Wednesday, January 19, 2005

Rail Traffic Disruptions Could Threaten Economy
Shippers seek other ways to move freight as
Union Pacific scrambles to restore service.
By James F. Peltz and Ronald D. White - Times Staff Writers

Shippers scrambled for alternative routes Wednesday as Union Pacific Corp. struggled to overcome a massive disruption of service in Southern California because of the recent rains.

Mother Nature might be to blame for Union Pacific's latest woes, but the recurring problems the railroad has had moving goods in and out of the region, coupled with recent backlogs at local ports, could threaten the local economy, shipping experts and economists said.

"If I'm a shipper, I'm starting to get disturbed about being able to use Southern California as a base to get stuff into the country and out to my stores," said John Husing, an independent economist in Redlands.

Citing mudslides and washed-out tracks and bridges, Union Pacific closed four of its five main rail lines out of the Los Angeles Basin. That brought the railroad's freight traffic in the region to a near standstill.

The company said it was racing to make track repairs and hoped to resume limited service today.

Union Pacific's troubles included 23 mudslides that covered tracks in the Cajon Pass east of Los Angeles, a key passageway from Southern California to Las Vegas and Salt Lake City and eventually to the Midwest.

"We have been told that the route from Los Angeles to Chicago has effectively been closed," said Scott Dailey, a spokesman for APL, a leading shipper of intermodal cargo containers and a unit of Neptune Orient Lines of Singapore.

The fresh disruption — coming on top of last year's gridlock at local ports and railways — persuaded APL to decide to permanently send "a lot of our transcontinental cargo" to Seattle rather than Los Angeles, he said. "That is a major shift."

Decisions like that and Union Pacific's not infrequent difficulties, in addition to bottlenecks at the ports, "certainly should cause people to think about the whole infrastructure" in Southern California, said Jim McKenna, president of the Pacific Maritime Assn., which represents West Coast shipping lines.

Husing said the "real damage is the continuing problems we have, whether it's 93 ships tied up off the coast or Union Pacific not being able to get its cargo through the area."

Union Pacific, which was suffering major congestion problems on its tracks before the heavy rainfall, is the nation's largest railroad, with 33,000 miles of track from the West to the Midwest.

It's also a crucial component of the U.S. and Southern California economies. Based in Omaha, it's one of two railroads that ferry goods from the ports of Los Angeles and Long Beach — the world's busiest port complex — north and east to the rest of the country. The other is Burlington Northern Santa Fe Corp.

About half of the raw materials and finished goods that arrive at the Los Angeles and Long Beach ports, mostly from Asia, are transported by truck to destinations in Southern California. The rest is forwarded nationwide by rail, with Union Pacific and Burlington Northern each handling about half of that freight.

Burlington Northern suffered no major setbacks from the storms, a spokesman said, and is carrying some freight for Union Pacific.

Some analysts wondered why the nasty weather affected Union Pacific and not Burlington Northern. In the Cajon Pass, for instance, the railroads' tracks nearly parallel each other west of Interstate 15.

But Union Pacific tracks are higher in elevation than Burlington Northern's are, Union Pacific spokesman John Bromley said, and thus were first to be hit by mudslides. The damage was even more pronounced, Bromley said, because "the slides have occurred in areas where we've had all the forest fires and the ground cover was burned off."

At the Port of Los Angeles, "we are storing the containers until the rail can get up to speed again," marketing manager Michael DiBernardo said.

Those containers hold such items as apparel, shoes, consumer electronics, appliances, furniture and auto parts, said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp.

Port of Long Beach spokesman Art Wong said the added congestion "won't be a big deal if they can fix it within a couple or three days. If this drags into next week, we'll be more concerned."

Robert Krieger, president of Norman Krieger Inc., one of Los Angeles' biggest freight forwarders, said if Union Pacific "can't move that cargo, it's going to choke that harbor quickly."

On Wednesday, operations were also disrupted at Amtrak and the Metrolink commuter service, which use many of Union Pacific's tracks.

Amtrak canceled its popular Pacific Surfliner service from San Diego to San Luis Obispo, and its Coast Starlight train, which normally runs from Los Angeles to Seattle, is starting from San Luis Obispo until further notice.

Metrolink shut down service in several cities, including San Clemente, Oceanside, Oxnard and Camarillo. It's unclear how quickly Union Pacific can restore full operations.

"Recovery will be slow and will depend on weather," Jack Koraleski, Union Pacific's executive vice president for marketing and sales, said in a note to customers.

Wal-Mart Stores Inc. was experiencing no delays because of "contingency plans" that included moving goods from the ports by truck rather than rail, spokeswoman Sharon Weber said.

J.C. Penney Co. diverted its Union Pacific cargo to trucks or other carriers, spokesman Tim Lyons said. "We were fortunate this was not the peak season for goods coming in," he said.

The rail service disruptions added to the challenges of handling the flood of imports through the ports, Kyser said. "We are behind the curve and we are going to have to run to keep up."

Union Pacific's stock fell 38 cents Wednesday to $63.96 on the New York Stock Exchange.

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Times staff writers Debora Vrana and Evelyn Iritani contributed to this report.

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