Operator: Greetings, and welcome to Union Pacific's Q3 2026 Earnings Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded, and the slides for today's presentation are available on Union Pacific's website. It is now my pleasure to introduce your host, Mr. Jim Vena, Chief Executive Officer for Union Pacific. Thank you, Mr. Vena. You may begin.
Jim Vena: Thanks, Rob. Sorry, I am rather fast this morning. I am ready to go. I overstepped you, so hopefully I do not do that to everybody today. I hope I am. We are ready to go here. Why do we take a step back and think about where we are as a company and what we are doing. This morning, my wife, for whatever reason, got me up a little early. I had a little more time to look at the railroad real close. The first thing I look at is what is happening to the railroad weather-wise. Bottom line is, this is my favorite time of the year to railroad. Eric will tell you the same thing. Engineering programs are in a different place. The railroad is well set up.
Jim Vena: You do not have the extremes, too much of an extreme of weather, and it is a beautiful morning here in Omaha. Absolutely gorgeous. I will tell you, it is a great place to live and a wonderful spot. The railroad is good. Now, the range of temperature we have is from the low 30s to the high 80s, but that is who we are, and we have thousands of employees out there right now. Yesterday, we had 2.31 billion GTMs of product that we moved in this railroad and all the people out there, and I got to congratulate them on the quarter that we had. Very excited to share with all of you who we are, what we are doing, and one thing we are not changing is the key pillars that we have.
Jim Vena: Safety for us is the foundation, and Eric will take you through some of the detail. Where we are this year on an injury rate improvement from last year, where we are on the derailment rate, significant improvement from last year that continues all the work we have done, is very exciting as a foundation of everything that we do. Safety for us is more than just a number. It is about people going home exactly the same way as they showed up when they came to work, and it is the movement of the goods that we have for America. We are moving products across the Western states and pretty soon across the entire country. That just helps the economy and helps businesses move ahead. I love where we are safety, and I know Eric has got some more detail on that as we move ahead.
Jim Vena: Service, absolutely, I love where our service is we are delivering what we sold the customer and what we agreed to. Operational excellence, I see numbers in detail that I had a chance this morning to spend probably a half an hour, usually it is five minutes on, that show me that the number of cars that missed their plan, that we call 32-hour cars, is 15% lower with business up. The number of locomotives we have out there running and operating do not match the amount of business increase, meaning we have way less locomotives operating, so much more efficient with them. The way the cars are turning, the car velocity is exactly the same as it was last year at this time with increase in business to show the resiliency of our buffer and how we handle traffic.
Jim Vena: If I do not stop there, I might as well just tell everybody to keep quiet, and we will just go to question-and-answers. Let me, real quick, tell you who is here with me. Our Chief Financial Officer, of course, Jennifer is with me every quarter. Love having her here. She is next to me. Kenny Rocker, Executive Vice President of Marketing and Sales, always in the right spot, right there to my right. Across the table, Eric Gehringer, our Executive Vice President of Operations, and I cannot be prouder of what the team has done. If we can turn to slide 4 and quickly review.
Jim Vena: This morning, Union Pacific reported record financial results as net income totaled $2.1 billion, and our adjusted earnings per share grew 15% to $3.53. Union Pacific’s Q3 results demonstrate our ability to safely deliver the service we sold our customers while efficiently handling 6% volume growth. Higher fuel prices were a big cost driver, but when we take out the impact of fuel price and merger costs, our core operating ratio improved 110 basis points from last year. Now, I will let the team walk you through the results in more detail, and then I will come back to talk about the Q&A and maybe a quick wrap-up before we finish the call. Jennifer, all yours with some of the details on the financials, please.
Jennifer Hamann: All right. Thank you, Jim, and good morning, everyone. I will begin with our Q3 income statement on slide 6, where operating revenue of $7.2 billion increased 15% versus last year. Digging into the components of our growth further, freight revenue totaled $6.8 billion, up 15% on 6% volume growth. In addition, higher year-over-year fuel prices and the related fuel surcharge added 900 basis points to freight revenue. Although our quarterly pricing gains continue to exceed our inflation dollars, that contribution from price was masked by business mix, as nearly 75% of our quarterly volume growth was from Domestic Intermodal and International Intermodal traffic. Wrapping up the top line, other revenue increased 21% to $384 million, as higher Intermodal volume contributed to increases in both accessorial and subsidiary revenue.
Jennifer Hamann: Turning to expense, our appendix slides will provide more detail, as our total operating expense increased 15% to $4.3 billion, primarily from the higher diesel fuel prices. Compensation and benefits expense increased 4%, as cost per employee was up 5%, driven by higher wages, incentive compensation, and training costs. Offsetting some of that cost pressure was a 1% decrease in headcount against that 6% volume growth, enabling us to generate our ninth consecutive quarter of record workforce productivity. Fuel expense grew 69% on a 64% increase in average fuel price and 4% higher gross ton miles. Year-over-year, our price per gallon increased from $2.56 to $4.21, an added 140 basis points to our operating ratio. Purchase services and material expense increased 9% as a result of inflation, intermodal-related costs for our Loup subsidiary and the railroad, as well as cost to add surge locomotives to the active fleet.
Jennifer Hamann: These increases were partially offset by lower year-over-year merger costs. Equipment and other rents declined 3% versus 2025, as we more than offset the impact of volume growth with lower car hire and operating lease expense. Putting it all together, we had a record quarter with reported earnings per share of $3.49. Adjusted for merger costs, earnings per share totaled $3.53, and our operating ratio was 58.8%. Turning to cash returns in the balance sheet on slide 7, our record financial results translated into 18% growth in cash from operations to $8.3 billion. Free cash flow totaled $2.4 billion after we reinvested in our network and increased our Q3 dividend 3%, the 20th consecutive year providing our shareholders with an annual dividend raise. We finished the quarter holding $3.1 billion between cash and short-term investments, and with an adjusted debt-to-EBITDA ratio of 2.4x.
Jennifer Hamann: We will continue growing our cash reserves in anticipation of closing the Norfolk Southern merger in the H2 of 2027. Looking out to the remainder of 2026 on slide 8, we are affirming our outlook of reported EPS growth in the high single-digit range versus 2025's reported EPS of $11.98. As a quick reminder, that $11.98 included $0.30 from a Q4 land sale. We are also affirming our ability to continue improving our core operating ratio in 2026 and leading the industry. Our 2026 reported operating ratio remains challenged by higher fuel prices, as we are currently expecting prices to average around $4.85 per gallon in the Q4.
Jennifer Hamann: We are also updating our capital spend to $3.5 billion for 2026 as we invest for growth and pull ahead some of the capital work planned for 2027. Overall, we are delivering strong financial results in 2026 as we consistently execute on the three key levers for our railroad success, volume, pricing, and productivity. I will now turn it over to Kenny to provide an update on the markets.
Kenny Rocker: All right. Thank you, Jennifer, and good morning. We delivered a record revenue quarter with freight revenue increasing 15% to $6.8 billion. Excluding fuel surcharge, freight revenue grew 6% to a record $5.6 billion. That is the result of our team at Union Pacific winning in the marketplace, pricing to the value of our service product, and executing for our customers every single day. Moving to slide 10, let us talk about the key drivers. For each of our business groups, starting with our Bulk segment, revenue was up 10% compared to last year on flat volume. Grain and grain products was driven by strong export grain demand and continued growth in renewable fuels, ethanol, and feedstocks. These gains were partially offset by lower wheat shipments resulting from a softer harvest. Coal and renewables volume declined 3% as lower natural gas prices and elevated inventories weighed on demand.
Kenny Rocker: Moving to Industrial. Revenue was up 14% on 6% higher volume. Our strong service product and business development efforts led to record Industrial carloads and freight revenue excluding fuel. We saw growth in all of our major commodity segments. Metals and minerals growth was driven by our construction project wins located in Louisiana and Texas. We also benefited from sustained strength in our domestic steel production. Energy and specialized markets growth was driven by business development wins across petroleum, non-metallic minerals, government, and waste markets. Petroleum products benefited from refinery utilization that remained at near record levels. Premium revenue for the quarter increased 21% on a 9% increase in volume and set a record for freight revenue and freight revenue excluding fuel. Domestic Intermodal delivered its fifth consecutive record quarter in both volume and revenue.
Kenny Rocker: Our foundation of service, combined with strong business development and the deployment of buffer resources, enabled 13% volume growth. International Intermodal volumes improved 8% versus last year, driven by strong West Coast import volumes and business wins. In Automotive, business wins offset continued market softness. We saw strength in auto parts driven by growth with our current OEMs, as well as over-the-road conversions with parts suppliers. Looking ahead to slide 11. Grain and grain products is positioned for further growth, driven by strong export grain demand and our ongoing business development efforts. We are also seeing a positive impact from new facilities, including Bunge and 5V, both in Dalhart, Texas. Our industrial development pipeline in this market remains strong. In fact, I recently took part in the groundbreaking of CHS's new crush facility in Evansville, Wisconsin, which we will serve.
Kenny Rocker: We also see continued upside from renewable fuels and feedstocks supported by further policy certainty. In Coal, lower natural gas prices and elevated inventories will continue to be a challenge. Our pricing discipline and business wins are helping to offset some of the market-driven declines. Moving to Industrial. We are focused on winning new business and outperforming industrial production. In Metals, we expect continued strength from our construction projects and domestic steel production. In petrochemicals, we are excited to see the Golden Triangle Polymers plant in Texas continue their commissioning and start-up activities towards full operations. Concurrently, export demand for plastics is strong as customers respond to disruptions in global supply. Overall, we expect continued momentum supported by our strong service product and the investments we have made in the Gulf. And wrapping up with Premium.
Kenny Rocker: Domestic Intermodal is on track to deliver its third consecutive record volume year, supported by over-the-road conversions and our service product. International Intermodal has fully lapped last year's tariff volatility, and we expect volume to grow double digits in Q4. For automotive, we expect business wins to continue to offset market weakness. While we delivered a record Q3, our focus is to build upon that success. We remain committed to pricing to the value of our service product and capturing new opportunities across the network. With that, I will turn it over to Eric.
Eric Gehringer: Thank you, Kenny, and good morning. The team operated at a consistently high level, safely supporting 6% volume growth while providing strong service for our customers. By remaining agile and strategically deploying resources, we overcame weather-related and seasonal network challenges and improved network fluidity. Importantly, we continue to be disciplined and committed to personal injury and derailment prevention efforts as our employee safety and derailment rates both improved against our three-year rolling average. Moving to slide 13. The majority of our key operating metrics improved in Q4 2026, even as carload volume increased 6%, reinforcing the importance of maintaining surge resources and highlighting the resiliency of our network. Freight car velocity increased 1% to 228 miles per day, driven by a 2% improvement in terminal dwell.
Eric Gehringer: This marks our fourth straight quarter of terminal dwell below 20 hours, demonstrating our ability to run an efficient network while handling higher demand. We delivered the service we sold our customers. Intermodal Service Performance Index finished at 92% as Intermodal volume grew 11%. We responded quickly to capitalize on the improving freight market by unstacking containers and utilizing our buffer of resources. Manifest Service Performance Index finished at 93% against best ever industrial carloads. While these results reflect solid execution, we continue to see opportunities to perform even better. We know what is possible, which is why our service performance index is set to continually challenge the team by setting the threshold at our best monthly performance. Moving to slide 14. Operating discipline and consistent execution of the fundamentals drove another quarter of record workforce productivity, record train length, and record fuel consumption.
Eric Gehringer: Locomotive productivity of 140 gross ton miles per horsepower day was even with last year's record Q3. The active locomotive fleet increased 2% to handle 4% higher gross ton miles, demonstrating strong asset efficiency. Additionally, we continue to benefit from our ongoing locomotive modernization investments and fuel conservation initiatives as our fuel consumption rate decreased 2% and set a new quarterly record. Workforce productivity improved 5% as our active train engine and yard workforce increased 1% against 6% higher car loads. We remain diligent in our hiring approach, aligning resources with demand while delivering for our customers.
Eric Gehringer: Finally, we continue to safely increase train length, which improved 2% to nearly 10,000 feet. This remarkable progress is supported by technology improvements and mainline capacity infrastructure investments that enhance network efficiency. These results are a testament of our unwavering focus on safety, service, and operational excellence. The team is well-positioned to serve our customers and empowered to raise the bar in what is possible. With that, I will turn it back over to Jim.
Jim Vena: Thank you, Eric. Thanks everybody. Great presentation on who we are and what we are doing. Listen, before I tidy this up and get to the questions, which is the part I am looking forward to, is the real smart questions we are going to get this morning. I would like to talk about Jennifer, my favorite CFO and the person that has been by my side since I came back as CEO. I have known Jennifer, and I met her first in 2019, and then when she took over as CFO in 2020. She is grounded, tough, sweet, tough. Delivers, listens, and tough. I find that to be a perfect mix, and she has delivered for this company for many years. I have to thank her for extending her stay a year longer than when I came back to work.
Jim Vena: She was going to stay for a couple of years and then depart, and she has been with me for 3 years and will finish off early next year. I cannot be more pleased that she is going to go enjoy herself and do things with her and Kippy and enjoy life a little bit. I know she is going to miss me, and she is going to miss this railroad, and who knows? It is just October, so we will leave it at that. But Jennifer, thank you very much for everything you have done.
Jennifer Hamann: Thank you, Jim, for the very kind words.
Jim Vena: No, I speak truth. If you were awful, I would have just said, "Thank you very much. Away you go. Go enjoy yourself, and don't come. Watch the door as it hits you in the back."
Jennifer Hamann: I'd be gone by now, is what you're saying.
Jim Vena: Listen, Jennifer, in all seriousness, you've done a spectacular job for this company, seeing all the things that it's been through, and you've been very helpful on the merger and everything else we've done, so congratulations to you. I wouldn't mind, real quick, just before I get to the questions, summarize what you've heard and make sure that everybody's clear and provide a quick update on the merger with Norfolk Southern. Our Q3 results reflect the strength of our franchise and our ability to execute at a consistently high level. 6% volume growth and 110 basis points of core operating ratio improvement don't just happen. It's a result of a long-term execution of our strategy that has enabled record financials and reinforcing our position as industry leader.
Jim Vena: Year to date in 2026, we delivered reported EPS growth of 9%, exactly in line with our outlook of reported high single-digit growth. We are focused on what's possible, delivering at the highest level and winning even more business. As to the status of our merger with Norfolk Southern, the Surface Transportation Board published a procedural schedule. Based on the schedule, we should be reporting our first earnings as a merged company a year from now. We also have requested for the second time ex parte communications. That's lawyer talk.
Jim Vena: Jim Vena talk is we are more than willing to have open discussion with the STB for any information they need or if anybody at the STB or others want us to take through all the detail in those 8,000 pages, because there is a lot of benefits for the country, for our customers, for our employees, and for the movement of goods seamlessly at a faster rate that is in that 8,000 pages detail that we have given. We are hoping that they accept the ex parte and we are able to stop any of this, that we are trying to hold back any information.
Jim Vena: This is the second time we have done that, and it is real important to think that we have always been open and willing to talk about, and we can hardly wait to see the 18 November openness from anybody that wants to put comments in about who we are and what we have been doing with the merger. We are very confident the merger application and the information we have provided are the most extensive and transparent merger record ever submitted, and it demonstrates through fact and analysis that the best way to enhance the US supply chain is through the UPNS combination. Our merger, as I said before, but I love to repeat myself on this, will deliver substantial measurable benefits by strengthening the supply chain.
Jim Vena: It will lower transportation costs and provide faster, more seamless rail service options that enable our customers to compete and help keep goods affordable for American consumers. You can see it every day, even with the latest announcements from some of our competitors. They know they have to up their game and be better to be able to compete against this railroad when we get the merger approved. With that, Rob, let us go to question and answers. Thank you very much.
Operator: Thank you, Mr. Vena, and best wishes, Jennifer. Thank you. We will now be conducting our question-and-answer session. To ask a question at this time, you may press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We do remind you that due to the number of analysts joining us on the call today, we will be limiting everyone to 1 question to accommodate as many participants as possible. Thank you. Our first question is from the line of Chris Wetherbee with Wells Fargo. Please proceed with your question.
Jim Vena: Good morning, Chris.
Chris Wetherbee: Good morning, Jim. Congrats, Jennifer. I do not want to imply we are getting old, but I think you and I have been talking for a very long time, so well-deserved in your retirement. I wish you all the best. I wanted to start maybe big picture on the M&A side, Jim, just where you kind of left off. How do you think about the receptivity? I know in mid-November, we will get some commentary from all the folks who want to weigh in on the merger, and it will probably be incremental to some of the stuff we have heard already from some of the other railroads. You obviously were very successful getting an agreement with CN. How do you think about potentially staving off some of the other potential asks by further agreements?
Chris Wetherbee: I do not know if there is any receptivity that you are seeing out there from competitors or other folks in the industry. I just want to get a sense of how you are thinking about discussions that may be going on in the background with other folks in the industry.
Jim Vena: Yeah, Chris, listen, I appreciate the question. I cannot believe you and Jennifer think you might be old. I do not know. I woke up this morning, and I was ready to run over anybody that was in my way coming into the office, and I am a lot older than all of you guys, but that is okay. Let us get to the whole M&A. I think sometimes we have to make sure that we understand what it is that we are doing. This is an end-to-end attachment between the two companies that extend the possibility of how people want to move. This is not a big overlap.
Jim Vena: We knew we had to fix some of the areas, a very small piece, the St. Louis, Kansas City. With Canadian National, listen, we have a deal that should be announced, finalized completely right away with all the T's crossed and the I's dotted. Tracy Robinson and her team have done a spectacular job of protecting Canadian National, and we have done a good job of protecting Union Pacific, and that deal is just about done. I love it. Given that, really, there is not a lot of opportunity to say, what do we trade? Are we willing to trade benefits for the industry? Sure. There is not a lot of competitive benefit that we need to fix within the merger and what we are going to deliver.
Jim Vena: Listen, I have seen what people have asked for, the very first one without the detail, and hopefully nobody has their kids on this. I hate to tell people there is no Santa Claus, okay? It is not a freebie that you get to go in front of Santa Claus and wish for something that is going to happen on 25 December, okay, in the morning. Then you get it delivered down the chute, okay, the fireplace. Most places do not have real fireplaces anymore, so it is fake. What they are putting in, if their dream is off, it needs to be fact-based on what the impact is. It is pretty hard for anybody in this industry other than being selfish for themselves or trying to get something for free. This is going to be a long answer.
Jim Vena: Even some of the unions that are against us, that are part of the coalition, I would ask the unions that are in the coalition if they have asked their partners, the railroads, to guarantee a job for life for every employee like we have. The benefits of what we are doing is across the board for consumers, for the nation, for our employees. I do not think we are going to have a lot that we have to move. The STB was pretty clear when they approved the Canadian Pacific and Kansas City merger. They handed out no concessions to other railroads because there was no big overlap in movement. The pattern is set, and that is why I am looking forward to go through this process, Chris. Sorry for the long answer. Hopefully, I answered it.
Chris Wetherbee: Always appreciate the perspective, and best wishes, Jennifer. Take care.
Jennifer Hamann: Thanks, Chris.
Operator: Our next question is from the line of Jonathan Chappell with Evercore ISI. Please proceed with your question.
Jim Vena: Morning, Jonathan.
Operator: Jonathan, perhaps your line is on mute. Okay. Mr. Vena, it appears he may have lost his line. I will move on. Our next question will be from Ken Hoexter with Bank of America.
Ken Hoexter: Hey, great. Good morning. Jen, congrats. It has definitely been a long time since we met back in 2002, so thanks for all your help along the way, and best of luck in your next phase. I guess if I jump into, I guess, looking forward, right? Volumes are trending at double digits quarter to date. So it looks like you have accelerated a bit. Kenny, good job there. But maybe, Jen, dig into the outlook a bit for upper single-digit growth. You are raising your CapEx $200 million. You noted you used your surge resources. So if that growth sustains, maybe thoughts on investments or capital going forward, ability to beat the targets and sustain given your need to increase the investment and keep pace. And if you are using surge resources, do you have some left on the side if you continue to get this strong growth?
Jennifer Hamann: Yeah, Ken, thanks for the question, and thanks for the well wishes.
Jennifer Hamann: Yeah, we feel very confident that we have sufficient resources that we can deploy and continue to handle the growth seamlessly and continue to put up the great numbers, the record results that we have done so far. We are wanting to make sure we maintain that surge buffer. That is what I was referencing in the comments around purchase services. We have put more locomotives into service to handle the growth, still hitting record locomotive productivity. We want to maintain that buffer, because if we get another leg up on the growth, we want to be ready for it. Same with hiring. I think we have, call it 300-plus folks in training right now, because we want to make sure we have those crew resources available.
Jennifer Hamann: We are getting, to your point, great volume leverage, and that is what gives us confidence that we are going to be able to finish the year in a very strong manner, putting up high single-digit earnings per share growth. It has just been a great year. The thing that has been the variable that we were not anticipating coming into the year is the high fuel prices. Certainly, that has an impact on our results, weighs on our margins. The team is doing a great job in working with that when you think about our fuel conservation efforts and really the fact that rails are so much more fuel efficient than truck, that is actually enabling us to win even more business and bring it onto the railroad.
Jennifer Hamann: In terms of the capital, we look at capital over a multi-year period, and some projects you can accelerate, some projects stall a little bit depending on permitting and all the variables that go into it. We had an opportunity, and I will let Eric weigh in here, to pull some things forward, and certainly, we had the cash resources to do it, and it just made sense to do that this year.
Eric Gehringer: Yeah. When you think about kind of where we made those adjustments, Jennifer mentioned the locomotives. That is an important one. You know that we have been in multi-year contracts in our modernization overhaul of locomotives, and we saw some opportunity because of how well the railroad continues to operate to pull some of that forward. That is a down payment in the future growth that Kenny is bringing to the railroad. The others were some infrastructure-related opportunities that, again, because the railroad is running so well, we saw the opportunity to pull some of those projects ahead. I am just going to reiterate Jennifer’s point. When we said used, we did not say used up. We utilized some of our buffer of resources, of which we have many buffer resources still left across the board.
Jim Vena: I think you had 589 locomotive success this morning.
Eric Gehringer: That is correct.
Jim Vena: 289 stored, sitting there wondering what the heck you are going to do with them, and the other one is ready to go if we had bulk go up or AGRs or we had an issue. Again, I like where we are. It is pretty exciting right now. Good question, though. I love it.
Ken Hoexter: Appreciate it. Thank you.
Jim Vena: Thank you.
Operator: The next question is from the line of Scott Group with Wolfe Research. Please proceed with your question.
Jim Vena: Morning, Scott. How are you?
Scott Group: Hey, thanks. Good morning. I echo those comments to Jennifer. Jim, do the comments from Koster change your view at all of deal approval, what you need to do to get deal approval? Separately, Kenny, the yields ex fuel were flat, and I know there is mix, but I think there is an expectation that with better volume, rising trucking rates, that rail pricing is going to accelerate. Is that a reasonable expectation? When do you think we start to see that? Thank you.
Jim Vena: Yeah, listen. I think you were asking me about the one of the four STB members that put out the separate note after they accepted the application and moved it forward. Is that right? Is that what you were asking, Scott? Sorry.
Scott Group: Correct. Yes.
Jim Vena: Okay. Bottom line is if you take a look at what is in the application, there are benefits across the board in far of how we enhance competition, how we enhance the product for our customers, how we are going to be able to make it less expensive. If we are faster, if we remove touch points, every customer that uses our railroad that used to have to hand it off to somebody else is going to have a reduction in supply chain costs. It is automatic. It is basic business. We see that every day. We see that every day, even today, when we go hand off to a short line or hand off to somebody else versus the mileage and what we charge to be able to handle it on our own railroad. That is a given.
Jim Vena: I always take people's position, and I read it, and I said to myself, I wonder if he used AI to summarize the 8,000 pages and all the detail or what, but he is a smart guy. He has the position, and we are clear, and we would love to have the ex parte discussion with the board to take them through what the benefits are. It is up to them if they want to have that or not, but we are clear on what our case is, Scott. It is a benefit for this country. I do not know how many times I have to say it, and I am not trying to say it to make sure people hear me other than to say it is fact. Canada has two railroads that go across the entire nation.
Jim Vena: There is a reason for that, and they are not split up, even though some of them do not like it, one of them does not like us to have the same thing here. At the end of the day, it is a benefit, and we are able to provide a better product to our customers, and that is what it is all about, and that is why this is going to be approved. I am 99.999% sure that it is going to be approved. Kenny, you want to take the second half? You ready to go?
Kenny Rocker: Well, first of all, we do not want to lose sight of the fact that we had a record revenue year ex fuel for Union Pacific, and we have done that in not just one area, in a couple of places that you heard in my comment. It is a dynamic market. When we are going out there to price, every day we are competing against barge, we are competing against sourcing options, we are competing against truck. There is a lot of competition out there that we have to compete against, and Eric and the team have provided us an excellent service product, and that is what we stand on.
Kenny Rocker: We are going to price to what the market can support. We want our customers to win. We want to win too, but we want our customers to go out there and win with the excellent service product that we have. As the service product supports it, we are going to keep pricing to what the market can support.
Jim Vena: Thank you very much, Scott.
Operator: Thank you. Our next question is from the line of Jason Seidl with TD Cowen. Please proceed with your question.
Jim Vena: Morning.
Jason Seidl: Hey. Thank you, Op. Hey, good morning, Jim, and I will jump on the train for saying congratulations to Jennifer, and thanks for putting up with guys like me for the past almost 25 years. Wanted to talk a little bit about now that we are in the merits phase and we are coming up along the comments period. Jim, can you talk to maybe some of the ongoing discussions to get more people on the side of supporting the mergers, whether they be customers or some of the unions that may not be supporting right now? Is this something that is ongoing, and could we expect some more letters of support, or is this something that we are just going to have to wait for the comments and we are going to look forward from there?
Jim Vena: Well, I think it is important that we wait for the comments and see what everybody puts forward. Let us talk about the union piece because you raised it. Bottom line is, no one has given a guaranteed job for life for any employee, unionized employee in the railroad industry ever. Every employee. It is amazing, so what are we supposed to give? What else is there to give? We are going to grow the business so there is more employees that work because we are going to have a much more efficient railroad. The rail unions that understand that benefit signed up real quick. I do not need them to sign up because for me, it is more important on our employees.
Jim Vena: Sometimes I wonder whether the union at the highest level is worried about their employees or worry about the employees, they are our employees that are unionized, or they are worried about their union. The Teamsters, listen, trucking is real important to them, and it is truly amazing that we have them part of the against coalition with railroads that have not guaranteed jobs. In fact, some of them have been cutting people left and right over the last few months, and they still think that is a better model than being. So I do not know how you make a deal there. The merits will show that we have a great plan for our employees. We care about our employees, and we want them to win. That is where I am at with it. I do not see us making a deal with anybody.
Jim Vena: Now, if it gets reasonable, if people want to talk, I am good. On the customer side, we have over 500 customers that have written letters of support across this spectrum. We do not have very many, if any, just a little number of people that have actually gone into the STB and said, "We are against it." We have a lot of customers that we have met that say, "We want to go through and understand through the process." I am good with that. That is a smart move for some of them.
Jim Vena: We also just had, in the last 2 weeks, customers that are in the chemical industry that put a letter of support for us, and they are actually single origination with us in Texas because they see the benefit of that handoff of not happening when we close the deal with Norfolk Southern. Sorry for the long answer, but I think from the customer side, big support. From the union side, our employees understand it. We just finished a survey of our employees and the feedback is about as good as it has ever been because they understand what providing. Think about it.
Jim Vena: We hire an 18-year-old because that is who we like to hire to be one of our people in repairing locomotives on the track, operating locomotives, tech people, everything else, and we say to them, "You are unionized. You have been with us for 1 day. You have a job for life." The average pay at Union Pacific, all in with benefits, is $160,000. I am not sure about anybody else, but unless it is the rich cats that might be all on this call, there is a lot of benefit for that for everybody that works for Union Pacific. I am not ready to hurt that. Kenny, you got your hand up. Away you go. Kenny is excited. He wants to correct something I said, or what, Kenny?
Kenny Rocker: No. Hey, look, we had about 30 of our customers that are excited about the merger. They are going to be helping us with the integration process, and the feedback is that they are looking forward to this happening.
Jim Vena: Yeah, I forgot to thank Kenny. That is why I got Kenny and Eric and, Jennifer with me. I go on, and I forget. So I will try to shorten the answers because otherwise we are going to be here until lunchtime, okay? Away we go.
Jason Seidl: I appreciate it, Jim. Thank you.
Operator: The next question is in the line of Walter Spracklin with RBC Capital Markets. Please proceed with your question.
Walter Spracklin: Yeah, thank you so much. Good morning, everyone.
Jim Vena: Good morning.
Walter Spracklin: Yeah. Jennifer, echo as well. Congrats on the retirement. Wishing you all the best. Perhaps this is for Kenny. When we look at your Intermodal volumes, they have been very good. We are focused a little bit here on some of the items that both you and Jennifer have mentioned on truck to rail conversion opportunity. Can you bifurcate here between how that volume growth is coming in, whether you are seeing it mostly in general economic coming out of the freight recession type of driver? Is it business wins or is it that truck-to-rail conversion? Just if you could size it for us, in order of magnitude in those three buckets or if there is other buckets I am not mentioning here, but I would appreciate if you could give that kind of color.
Kenny Rocker: Well, this is great. I appreciate that question. I am getting excited that I get to trifurcate the volume growth. Just take a step back. Remember, this volume growth has happened before we saw the inflection and the acceleration of these diesel prices. I said it in my comments, it is our fifth quarter of record growth. Over the last couple of quarters, we have seen some things happen with the fuel. Yes, that has helped us go out and win some business. But before, like I mentioned, the service product is what has helped us go out and win that business five quarters ago. Lastly, you look at some of the investments that we made over the last couple three few years, they are paying off as we thought. Twin Cities, Phoenix, modernizing Kansas City, Inland Empire.
Kenny Rocker: Having that capacity to grow the product with a strong service product has helped. We talked a little bit about resources, Jim and I debate this all the time. What is the right buffer for our UP rail fleet? We have it. We are 100% on our mutual commitment program for customers on our rail box. But on the box car side, Eric, we are near 100% on car orders. You put it all together, it is all of it, but it starts with the foundation of a strong service product, the investments we have made in the network.
Jim Vena: Appreciate that. Boy, you keep that up much, just tell everybody what our strategy is completely, Kenny. Okay, just like thanks, Walter.
Kenny Rocker: You bet.
Operator: The next question is from the line of David Vernon with Bernstein. Please proceed with your question.
Jim Vena: Morning, David.
David Vernon: Hey, good morning, guys. Thanks for taking the question, and Jennifer, congratulations and best of luck on the next chapter here. Kenny, I wonder if you could help us understand what is going on with the Intermodal business in terms of profitability. It looks like the RPUs came in maybe a little bit lighter than we would have expected, just given what is happening in the truck market. I am not sure if that is mix on an underlying basis.
David Vernon: It also looks like accessorials are elevated, purchase services a little bit up. So if you could give us a sense for how the business is performing from a profitability standpoint and how you expect it to perform into 2027 as you get around to maybe the contracts resetting some of the index-based pricing, starting to respond to what we are seeing in the truck market, catch up on fuel, that kind of thing. Thank you.
Kenny Rocker: Yeah. Remember, David, we saw a transition in what is gone on with the truck rates and truck capacity really over, I will call it spring to summer, when much of the bid season was pretty much baked. Now, we are going to have an opportunity as we move forward here end of the year, first several months of 2027, to have a better opportunity with our service products that we have to support the inflection that occurred in the summer. Looking forward, you would expect a better position, a better environment for stronger pricing.
Jennifer Hamann: Yeah. David, just on your question or tying in the purchase services, I did reference Intermodal volumes. We have got our Loup subsidiary. As Intermodal volumes grow with them, we tend to see an increase in some of the drayage costs. That was part of it. You certainly, when you think about our Intermodal ramps, they are primarily operated by third-party contractors. As we are putting more volume through those ramps, you see some elevation there. I think it is also important to point out that on the other revenue line, you saw a 21% increase or growth year over year there. That really is Intermodal driven as well because that is the revenue that you are seeing come through on that subsidiary side, as well as some of the accessorials associated with our containers.
Jennifer Hamann: One thing to recall for everybody is, that is what I think is a big differentiator for UP, is not only do we have strong relationships with asset-based IMCs, we also work with the non-asset guys because we have our own intermodal box fleet. That is what Kenny Rocker was referring to when he said we have got all the players on the field. That has been a big plus for us this year.
Jim Vena: Yeah. Listen, thank you very much. Good question.
Operator: The next question is in the line of Stephanie Moore with Jefferies. Please proceed with your question.
Jim Vena: Morning, Stephanie.
Stephanie Moore: Good morning. Thank you. Appreciate it. Maybe taking this into a different conversation. First, Jennifer, thank you very much for all the help and working with you over the years. I guess maybe starting out, investors I think are obviously splicing and dicing a lot of the freight data right now, and I think they are trying to form a broader view on the economy. You have obviously called out some pretty broad-based strengths across industrials, and I think maybe beyond data centers, what are you hearing from customers about demand through the rest of the year?
Stephanie Moore: On the other side of this, given what we have seen just as of late in the food and beverage side, maybe being a little bit softer, do you think that is idiosyncratic or do you think that maybe you are seeing something early on in terms of just the broader consumer? Any color on the volume environment would be great. Thank you.
Jim Vena: Stephanie, let me start and then pass it off to all three of you who want to comment. Bottom line is, it is nice that we see strength in the industrial market, and industrial for us goes across. Products that Americans use to build things, to move things, to tidy things up. Whether it is steel, you name it, is there, including our premium business. Our bulk business is pretty good, right? The movement of all that.
Jim Vena: All that, it goes across the section, and we have not seen or any indicator of the consumer slowing down, that the consumer spends. Are there parts of the economy that are probably based in the higher inflationary pressure? Absolutely there is. There is a big piece still that are spending money and going out and buying, and that is what we see. Kenny, you want to, or any of the rest of you get more detail?
Kenny Rocker: I just want to really more or less talk mindset and the results. We do not come in and say, "Hey, the economy is tracking at one way, and, oh, woe is we." We want to outperform the macroeconomic indicators. Industrial production up 1%, industrial team up 6%, automotive down 1%. You have seen the finished vehicles and parts up in the positive. Same thing with the housing starts. They have not been where we like them to be, but we are going to outperform the macroeconomic indicator. We want to pay attention to it, but our goal is to outperform it.
Jim Vena: Yeah. Great question. Thank you very much.
Operator: The next question is in the line of Jordan Alliger with Goldman Sachs. Please proceed with your question.
Jim Vena: Morning, Jordan.
Jordan Alliger: Yeah, morning. Hi. Just wanted to come back to fuel, in light of the energy volatility, maybe talk a little bit more about what you can do around fuel efficiency, ability to improve on that. Then, in light of the volatility, any impact on the Q3 drag. Can you maybe talk to how you're thinking about the Q4 and the fuel impact? Thanks.
Jim Vena: Let me make one point, then Eric and Jennifer or Kenny, but especially the two of you, get through this. Bottom line is this is the way we are. Railroads are much more efficient. It costs us way less per ton to move products across the US. So when fuel prices go up, it's naturally an advantage. What we need to do is show all those customers that are trying us now or deciding they're going to do this, that our service level is high enough that they should stay with us.
Jim Vena: Not all of them will, as they drop. But bottom line is, we see a time for us to show what a high level of service is, what consistency is in movement, and the cost structure can be better for them, and it's better at the end of the day for the final consumer. I like where we are, and we'll deal with fuel, with the fuel surcharge. We've got long-term programs that we go in and out with, and I think it's good and it's clear, and our customers understand where it is. Eric?
Eric Gehringer: Building on Jim's foundation. Then you start thinking about the specific initiatives we have. Now, we're a little bit different than other railroads. Where other railroads start by talking about initiatives, we start by talking about the fundamentals, because when you're trying to conserve fuel or generate productivity or generate capacity, it's not about initiatives first, it's about the fundamentals. So when you see us increase the fleet by 2%, but we're handling 4% higher GTMs in the quarter, that's us executing on the fundamentals. When you see us grow train length 2% to nearly 10,000 feet, that's us executing on the fundamentals. That also saves us fuel.
Eric Gehringer: Then on top of that, we have our technology portfolio, from our Energy Management System to our Precision Train Builder that dictates the use of locomotives and route, to even when we think about how we manage the locomotives inside the terminals. At 14-hour dwell, which was also a 2% improvement in the quarter versus same quarter previous year. We are doing all the things you would expect us to, Jordan, and then we wrap around that as one last layer our perpetual dissatisfaction with our performance, always challenging ourselves to look for what is the next thing, whether the next thing is new or doing more of the thing that is already making us successful. In the quarter, it netted out a 2% improvement in our fuel conservation. But we are not done.
Jim Vena: You are actually doing something out there. I appreciate that, okay?
Jennifer Hamann: Yeah.
Jim Vena: Listen, great results, and I love the detail on what we are doing specifically to. If you stay the same, you burn fuel at a certain level, even if your locomotive is more efficient with the money we are spending on them. But if you can operate the same amount of business with the same amount of locomotives and a larger train size, we end up winning less cost, lot more efficiency. Love the story.
Jennifer Hamann: Yeah.
Jim Vena: Well done, Eric.
Jennifer Hamann: Just the last point of your question there, Jordan, in terms of how do we see that impacting the Q4. So, you heard me say that we are looking at pricing right now in terms of fuel prices for the Q4 to be around $4.85 a gallon. That compares to $4.21 that we averaged in the Q3. So at this point, I would say we are probably going to see a little bit greater impact to Q4. And we said it had about 140 basis point drag to us in the Q3. So that is how I would look at it sitting here today. Obviously, if we see a change in fuel prices, we will update folks. But that is the current lay of that land.
Jim Vena: Listen, thank you very much for the question. Great question. Thank you.
Operator: The next question is from the line of Ari Rosa with Citi. Please proceed with your question.
Jim Vena: Ari, how are you this morning?
Ari Rosa: Hey, how are you, Jim? Good morning, and congrats to Jennifer. Echo everyone else in appreciating her contributions.
Jim Vena: Ari, can I stop you there? This congratulations for somebody retiring, I do not understand. It is much more pleasant work than to be retired. I thought if anybody should be congratulating Kenny, Eric, and Jim, that we are still going to work. This idea of congratulations to retirement, I have no idea. But go ahead, ask the question. I am good.
Ari Rosa: Well, Jim, I know you are signed up for many more years ahead, so it is good to hear. I am sure a lot of folks will be encouraged by that. Jim, just going back to the merger, I am curious what you say to customers who say, "Look, I understand the benefits, the efficiency benefits that come from not having to switch between railroads," but are concerned about the downstream merger effects and what happens with that wave of further consolidation that could follow. If that is the big concern that customers have, what do you say in response to that?
Jim Vena: I will tell you. I have sat down with a lot of customers. Top 50 customers, I have written them a letter specifically to their CEOs, ask me any question you want, and I will not get into the detail with everything. I have met, Kenny, I could probably pretty fairly say between you and me, hundreds of customers, and we talked through. Actually, once we go through the detail, they go, "Son of a gun. This sounds pretty good." They understand that every commodity that we move for them is competitive against another shipper, and it is driven by what the market is, or even they understand that it is competitive against the world. Whether it is soybeans going to Mexico, whether it is corn being exported, whether it is steel products. So when they see the efficiency that we can give, they understand it, and they see it.
Jim Vena: Now, let's talk about the next step. It's pretty straightforward. You can see what we're going through with the STB. It doesn't matter what people think. First of all, Berkshire, who actually is the company that owns the subsidiary, BNSF, has been pretty black and white that they don't want a merger. I don't know how they change. They've been spending a lot of money. I just got a seven-hour deposition with their lawyers. Talking about every freaking question in the world, and they say they're against it. So in my lifetime, if they're against it sure won't be with BNSF. It's going to be with somebody else. But let's say they get religion. They still have to go through the process and prove that they're going to improve. I'll be honest, I have no problem with them if they merged.
Jim Vena: If CSX and BNSF merged, I think the customers in the US would get a better product, and then you would win against the world. So that's where I'm at with it, Ari. And I tell you, when I go through that and I'm not nervous, and we give them the facts of what were in that application and what we're doing, I hate to tell you, most of them go, "Well, we'll still go through it, but we see the benefits of what." Kenny, maybe you can add something that I'm missing there.
Kenny Rocker: Yeah. I believe we do a good job of personalizing the discussion with the customers. You got some customers that, boy, they got 10,000 rail cars, and then you have that conversation about the fleet savings, and that matters to them. You have some customers that have to pay dray costs at the interchange, and you have a conversation with them, and they understand the benefits. You have other customers that want to compete, as you mentioned, globally, and have optionality, whether it's PNW, the Gulf, competing with barge. So I know the customers see the value that's there.
Jim Vena: Yeah, you bet. Good question, though, Ari. Appreciate it.
Operator: The next question is in the line of Brian Ossenbeck with JPMorgan. Please proceed with your question.
Jim Vena: Brian, how are you?
Brian Ossenbeck: Well, good morning, Jim. Morning, Jennifer. Jennifer, I will give you also congrats, but also I know you like talking about the quarterly. Wait for a second here, Jim. You like talking about the quarterly OR cadence, so I know you are going to miss that, so maybe you can walk us through that for Q4, some of the puts and takes, and it gave us a little bit on fuel.
Brian Ossenbeck: Jim, for all the other stakeholders that we have talked about here, one that we have not heard too much about, I do not really know your level of interaction, but it would just be the DOJ and maybe the DOT, but they are on a little bit of a different track, obviously different entities. There is a lot of history there, so we would love to hear any context you can provide with your interactions with them because their comments are due, I think, sometime in early December. Thank you.
Jim Vena: Yeah. Listen, Brian, you are a smart guy. You work for one of the biggest bank in the world, if not, for sure, pretty close. So you guys have a lot of history of how the regulatory environment works. Pretty simple. The STB is the regulatory agency that will review and decide how we move ahead. The DOJ has the right to put comments. In one sense, I would have liked the DOJ process because it would have been done already, okay? But we go through the STB process. So their comments are going to come forward. Have we had meetings with them?
Jim Vena: Yeah. They want to learn about the railroad industry and what we are doing, and when they put their comments on, which we have sat down with them, and we will continue to answer questions of anybody, Department of Transportation or DOJ, so that people can get facts. Because there is a lot of misfacts out there where people just do not understand what the true facts are. So at the end of it, that is what we have done. The rest, Jennifer?
Jennifer Hamann: Yeah. Brian, in terms of Q4 OR, so you heard my comments relative to fuel. Obviously, when you think about seasonality, you do tend to have some seasonal changes going with Q2 and Q3 where you tend to have your highest volumes of the year. That is where you tend to have your greatest ORs. We will likely see very strong growth here continuing on in Q4, just on an absolute basis, probably a little bit of a seasonal step back when you consider the holidays and everything that happens in Q4.
Jennifer Hamann: So you obviously need to take that into consideration. But I think the important point is on a core operating basis, you have seen us make year-over-year improvements to our core OR, and that is going to continue. We have a great line of sight to being able to continue to very efficiently move this volume growth, and that will enable us to continue to improve.
Jim Vena: You bet. Thank you very much, Brian.
Brian Ossenbeck: All right. Thanks, Jim. Thanks, Jennifer.
Operator: Next question is from the line of Tom Wadewitz with UBS. Please proceed with your question.
Jim Vena: Morning, Tom.
Tom Wadewitz: Yeah, good morning. Jennifer, I would just say thank you and wish you well. Pleasure interacting with you and benefiting from your insights over the years. Jim, I just got to say, I am a little more optimistic on Santa Claus than you are. A little more of a fan. But-
Jim Vena: Yeah, but you know who Santa Claus is, right? It is not real.
Tom Wadewitz: Yeah, I guess so. All right. Let's see. I understand with your-
Jim Vena: Sorry about that. Ask the question, I apologize.
Tom Wadewitz: No, I am trying to add a little humor. I think your position is pretty clear. Single line service is a strong benefit that is compelling driver for the merger, and you got some other elements in there. But let us say that there are potential elements of consideration for the constituencies, kind of labor shippers, railroads. How do you think short lining is a component of what you would want to do in the future?
Tom Wadewitz: Is that important to say, "Hey, there is some branch lines inefficient, and we would like to have flexibility"? Or is that something that is not really important? I am just thinking that is a point of potential negotiation. Then with respect to the CN deal, does that preclude you from giving access to another railroad on that St. Louis to Kansas City? Or is it like, if you wanted to do that, you really could?
Jim Vena: Well, we can do anything that we can control, Tom. But at the end of the day, the Canadian National deal fixes that issue of a little concentration and overlap on that piece. Listen, Canadian National is a very good railroad, goes across Canada, goes all the way to the Gulf, and is going to give a lot of opportunity for customers in there when they serve them to compete against us, and we are looking forward to that. So we are pretty comfortable with where we at, but we always are willing to listen. You said something about short lines, and it sort of sounded like you thought maybe we would short line more. No, we are not going to sell off pieces of our railroad, large pieces to anybody. Okay? In fact, I found that short lines are really good at some things.
Jim Vena: But listen, if you take a look at the way short lines work and what they do, we should be able to do that ourselves, and we do that every day on our railroad. So we are pretty good at dealing with customers. We are pretty good at growing the business and a lot of the business that is being given, and we see the short lines that we have attached to the Union Pacific and Norfolk Southern will grow because of the business that we are going to grow on the railroad. But listen, it is a bigger picture. If you step back, short lines in the United States of America do receive a lot of funding from the federal government per mile and tax breaks that put them in a different place in how they operate.
Jim Vena: But that is not enough for me to think, and if you think about it, they get $3,400 a mile for every railroad, and some of them are not small mom-and-pop railroads anymore. I think Genesee & Wyoming was bought out by a couple of foreign investment funds for $8.5 billion. So even though they own over 100 short lines, that is really not a short line. It is a big railroad, a big piece of business. So I am not into selling to somebody else our railroad, unless it allows us to grow more business and to be able to deliver a better product for our customers.
Jim Vena: I think Union Pacific, with where we are operational efficiency, where we are with assets, where we have invested in our railroad, most of the time, we want to keep everything internal and grow and be able to manage it ourselves, Tom. Hopefully I answered the question.
Tom Wadewitz: Yeah, maybe just another component. Any thoughts on, are there active discussions with the parties? Is there a phase when you might expect them to become more active with what you might offer, whether it is shippers, labor, other railroads?
Jim Vena: Listen, I am willing to talk to anybody, but at the end of the day, it has to be a good reason. It cannot be just because I want it. Okay? Let us go back to the Santa Claus piece. Right now, they put a piece of paper out that says what they want from Santa Claus. Santa Claus is not real, so we are going to look at it, but I have to wait to see what factually they can put in on the 18 November deadline to see if there is an issue there that we have missed.
Jim Vena: I do not think we have missed anything. But if there is, more than willing to talk. I will be honest, even though I have known some of the CEOs at the other railroads and some of the people below them for a long time, for some reason, they do not talk to me very often anymore right now. I do not know. I am still a nice guy, right, Jennifer?
Jennifer Hamann: Yes, very nice.
Jim Vena: They have got this coalition against making America better. They have a coalition that will not give the employees a guaranteed job for life. It is truly interesting, Tom. Truly interesting. I love where we are.
Tom Wadewitz: Okay, great. Thanks for the time, Jim.
Jim Vena: Thank you.
Operator: Our next question is from the line of Jonathan Chappell with Evercore ISI. Please proceed with your question.
Jonathan Chappell: Good morning.
Jim Vena: Morning, Jonathan.
Jonathan Chappell: Can you hear me?
Jim Vena: Hear you perfectly.
Jonathan Chappell: Hear me this time, Jim? All right, great. Sorry, I do not know what happened before, but I was doing some damage control with my two young kids, explaining to them about Mr. Vena just lying about that Santa thing.
Jim Vena: Oh, son of a gun, I apologize. Are you serious? I apologize if you had your kids.
Jonathan Chappell: No, I am not serious.
Jim Vena: Okay.
Jonathan Chappell: They are at school. They do believe, but they are at school, and that was all my fun. I have no idea what happened.
Jim Vena: Yeah, good. Do not let them hear me, okay?
Jonathan Chappell: I will not.
Jim Vena: I am worried about my grandkids, that my wife was listening, and I am going, after I said that, I said, "Holy cow, I could get myself in big trouble at home." That is not the place I want to be in trouble, okay? Go ahead.
Jonathan Chappell: No. I'm not going to let my nine-year-old read the transcript tonight like he typically does. Anyway, I don't know who wants to take this, maybe Eric, but 9 consecutive quarters of workforce productivity. You're investing more now with your capital envelope. Kenny talked about Intermodal, basically going from strength to strength. It seems like the West Coast ports are set up really well. At a certain point, do you reach a hurdle where wringing out more workforce productivity becomes more difficult as you shift to more top-line volume growth? Or is this just kind of an evergreen opportunity that may ebb and flow depending on where we are in the cycle?
Eric Gehringer: Yeah. Thank you for that question, Jonathan. I don't think it's either one of those. When you think about the way that we think about productivity, the driver behind why we focus on it is to ensure that we're putting Kenny and the team in the best possible position to compete in the market. No matter what the markets are giving us, no matter what the railroad's like, that's always going to be with us. There's always going to be a drive and a strong commitment to put Kenny and the team in the best possible position. Now, if you think then within that and you say, "Okay, now what do we think about workforce productivity as we look out?" I still see opportunities.
Eric Gehringer: Hell, before I came to this call, I had 2 phone calls this morning where we're talking about things that are related to workforce productivity. Even on a daily basis, we see opportunities, and then what you've seen us do, and you'll continue to see us do is, as I mentioned with Jordan's question, focusing on the fundamentals. That's perpetual. We'll never stop doing that. Then the technology side.
Jim Vena: I was going to say, technology, Eric, keep on going.
Eric Gehringer: The technology part. We talk a lot about it. We don't necessarily always talk a lot in detail. When you think about the technology side, it's first designed to improve the decision-making of our frontline leaders. We've talked about a lot of results here today. While all the four of us are part of it, the reality is the 29,000 people out in the field that are switching boxcars, fixing track, fixing cars, they're the ones that actually made the results happen. If you can give them, which we have, and you can continue to empower them to make even better decisions, you're going to drive workforce productivity that way.
Eric Gehringer: When you think of some of our work around semi-autonomous operations in our terminals, on our engineering gangs, inside our locomotive facilities, you're just adding layer and layer of success that we've delivered on, and I don't see an end to it.
Jim Vena: Yeah. Right on, Eric. Listen, great question.
Jonathan Chappell: All right. Thank you, Eric.
Jim Vena: Thank you very much. What time is NS supposed to start? 9:00? 8 minutes? Okay, lightning round. Let's go. Okay, we will be fast.
Operator: Next question is from the line of Richa Harnain with Deutsche Bank.
Jim Vena: Morning, how are you?
Richa Harnain: Hey, good morning. Jim, you can chuckle, but I have to tell Jennifer how we have been really impressed by the quality and consistency of Union Pacific's execution over the past few years. Jennifer, obviously, you played a major role in that success, so congratulations. I am sure you are proud of what you have helped build. So for my question, it is for Eric, and maybe just following up on that last question, actually. From a technology standpoint, are there capabilities, tools, or operating systems at NS that you do not have today, or vice versa, that make you particularly excited about the merger opportunity?
Richa Harnain: On a related note, and maybe more broadly for the team, for Kenny or Jim, what do you make of autonomous trucking as sort of a competitive offering to railroads? As that technology matures, do you see it as a meaningful competitive threat, or do you think investors are overestimating its impact to rail? I would love to hear what structural advantages rail retains that it cannot replicate. I am sure fuel efficiency is top of the list, but I would love to hear that from you. Thanks.
Jim Vena: Let me answer that last one real quick. I want to try to get off. I do not want to overlap with NS. Bottom line is, you always have to look at how you move forward, not backwards. Autonomous is going to happen. We need to be ready for it to be the most efficient railroad in North America, which we are today, and we will continue to find ways to be better. We will use technology every way to be able to move it ahead.
Jim Vena: That is the challenge, and it is exciting. It would be boring to get up in the morning and saying, "Well, guess what? We are railroading." I love it. We have a lot of plans on how we move this railroad forward to make it, and part of it is this merger that will help us be able to give much more seamless operation. Eric?
Eric Gehringer: Yeah.
Jim Vena: Real quick on the tech.
Eric Gehringer: I love the way that you framed that question because oftentimes the question we get asked is, what can UP bring to the NS? But you are right, there are things on the NS that we will look forward to bringing to the Union Pacific. We are talking about those because we can talk about integration. One example, just briefly, their wayside technology for the inspection of rolling stock, whether that is locomotives or rail cars, is really impressive. Yes.
Jim Vena: The technology behind it, the software, right?
Eric Gehringer: Absolutely. It identifies defects even better than our system. We are looking forward to taking the best of Union Pacific to NS and the best of NS and bringing it to Union Pacific.
Jim Vena: Thank you very much. Okay, next question.
Operator: Next question is from the line of, final question from the line of Brandon Oglenski with Barclays.
Brandon Oglenski: Thanks for getting me in here. Yep. Good morning, Jim and Jennifer. Condolences that you have to go drink margaritas now.
Jim Vena: No, Brandon, you can ask any question you want. Take your time.
Brandon Oglenski: Well, Jim, we will be a little critical here. I know you have a majority of the unions, but obviously the BLET here is against the merger. Maybe if you can speak to that. In the responsive request from a number of your competitors, they have called out this vertical competition issue that the STB could be incrementally concerned about with this merger, and obviously given the Koster comments as well, I guess, is there a medium ground on some of these responsive requests where you could see potentially more deals happening to get this across what could be really arbitrary issues approving competitive enhancement in the future? Thank you.
Jim Vena: Yeah. Listen, I would be remiss not to say, and I get it, I am aggressive against the side that says, "What are we going to give?" But there is always deals to be made. Let us listen, let us wait, because time is real important. If you are playing poker, you do not put everything down before you see the last card or the third card coming out. Bottom line is, I am waiting to see what they put in on 18 November that has to be factual, has to show what their concerns are and how we move ahead. Then at that point, we will reexamine. I think we have done a good job so far.
Jim Vena: I said it before, I was surprised at the comments that we got from one of the STB members, especially when we were the ones that said we would be open for discussion. It is what it is. That is part of the process, and that is why we applied again. With the unions, the BLET, let us get serious. People do not understand this. Again, there is a deal to be made, but every locomotive engineer that is covered under the BLET, the Brotherhood of Locomotive Engineers and Trainmen, actually gather and increase their seniority with SMART-TD, who is a proponent for this, who has accepted it and sees the benefit. If somebody from the BLET gets cut back and they cannot hold as an engineer, they become a conductor. Guess what? So they are all protected already. I have no idea what.
Jim Vena: I have already got a deal that covers every one of our locomotive engineers at both railroads, so I have no idea what the BLET is doing. They want to get something like job protection for life. I am not into that. I am not setting this company, so I am not going to do things that are going to hurt this company. I know I am going longer than I should. At the end of the day, if anybody thinks we are going to make a bad deal for Union Pacific, we are not.
Jim Vena: We will walk away from this. We are pretty strong, as we have just shown this quarter, and we will move ahead. But it is so good and compelling for the country that it is crazy for us not to push this to the final piece. Anybody else want to comment? But good question. Thank you very much.
Brandon Oglenski: Thank you.
Jim Vena: We have time for one more, or I think that's it, right?
Operator: Yeah.
Jim Vena: Thank you very much. Appreciate it. Listen, all I have to say is this, I am real proud of the team. I really am. Everybody, the management team, the unionized employees, everybody at Union Pacific, heck of a quarter. It is about who we are, what we want to do, and how we win and move ahead. I love our competitors getting better. I love our competitors getting more efficient because we make up such a small amount, as railroads, of the total products that are moved in the US, that we could all grow and win. We work together so many places together to win, and I think this merger has driven people to get merger discussion, has driven people to get better, and I love it.
Jim Vena: A little more competition, movement of products more by rail than by truck, decongesting highway systems, decongesting city roads. I am telling you, it is a win-win, and I love it, and we will talk to you all next quarter. Jennifer, in all seriousness, congratulations. Even though I do not understand retirement, but congratulations. Enjoy yourself and all the best, and thanks for everything you have done.
Jennifer Hamann: Oh, thank you very much.
Jim Vena: Thank you very much, everyone.
Operator: Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.
