All right. We're gonna go ahead and get started with the next presentation. It's a pleasure for us to have Union Pacific here. I, you know, I don't think that they really need an introduction, but, you know, we'll mention their names nonetheless. So, Jim Vena, Jennifer Hamann, and Eric Gehringer. So we have, you know, the CEO, CFO, and Head of Operations. I think they have a couple slides that they're gonna provide and some initial comments, and then we will jump into the fireside chat. Just as I've mentioned before, if you have any questions along the way, we're happy to take those questions if you raise your hand and there's a mic. Also can send in with the QR code, send in something to me on the iPad. But, Jim, Jennifer, Eric, thanks so much for joining us. Let me hand it to you.
Great. So, listen, five slides. Let's pound through them real quick looking forward, Tom, this morning and a beautiful morning here in Florida. It's a little nicer weather than what we have back home in Omaha. But you only invited me for one day. Otherwise, I'd stay a few days down here.
No, you're welcome to stay however long you want.
My assistant, for some reason, filled my schedule up somewhere else, but I'm really good. Listen, the reason I have Eric with me, I think everybody knows Jennifer real well. Eric leads our operations. He and the team have done a fantastic job. They're a key part of who we are and what we're doing. I think it's time for him to get a little more exposure. People get to know him a little bit better, and that's why he's here. And away we go, and then you'll see him present some of the slides. At the end of the day, anything we say for people that aren't in the room or people that haven't seen it is available on our website. Please go there and take a look at it.
We're very proud of what we've been able to accomplish this year, how we've been able to handle the traffic changes, the flow changes, and the surprise that we've had. So at the end of the day, I think we're in a good place at Union Pacific. We like where we are. And this last slide, I'll come back and talk a little bit about it. So why don't I pass it over to Eric, and Eric take us through you and Jennifer over the next few slides, please.
Thanks, Jim. And good morning. So we've been very consistent throughout the entire year that service is what we sold our customers, and operational excellence is how we deliver that service. What you see here is a good summary of the primary metrics that reinforce the progress that we've made this year, which has been truly exceptional performance. You look at the top right, Freight Car Dwell, you can see every single quarter improvements. That's driven by two primary things. First, it's process improvement. At UP, we talk about the fundamentals, focusing on the fundamentals, boots on the ground, being in the terminals, all the way from our frontline leaders to me looking for those opportunities. And, you know, if we were talking six years ago, we would've been looking for opportunities that are worth five hours of dwell. Now we're focused on minutes.
When we think about even time between cut on the top of humps, if today it takes us 42 minutes in Englewood, how do we make that 36 minutes? That's the work of the hundreds of frontline leaders every day to improve that, and they're getting those results. Freight Car Velocity, the biggest opportunity on Freight Car Velocity is the work that we've been able to capitalize on run-through dwell as an example. That's a measure of how long does it take for us to stop a train in a terminal, do a crew change, do a fuel and inspect, and get it going. 24% improvement year to date on that, and there's still more opportunities on that. You can also look at car touches. We talk a lot about car touches. Our job at Union Pacific is to get the car from origin to destination in the fastest possible way.
So we have different tools, different processes we employ where if a car would normally touch three terminals, how can we take one of those out? How can we bypass that terminal? We've taken out thousands of car touches this year, and I still see opportunities of thousands more in 2025 and beyond. Most importantly, I wanna point out that we've bucked the trends that other railroads have not. Typically, when railroads have more volume, which we've been able to deliver this year, you see the inverse relationship with their car velocity. Not at Union Pacific. As we've been able to grow the volume, we've been able to improve our car velocity. That's what operational excellence truly is. Workforce productivity, while doing everything I mentioned, we're delivering record workforce productivity. That's through automation, and it's also through as we think about terminal operations and other activities inside our terminals.
It's also on our engineering and mechanical teams, so I'm very proud of what the team's accomplished. They've done a hell of a job this year. Next slide, please. Now let's talk about investing for growth, specifically on the capital side. Anytime you talk about growth, you've gotta talk about the five critical resources, and we talk a lot inside Union Pacific about how we manage all five. Remember that that's mainline capacity, terminal capacity, locomotives, crews, and railcars. We're in a great position on all five, and yet, as you see here, we're making investments on mainline capacity and terminal capacity while maintaining our buffers on our locomotives, our crews, and our railcars. These investments take three forms. We'll start with the ones that are in green. These are mainline capacity investments. Within that, these are siding extensions, the construction of new sidings, or the installation of double track.
Some that are most important. You see in the Pacific Northwest quite a few green dots. Those are all siding extension and siding construction projects that support the business development wins that Kenny's already brought to the railroad and will continue to bring to the railroad, specifically in soda ash and export grain. The green dots in the Southwest, that's our Sunset and Nogales Lines. Those really focus on the intermodal side. Part of that is continuing to double track our Sunset Route, and on the Nogales Line, the one that runs north and south out of Tucson, you see two dots. Those are siding extension and a siding construction to support our continued growth out of Mexico. The yellows are our manifest terminals, and these are incredibly important.
As we think about the next three years and as Kenny sees the world and the business development wins that are in the pipeline, we're gonna make additional investments in our manifest terminals. Now, these investments have a lot of different forms: the construction of departure tracks, receiving tracks, the installation of Mobile NX, the extension of bowl tracks, and the list goes on and on. The bottom line is we're putting the resources where we need to put in our manifest terminals to support the growth, specifically down in that southeast portion in our Houston and Gulf Coast territory. And then the intermodal side. You know, if we were looking four years ago at this map, you'd probably see a few more blue dots. That's because over the last five years, we've added a million lifts of additional capacity in our intermodal network.
These investments focus on things like the construction of a new terminal in Kansas City and the completion of some expansions like our facility in Lathrop. And we'll talk a little bit more about the intermodal terminals here later on. Jennifer?
Okay. So when you look at driving growth, that is really the culmination of the work that we wanna do in terms of our strategy of being industry leading in safety, delivering on that service product that we sold to our customers, doing it in an operationally excellent manner. That's gonna deliver growth for us. And we go about pursuing growth across a number of different things. One thing is through an expansion of our service offerings. Eric was talking about the investments that we've made in intermodal from a physical footprint standpoint, but also we have done things to change the services that we're offering to our intermodal customers, understanding what their needs are in different lanes and then working to do that. Importantly, I'll just point out a couple. One is the removal of two days of transit from LA to Chicago.
That's a premium route for us. It goes across our Sunset Corridor, which is a great corridor for us that we have put tremendous investment in going from LA to Chicago, and taking out those two days of transit was critical to bringing new customers onto our railroad. We also wanna highlight the Falcon and Eagle Premium. Those are our services going into and out of Mexico where we've partnered with the FXE Railroad as well as the Canadian National, serving our customers end to end to make sure that we can provide them that growth product that we know that they're after in the marketplace. If you look over at extending our network reach, when you think about a railroad, we do have definitive endpoints, and so for us to be able to grow with our customers, we need to find ways to reach beyond that.
If you look at our portfolio today, about 40% of our business either originates or terminates on another railroad. So those partnerships, like I just mentioned with FXE and CN or with short lines, are critical to being able to serve our customers and meet their needs and give them that through transportation product. Another thing that we're doing, and we highlighted this actually at our investor day down in Dallas, is with industrial parks. So it's one thing to extend the network end to end. It's another thing to bring customers onto our railroad and attract them to put their facilities onto our network. Industrial parks are a great way to do that. Prime Pointe has been a great success story for us. And it's not the only one on our railroad. It's the one that we highlighted.
But if you look, we have 29 other what we call focus sites around the network that we're working to develop. One I'll highlight there is in San Antonio. We've engaged a third party to help us attract and put together a footprint where we can bring some new customers to our railroad. And San Antonio, I think it's the seventh fastest growing, or seventh largest city in the U.S. and, very fast growing. So meeting again those customer needs in those critical markets, we mentioned expanding SIT facilities. SIT stands for Storage in Transit . It's not a very, I'll call it sexy concept, but it's critical for our petrochemical customers to be able to fulfill that supply chain need that they have of being able to store their intermediate chemicals.
I could go on, but the key point there is, and it kind of ties back into what Eric just showed on his prior slide, we're willing to invest to do the things that our customers need from us to be able to meet their service needs and to help them support growth. Anything you wanna add, Eric?
You know, that investment also continues into our customer experience. When you think about customer experience for us, it has lots of different forms. Some of the investments are literally in the technologies that our customers use. But one of that I focus the most on is just car order fulfillment. This is a measure of when a customer requests a certain number of cars, what percent of those cars do we deliver. In the evolution over the last year that we've made, we used to accept 95% success rate. That was good. Now we're at 99%. We've sustained 99%. And it's because the experience for the customer cannot be, "I'm waiting on cars." The experience should be, "We already have cars there for them." Even if they get a volume surge, there's still buffer cars for them to use.
You can also see that in the investments we've made in their containers with GPS now, RailPulse. That's all focused on providing transparency to our customers so that within their own supply chains, they can make the best decisions. And the list really goes on and on. Doing a lot of great work in that area.
Oh, absolutely. If you wanna go to the next slide then. So you take all of that work that we're doing. You take the strategy that we implemented about a year and a half ago when Jim came on board, and you couple that with the UP franchise. We very much think that those things are a combination that really come together to be very successful for us going forward, and we believe we're already seeing some good early proof statements of the success of that strategy. In the third quarter, we had about 6% volume growth, and that was against a headwind of two points from coal. Right now, quarter to date in the fourth quarter, our volumes are up about 4%. Coal continues, unfortunately, to be a headwind of about three points.
So we are overcoming some of those challenges that we have in the secular marketplace relative to coal and driving growth with our customers through an excellent service product, through providing a good, safe service product, and doing it in an operationally excellent way. The other part of the top line story that's important is price. And we know that investors are very interested in the price part of the story. So we've got the volume growth layering on the price. And that's an opportunity that you have seen us be very consistent with over the past many years. We have consistently said and performed in terms of being able to yield price dollars that exceed our inflation dollars. But the story isn't over yet. In fact, when you look at the pie chart there, you see the mix of business that we have.
So on an annual basis, we can touch about half of our portfolio from an active pricing standpoint. The other half is in multi-year contracts. Since 2022, when inflation really started to pick up on us, we've repriced about 75% of those multi-year contracts. So there's still fully 25% of our multi-year contracts that we've not actively touched since you saw inflation really run up. And I think it's also important to point out that when you think about the part that we have repriced, I think we've learned a lot about what's happened with inflation over that time period. It's stickier than what I think we originally appreciated.
When you think about some of those early renewals in the 2022 timeframe, I believe there's still an opportunity to bring some of those contracts, I'll call it up to market, when you consider what's happened from an inflationary standpoint. We know that with the intermodal part of our business, which is a critical part where we've seen good growth and expect to see further growth, with the truck market being what it is and with some of the index-based contracts that we've entered into, that has been at a very depressed level. As the trucking market recovers, we expect additional opportunities on the price side there as well. Very good setup for us going forward on that top line and then obviously doing all we can to bring that to the bottom line through productivity.
Perfect. You know, there's a lot of talk always. When companies come out and talk about how they're doing, they like to put in a whole bunch of words. Yeah, the words are good, but like Jennifer said, we're not trying to be a sexy company. You know what we are trying to be? We're trying to be the best in the industry. This is metrics that we think show where we are so far. This is third quarter year to date, 2024. So numbers that we've announced and we've scoured the rest of the industry to see where we sit. I think operating revenue is real important, and we're number one, the most, including our partner, our big competitor in the west.
So I'm not gonna label which railroad is there to our right, but that's where we are. We think operating ratio is very important. It's a good indicator of how well you are dealing with the mix of traffic and how efficient you are on the railroad. And I love our improvement year to year, and I think there's more of an improvement. In fact, I don't think it. I know there is. I've been doing this for way too long to be guessing about what's gonna happen. So we're leading the industry in operating ratio, and we're leading it pretty good. And that's our goal. So operating income, very important for any investor and for us in the company. And you can see where we are. We're number one and substantially better than anybody else.
Net income that drives the bottom line, free cash flow in what we have for cash at the end of the day, a real good indicator. You can see in billions of dollars where we are against the industry. This is great. It's nice to have. It's a nice position to be. We said we wanna be the best in safety. We said we wanna have service that it's a very high level that does not impact us when we look for pricing dollars and how we move the traffic. I think we've got a great service product. We're delivering at a very high level. We showed it when we had a 30% increase in intermodal that we did not slow down, as that first slide showed that Eric had up and spoke.
And the final piece is, are we delivering operationally and financially for the owners of this company? And do we see that we can continue to improve and continue to deliver at a real high level? I think it's there. Our goal next year, and I don't see anything stopping us from delivering, is we said at our investor day we're gonna be high single-digit or low double-digit EPS growth. We're gonna continue to have a and improve our dividend. We look at it every year. We just announced, okay, that we increased it last quarter. And this quarter, we already announced what we're gonna do and maintain that number. So you put those two things together. I'll even start with the low, sorry, the high single-digit and dividend that's over 2%. I think it's 2.21% this morning. And we'll continue to see that stay up there.
I think you can take a look at what and who we are and how we're gonna improve. Let's just talk one little bit, Tom, 'cause this is real important. Listen, we're never happy. We're never comfortable. I've sort of tried to instill that in the company. I don't get up. The best way to win is when you're winning and you're worried that somebody wants to pass you. It's you have a different goal when you're last or you're the worst and you're trying to get up the ladder. What we wanna be is, is we wanna be the railroad that is first, and we wanna continue to stay first. And that's who we are. That's what we're here for. That's why I came back to work, and I love the team I have. I push them hard. They push. We have fun.
But at the end of the day, let's go deliver. So with that, Tom, maybe you don't have any questions after that great presentation. I mean, I will give you the time back.
I like the bar charts. That's a nice set of four charts there. Great. Thanks so much for those comments. It's great to have the three of you here. I assume Kenny's not here 'cause he's going out selling business, right? I know he wants to do that.
That's right.
So that's a good thing too. Quickly on 4Q, how do you think are, you know, your kind of markets and your volumes coming in roughly like you would think? Are there kind of, you know, you had some mixed headwinds with the surge in international? Maybe, how do we think about kind of the way volume and mix are coming in versus your expectations in 4Q? Any thoughts on that?
Yeah. I mean, I would say 4Q is coming in very, very much aligned with what we were expecting, when we talked back in October at our earnings day. We are still seeing very strong international intermodal volumes, up 20+%. So not quite at the 30+ % level that we saw in third quarter, but still, you know, quite strong. We also are starting to see domestic intermodal come back a little bit, in part driven by those volumes coming through the West Coast port. We're seeing more of that transload opportunity. Grain continues to be good for us. Grain products, two areas that have been good growth areas for us here in 2024. The petrochem markets, continuing to be strong. Continuing to see weakness, though, as I mentioned earlier, on the coal side of the world. Unfortunately, that hasn't abated.
In fact, I think fourth quarter's looking just a tad worse than third quarter was. Also continuing to see some pressure in some of those key industrial markets. Think about construction, think about metals, some of those areas, just not seeing the level of activity that we'd really like to see there.
Okay. So kind of puts and takes, but not much different in terms of overall.
No. Very, very close to what we were expecting coming in.
Good. Okay. It, you know, the metrics would indicate the network's running really well in 4Q. Is that, is it anything we should be aware of on the metrics, you know, on the kind of the way the network is running or the cost side or, you know?
It's okay.
Outdoor sports. It's okay?
Yeah. I'll answer the first piece. It's okay.
Eric? I thought Eric said it was running great.
That's the problem, Tom.
That's the challenge.
I don't want anybody to feel that it's great. It's okay.
Yeah. Okay.
But there's more there. And Eric,
It's the mindset of perpetual dissatisfaction. That's what we do at UP, right? We look and we say, "Even when things are running well, how can you find another level to go to?
The reason I say that, it's not because I'm a tough guy. I'm an easy guy. I'm a pussycat at work. You can ask everybody at work. But at the end of the day, the way I look at it is like this. There's more velocity. There's better terminal time. There's better car handlings. There's better car touches. There's better ways to use the network to be able to be the best and be able to move products from LA to Dallas and from LA to Chicago in a better manner. And our traffic changes a little bit, right? You get a slight change, more intermodal, less coal. And in some of those subproducts, the 100 different big products that we move, it affects the network.
So if you're ever, if you ever wake up as a railroader at Union Pacific as an operator and you ever tell me that, "Listen, we're at 100%. We're perfect," that's the day I take the company plane and I fly in to come and take a look at it to see what's left. And it's there. So that's what it's all about, Tom. Okay?
Opportunity to do better, right?
Absolutely.
Let's see. Okay. That, that's helpful. Appreciate that. How do you think about the, obviously kind of, you know, recent, you know, a couple weeks ago, we get the, election results and, and you get, a fair bit of news flow and, and, you know, commentary on tariffs and things like that. So I, I guess, how do you, how do you think about the, customer response so far? And is there some increase in enthusiasm for, you know, the, the you have a result from the election, that uncertainty's behind you. Now you can invest more, be more optimistic. Is, is that coming through somewhat, or, you know, how do you think about that as a component?
Then also a second piece would just be, you know, how do you think about tariffs and if there are, you know, significant tariffs on Mexico and Canada, is that a meaningful impact to you? So two different things.
There's a transition. Anytime you have a new president come in and a new administration, plus the changes that have happened, it happened, and it looks like we have a Republican small majority in both the House and the Senate.
Plus a Republican president. Now, absolutely, you need to pay attention to what you think that they're going to do. There's a lot of things that I've heard is; there's some things that would be very positive normally under a Republican-led administration, and there's some things that I've said that we'd say, "Listen, we need to deal with it." The question of tariffs, and a lot of people have asked me the question of tariffs. I just read a great article this morning of what the average tariff actually is today and what's sort of proposed. We think that with all the multitude of products and whether we can originate them in the U.S. instead of other places or other countries, that we think that we can go through that and handle that change.
We also think that, if the regulations are changed, so it makes us easier to implement some of the technology that we have that's ready to go to make us safer and make us more efficient with the change in regulation is a real positive for us and the industry. So it's really puts and takes, and it happens every time you have an administration change in the U.S. or, and we know that in two years it could change again as far as who has control of the House and who has control of the Senate. I don't lose a lot of sleep over that. We just have to be ready for everything that could happen. So we're looking forward to see how the administration, when they, in January, when the turnover happens and what the effect is at Union Pacific.
If it slows down, we have the capability to remove a lot of costs because they're variable. And that's real important for us to be able to deal with that. And that's how we're set up, and I like where we are. But also, I think if there's opportunity because corporate taxes changes or depreciation changes or how we can capitalize, then it's an opportunity for us to be in the right place. I love where we are, and I'm not real worried about anything. I've seen this for too long. I've been railroading for 47 years, and if I haven't seen this game before, I'm telling you, it's been there before, and there's no reason for this company. Maybe other companies might wanna worry about it. But for us, I like where we are. We're gonna get through anything that's thrown at us.
That's the result of the slide that is still up there. We want, at the end of the day, find a way to be the best in the industry.
If you, if you build a plant in Monterrey or San Luis Potosí or wherever you do in, you know, in Mexico, it's not like you can easily move that. So one framework could be that, okay, there can be some additional friction, but the customer response could easily be that, okay, you know, that's kind of a cost, but I can't, you know, change where the plant is based on that. So ultimately, there's some risk, but more likely not to be a big impact. Do you think that's reasonable, or is it just like, hey, it's hard to take a, you know, much of a view right now and we just see what happens?
Listen, if the level of sometimes the numbers that are thrown out against where the average amount of tariffs coming in, China's a little higher if you look at it, over 10% overall if you put all the products in the mix. The rest of the countries that bring products into the U.S. are less than 10%. So if it goes to 10%, less of an impact. If it truly goes 100%, like the president said, "Listen, we're all gonna be affected," and things all have to happen quicker, and whether the people that are producing things in other countries can do them and still wanna be able to sell and the consumer buys them. I think those numbers start to affect the U.S. economy way too much for people to end up there, and it's a negotiation.
But listen, I've seen all sorts of things with government. You know, we've been trying to get some regulations changed that allow us to be safer with our signal system and how we look at it or the track. And we've been waiting five years for an answer. So I'm hoping that we get some of those regulations changed this time with new administration and new people leading the FRA and the STB.
So we actually had Patrick Fuchs here yesterday and Ian Jefferies as well. We had some, you know, we split a spot with those two. And, you know, we talked about some of the regulatory things. I think there is some optimism, certainly, that there can be a different approach with the new FRA leader and that, you know, maybe some of the technology that you have developed that can be used more aggressively. I think in particular on the maintenance side, right? So how should I think about what needs to change at FRA?
And if it does change, then is that you need fewer maintenance people to inspect track and cars, or what, what's the kind of, you know, flow of that or the impact if it plays out in a constructive way at, you know, FRA over a couple years?
You know, at the end of the day, the STB, we have the exact same goals. We wanna provide good service at the good price for our customers so that they win in the marketplace and we win and we can grow with them. That's what it's all about, so that's the same result that the STB wants, and that's what we want.
Sure.
Listen, you know, back in 2022, we did not do very well as an industry and at Union Pacific. We made some mistakes. Like, we were caught with how fast and what happened after COVID, the big V spike that came back. But at the end of the day, I think we've shown that we have the buffer and how we're handling it. With the FRA, same thing is we have technology that we could implement, and we have the same goal. We wanna be safer.
This is not a headcount discussion to say, "How do we remove 500 people?" It's, "We figured out a way to be able to inspect our track using the latest technology on locomotives, on cars, hi-rail." We've been able to figure out how to implement with the money that we put in into the signal system so we can remotely look that our system is working right and we don't have an issue. Would that mean some productivity gains? Absolutely. But that's not our key goal is to always look for ways to remove people out of the system.
Sure.
But will it? Absolutely. So I think we're aligned. I think there's some great the STB, the four members that are there right now are smart. They're on it. I'm sure they wish we moved faster sometimes, and I wish they moved faster.
Sure.
And the same thing at the FRA. And what I'm hoping is that we have the leadership at both those that say, "Listen, we wanna move faster. We wanna make the product better." 'Cause the way the railroads win is that we deliver a faster product, a safer product, and we affect our communities and we let our customers win. And we all have the same goal. So sorry for the long answer, but I think that's real important in the relationship with the FRA and the STB.
Sure. Actually, one of the things we heard yesterday in the discussion I mentioned was setting clear deadlines and then meeting those deadlines from the regulator. So it seemed pretty constructive commentary.
You bet. I saw, I heard what Patrick said, and I loved that when he said clearly at Rail Trends, and it sounds like he repeated it: "We expect the railroads to deliver in certain timelines, and the STB should do the same thing.
Yeah.
I'm like, "Listen, I think Patrick is on it, and the rest of the members are on that same page, and let's get going." 'Cause we've got a great industry.
Yeah.
We work together to win. We wanna move more products by train than truck.
Yeah.
Let us be efficient where we need to be efficient. Let us grow the business. Let us show that we can be real safe, which we are. And I'm telling you, it's a win-win for the country. We move things away from highways. We put more on trains. We're very efficient. I'm telling you, this keeps up, and I might wake up tomorrow morning being real happy, big smile on my face instead of looking at, "What dirt can I find on the railroad?"
Yeah.
'Cause it's not operating the way it should be, as Eric Gehringer could tell you about the text I sent him this morning.
Yeah. There you go. So how do we think about 2025? How do we think about, you know, you need to plan in advance from a T&E headcount perspective? Let's say it's a six-month, I don't know, I said a while ago, six to nine months in terms of, you know, kinda actually getting people into training, you know, from a conductor perspective and then getting them out on the system. So, you know, presumably, you already have, you know, new hires coming in to reflect a certain expectation for 2025. Are you optimistic? Are you, you know, hiring so that you can handle, you know, stronger volume growth for next year? Are you taking kind of a cautious approach that says, "Hey, we'll match attrition and we'll keep headcount flat"?
Or how do you think about the kinda planning for 2025? And then what kind of a baseline view or base case? I should say I know the multiple scenarios, but what do you think about for a base case view on 2025 and how you plan for that?
If the business stays flat, you can expect us even though we have to implement some of the items from the last contracts that we signed.
Yeah.
So we're carrying some more people than we normally would as a minimum.
Yeah.
I'm very comfortable that in 2025, if the business doesn't grow, which I think it will grow, but if it doesn't grow, 'cause I think that's the question you're asking, what do we do with headcount? I don't see us increasing headcount per volume for the amount of work that we have out there. So and that's real important for us is to make sure that the amount of people that we have, and you see it in our attrition and productivity. You know, if we went back a couple of slides, that productivity number is real important. We've been able to improve our productivity overall, and we expect to improve our productivity again next year. And that'll help us deliver that high single-digit EPS to low double-digit EPS. That's the way we look at it.
We'll react. Every month, Tom, this is not a six-month discussion. We look long-term.
Yeah.
But we know how long it takes us to hire.
Yeah.
And to put them as people to operate trains. And we also hire a lot of engineering people, a lot of mechanical people.
Yeah.
Everybody wants to talk about those locomotive engineers, and I used to be one, okay? That's because they're the highest paid. You know, all in, they're making about $180,000-$200,000 with benefits on the railroad, plus free tuition to get a college degree at Union Pacific, plus employee share participation plan, so that's a pretty good job, but there's a lot of other people that do their job every day that we need, and we've got it down pat. We look ahead. We look at where the business is. We always have a buffer that says we can handle the normal fluctuation that's gonna happen, and that way, we don't have to be perfect every month, and every month we decide what we're gonna do. It's complicated, but we've been doing it for a while, and I'm very comfortable.
Overall, flat business should mean a drop in headcount as we're moving ahead.
Do you think, like, are you still a little bit overstaffed today? I mean, you mentioned the union agreement and how that's a little bit of a constraint, but is there still some level of kind of overstaffing, if you will?
Well, in those variable locomotive engineer conductors and yard people that switch boxcars, we are because we have some contracts that with the way we have to work through on the time-off pieces that we've agreed to. But the rest of them, we have a little bit of buffer, but we're not sitting there carrying a whole bunch of extra people on the engineering department or on the mechanical side or at headquarters on the management side. And in fact, you've seen us drop our management headcount, and I think we'll continue to do that. We haven't hired management people since I've got there for 16 months, and I don't see us hiring for the next 16 months.
You know, we need to, and we're doing that because we want decisions to be made faster, much more of a company that's got less layers and a company that's ready to make a decision. If you make a mistake, let's not make the mistake again and move ahead 'cause I think that's a winning formula, so that's where we are with headcount.
How do you think about where the network's at, where the culture's at? You know, you, you were the Chief Operating Officer 2019, 2020, made big changes. You've been, what is it? I don't know, 15 months this time around, something like that, and so, you know, more pretty quick responsiveness. Is what, what's left to go, right? Like, there's a continuous improvement, so you're always gonna do better. But are there any areas that you say, "Oh, this is a little more, you know, a little bit of a bigger opportunity for the network to run better, for our asset utilization to be stronger"? You know, is, is any of that left, or is it just like continuous improvement?
Listen, if I've done my job properly when I showed up in January of 2019 and I led the operating department in the right way, which if you go back and take a look, stock price was at $136 January 7th when they announced me, and today where it is, our headcount is down substantially. The way the railroad operates and the operating metrics are substantially better. We're faster, less touchpoints. So yeah, I've, you know, that's where those were. Are we at the same place? Tom, that would've meant I didn't do my job. In fact, the board should be calling me after this discussion if they're listening in and say, "Vena, we need to fire you 'cause you didn't do a very good job.
You saved it all for when you came back as CEO." So it's much more of what's left, and I see that there's a lot left. We can, we can operate better. Now, is it a 30% improvement in productivity on the mechanical side? No. But do I see another 5%-10%? Absolutely. Engineering department the same way. The way we operate trains, you know, we're working hard to see how we can be more efficient with the number of cars. And you could see that year over year. We're high single-digit better on the number of cars we handle per employee when we're switching that nobody sees 'cause we don't put that number out.
Right.
But that's what's driving. When you look at our headcount, when you look at what we've been able to do year over year, that's what really counts. And on the culture, don't let me answer it. Why don't I let these two 'cause they've been pretty quiet after the first piece 'cause I've taken it all. So Jennifer, like, where's the culture?
Certainly, I think you alluded to it with the culture of wanting to improve and really, you know, trying to pursue what's possible. In the past, we used to talk about, "Well, this was our best ever," or, "This was our best month. This was our highest speed." We don't talk about that anymore. We talk about what could it be, what should it be, what does it need to be to be able to meet the needs of the customer. And so culturally, that's a very different conversation to have, and it moves you in a very different place when you're talking about the productivity initiatives that you're pursuing, when you're talking about the technology changes that you're pursuing. It's a very different conversation. And the speed at which you're trying to get to that is also much different.
There's greater sense of urgency in terms of for us to be able to deliver on the promises that we set forth at Investor Day and to deliver to the promises that we've made to our customers. We can't wait a month, two months, six months to act on something. We need to make that action today. And that's, you know, historically, in addition to the knock on the industry being that we don't improve when volume grows, it's that we're slow, that we're slow to react, that we're slow to change. And so that's another very big cultural change, that we're working through is we need to be much quicker, much easier for our customers to do business with so that they wanna come to us with their problems. They wanna come to us with their business.
Yeah.
So, Eric, why don't you talk? We just.
Yeah.
Had results about with the survey, employee survey, and some of the sort of indicators and that we're receiving from everybody. Where are we with that?
Yep. So we do an employee survey every single year. There's lots of metrics that we collect, but the ones that are most important to us are managerial effectiveness. Is the leader of that organization at the different levels within the company leading their teams well? And we got significant improvement from last year, which was improvement on top of the year before that. What that's telling us is that the message and the strategy that we've instilled is getting deep into the organization, and it's being applied. Now, there's no finish line to that. We have to continue to do that work. And largely, that work is reinforcing to our employees the value proposition that we as a company provide to them. And Jim mentioned a number of those examples earlier. And number two, that growth is everybody's job.
It's not the job of just marketing and sales. So this year, and we'll do it again next year, we've embarked on a How We Win Together where every single employee in Union Pacific goes through a four- to eight-hour class, depending on which craft they're in, where we do exactly this. Jim's message is the way we start it, and then we personalize it into this specific department that employee or group of employees works in. That's how we're pushing cultural change.
So we're actually at time, but I wanna ask, like, just one last quick one, Jim. Are you optimistic about growing volume next year? I mean, you've run the network well. You got a lot of initiatives. Hard to tell what markets do, but are you optimistic that you're gonna see some volume growth next year?
This year, we were able to grow our volume. I don't look at the subsections of our business and say, you know, we can't control this. Where's the lumber? Where's housing? Where's auto? Where's chemicals? Where's LPG? Where's the fuel? What the heck? Like, you could go crazy trying to manage all 100, but this is what I see for Union Pacific.
I see us growing our business. That's what Kenny's out there doing this morning and his entire team. We're gonna increase the amount of revenue we get in that business, okay? Mix might have an impact when you take a look at the whole quarter, but we've done a pretty real good job, and we expect to do the same thing in 2025 so that we see an improvement on the amount of revenue that we're making. If you look at it, so far this year, our revenue ex-fuel has been really good for the volume that we've had, okay, and the mix. That's a win, and it's there. Then fundamentally underneath, it's all about how efficient can we be?
How can we move the extra business in the most efficient manner so you don't increase cost dollar for dollar on what you're coming in? I'm very, very proud of the team and very (hopefully they don't hear this) very happy with what we're doing. And I think next year, we're gonna continue to show an increase in business and an increase in the value to our shareholders and how the company's operating. So Tom, that's where we are.
Excellent. Jim, Jennifer, Eric, thank you so much for joining us. Really appreciate it.
Listen, Tom, I appreciate the invitation. Thanks for having me and the hospitality and great questions, and looking forward to communicating as we move ahead and taking this great company forward and winning in the marketplace. Thank you.
Okay. Great. Thank you. Thanks for joining us.