and anybody that pumps up and find a target to start scape goating that is when it creates that dynamic. at thetimely like he did press conference at the trump hotel. everyone come in, i'm going to have a major announcement and look at my beautiful new hotel and he said president obama is a citizen but hillary clinton started it, but i finished it. >> watch "after words" on book v. next on c-span, union pacific railroad chair, president and c.e.o. lance fritz on trade, technology and the economy. he also talked about how the railroad industry is using new
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technologies such as automation and scanners to improve operations and increase efficiency. >> good afternoon. welcome to the national press club, the place where news happens. my name is derek and i'm a news editor and chairman of the board of governors of the national press club. first of all, i would like you to silence all cell phones. if you are on twitter, tweet npclive.he program # hold applause until all is introduced. i don't want anybody to feel bad if they get more applause than they do. and the head table is not linear and i ask that you stand as i
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call your name. i have mike, vice president, external relations for union pacific. jay, president and c.e.o. of the national association of manufacturers, lisa, assignment manager at the associated press and co-chair of the n.p.c. headliners' team. hn, bill cassidy, journal of commerce, alan, science and enterprise, joseph morton, omaha world herald and former member, chuck, st. louis post dispatch and martin from bloomberg. please give them a round of applause. [applause] >> here's one name i didn't mention here. i would like to acknowledge the staff and additional members of the headliners' team who made it
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ssible, betsy, lisa, lori, . mara, lindsay, andy and bill thank you very much. [applause] >> i would like to thank our kitchen staff who bless us with very good food and the cookies are very delicious and topical. for our broadcast audiences watching on c-span and elsewhere by live stream, be aware in the audience today are members of the general public and any applause or reaction you hear is not from the working press today. now our lead guest. this week nearly 155 years ago, union pacific railroad laid its first rails reaching the outskirts of omaha and incorporated in 1862 through an
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act of congress signed by president lincoln. union pacific has evolved into a freight hauling giant that is a link connecting global supply chains with 40% of its traffic originating or terminating inside the united states. union pacific chairman, president and c.e.o. lance fritz. mr. fritz joins us as an interesting time. while trade wars and automation were not a thing a century and a half ago, these issues very much affect how union pacific and its competitors operate today. weighing in nafta, pulling out of the agreement could not only damage the u.s. economy by raising consumer prices but could hurt many of the 14 million american workers whose jobs depend on trade with canada and mexico including on those in states that will helped elect the president.
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mr. fritz has a strong horse in this race as he runs a railroad that handles 70% of rail cargo into and out of mexico. as head of the nation's publicly traded railroad as both commodities and finished products, it's difficult to steer clear of the big debates shaping the country whether the effect of fossil fuels on climate change or the mix between public and private investment on the nation's private infrastructure. mr. fritz, the man currently up to the task began at union pacific in 2000 as a vice president in marketing and sales. he was legitimated president and c.e.o. in 2015 and added chairman to his title later that year. he will discuss trade and economy as well as discuss how technology is making freight transport safer. join me in a warm welcome to lance fritz to the national
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press club. [applause] lance: thank you very much. thank you very much. great pleasure. so, with that being said, it's a real honor to be in front of the national press club, esteemed journalists and i see friends, both new and old and i'm pleased to join you here today. you know, the national press club's mission to support professional journalism has never been more important than it is today. more than ever, we need a vigorous, independent press to ensure that our public policy discussions, debates are grounded in fact and reason. and one area of policy that could use more fact than reason today maybe than ever before is international trade, which is exactly why i'm here today. in the past, an issue like trade policy might beso teric or an
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abstract, but let me assure you for union pacific railroad, it's anything but. the decisions made here in washington about trade affect my hometown of omaha, nebraska and all of our citizens and affects the 7,300 communities that union pacific communities serves. and i'm going to describe some of the impacts that i see and what is at stake for american workers, our consumers and businesses and the communities that we serve if our government continues to see trade as a zero-sum game. i would like to share with you some thoughts on the role of technology in the debate. how our industry can help to adjust and how we can use technology to provide a safer and more reliable service product. so to understand how union pacific looks at trade and thinks about the future, it's
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helpful to know a little bit about our past. derek mentioned, we were started 156 years ago by president lincoln when he signed us into existence with the pacific railway labor act in 1862. you know, it startles me when i say that because you just need to put yourself back in lincoln's shoes. in 1862, the union was losing the war badly. there were southern troops within 40 miles of the capitol and it was all within a certain thing and common knowledge that the war would end soon and end in a divided nation and a lot of the dialogue is about what was going to happen when we have two united states and not one and what would they be called. yet at the time, the president had the foresight to think there is going to be one nation after this conflict. that nation is going to have to have something that stitches it back together and he thought what better than the
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exploration, the growth, the development of the west and what better mechanism to do that at the time than to put a transcontinental railroad together. that's what he was thinking when he took that action and signed that act. over time we played that vital role he had in mind in helping the freight railroad industry become the envy of the world. it enhances both our nation's standard of living and our competitiveness. freight railroads are the blood stream. we support every sector of our economy. in fact, we are so tightly linked to our economy that we are considered the bellwether of economic progress. things show up in our loads before they show up in statistics. today, we operate in 23 states over 32,000 miles of track. i have about 42,000 employees and we serve again about 10,000
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customers and market cap is over $100 billion between ourselves and u.p.s. we are the world's most valuable publicly traded transportation company. we have a long history of opening new front ears and new markets and play a very important role in the supply chain and in international trade. roughly 40% of our shipments originate or terminate outside the united states. that's before and after into and out of canada, mexico, asia, europe, south america, literally around the globe. and we are the only railroad with service to the six gateways to and from mexico and we enjoy about 70% of that business. increases in demand for autos, for grain, plastics, beer, thousands of other products, they show up on us before they show up in the statistics. all of that means i see how
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international trade benefits our country every day and in the stories of americans that we serve and we see. i see it in the iowa farmers who raise soy beans as they are shipped by us down to mexico and get crushed into oil and meal and meal comes back as vegetables oil and sold in our grossy store. there are plastic dash boards built into a car and brought back across the border to be sold in our show rooms. i see it in texas. we serve a factory that makes glass bottles and ship crushed glass into the factory and ship those down into mexico and get filled with one of our favorite beers and gets shipped back into the united states for distribution in the stores and restaurants. that cycle happens over and over and over every day, tens of thousands, hundreds of thousands of times a day. so from my vantage point it's
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crystal clear that the u.s. economy is quite strong. some part of that is due to the corporate and individual tax reform that was passed. ome part of it is due to the sensible regulation that our government is approaching business with right now. i have heard very positive news from our customers that say both tax reform and the sensible approach to regulation are generating strong consumer optimism generating demand for them for capital investment. but our fonings exit from the north american free trade agreement or nafta along with the growing list of tariffs and escalating trade tariffs with our trade partners threaten to undo that progress. what do i mean by that? let me give you a few examples. one of the key hubs is the port of long beach, california and
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cause of new quotas over the last few weeks, a ship has been sitting outside the port with a shipment of steel that normally would land in the port and ship it inland to our customer. the reason it has been sitting offshore is there a dispute over who is going to pay that tariff. we see it in the consumption of steel. we buy a portion of the rail from japan, premium steel and built to a dimension that we are having a hard time and cannot find in the united states. our first shipment of that happened in may and the bat sat for four weeks while there was a dispute over who would pay the tariff which was $6 million for that boat and ultimately if we got an exemption whether or not there'd be a refund.
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you know what happens in soybeans, that's a critical crop for the middle of the country, for mid western farmers. they use our rail lines to get those to foreign markets. in the middle of the country, roughly one of every two acres is planted for export. you ask any soybean farmer today what they're worried about and they'll say retaliatory tariffs. china has imposed a 25% tariff on soybeans in retaliation of tariffs on chinese goods and that sharply curtailed their purchases of soybeans in the united states. it also doesn't help that soybean prices right now are at a 10-year low. as president of the arkansas farm bureau recently said, we're getting to a point where it's going to be difficult far farmer to make a profit. with prices down and an increase in prices for virtually everything else. i see in it lumber. union pacific hauls lumber from western canada down into locations throughout the u.s.
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the tariffs on canadian lumber, which were enacted last year, are driving up prices and hurting american business an american consumers. lumber tariffs have added to the cost of living and housing in the u.s. at a time when housing is already difficult to afford. the cost of 1,000 board feet of lumber from western canada is up nearly 80% over the last 12 month, about 40% of that has happened this year alone. the record-high lumber prices have added nearly $9,000 to a single family home, according to the national home builders association. those are just a few anecdotal examples. they are hardly the only warning signs. studies show tariffs will hurt u.s. jobs. according to the study of trade partnership worldwide, for every steel or alum numb job protected by a tariff, 16 other jobs in the u.s. economy would be lost. according to a study commission i -- commissioned by the
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consumer association and retail federation, 113,000 jobs are threatened by the first round of new tariffs on china and that could be amplified if to tariffs escalate. and according to a study by the u.s. chamber of commerce, 165,000 jobs could be last from tariffs already enacted and those being considered on autos and auto parts. tariffs have the possibility of undoing the benefits of tax reform by raising the prices of a range of goods. mark sandy said households gained about $900 annually from last year's tax reform and widespread tariffs could consume about $720 of that amount because of the drive up in the cost of imports. i want to be clear. i, we, applaud the administration for its efforts at leveling the playing field for american workers when it
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comes to trade. particularly when it comes to addressing china's trade practices. that's absolutely the right goal. and i agree with the administration that nafta needs to be modernized. but some of our administration's proposed changes look to me like they'll do more harm than good. for example, on nafta, as you know, we're seeking a sunset clause that would automatically terminate nafta after five years unless all three countries agreed to continue. that causes significant uncertainty for long-term business planning, which would ultimately shrink investment in the united states as well as in our national trading partners. a more straightforward alternative that maybe would achieve the same objective is to replace the sunset clause with a review mechanism that says after a reasonable period of time any party to the transaction, to the atpwhreement, could choose to prompt a review of a specific nafta element on an ongoing
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basis. i.e., you can force the other parties to get into a negotiation on something that, for instance, has aged and needs to be changed like in the current agreement. the united states has also taken aim at nafta's investor dispute process, which requires the nafta governments treat investors and other property owners in accordance with basic private property standards already guaranteed in the u.s. constitution and under u.s. law. isds allows investors of one nafta country to bring claims directly against a government in the pact before an independent, international tribunal. when the government engages in discrimination or unfair treatment of a property owner or the outright seizure of property without recourse, scrapping or undermining that process would raise questions about america's commitment to due process principles. instead we should find and focus on mending, not ending, the isds
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so investors in the united states, canada, and mexico have a clear path to protecting our investments. make no mistake, withdrawing from nafta would be disastrous. it could challenge the -- it could damage the u.s. economy, it could hurt many of the 14 million jobs -- million jobs that depend on trade with mexico and canada, including the five million directly attributable to nafta. the administration needs to find a better way to address trade challenges by strengthening and modernizing agreements like nafta, not ending them. china's behavior for sure needs to change. but in order to make that happen, we need to work with our scral lie, not start trade wars with them. we need to get china to the table to negotiate enforceable new rule, not just impose tariffs an raise prices for everyone everyone. the business leaders that i've spoken to understand that global trade will continue with or without the u.s. and they're concerned that america could fall behind as
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other countries strike trade agreements of their own. they're particularly concerned that the 11 nations in the transpacific partnership have decided to press ahead with a new pact despite the u.s. decision to withdraw from the deal. if the united states of america doesn't write the rules of global trade i'm sure china would be more than happy to write them for us. i believe one of the biggest challenges our society faces isn't necessarily unfair or weak trade agreement but how to provide meaningful work and decent wages for workers whose jobs are threatened by technological change. i'd like to return to the topic of trade's impact on jobs the changing work force landscape. for sure, some job dislocation happens from trade but to blame the loss of manufacturing jobs entirely on international trade is wrong. even countries that export more than they import like germany and japan over time have lost substantial amounts of their manufacturing job base.
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in 2015 the ball state university did a study on factor responseable for declining manufacturing employment in the united states. what they found is that of the 5.6 million jobs lost between 2000 and 2010, roughly 88% of that could be accounted for by productivity. 88% of the 5.6 million jobs lost in that decade. 12% could be accounted for by a negative trade balance. most economists believe that nafta's most significant impact on jobs has been the gradual move to more high skill, high-wage jobs and fewer low-skill, low-wage jobs. all you've got to do is look to silicon valley and the growth there that is an important contributor to that job evolution. while manufacturing jut put has been trending up in the u.s., due to increased productivity and advancements in technology, it's accomplished with fewer and fewer workers. the decline to manufacturing unemployment is global, not local, and it's not one unique
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just to us. and even with the decline in the u.s., our country remains the second largest manufacturer in the world. our value-added u.s. manufacturing output reach and alling-time high of $2.25 trillion last year. advancements in technology and automation mean our economy will only become more productive over time. and that more of the jobs we provide will be better paying an safer. we're seeing significant changes in railroad industry as well. and i'd like to tell you a little bit about that. when you think of big data, artificial intelligence, is fist kated ultra sonic sensors and drones, freight rails don't immediately come to mind, perhaps, but they should. we're building the world's premier transportation secnology solutions right now. over the last 10 years we have made substantial progress in our platforms. we maintain advanced telecommunications systems for our own purpose. we have 1,300 cell towers and
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700 microwave towers. a leading number -- a number of leading technology companies partner with us to use that infrastructure for their own use. one of our other areas of technology we call net control which is a comprehensive logistics software platform built on something called microservices architecture. today we've implemented something like 3,000-plus microservices and 50 million livense application code. we're aware of only one other company in the world that has a larger microservices implementation. the way you think about that is, that's the same kind of technology platform running the cloud that netflicks uses, there's only one other company that has a larger application than ourselves. our technology platforms allow us to quickly deploy advanced automation, deep analytics that include a.i. solutions like machine learning, to i want grate quickly and effectively with our customers' erpgsal
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systems through things called a.t.i.'s. we provide internet of things capability, allowing us to leverage more sensor integration to streamline our process. several years ago, our engineering teams realized that lasers could be used to inspect trains instead of humans. the idea resulted in what's called machine vision which essentially is a big m.r.i. for a train. it combines lasers, sophisticated high speed digital cameras and detectors that can take a crystal clear 3-d image of a train at 70 miles per hour. it takes 50,000 images a second and enhances the train repair process that reduces delays and improves reliability and customer service. we're using machine learning to improve our customer experience through a technology we call smart e.t.a. that's built for scratch by our technology experts. what smart e.t.a. does is a smart learning model that
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incorporates train speed, train schedule data and builds a model to make increasingly accurate train arrival times. we've seen a 26% average e.t.a. improvement since we launched the pilot and in some areas it's been as high as 80%. we imemployee gaming simulators engineers and we're testing 3-d printing to help our services and we're using drones to inspect telecommunications towers. we're aggressive about recruiting top tier tall frent the top universities and have created a dedicated career path inside our i.t. function so that if you're an individual contributor but you're growing your skill base over time, you have a path forward that doesn't include having to get out of that work that you value that we value, and going into a management job.
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what we're trying to do isn't create one cool innovation or a series of cool innovations. we're trying to create a perpetual posture of constant innovation. that's what's necessary in the world of railroad. as you're well aware, autonomous technology is also continuing to drive change in the transportation industry and our competition isn't standing still. the auto and trucking -- trucking cities have been pursuing awe ton must operations for some time and continue to make advancements despite initial setbacks. pilots for autonomous tracking and platooning are active around the world. the rail industry is keeping pace with these trends and we're finding ways to adopt similar technologies in a man their makes sense in our operating environment and competitive environment. last year the world's first autonomous, driver-free train completed a journey in australia. ultimately, it's a very long road to autonomous trains but we have to be open minded, given
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the technology and the competitive challenges. and the platform already economists in the frm of ps ty train control or p.t.c. p.t.c. is a suite of technologies designed to automatically stop a train in forced circumstances before a train-to-train collision occurs, before a derailment ocurse because of excessive train speed, before train movement goes through a misaligned switch or before a train enters into a work zone unauthorized. by the end of of 2018, p.t.c. will be installed on 100% of union pacific about 75% to 80% of our required lines will be implemented wit. i want to emphasize that 100% of our passenger lines will be equipped and available for passenger trains to use p.t.c. by the end of this year. as we're implementing it across our network which is the largest p.t.c. network in the united states, unanticipated operational issues have naturally develop. we're working diligently to
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resolve those while maintaining the health, safety, and resiliency and fluidity of the rail network. obviously, technological change is an unstoppable force. we want to protect american jobs, i believe we need to focus on enhancing america's ability to compete globally and helping u.s. workers adapt to technological change. what we must do is train our work force for the jobs of now and the future as opposed to looking longingly at the jobs of yesterday. two examples of jobs that require trained work force that are -- are things like automotive service by or railroad diesel mechanics. i've got a story, i have a friend in omaha who owns about 20 car dealerships. and his service bays pay about $70,000 to $80,000 for a skilled technician with a great benefits package and there's quite a bit of job security in those jobs. he keeps about 10 or 12 bays
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empty because he can't find a work tors to fill it and he's not big enough to be able to create a program to train his own. at union pacific, we're big enough to train our own. but what we need is bigger pools to hire from. we're looking for technically trained employees or employees that are -- have an aptitude toward being technical and weal run them through our apprenticeship programs. but we've got to find ways as a nation to more effectively train our workers so that they can fill the gaps for us an other employers more readily and they can compete better for today's jobs. america spends about .1% of its g.d.p. at a federal level on job retraining and job finding. that's about a sixth or a seventh of what other rich countries spend and even that is probably not enough. we need to improve our ex-al system to train students to fill
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high-skilled technical jobs across a variety of industries. we've got to stop timpinge kids that college is the only way to go when if you work for a railroad, you can even earn $70,000, $80,000, $90,000 a year with an excellent benefits package doing work that's very rewarding. we've got to protect the right of u.s. workers and companies to compete on a level playing field by reducing unfair competition from state-owned enterprises and protecting intellectual property right. the best thing we can do for american workers is to create new job and the best way to create new jobs is trade. for every billion dollars of international trade, the united states creates 5,800 new jobs and on average they pay about 18% more than other jobs. i'm going to go back to the beginning. our company was founded by abraham lincoln 156 years ago and we did it so we would connect america, east to west. today, as our country's largest
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publicly traded freight railroad, we continue to provide means to american businesses to compete on a global scale. our government has the chance to continue creating economic opportunity for american workers and businesses by only if we lead the world and maintain our long standing commitment to international trade. the best step our government can take is to create a climate in which businesses have the confidence to invest and to create jobs. but the recent trade policies have done the on silt by creating uncertainty that's going to cause capital investment to slow down. we need to find a better way to address trade balances by modernizing agreements like nafta, not ending them, and by working with our allies constructively instead of starting trade wars with them. so with that, i'd be very happy to take any of your questions. [applause]
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>> if you have questions, please feel free to hand them to my colleague right over there and we'll jump right in. you mentioned a lot of -- a lot on trade a lot on tariffs. and how they'll impact commodities, how they'll impact other sectors. how will they impact freight rail? mr. fritz: freight rail thrives when consumers consume things, when the industrial economy is healthy and producing and when international trade is healthy. it will impact all three of those sectors. tariffs and disrupted trade tends to be a tax on consumption, for sure, it's going to drive up pricing and we'll see consumption be less robust than it otherwise would be. uncertainty, like what we see happening in nafta right now, causes the industrial economy to slow down on its investments and be more cautious. and the industrial economy, the
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life blood of that, is capital investment. so that will be impacted. and then when we start disrupting trade flows through either tariffs or other retaliatory measures whether by us or our trading partner that disrupts trade flows. and the scariest part about that isn't the immediate impact, the scariest part for an industry participant like a freight railroad is supply chains start altering. once a customer has altered a supply chain and learned to live with it and even more, learn to optimize it they never come back fully to the original supply chain. that will change where we've made investments, maybe where trade flows. so all of that could impact us. >> how much more expense sieve a mile of track? mr. fritz: takes about $3 million to build a new mile of track. >> and steel tariffs? do they -- mr. fritz: that boat out in the harbor, our rail bought from
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japan which we were already paying a premium to buy, the 25% tar rir -- tariff on it cost about $6 million. it's a significant amount. rail might be, call it three quarters of a million dollars a mile. >> you mentioned the tax cuts, i want to get to that because one of the things we're seing across companies now is a great influx of cash. i'm sure you've seen that as well in your business. what are you doing with it? mr. fritz: we were a great beneficiary of corporate tax reform because we are a u.s.-based, big asset participant in the economy. our asset base, undepreciated is about $70 million and we spend about $3.5 billion in capital a year. so what we've done with our incremental cash flow, we did uptick our capital spent this year. our wages and wage base and benefits are very attractive and we're increasing the amount of cash we're giving back to our
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shareholders. it's their cash to begin with. >> we've seen a lot in the way of buybacks and other things that sort of raise share prices. are you doing a lot of additional capital expenditures? where is that going? mr. fritz: in your mind's eye think this year's capital spending versus last year is up $250 million, a significant amount for any company. the benefit from corporate tax might have been in the naked of $1 million in incremental annual cash flow. the rest is both reflected in job growth, as the economy percolates so that's a bigger wage base for us, and then returning to shareholders in dividends and buybacks. >> one of the things i know you're walking on is dwell time, train velocity, the block and tackle statistics that you deal with. right now, i know that you all
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have said that you're trying to increase capacity, that's one of the things that you've been clear on. dwell time at least over the last several quarters keeps rising. train velocity falling. what's going on there? mr. fritz: dwell time right now, we publish statistics weekly with the association of american railroads, our dwell time is down pretty substantially. call it in the neighborhood of 29 hours a day. when i say that, that's a measure of every rail car on the railroad and how long it sitz in a terminal when it's not on a train running. and velocity is every mile of the railroad where trains move, even through terminals, how many miles you make in a given hour. we had a little bit of congestion at the end of last year and into the beginning of this year. that was caused by a number of events, some of them weather
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events like hurricane harvey. some of them other catalysts. we've been working to get those statistics back. both of them are on the road and largely back to being kind of the way the railroad is designed. and so we're within kind of earshot of, call it 20% plus or minus of being where we want to be. where we want to be is where our customers want us to be which is excellent service, highly reliable, do what we say we're going to do. that's what they expect of us. that's what we deliver to them. we're on the way to being that exactly. >> if i match you against other companies that are direct competitors, b.n.f. has slightly better rates right now, when are you going to catch them? mr. fritz: bnsf doesn't have slightly wetter -- better rates right now, depends on what you're looking at. let's deconstruct the industry. we think winning in business is
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generating this most cash flow from operations and the most operating income. we're winning. in the industry. we generate more than the second in operating income by three quarters of a billion annualalism our shareholders appreciate that, applaud it. they'd like us to continue to do better. if winning is described more broadly as creating long-term shareholder value, doing it in a sustainable way, we're the most valuable transportation company in the world. so i think we're doing a pretty fair job there. and when you broaden that out even further, we like to talk about what we're creating for four key stake holders which is our customers, who depend on us to win in their marketplace, our employees who depend on us to fulfill themselves, the communities that we serve who depend on us to be safe, reliable and build their economic fabric, and our shareholders who depend on us to generate an attractive return
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for them. in all categories we're making progress and i consider us market leader. >> there's two things, two of the main things any freight rail deals with, coal and oil. and these are two things that you talked about the president's policies and how they're having an effect. this president has been -- has made no secret of wanting mr tell, more shipping on coal, are you seeing it yet? are you expecting anything? are you changing your business in a way that would allow you to carry more? where are we going on that? i'm not sure we're necessarily seeing matching the rhetoric. mr. fritz: i think largely our experience as society has made a decision that they want to rebalance our electricity generation and they want to rebalance away from coal. so we see coal as an industry in kind of a secular repositioning. it used to generate half the
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nation's electricity if you go back 10 or 15 years. today it generates maybe 3%. i don't think that grows from where it is today as a percent of electricity generation. i think it is important for our economy to have a good, balanced support of multiple fuels generating our electricity. coal is excellent because you can store the fuel source outside on property. and it's highly reliable and we got a lot of it. >> can i jump in right there? sometimes when we're looking at growth, people talk growth in absolute numbers. sometimes it's growth against projections. right now the projections have down and they go to flat, that's growth? is that what you're saying we can be hitting? >> mr. fritz: i think it's hard to say that. a as we look at the future, the best source is the e.i.a. a government source that looks at the energy industry, their projections are kind of short-term flattening out of the
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curve but long-term that percentage is probably still going to drop to some degree. i don't think it goes away. i don't think that's good for the nation for it to go away. but i think it's probably got more downward pressure than upward pressure. >> on oil what price do we need to be at? for that to start coming up to where it was a couple of -- four or five years ago? mr. fritz: royal is not terribly directly connected to coal consumption. natural gas is directly connected to coal consumption. natural gas and oil have some connectivity. recently they've been disconnected to a degree. that is we've generated so much more incremental oil production in the united states that we're awash in natural gas. so our natural gas pricing right now has been pretty stable and has been in the $3 plus or minus range or even less for quite a bit of time. that'll change over time. that'll prompt consumption of natural gas and that'll, you know, the demand then will start
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consuming the excess supply. but we're in a place that looks like for a bit of time, we've got plenty of natural gas and that's what's going to really retard coal demand on the demand side. >> one of the questions from the audience, we talked a little bit about cash influx and what you're doing with that off long history of opening new markets, being in new places. what's new? where are you going? are there new marks you're looking at opening now? mr. fritz: what's new in the world of railroad is the consumerization of our customer base. think about our experience, regardless of your age right now, you've probably ubered, brobal ab&b'd or know somebody that has. you've used amazon, probably amazon prime. you've used u.p.s., u.p.s. my choice or the fedex equivalent you see instant price, lots of option, done your way, delivered
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your way, when you want it. our customer base is look at us like that. pause the buyers of our service have that personal experience and they think, in your industry, why not? so what i think is happening and it's happening rapidly and we're driving it is applying technology and innovation to that customer experience. we're not only applying it on the inside of the business, i mentioned a lot of those examples today, but we're applying it to the outside of the business. all along the path that a customer interacts with us, making that experience rapid, easy, ridiculously easy, and something that they want to do more of, not less of. that's a sea change for us as an industry. >> another question from the audience that i -- had to do with what are you going to do with the money, i think that's on a lot of people's minds, but mergers and acquisitions. that's a place people always talk about. i do want to ask, what are you looking at in terms of m&a. mr. fritz: for us right now, m&a
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has been relatively small. think in terms of adjaysencies in our -- to our core business. we bought some cold storage warehouse business because it fit well with a service product we call cold connect where we ship frutes and vedgetbles from the west coast to the middle of the country and east coast. most of our m&a would be in areas like that, value-adds for our customer base. if you're thinking about going to happen oon. >> not going to take over another railroad? >> not right now. >> i had several people ask, is that going to happen in the future or is the industry happy where it is right now? mr. fritz sneck industry has been in this current state for quite some time.
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and there could potentially be benefits of additional consolidation, right? you can always kind of take redundancies out. but the path forward is to go through the s.t.b. for authorization to acquire another class one railroad or for two class ones to merge. in that process, you know, they are committed to evaluate not just the competitive dynamic bus to enhance competition in the industry through acquisition. it's got to be more competitive, not less. and also they have full control of the remedies and they've got to consider the downstream impacts of the first transcontinental merger or class one merger. all that being said, we think those economics mean more value destroyed than value created. and so right now, we don't think that's the right path to go down. >> back to trade, put a fine point on it. you know, you mentioned a lot of
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your business relationships with mexico, with companies in mexico work cerveza, which is very, very important. let's be clear. mr. fritz: hopefully to everyone. buy more. >> what would repealing nafta mean to union pacific? mr. fritz: i think it would be a disaster. first and foremost it would be bad for our economy. i truly believe that. i think it would have a downward pressure on jobs. a downward pressure on trade. and an upward pressure on price. and we thrive when the economy thrives. so right off the bat, that's the biggest concern i have. you know, there are some other concerns that are more granular and specific to union pacific but those are of less concern to me than the general impact on the economy. >> let me think about some of the safety things you mentioned.
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positive train control goal end of the year, you said? 1% to 100% how confident are you? mr. fritz: 100% that we'll be 100% installed, everybody trained for it, all the band width we need and we'll have about 75% of the railroad implemented, lit up, working under p.t.c. we have 2019 and 2020 to do the rest. there's a lot of hard work there, i'm 100% confident that by the end of 200 it's all done. >> another question from the audience, all with safety. in your network area, you have, i don't know what the number could be of at fwrade crossings. mr. fritz: a lot. >> at grade crossing, something that other countries try to minimize. it's a major source of accidents, vehicular, points where derailments might happen. are you doing anything to try and reduce the number?
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do you have a goal there? mr. fritz: absolutely. we've got 32,000 miles of railroad, we have about 30,000 grade crossings, about one a mile but not spread out evenly. the issue is driver behavior accounts for virtually all of our crossing accidents. and we have a crossing accident a day on average. it's really discouraging. what we're doing about that is a couple of things. one is big data and analytics. we enroll the help of some smart ph.d.s on the outside and some of our own and collectively they came up with a 27-factor mod tole determine relative risk of grade crossings and then that drives our team on the riskiest crossings to go out and work with the local community and come up with a game plan to mitigate the risk. we're doing that owl thever -- all over the place right now. >> are you see, given that a
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fair number of republican legislatures were in a train that hit a vehicle are you seeing any legislative move toward anything? mr. fritz: what i am seeing is those conversations are much more meaningful. and we can drive to personal experience. which always helps. the other thing that's really important is fully 0% of the grade crossing accidents on our railroad happen where there's active warning devices. either gates or flashing lights. so you know, i don't think it's about, let's add more flashing lights -- flashing lights, i think it's about we've got to harden the infrastructure to the greatest degree and shunt drivers to those places and then the next thing we've got to do is, when we're developing autonomy we have to build traffic law into the autonomous vehicle and for grade crossing that means stop and if it's not clear, don't go. so that'll be -- autonomy will
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help us tremendously in that way. >> are accidents up or down? >> grade crossing accidents are marginally up but what they're doing is saw toothing over the course of the last four or five years. it's frustrating. for a company that cares deeply about safety, there's nothing more frustrating than grade crossing incidents and trespassing incidents. >> speaking of trespasser incidents, we've had a lot of talk about immigration. there's a big focus within the trump administration on reducing illegal immigration are you seeing anything in terms of that connected with your freight rail network? mr. fritz: the way we think about immigration is more about a job source. if you look at the united states, we got labor participation rate of something like just below 63%. historically that was 67%. economists will tell you there's some reason for it to drop. i will tell you there are some reasons for it to drop and some of them are within our control. the opioid epidemic is creating
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felons, a large number, that become unemployable. we've got a number of other issues going on in the younger population that we've got to deal with. so we're going to need immigration to feed the work force to keep the economy going. our u.s. citizens, there's not enough in the work force to do the work necessary. we saw statistic, i think it was last month for the first time in forever that the number of open jobs exceeded the number of individuals seeking a job. so you got just fundamental imbalance right out of the chute. >> one thing we're tracking heavily is the folks the president may or may not be listening to on this topic. s that president with has come out and had his office of u.s. trade representative just the other day outline $200 billion in possible tariffs from china who has come out with aluminum tariffs, washing machine
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tariffs, etc., etc. it seems like a lot of free trade, more trade guys aren't there right now. so who do you go to? ho is the open door? mr. fritz: we'll speak to anybody. >> who speaks to you? mr. fritz: you don't have to be a friend to be part of our dialogue. if all we do is speak to the friendlies, probably not having an impact. >> who is your biggest ally in the administration? mr. fritz: there are a numb in the administration that i think fundamentally get the utility of trade and the end game right. whether that's will burr ross in lashry kudlow or mnuchin, there are mfment >> one question from the audience i wanted to put to you, do you think the trade war is coming to an immediate climax sometime soon? or are you expecting this to endure throughout the trump presidency and beyond?
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mr. fritz: either way is bad from my perspective. if we wake up this time next year and there's still uncertainty about nafta, we're retarding investment. that's essentially 1/2 years of uncertainty surrounding nafta and i'm sure that would start impacting people's decisions, businesses' decisions on where they're going to make their investment and to what degree. if something were to happen catastrophically today negatively, that's a bad outcome because i'd prefer to tread water and be in dialogue than make a bad decision. the best outcome is let's close this baby up quickly. stop picking fights with some of our trade partners an focus our full attention and might on the issues at hand which is fair and equitable trade and fsment with china. >> a question from the audience, union pacific had a nonagreement employee layoff in a
5:41 pm anything you'd do differently? mr. fritz sfk you've ever led aning orny sargse, i'd be liing if i said i'd d it the same. there are things i'd do differently. but those decisions were made for the right reasons. union pacific has to be more agile have to make decisions more quickly have to allow technology to do the work that's necessary and we have to be able to compete in our freight railroad market and depens the outside world whether it's geographic competition or truck. what i would do differently is focus more attention on the changed management process. that's an area that i think my leadership team and i did not do a particularly stellar job at. and given an opportunity to do it again, i'd spend more time and energy on that. >> let me ask you about some future technology.
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seems scomma pie in the sky but i think captured a large bit of the imagination. what do you think about the hyper loop? is that realistic? mr. fritz: we pay attention to the hyper loop. we were invited to participate and chose not to at this point. hyper loop right now is defined around trying to move passengers. there is a context for trying to move freight but the context for moving freight is pretty small quantity and there's a will the of challenges there, right. big mass, accelerating rapidly and decelerating rapidly, there's a lot of physics to that and it's not real obvious to us that that's an immediate, direct, competitive threat. autonomy, platooning, just the application of technology to our relationships with customers, much more immediate, much more attention-grabbing right now. >> there is movement under way to build a magnetic levitation train from washington to walt
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and then eventually on to new york. realistic? nonrealistic? mr. fritz: that's for you all to decide here on the east coast. >> do you want one in texas? mr. fritz: i do not need one in texas. >> amtrak has had well publicized issues, especially with on time rates. that's always a persistent thing. how do you rate amtrak right now? where is that going? and if you can sort of give us any idea of how it looks as a partner under the trump administration versus previous years. mr. fritz: i'm going to do the unconscionable , my communication team is starting to cringe. i'll remove us from the context of amtrak and then talk about our relationship with amtrak. amtrak has a contract to run on us with authority, you will over our freight traffic and we take that seriously.
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that's a contract that we entered into knowingly. it's one we honor. and we're very proud of providing the best service level of long haul amtrak anywhere on any system. so we care about that. that service is on union pacific. having said that, we're not looking to run more amtrak trains. we don't make money in that marketplace and they have an outsized footprint on the railroad. i look at amtrak and i think, so long as the united states wants passenger rail to exist and long haul passenger rail to exist the united states needs to figure out how to fund it adequately and reliably we feel don't do that now. amtrak begs if their subsidy every year and it's going up and down and that's a bad place to be. so i would advocate that if we as a country think we want long haul passenger rail service and want the northeast corridor and you want state-sponsored service on amtrak, figure out reliable
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funding mechanisms, put them in place and make it happen. >> one of the best success stories probably i think unquestionably the best amtrak success story is the northeast region, the northeast regional, etc. there's talk about doing a little bit more like that in your footprint, you know, ouston, dallas, etc. do you see anything like that in the immediate future? is that realistic? would the marketplace support that? or is everyone weded to southwest? mr. fritz: one of those has occurred on us. we run a line between chicago and st. louis. we had a long-term agreement with the state of illinois that under certain circumstances we would increase or at least host passenger service on that line. that's happened. and it is a higher speed rail line. it's built out to be, i want to say, 120 miles per hour on certain segments. and it's hosted by amtrak and they're making significant
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capital investment along with the state and the federal government. and so we're already a for days pant in that. now i'm going to tell you, i don't think that ridership is going to explode on that service and it's going to replace the air service between chicago and st. louis. >> all right. well, we are coming to the end. i did promise to be prompt. and i would like to respect everyone's time on that. i know you all are used to promptness. so i would like to, right before we close up, we do have one last question, it's a tradition, i'll get to that in a moment. but before that let me make some announcements while i have you all hire as a captive audience. future national press club events with major speakers, july 16, luncheon with mlb commissioner rob manfred, you can ask him about the all-star game. july 18, luncheon with anthony
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fauci, director of niaid, and august 13, a book event with sean spicer, i think that will be very well attended. just as the anthony scare moochie one was earlier this year. i'd like to, i'd also like to present you, this is a big deal, with the national press club mug. it's a tradition we do for speakers. [applause] and i can confidently say it fits well within any possible gift limits. , as nal question to you is many people in this country, their familiarity with freight rail started at a very, very young age. do you see yourself more as a homas or a topham hat? mr. fritz: i'm a thomas. i try hard, i'm a grinder.
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we'll take on any challenge as a team and succeed. e're thomases. >> lance fritz a very useful engine, thank you for being here at the national press club. mr. fritz: thank you. good job on the questions. [captions copyright national cable satellite corp. 2018] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit]
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>> c-span's "washington journal" live every day with news and policy issues that impact you. coming up saturday morning, we'll look at the ongoing trade disputes between the u.s., canada, china, and mexico.
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with daniel griswold of the mercada center and joshua meltser of the brookings institution. also the national review's obert verbruggen talks about redefining what disability means and looks at available programmers in community. c-span's "washington journal" lye beginning at 7:00 a.m. eastern on saturday morning. join the discussion. our next guest is a member of the judiciary committee for the house and also the republican conference vice chair. he is representative doug collins from georgia. good morning. from the takeaway, what did you walk away with from that hearing with peter strzok yesterday? aest: we walked away with better understanding of the concerns we have had. there is always concern of bias and text messages. frankie, they should raise concern both on republicans and democratic sides.


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