Union Pacific Corporation (UNP) Earnings Call Transcript & Summary

Okay. Thanks very much for joining us here. We'll kick off our second session here of the day with Union Pacific. So again, I'm Brian Ossenbeck. I cover transports for JPMorgan. Very happy to have Jennifer Hamann, the CFO; Eric Gehringer, the EVP of Operations, here to keep things rolling. So Jennifer has got some slides she's going to go through with a few opening comments, so I'll turn it over to her. And then we'll jump into Q&A.

All right.

Thanks very much for being here.

No. Thank you, Brian. Thanks for the invitation. Thanks for all of you who are here with us in New York and those that are joining us online. We will be making some forward-looking statements today. Those statements are subject to risks and uncertainties, so please refer to the UP website and SEC filings for more information. I thought I'd start out today with what really is the foundation for UP, our franchise. We truly believe it's the best franchise in North America. It's the largest, 33,000 route miles across 23 states, giving us really broad access to diverse customers, diverse markets. And what we have been focused on as a company over, call it, the last 20 months or so since Jim came on board is unlocking the full potential of that franchise, and our methodology or our strategy for doing that is pretty simple. It's focusing on safety, service and operational excellence, really the fundamentals of railroading. And we believe if we do that right and do that excellently day in and day out, that's going to allow us to grow our business. And we look at 2024 as a proof statement for the success of that strategy, that it's the right strategy for us. We grew our volumes 3%. EPS was up 6%. We improved our operating ratio almost 2.5 points, improved ROIC. And we're leading the industry in both of those metrics, which that's a goal of ours. We believe we should be the industry leader. We want to be the industry leader in safety as well. We're still working on that. But again, that's kind of the backdrop from which we're looking at ourselves right now. And obviously, moving into 2025, we want to take that success from 2024 and build on that. So if you see the volumes there on the slide for 2024 first quarter, quarter-to-date we're up 8%. So strong growth to start the year. You see the variety and, again, the diversity of our business mix there, just looking at that, with bulk up 2%, our industrial segment flat and then premium up 15%. The story there really continues to be the same thing that we experienced in the second half of 2024, very strong growth on the international intermodal side. In fact, international intermodal volumes are up a little bit over 30% right now. So continuing some of the strength we saw last year. Obviously, question marks about how long that's going to continue. Is there some pull forward there? May very well be. We certainly know in the second half of the year, it's going to be a very tough comparison. Our volumes were up 30-plus percent in the second half of 2024. We don't expect that for 2025. Really, our goal is, with Eric and his team and Kenny and the great service product that they're providing, we want to try to retain some of that business. If you look further into intermodal, our domestic volumes are actually up here in the quarter. They're up about 6% right now. So I think that's attributable in part to the international intermodal, some of the transloading that's happening as well as some new business wins, which we'll talk about in a minute. And then the other part of premium, though, that I should mention is our automotive piece. Finished vehicles and parts are actually down about 7% to start the quarter. So you've seen some production callbacks. It's just been a little bit of an anemic start to the year on the auto side. And then going back to bulk, grain, grain products continues to be a growth engine for us, very strong pull-through there. And then I should highlight one thing that might surprise some people, coal. Our coal volume is actually up about 1% here in the quarter. And that's really about higher natural gas prices, making some of our plants a bit more competitive there. Last thing I'll say before I turn it over to Eric is just a reminder that 2024 was a leap year, so we do lose a day here in 2025 year-over-year, and it's worth about 25,000 carloads to us. So just a little reminder there. And with that, Eric, I'll turn it over to you to talk about the network.

Perfect. So you'll recall in our Q4 earnings, we talked about the momentum that we were carrying out of the fourth quarter that really had built all the way through 2024. I'm very pleased to tell you today that we have carried that momentum, and it shows in our results that you can see here. Most importantly, then, after safety is our freight car velocity. As a reminder, this is the best measure of fluidity on the railroad. 217 miles per day through February, 7% improvement. What that is allowing us to do is to support the growth that Jennifer mentioned, and it's also delivering exceptional service. You can see those in our manifest and intermodal SPIs. One thing I do want to point out about the SPI metric is, remember, we rebase that every single year. The math is pick the best month that you've ever accomplished in the last 3 years and compare yourself to that. So with every year as we get better, the goal actually becomes even more difficult. So it's an even stronger complement to the collective team at Union Pacific that we're operating at this level. If you then transition and you think through, okay, what's driving that freight car velocity? It's the bottom right, it's the 7% improvement in dwell, and let's level set on that. 2024 was the best full year performance in the history of Union Pacific for dwell. And you can see we've added 7% on top of that all the way through February. Why is that important? Number one, it's fundamentally how we deliver our service product, right, improve dwell, drives car velocity, car velocity provides the fluidity that we need. In addition, we're turning our customers' assets faster. That's what's allowing us to do 2 things for them: one, to be able to support the growth they have; and also to be conscious of the fact that they can be capital intensive like we are. And so the faster we turn those cars, the less they need to invest in their asset base. On the locomotive productivity side at 133 through February, 1% improvement. Now you look at that, the biggest most important thing about that is when Jennifer was talking about the volume increases we've seen on the international intermodal side, 30%, right? That one number right there tells you that as we think about being able to onboard volume, some of which even we didn't know ahead of time that we were going to onboard, we're being very judicious in how we think about assets on the railroad. That means that we're taking that roughly 500 at-the-ready locomotives that we've staged across the system, and we're injecting them as we need them. That can be for volume and it also can be for weather. Now weather has certainly visited us this year, and we've weathered it quite well, as measured by everything that you see on this chart. And then finally, on workforce productivity, off to just a super strong start at 9% improvement. As a reminder, this is a measure of workforce productivity that encompasses every employee at Union Pacific. One of the biggest drivers that is resulting there is our continued work on train length. As you'll see, as we close out the quarter, we've had a very strong start on train length, and I still see more opportunities for that. Now let's talk about what really is going to continue to drive our service product, continue to drive our productivity. This is really the epicenter, having this technology. I'm very proud of what we have as a collective portfolio across the board, and it's all departments. Today, obviously, we're going to focus on the ones that deliver service and deliver productivity. Adaptive transportation planning. We haven't talked very much publicly about this. We launched it last year. We're about 6 months into its development. The best way to think about this is kind of imagine whatever your favorite navigation app is on your phone like Waze. If you think about what you're doing on that, right, you're sitting here in New York, you're saying, "I want to go to Boston." You put it in. It calculates how long it's going to take you, and it gives you the route. But as you're driving to Boston, the world around you changes, right? It could be a car accident, it could be a storm, et cetera. And as a result, that app adjusts. Adaptive transportation planning is the exact same thing. Now we've always had a version of this. It's what's inside what we call CADx, which is how we dispatch the railroad. But in CADx, it looks at like 10- or 20-mile sections of the railroad. And inside that, it considers everything that's happening, how many trains do I have, which ones have most preference, which ones are going which way. But we don't have a tool yet that looks at the whole 33,000 miles and optimizes. That's what this is. We're already implementing it, and it's going to come in modules. So just like some of the other initiatives we've taken on in the past, you'll see us be able to continue to layer value over, over and over again with that. And what most important for us on the service side is whether you're talking about mix changes, storm events or some other type of variability event, we can now get the transportation plan changes we need in a matter of seconds and minutes. Instead of today, in some cases, it can take us multiple days to be able to adjust. So again, whether you're talking about service or productivity, it's a big driver there. Terminal Command Center is really a visualization tool combined with an optimization tool, and this is for our frontline leaders in our terminals. If you think about everything that happens on the railroad, whether you're talking about manifest, intermodal or auto ramps, it all starts in the terminals. What this tool allows our frontline leaders to do is to see with even better visibility what's in their yard from A to Z. And what I mean by that is it can look at every single track, how long have the cars been dwelling in there, how do I want to optimize the way that I actually bring in cars from the receiving to be able to switch them, which tracks do I want to pull first as I'm building out bound trains, and on and on it goes. It's a phenomenal tool. We're just starting to scratch the surface on its value proposition, but we expect that it's going to have a large value proposition for us. Train control and emerging tech is really about safety that as we work to become even more safe, we also become more consistent in our service product, and we become more productive. We believe that in our hearts, those 3 things are linked together. So what this is, is a very vast portfolio that focuses on things like how do we help people have to not walk as far and how do we handle material better and how do we handle trains better. Those are the 3 biggest risks on the railroad that's inherent to what we do. So you've seen us talk in the past about SwitchPro NX or we -- before we called it Mobile NX. This allows an operator in the terminal to be able to handle cars and takes their walking from 6 miles down to 1 mile. It also improves the dwell in those terminals by up to 20%. In the case of material handling, it's the automation of our engineering equipment that removes the need to physically have to handle things like ties and move to automated distribution. And then, of course, on the train handling side, it's our precision train builder that we talk about consistently, and we always are going to talk about it because it's the best tool. It's proprietary to Union Pacific. And it's, in large part, what's allowed us to reduce our derailments on the mainline, while we've still been able to grow train length. And then on the customer interface, this is a portfolio of initiatives that really focus on as the customer is engaging with the Union Pacific, even beyond our APIs, what do we need to be able to provide them and what frequency do we provide them and what manner do we need to provide it to them that's easiest for them to understand the things like where are their cars, their estimated arrival times, being able to handle if they have a claim of some sort, if they have a question, being able to handle in the most efficient fashion. So again, whether you're talking about safety, service or productivity, we have the best portfolio of technology initiatives, I believe, in the industry.

So, and with that, obviously, the strategy is to take those 3 fundamentals of railroading and translate them into growth. And so I'll wrap things up with a couple of growth stories for us, and the first 2 really are centered around that service product. And I think sometimes, it's maybe hard for people to conceptualize how does better service actually drive growth. I think these are 2 really good examples of that. The first one is with our ethanol business, where many of those customers -- most of those customers either own or lease their railcars. So to the extent that we can drive productivity, speed their cycle times, that's real savings for those customers. And so last year, we took about 1.5 days out of the cycle time for some of our ethanol customers that allowed us to win new business, gain market share. And it added about 9,000 carloads to the railroad in 2024. Similarly, we've talked about a new coal contract that we won here in 2025. Now that business doesn't start on us until April, but cycle time was part of what helped drive that business win as well. We have provided faster cycle times than did the competition, and that allowed us to pick up that business. That's going to add about a train a day to us from a coal perspective starting again here in April. And then the other 2 examples really get into business development, and we talked about this quite a bit at our Investor Day. We know that we need to work directly with our customers, addressing them at the project level to be able to bring new business onto the railroad. And so a couple of wins here. One is with Norfolk Crush. It's a soybean processing plant in Northeastern Nebraska. They made the decision to construct their plant on the UP rail lines in part because we worked with them to offer them both unit train service as well as manifest service, so that we could, again, meet the needs that they had. And it's a great opportunity for us because it gives us both an inbound load in terms of the soybeans as well as the outbound loads in terms of the processed oils. Again, that's about a 9,000 annual carload lift for us. And then the last one was with Uber Freight. So this is a direct off the truck onto a rail conversion, 6,000 trucks that we picked up here. And again, it's the service product that we're providing to the customers, the value that we're providing them, the consistency, Eric mentioned the SPI, and really proving on a consistent basis to our customers that we're able to be there with them and support their growth initiatives. And really, that's the endgame for us is with the execution of our strategy, using that to drive growth on the railroad, growth across a very efficient network can be a beautiful thing from a profitability standpoint. And it lets us drive strong returns for our shareholders. So with that, we'll open it up for your questions.

Okay. Great. That's a very helpful start in terms of growth in technology, both very important for the railroad going into the future. But just to start a little bit more. In the near term, obviously, weather wasn't that great in the first quarter. First quarter OR is never the best for anybody really throughout the year, for the most part. Can you give us a little more color, maybe you can put some specific thoughts on just how the first quarter is shaping up in particular?

Yes. So to your point about seasonality, it is a part of our business certainly. First quarter, you generally have less car loadings. You generally have the tougher operating conditions. And historically, I would say that shows up in, call it, 1.5 to 2 points sequential degradation in your operating ratio. This year, our carloads have been strong, are staying strong decently, up 8% year-to-date, so that's a positive. The mix continues to be on the unfavorable side of the ledger when you see that most of that growth is continuing to come from international intermodal. Although I think we did a nice job in the fourth quarter showing that, that can still be good profitable business for us. And hopefully, that helps to allay some of the investor concerns about the fact, can you both grow intermodal and improve your margins. And the answer to that is, yes, you can do both. So weather-wise, February was certainly tougher for us, but I don't think Eric would say that, that was unseasonably so.

No. I think you're exactly right.

Okay. Well, obviously, the other big topic is tariffs. So a couple of questions on that. How would you characterize conversations with shippers and customers at this point? And I guess, Eric, for you, in particular, have you seen any impact to the start and stop with the auto, in particular? And how do you, just in general, think about planning for some of the volatility and working through that with the network?

Yes. So I'll start and then turn it over to Eric. So in talking with our customers, I think everybody is in the same place a little bit in terms of there's uncertainty and they're unsure what's the next move that they need to make or that will potentially be made relative to tariffs and for our customers and for ourselves. It all comes back to what is the consumer going to do. Is the consumer going to stay engaged? Or is the consumer going to pull back? I was listening to some news this morning, and the small business consumer confidence hit, I think, a 4-month low in the most recent survey. So that's concerning. And obviously, that's something that we're watching very closely. We need to stay very aligned with our customers to understand what their plans are. But I think everyone's, I don't want to say, frozen, but people are unwilling to make big bets one way or the other right now in terms of they don't want to pull back because there isn't a tariff yet in many cases. Now Wednesday, I think some of that changes for steel and aluminum. But then, at the same time, people aren't willing to really step out and make big investments. And so that's the landscape that we're dealing with right now. And hopefully, we get some certainty here soon, so that then people can really start to make those investment choices and move forward.

And then as far as reacting to the uncertainty, that's a playbook we know quite well. When you're thinking about it, especially from a productivity perspective, the first place you're going to start as you get clarity towards what's the outcome is we start looking at our transportation plan. We start fundamentally redefining where are we going to run certain trains, how many of those are we going to run. And then that really starts to trickle down through the matrix of the rest of the organization, so that then goes into how many people do we need to hire. Already, this year, we have made some adjustments to our hiring plan. They've been small adjustments, but appropriate adjustments. Then we look at how many locomotives do we need to have in the active fleet, and we just keep working all the way through that. So our ability to respond to those types of things, we're very good at it. We've demonstrated that in the past.

So in terms of the commodities or maybe end markets that you're focused on from a potential impact of tariffs, which are the ones that are maybe the top 5 or 3 from your perspective? I think autos and lumber. Obviously, we saw the retaliatory tariffs last time that impacted export ag. So those are the top 3 in my mind. Are there any others that you would sort of put on that list as well?

No. You certainly hit my top 3, Brian. And automotive clearly is at the top of the list when you look at flows into and out of Mexico as well as into and out of Canada. Parts are going North, South. And finished vehicles primarily coming out of Mexico. So like I said, those volumes are down 7% to start the year. So it's a little bit of a weaker market anyway, setting tariffs aside. So certainly, if you put an added cost to that, that would be concerning for us. Again, lumber, housing has been down. So that's been a bit of an anemic market for us as well in '24 and starting out 2025. So if there's a further shock or further cost to that, that's going to be concerning. The retaliatory tariffs on grain southbound into Mexico would certainly be the other piece that comes to my mind. And then you have intermodal flows just North, South as well. So really watching all of those things, and that's where, again, staying close with our customers, understanding what their plans are, so that we can make adjustments and support them if they look to be changing their supply chains because if ultimately that's where this takes us, then we want to be working with them very closely. As they're looking to maybe put more operations in the United States, we want to make sure that they have an opportunity to do that, that Union Pacific can serve them.

One other potential big supply chain change could come about if they put in the fees for the vessels tied to China, either flagged or built or in the backlog. So from what I've heard, that would create a lot of potential grouping at larger ports, potentially big ones that you serve. So I don't know what you're hearing from your ocean carrier partners, the international folks from that perspective. And then, Eric, that would probably put some strain on the network. Clearly, you're up 30% international intermodal. You can handle a good amount, but just wanted to see how far along that thought process was and how you're viewing that potentially if it were to come to pass.

Yes. Again, you hit it on the head. I think it does lend preference then to the larger ports. And then that's where we really like the diversity of our franchise. We serve large ports and small ports. And so that may concentrate traffic a bit, but that's where the agility that Eric and his team demonstrated last year with responding to that very strong international intermodal growth and handling it, while improving our service product, I think, will certainly come into play again.

I think you're exactly right. And you also see we're making investments even in the L.A. Basin, right? So Inland Empire, we've been able to add another 70,000 lifts last year. We're going to add in even more than that this year. So -- and if you think about really the whole intermodal network in total over the last handful of years, we've added in almost 1 million lifts across our network. So we've been building in this capacity, and we'll be able to handle that volume. And periods where we start to see challenges, it usually comes down to, okay, how do I just simply shift some of the resources down to that part of the railroad to be able to handle it.

So we're starting to hear more about truckload conversion in general across the industry, but in particular for UP. And it's my perspective, that's been a pretty significant change in the last couple of years. What's causing that? I know there's internal focus probably as part of that new partners. Perhaps with Uber Freight, seems like another one. But maybe you can characterize what's driving some of that and where are these customers coming from. Are these people who trust the service? Are these new to rail? Is it a mix of all the above?

Yes. I would say it's a mix of all the above. So certainly, one of the first places that we're looking to grow our share is with existing customers because, generally speaking, our existing customers don't literally put all their eggs in one basket. They're going to ship with ourselves. They may ship with another railroad, even out of the same plant, or they may be dividing that traffic between rail and truck. And so some of our first conversations are, how can we shift more of that business to us. Talk to them and share with them the cost savings that we're hopefully driving for them, the improved service that Eric and his team are giving them and then talking to them about where those opportunities are. And certainly, when you're providing that really strong service product, that's a much easier conversation. And we're having customers that are being much more open. They're opening their transportation book to us and saying, "Okay, here's some different lanes. Let's talk about what you can do." And so those are obviously great conversations to have. The other piece certainly is then with newer customers. We did add a couple of large IMCs to our stable here a couple of years ago. We did that at a time that the truck market was starting to go down. So we believe we really haven't seen the full benefit to our network yet of those significant contract wins. So we're working very closely with those partners to help them grow their businesses on the intermodal side. And then just working -- you hear us talk about customer vision. You saw Eric talk about the different things that we're doing from a technology standpoint. All of those things are geared towards making it easier for customers to do business with us, giving them greater visibility to the traffic when it's on our lines. And then obviously, backing that up with a very strong service product. We know we can be a more economical, safer option for our customers. And as we're proving that day in and day out, we're gaining confidence in that consumer base, and they're giving us more business.

So Eric, when you're dealing with the big surge coming out of the West Coast in one particular product line, I guess, how do you think about network balance going back in the other direction? Is that a challenge now? Have you been able to handle it? Are you able to find different ways to do matchbacks and possibly exports? Because it does seem like this is going to be a good problem to have at least for the first half and maybe even further than that.

Yes. So Kenny and I work as our teams together because we believe this is a critical initiative for us. We've demonstrated progress certainly over the last many years. As you said, your matchback's biggest opportunity is always going to continue to be things like our G4 ag facility. But in addition to that, not a lot of people know this. For example, we ship a lot of hay West. So we have hay farmers in Arizona that we do matchbacks into the L.A. Basin as well. So Kenny and the team are constantly looking for any opportunity and every opportunity they can to be able to fill those containers on their westbound moves. And what's beautiful for operating it is we're going to take that box back anyways. So we don't have to make complex transportation plans to make that happen. So it's one of those wonderful scenarios where everybody wins. We're able to be consistent and reliable with it. The customer has the means to be able to send it back West. And of course, Kenny gets revenue and price as he does it.

So one thing we don't really talk too much about in these earnings calls, but the AR says it's $100 million a year problem would be cargo theft. So we hear that a lot more from shippers, and there's always been this sort of challenge, so maybe it's a little bit elevated relative to the past years. But has that come up in your conversations with BCOs and shippers? And is there anything in particular that you're doing differently to address that risk this year?

Well, it certainly has been coming up more with shippers, and I would say that dates back all the way to really COVID. To your point, we've seen it not necessarily go back to the levels that it was in COVID. We've done a lot of different things, especially over the last 2, 2.5 years. And this is an industry problem, not just a Union Pacific problem. So in no particular order, the first thing that you want to do is, obviously, you want to follow up in your partnerships with those entities that we operate in. So right out of the bat, we've been able to partner with some of our customers who've actually partnered with us in additional security efforts, largely boots on the ground, having special agents or the equivalent there. We've also partnered with the state and federal entity, and that partnership takes a couple of different forms. From a strategic perspective, it takes the form of task force that we, BN and others are part of. But then very more tactically, it involves having agents on the ground. So we've added in about 50 additional agents just to the L.A. Basin. In addition to that, we've also continued our infrastructure investment, largely in the form of additional fencing around our terminals and around those sections of our main lines, where we build trains. So it's tens of millions of dollars that we're investing just in the L.A. Basin on an annual basis. Now the partnership that's most new and that we're most optimistic about is if we look politically inside the L.A. Basin, we've seen a significant increase and the willingness to prosecute those that try to vandalize our trains or other trains. That is a critical step here, period. So doing a lot of different things. Our customers expect us to do those things, and we're partnering with them to make sure that we can ensure we have consistent reliable service.

So Jennifer, you mentioned one of our favorite topics, mix, earlier. Price mix, I think, was a little bit of a drag in the fourth quarter. It feels like maybe it will still be a little bit in the first quarter, but price is accretive to margin percent this year. So maybe you can give us a little more context in terms of how the force curve is tracking in that regard. And then maybe just the bigger cost profile as well. You probably have some pretty good visibility to where those are -- those bigger buckets are heading this year, in particular on the labor side.

Yes. So I'll start with the price versus inflation. So you're right. We have long talked about and delivered price dollars that are in excess of our inflation dollars. That's table stakes for us. As inflation really kicked up in the, call it, 2022, 2023 time frame, those price sellers, while still above the inflation dollars, weren't accretive to our margins. We changed that in the fourth quarter. And we have said going forward in 2025 and beyond, we expect our pricing to be accretive to our margins. So I think that's a very positive step -- positive statement forward. We know that has to be part of our overall profitability story. When we look at what's happening with inflation overall, it's still high historically. I think we said from a wage inflation standpoint, it's about 4% overall. Total inflation for us is about 3.5% this year. And when we talk about inflation, we do exclude fuel from that because we have the fuel surcharges that cover that separately. So think about that as all of our costs ex fuel. I would say we feel fairly confident that those are going to stay. Obviously, we're in the midst of labor negotiations right now. Having those talks, those are continuing. And we have separated ourselves from the national bargaining this year because we want to be very specific in working directly with our unions to make sure not only do we reach good wage and benefit packages with them, and we want to reward our employees. In fact, we're happy for Union Pacific's employees to be some of the highest paid in the rail industry, but we want to make sure that we also are able to work with them in a productive manner in a way that supports the service product that our customers need. And so it's important for us to be able to achieve some of that through this round of bargaining as well.

And just the pricing environment, in general, I think at least you guys have been a little more specific in terms of what percentage contracts are renewal from a longer-term perspective. So how is that going, considering you still have a fairly soft truck market? But obviously, the service product has improved for you guys pretty significantly and consistently. So is that helping a little bit on the negotiations in that regard?

Yes. A strong service product doesn't just bring new business to us. It also helps us support the value proposition that we're providing to our customers. And even going back to the ethanol example I used, where we're taking cycle time out, again, that's productivity savings for the customer. And so as part of us being able to provide them with that, then we're looking to share with some of that productivity savings in the form of a little bit higher price for ourselves. And those conversations have been productive, and we feel very confident in our ability to do that. Again, we want to make sure that we're providing that service product that we guaranteed them and that we brought them on to the railroad with. And by doing that, that supports our price efforts.

So maybe we can wrap up with a little bit more of the growth in investment viewpoint here. So some of the other rails are putting more dollars into the ground. Obviously, we've got industrial development pipeline. But in particular, looking at, BN has a few large projects out West. Is that something you feel like you need to bring to the market in a similar fashion? Are there other things you feel like are better solutions? You mentioned 1 million lifts over the last year. So can you really -- I guess, the question really is, can you still grow the way you want to and support the customers without making significant multibillion-dollar investments? How do you try to solve for that?

Yes. So I think, first of all, if there was the right investment opportunity, we would certainly make that to grow with our customers, and that's a conversation that we're having with them all the time. I think, right now, our pipeline is, call it, 200-or-so different projects that we think will bring about $1.5 billion worth of revenue on to the Union Pacific. Some of that involves a little bit of investment for UP. Some of that is more customer investment. But that's the pipeline that we have in front of us right now. The thing that I think is important to note is we are investing for growth. So of the $3.4 billion that we're investing this year that we invested last year, call it, $2 billion of that is for maintaining our infrastructure. But the other dollars, the other $1.4 billion is for locomotive modernizations that supports growth, it's for new freight cars, it's for technology investments, it's capacity, some of the intermodal capacity Eric talked about, it's siding extension. So all of those things are there to support growth. I think we're doing it at a very capital-efficient way, though, because we're looking at our network differently today than we used to. And instead of going out greenfield and building a new intermodal facility that might cost $0.5 billion to $1 billion, we're making investments in places like the Inland Empire, which was our West Colton switching facility. And we're transforming that over time, building it as we need it for the capacity to support the intermodal growth that's there. We've done that in the Twin Cities. We're doing that right now in Kansas City. We've got a pop-up ramp that we've put in Phoenix. So when you're doing it brownfield instead of greenfield, it's a much more capital-efficient way to do that. And I could say the same about our locomotive fleet. We have locomotives that we can bring back into service. You have to put some more money into that to refurbish the locomotive, but that's a much more capital-efficient way than having to go out and buy new. And so the investment dollars are there. It's supporting the customer growth, and I think you're seeing that in our results.

Okay. Well, we are out of time, but really appreciate you guys being here. And thanks very much for the update.

All right. Thanks, Brian.

All right. Take care.