Setting the Record Straight About Rates After the Merger

To Our Customers,

You've heard a lot of noise from the opposition lately, most of it is built on flat-out inaccurate claims about what Union Pacific will do with rates once this merger is approved. So let me set the record straight. We are going to compete hard for new truckload-to-rail business, and we are going to keep competing every single day for the volume you give us now. Our competitors are afraid to compete. We're not, and we say it plainly, right in the application. We're going after market share -- from other railroads, from trucks, from anyone who's gotten comfortable. We want to grow with you. And when we compete hard for your business, you win, because competition forces better rates and the marketplace has no choice but to respond.

However you choose to ship, you come out ahead.

1. We Are Building This Merger to Compete with Truck

Rail is still only 27% of total ton-miles in the U.S. freight market. Rail has never been able to fully compete and the reason is structural. Every interchange stops the freight, adds cost and hands 24 to 48 hours straight back to truck. That is embedded cost in your supply chain, and it is exactly where truck has been beating us.

This merger fixes that structural problem across the middle of the country. When freight runs longer distances between ramps and yards under one operating plan, transit time drops and cost comes out of the network. That is not theory. That is operating reality. Lower cost means competitive rates to win truckload freight that has stayed on the highway.

2. What This Means for our Customers Today

We appreciate every customer and every load we move, and we are going to keep getting better. Our relentless focus on executing our Safety, Service, and Operational Excellence Strategy is how Union Pacific runs every day, and it’s why our customers are seeing our best-ever service records.

Every customer on our network benefits from this combination, and most will benefit in more than one way.

• If you have volume moving by truck today, this merger opens lanes that could never compete with truck on price or transit time. We are unlocking more than 88,000 county-to-county lanes to single-line service, giving you competitive rail options that take cost out of your freight spend.
• If another railroad or a truck carrier holds your volume, they will sharpen their pricing to keep it. That is a competitive response, and it is real savings to you no matter who you ship with. This is why our opposition is so vocal. When Union Pacific gets more competitive, every other mode has to follow.
• If you own private cars, you will turn more freight with fewer cars. A faster network gets your assets back sooner. That is straight productivity. More loads per car, per year, on equipment you already own, and that productivity shows up as direct cost savings to you.

The Bottom Line: Customers will see benefits. Customers will see savings.

The merger pressures the entire freight market to deliver better pricing and better service. Other railroads will respond. Trucking will respond. That is how competition works, and that is exactly the outcome our customers should expect. More competitive rates win business away from truck and from other railroads, and competitive pressure drives down rates across the entire freight market.

Hold us accountable. Talk to your Union Pacific Sales team and ask what this merger does for your business. Call me. I want to talk to you, our customers, directly. My number is 402-544-3700. We will sit down with you and walk through your lanes. Our competitors are hoping you never make that call. We are hoping you do.

Sincerely,

Kenny Rocker
Executive Vice President, Marketing & Sales