August 16, 2018

UP re-shuffles executive suite amid Fritz's call for better service reliability

COO leaves position and will retire Feb. 28; company re-aligns reporting structure; Chairman and CEO says railroad `must deliver a more consistent, reliable service'.

By DC Velocity Staff

Western railroad Union Pacific Corp. has announced a sweeping change to its executive ranks in an effort to, in the words of its chairman and CEO, "deliver a more consistent and reliable" service to its customers.

As part of the reshuffling, which was announced late yesterday, Cameron Scott, who had been the Omaha-based company's executive vice president and COO, has stepped away from his dual roles ahead of his scheduled Feb. 28 retirement. Scott will remain a vice president until then, UP said. Tom Lischer, who had headed UP's central dispatching organization, was named executive vice president, operations, effectively succeeding Scott in the COO role.

Kenny Rocker, who had run UP's industrial business, was named executive vice president, marketing and sales, and will oversee the company's agriculture, energy, industrial and premium service lines, as well as UP's Mexico business, which accounted for approximately 11 percent of the railroad's total 2017 volume. Kari Kirchhoefer, who among a number of past roles has run UP's Streamline intermodal marketing subsidiary, was named vice president, industrial. In her new role, Kirchhoefer will be responsible for customers in UP's broad industrial service lines, which consists of construction, lumber and paper products, metals and ores, specialized markets, minerals, industrial chemicals, plastics and soda ash.

In addition, the company's network planning and operations function will now report to Lynden Tennison, executive vice president and chief strategy officer. Network planning and operations had been part of UP's operating department and had reported to the COO position, the company said.

All of the changes are effective immediately, UP said.

In a strikingly candid public comment on the state of UP's operational performance, Lance Fritz, who also holds the president's position along with being its chairman and CEO, said the railroad "must deliver a more consistent and reliable service product for our customers, and we need to further engage employees" to go beyond the company's current metrics.

It is unusual for the head of a large company to take such a critical view of its current state of affairs, especially in a communique that mostly addressed changes in top personnel. However, two sources outside the company said Fritz's comments were justified. "UP is in total disarray right now," said one, noting that the company is not delivering the service reliability it is typically known for. The other source said that UP is having serious issues with its intermodal network, laying a good part of the blame on the company's overemphasis on cost at the expense of service.

Through last week, the average speed of UP's intermodal trains slowed by 2 miles per hour from the end of the third quarter of 2017, according to weekly performance metrics submitted to the Association of American Railroads (AAR) by all large railroads known as "Class I" except for CSX Corp. Over that same time period, UP's terminal dwell times, or the number of hours that a train sits in a terminal, was reduced by less than an hour, on average, across its 23-state system.

UP is the second Class I railroad to announce a major re-alignment in the past 10 days. On Aug. 7, Jacksonville-based CSX said it had created an east-west management structure to run its three main businesses, and had promoted four executives, including Amy Rice as vice president of intermodal.

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