Perspective on Freight Rail & Transportation Challenges

Transcription

1 Perspective on Freight Rail & Transportation Challenges RILA Transportation & Infrastructure Committee Meeting Steve Branscum, Group Vice President Intermodal Sales & Marketing September 22,2009 All slides are copyright Burlington Northern Santa Fe Corporation and BNSF Railway Company. All Rights Reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system, without permission in writing from the copyright owner. The information on these slides is accurate as of the date of this presentation and BNSF assumes no duty to update the information for future developments.

2 Discussion Topics Economic Update Recession into Recovery BNSF Investments in Infrastructure Future Goods Movement and Rational Legislation 1

3 Economic Update Recession into Recovery 2

4 Housing Market High home inventories mean the slump continues Existing and New Home Sales vs. Existing and New Home Inventories Inventories (Months Supply) Home Sales (000) ,100 1, Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 New Home Inventories New Home Sales Source: U.S. Census Bureau & NAR, July 2009 and Standard & Poor s, July

5 Employment Employment is down 18 months in a row Nonfarm Payroll Employment Change from Prior Month (000) Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Source: IHS Global Insight, July 2009; U.S. Dept of Labor, August

6 The Job Market Payroll job cuts in July were 247K, pushing the jobless rate to 9.4% Unemployment Lines Cumulative job loss in selected recessions, as a percentage of total jobs Current Recession -5.1% Total Jobs Lost During This Recession 6.7 Million Jobs Lost in June 247,000 Unemployment Rate 9.4% Months of Job Losses Worst Unemployment Rate since 1983 Sources: National Bureau of Economic Research, Labor Department, August 4,

7 Consumer Spending High commodity, credit and gas prices squeezed spending power YOY % Growth 4% 3.3% 3.8% 3.6% 3.3% 3.1% 2.8% 2.7% 3% 2% 2.7% 3.1% 2.6% 2.5% 2.0% 1% 0.9% 0.6% 0% -1% -2% -3% -0.7% -1.8% -1.5% -1.8% 2005Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 Services Non-Durables Durables Source: IHS Global Insight, July 2009; Census Bureau, July

8 Consumer Spending Decline in consumer sector exceeds that of all post-war recessions Peak-to-Trough Declines* in U.S. Recessions Percent Change % -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Sources: IHS Global Insight, July

9 U.S. Economic Outlook Real GDP vs. Less Tech Manufacturing Output YOY % Growth 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% -14% Real GDP % -4.0% 2009F -2.8% -12.0% 2010F 1.5% 1.1% 2011F 3.1% 4.8% 2012F 3.8% 5.8% Less-Tech Mfg. 2008:Q1 2008:Q2 2008:Q3 2008:Q4 2009:Q1 2009:Q2 2009:Q3 2009:Q4 2010:Q1 2010:Q2 2010:Q3 2010:Q4 2011:Q1 2011:Q2 2011:Q3 2011:Q4 2012:Q1 2012:Q2 2012:Q3 2012:Q4 Source: IHS Global Insight, July,

10 The Demand Will Return Total Containers 2 0 Trailers US Rail Intermodal Traffic: (Millions of Units) Source: Annual State of Logistics Report, Council of Supply Chain Management Professionals 9

11 Supply Chain Challenges Challenge: Growth in Transportation Demand Solution: Increased Use of Rail Intermodal Higher Fuel Costs Environmental Regulation Highway Congestion Driver Shortage GROWTH Fuel Efficiency Environmental Stewardship Fewer Trucks on the Road Labor Productivity 10

12 BNSF Investments in Infrastructure 11

13 Largest Intermodal Network Coast-to-coast Access Vast market coverage Over 4 million containers and trailers a year Only western railway offering direct service to southeast BNSF Intermodal Network 12

14 Track Infrastructure Expansion P Total: $988M Lyle and Auburn Sidings $16M Hauser Fueling Facility $38M Tripletrack $212M Various Connection/Storage Tracks $71M Upgrade to CTC Signal System $57M +150 miles of Double Track $464M Abo Canyon $59M Upgrade to CTC Signal System Sidings $59M Other $12M 13

15 Facility Expansion P Total: $790M Seattle Facilities $43M St. Paul $4M Stockton Terminal $16M SCIG $14M San Bernardino $25M Logistics Park Kansas City $14M Chicago Terminals $268M LA-Area Facilities $130M Memphis Intermodal Facility $209M DFW Terminals $67M 14

16 TIGER Grants Create More Jobs Combined, these project would create thousands of jobs; enhance the economic development; and reduce congestion and emissions by shifting more goods movement to rail Reduce Highway Congestion Kansas City Intermodal Facility $50 million Environmental efficiency and productivity through wide span cranes and automated gate technology Stimulus for adjacent logistics development More than $233 million in state and local taxes over the next 20 years More than 13,000 jobs for Kansans Truck Efficiency Improvement Project, Los Angeles $27 million 50% improvement in facility productivity 50% reduction in emissions (CO2 and NOx) Saves $246 million in supply chain congestion costs: Improves dray truck productivity 580,000 fewer trucks per year on adjacent city streets Tower 55, Fort Worth TX $61 million Burlington Bridge, Iowa $25 million Air Emissions Efficiency and Productivity Infrastructure Investment 15

17 Highly Developed Corridors $30 Billion Invested Since 1997 Vital Link in the Global Supply Chain Highest capacity intermodal routes in North America Connecting 2/3 of the US geography with direct service BNSF Intermodal Network 16

18 Connecting Customers to Growing Markets Reaching over 179 M consumers with direct service Access to Fastest Growing Markets Serving 13 of the 19 fastest growing markets with direct access Reaching 100% of the consumer market with direct or connecting service BNSF Intermodal Network BNSF Intermodal Hubs 17

19 Access to America s Gateways Handling over 20M TEUs per year Port of Tacoma Port of Portland Port of Seattle Serving North America s Largest West Coast Ports Port of Oakland Port of LA Port of Long Beach Handling over 20M TEUs per year Houston Access to 1/3 of all North American Ports BNSF Intermodal Network 18

20 Connecting Advanced Logistics Parks 98% of the top 20 importers warehouses within 200mi S. Seattle Port of Seattle Industry Leading Seattle (SIG) Facilities Port of Tacoma Port of Portland Port of Oakland Spokane Portland Stockton Fresno San Bernardino LA Port Phoenix of LA Port of Long Beach Billings Albuquerque El Paso Denver Amarillo Omaha Alliance Dilworth St. Paul Kansas City Barbour s Cut Houston Cicero Corwith LPC Willow Springs St. Louis Memphis Birmingham Atlanta Developed the Logistics Park concept integrating truck, transload, intermodal and distribution 33 facilities nation-wide 12 M Lift capacity total Next-generation technology BNSF Intermodal Network BNSF Intermodal Hubs 19

21 70 New or Improved Intermodal Services This Year All service levels Premium Container, Expedited Container and Expedited Trailer 25 new intermodal services Enhanced goals on 45 different lanes Expedited Container Expedited Trailer Premium 20

22 Service Reliability On Time Performance surpasses 95% 100% BNSF Historic Service Trend 95% 90% 85% 80% 75% 70% YTD BNSF % On Time Estimated Door to Door % On Time July 21

23 Sustainable Service Designing higher capacity trains 20+ % Improvement in Train Capacity Longer Max Length More Productive Car Mix Positioned to handle endof-week demand peaks Better match of available capacity to cut-off time Multiplies impact of line capacity expansion 22

24 Capital Commitments $30B Invested in the last 12 years Capital Commitments with ROIC $ Millions : ROIC is restated to reflect the change in methodology for discounting operating leases. 23

25 Future Goods Movement and Rational Legislation 24

26 Growth and Challenges 2030 Growth Projections Population to grow to 364 million VMT to grow by 150 percent Freight rail to increase by 92 percent Challenges No national freight policy No Capacity growth Congestion- all modes Increasing fuel costs Lengthening supply chains Increased environmental requirements Source: Global Insight, AASHTO, FHWA 25

27 U.S. Supply Chain Competitive Advantage/Economic Engine Key to global competitiveness 10% of US GDP (China 22%) 8 million jobs involved in moving and handling freight The supply chain represents $1.4 trillion in goods and economic activity A 1% change in supply chain costs = $14 billion Source: Map - FHWA,

28 US Highway & Rail Networks: System Miles and Volumes Highway - VMT Highway - Lane-miles Rail - RTM Rail - Track-miles Source: National Rail Freight Infrastructure Capacity and Investment Study September 2007 and AAR 27

29 Freight Rail Works One BNSF intermodal train removes more than 280 longhaul trucks from our nation s highways Intermodal Indust. Products Grain Fuel Efficiency vs. Truck* 2.3x 4.3x 5.5x 11.5 million containers and trailers moved by rail reduces GHG emissions by 17.2 million metric tons vs. highway *Based on a 1,500 mile truck haul 28

30 To Accomplish 10%... We Need to Invest More in Rail Assessed long-term capacity needs of primary rail freight corridors Assumed no shift in modal tonnage shares among rail, truck and water beyond those projected by U.S. DOT Class 1 capital investments needed to meet 2035 volume demand $135 B $39 B Shortfall Productivity Growth $39 billion shortfall will occur without a stimulus to bring investments up sooner in their cycle Total Needed $26 B $70 B Sources of Capital Source: National Rail Freight Infrastructure Capacity and Investment Study September

31 Capacity Investment: Supporting Increased Market Share Target 30

32 Rational Regulatory Policy What is it? Provides: Certainty and stability Returns that justify reinvestment Reasonable process for both shipper and carrier Acknowledges: Network-nature of railroading: costs and operations Capital intensity Ongoing need to replace and expand infrastructure 31

33 Current Public Policy Debate Congressional efforts Antitrust legislation Regulatory oversight/legislative changes to STB Bottom Line: Policy must be analyzed with long-term view toward re-investable returns. 32

34 OneRail Coalition 33

35 Public Policy Options to Consider Rational regulation A national, multimodal vision for freight mobility Investment Tax Credit for freight rail expansion Stimulus funding 34

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