28.7.14

TOO OFTEN, RESTRUCTURING IS A ONE-WAY TRIP.

Last week, I quoted Trains's Fred Frailey. "Long term, pissing off your customers is not a viable business strategy."  And the long term is an aggregation of short term decisions.  The BNSF Railway is clogged with freight traffic, and subject to a higher level of regulatory supervision.  Disgruntled shippers are, wherever possible, routing Union Pacific.  Burlington management intends to purchase 500 locomotives and 5,000 freight cars to help alleviate the congestion.  Providing additional trackage takes longer.

For years, railroads, and other businesses, have used "downsizing" or "restructuring" or "re-engineering" as an excuse to shed physical and human capital.  Such decisions, though, are not so easily reversed.  The approach might make sense in a shrinking industry, but it can leave that industry in poor shape to deal with expansion.  (And Union Pacific have their own history of strategic errors).

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