Jim Vena: Kenny, if I can just start real quick, and then I’ll pass it over to you. The price is important. You have to have the right price that allows you, but service has to be consistent. And a few weeks is not good enough for any customer to say, how’s the railroad do it? If I was a customer, I’d be looking at — are you consistent in your service? And when you get impacted because our car velocity will drop with some weather events through the winter. This is not a game where you can forecasted to be at a 220 level all the time. We’re going to have some impact. Sometimes it will be higher, sometimes lower. It’s how fast we recover. If we can do that and we can show shippers that we have the capability to deliver their products in a consistent manner, recover fast, then I think we have the opportunity.
But it takes time. No one’s going to believe you the first time you show up and say, wow, we did had a great September. Well, how about January? How was that? And how was 2022? I think they have memories of that. Kenny?
Kenny Rocker: Just to build on what Jim mentioned, let me just level fit. First, we’ve got a really strong stable of customers private assets, customers that are on our network along with our own railroad assets with EMP UMAX and so — what that does is that provides optionality for the BCO. So that’s the first thing that we are appreciative of. Next as you look at all the product development that we’re investing, investing in a little bit more expansion in Kansas City, the new product development with Twin Cities, Inland Empire. You look at the discussion around Eric really improved product around coming into and out of Mexico. That’s been great for us. But setting aside this macro thing as our service improves, really, the North Stars going over the road.
You’ve heard us say by our estimation that we’ve got a pretty low market share in terms of overall rail coming into and out of Mexico, and that’s ripe for more penetration and we’re inserting more products out there. We announced that we’ve got a product to the Southeast that we’re taking advantage of. And so very bullish, we’re on offense and we’re clear-eyed about growing there.
Jim Vena: Thanks for the question, Jordan.
Operator: Our next question comes from the line of Brian Ossenbeck with JPMorgan. Please proceed with your question.
Brian Ossenbeck: Thanks. Good morning. Welcome back Jim. Just wanted to ask more about visibility to the cost inflation on labor side specifically into ’24. Obviously, it’s been a challenge, but it’s going to get will be a little bit more challenging next year, I think of the 4.5% increased bonus and maybe some work rest rules around SMART-TD. So maybe Jennifer you can give us some sense as to how much visibility you have for the cost inflation side when it comes to labor. And then Jim, would just love to get your thoughts on perhaps just the broader regulatory picture. Obviously, UP had some challenges with the regulator on embargoes. Last year, there was a FRA letter about some of the infections. So UP has been under the microscope a little bit. Just wanted to see how you perceive that as you’re new into the seat? Thank you.
Jennifer Hamann: We’re talking about inflation. I mean we’re still in the process of putting together our 2024 plan, but you hit some of the key ones there, Brian, in terms of July 1 is the last of the scheduled wage increases for the craft professionals from the PEB and that’s 4.5%. Obviously, there will be wage increases on the non-agreement side as well. So there will be labor inflation pressures. You mentioned the work rest. And so those are all — while there are pressures, there are opportunities, right, for us to look at how we can be more productive in how we do every part of our business. And so that’s one of the things we always challenge the team with is how can we chip away at inflation. It’s not just Kenny’s job from a price standpoint.
It’s all of our jobs as we look to drive productivity and work more efficiently. Purchased services and materials, that’s an area that also has seen some pretty heavy inflation over the last couple of years. The labor piece of that probably will continue. As the labor market stays tight, probably we’ll continue to see more pressure as well. Beyond that, if I think about fuel, obviously, driven by energy markets, we have opportunities there to be more efficient on the equipment rent side. That’s where car velocity certainly can play a role for us as we speed up the network, turn the assets more efficiently. And then the last one I’ll mention is the other expense line, which, as you know, has been pressured the last year or so on the casualty side, and that’s some higher verdicts, higher awards.
And that’s probably something that’s going to be around for a bit. That’s why that’s the corollary benefit to us running a safer railroad is taking those incidents off the table. We want everybody to go home safe. We want our customers’ freight to arrive undamaged but then it flows through from a cost standpoint as well. So those are kind of the big buckets that I’ll outline for you. And obviously we’ll talk in more specifics when we put the plan together and talk to you in January.
Jim Vena: You bet. So Brian, listen, good article on the cars per employee. I think it was a great comparison and it shows where the opportunity is. So well done on that. I enjoyed reading that last night, one of the last things I did before I went to bed. You asked about the regulatory agencies and how the relationship is. I think it’s best to describe it like this. With the FRA, we’re aligned. We have the exact same goal. And I like that the FRA wants to come out and look at the railroad to see if our safety management system is proper. We’re getting — we’re using the railroad in the proper manner and that we’re safe. So I love that. I have no issue with it. And I have a good relationship. I’ve reached out good relationship with the FRA, but it’s not my relationship that’s the most important is how we deal with things out in the field.
We’re professional. We look for ways to improve, and we work with the FRA because they get to look at other railroads. And when they give us some feedback, we need to take it to see how we improve. So I think that’s the way the relationship. And on the STB, there’s lots going on, and I won’t discuss the specifics, but I grew up in Canada working on a railroad that had inter-switching for a distance, and I know what the pluses and minuses are there. I don’t see anything as we’re moving forward, and we’ll give our feedback because I think we want to make sure that we don’t impact our customers and what we serve and slow down the railroads because of a regulatory framework. So we have to be careful because our customers compete with people with other, of course, within the US, other modes, but they also compete in the world.
There’s products that we move for customers that go around the world that if we wreck the efficiency of the railroads, it’s a mistake. And I know the STB does not want that. What they want is they want to make sure that we have good service. And that’s the best way for us to make sure that the regulatory environment doesn’t affect us is we provide good service if we provide the service that we sold to our customers, then we win. So I’m very comfortable with the relationship. I think we need to continue to communicate, and we both. We have the same end goal with the STB and the FRA. So Brian, I think it’s — the relationship is good. We’ll take the feedback, and we’ll see where we can improve.
