Union Pacific Sees Stubborn Inflation, From Rails to Lawn Mowing
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Union Pacific Corp. is coping with inflation on everything from steel for tracks to cleaning its offices and sees no signs of relief soon.
“From service providers who do things for us as mundane as cutting our grass or providing janitorial services, to running our intermodal ramps: All of them are showing to us inflation pressure, and it doesn’t look like it’s temporary,” CEO Lance Fritz said.
While Union Pacific is protected to some degree because union wages are locked by multiyear contracts, costs for most materials and services are rising, Fritz said Sept. 9 in a video interview with Bloomberg News reporters and editors. The Omaha, Neb.-based railroad plans to increase prices to offset its own rising costs.
Inflation in the U.S. is expected to accelerate to 4.2% this year from 1.2% in 2020, according to economists surveyed by Bloomberg, amid a tight labor market and as the pandemic fuels purchases of consumer goods. Freight costs have increased because of supply chain disruptions and a shortage of truck drivers.
Congestion for cargo likely will continue well into next year, Fritz said, as COVID-19 continues to reduce the number of available truck drivers and warehouse workers. Union Pacific took the severe step of halting some international freight movements for a week in July, holding shipments in Los Angeles instead of moving them on to Chicago.
“I anticipate these issues are going to last all through this year and into next year, and the question is how deep into next year,” Fritz said. “We’ve got to get truck capacity back, and we’ve got to get process capacity back in the form of labor in distribution warehouses before that really returns to normal.”
Union Pacific ranks No. 11 on the Transport Topics Top 50 list of global carriers.
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