Rail Shipments Point to Economic Recovery

During the recession in the early 2000s, U.S. freight railroads slashed spending and services. When business revived, they were roundly criticized for bottlenecks and delays. This time around, the railroads have continued to spend heavily, plowing more than $20 billion into capital improvements to widen tracks and tunnels, upgrade cars and engines and enhance their technology.

"Back in '03 and '04, we stumbled a bit. We really cut back too much, and when volume came back we were caught short," says James R. Young, the chairman, president and chief executive of Union Pacific Corp., the second largest U.S. railroad by miles of track. "That is not going to happen again."

All the railroads' investment has left them in a position to improve service for their customers, and now that's paying off. For the first 23 weeks of 2010, freight volume grew 7.2% after plummeting 16% in 2009, the biggest decline on record, according to the Association of American Railroads. Union Pacific reported the first growth in two years in the number of rail cars it uses in the first quarter, with volume up 13% from a year earlier. Shipments of cars and auto parts jumped 75%.