>> the chair, pres. and ceo of union pacific railroad, lance fritz, talk about free trade, nafta, and new technologies to improve operations and increase efficiency. this is an hour. [inaudible conversations] >> good afternoon, welcome to the national press club, the place where news happens. i am a news editor at bloomberg

news and chairman of the board of governors at the national press club. i ask you to silence all cell phones. if you're on twitter we encourage you to tweet hashtag in pc live. i will introduce our guest at the head table, please hold applause until all have been introduced. i would not want anybody to feel bad by getting more applause than they do. the head table is not linear. i ask you to stand as i call your name. mike rock, vice president external race and damage relations, jay timmons, the national association of manufacturers, lisa matthews, assignment manager at the associated press and the headliners team. john gallagher, bill cassidy,

the journal of commerce. alan cut top, science and enterprise, joseph morton, omaha world herald and former board member at the club. and the st. louis post dispatch and bloomberg. give them a round of applause. there is no one name i did not mention that i will get to in a second. i would like to acknowledge staff and additional members of the headliners team who made this possible today, betsy fisher martin, lisa matthews is here with us, lloyd russo, tamara hidden, press club staff, lindsay underwood, executive director bill mccarron, thank you very much. i would like to thank the kitchen staff who blessed us with very good food and cookies. they are delicious and

tropical. that is a fun thing. for our broadcast audiences watching on c-span and elsewhere please be aware in the audience today are members of the general public so any applause or reaction is not necessarily from the working press today. now our lead guest. this week nearly 155 years ago union pacific railroad laid its first rails to the outskirts of omaha, it was incorporated in 1862 through an act of congress signed into law by abraham lincoln, one of the company's biggest supporters, union pacific has served as a critical link of global supply chains with 40% of overall traffic originating or terminating outside the united states. at the head of it all is our guest today, chairman, president and ceo lance fritz who joins us at an interesting time for the us economy.

trade wars and automation were not a thing a century and a half ago these issues very much affect how union pacific and its competitors operate today. mr. fritz recently wrote an op-ed that pulling out of the agreement which donald trump has contemplated could not only damage the us economy by raising consumer prices but also hurt many of the 14 million american workers whose jobs depend on trade with canada and mexico including states that helped elect the president. mr. fritz has a pretty strong horse in this race as he runs a railroad that handles 70% of us railcar go into and out of mexico. as head of the nation's largest publicly traded railroad vital to the disposition of both commodities and finished products it is difficult to steer clear of many of the debates shaping the country, the effect of fossil fuels such as coal have on climate change

or between public and private investment in the transportation infrastructure. mr. fritz, the man currently up to the task began his career at union pacific in 2000 as vice president of marketing and sales. he was elected president and ceo in 2015 adding chairman to his title later that year. he will discuss trade and the economy, at a time when both are dominating the news and discuss how technology is making freight transport saver. please join me in a warm welcome to lance fritz to the national press club. [applause] >> thank you very much. it is a pleasure. so with that being said it is a real honor to be in front of the national press club. i see many friends both new and old so i am pleased to join you here today.

the national press club's mission to support professional journalism has never been more important than it is today. more than ever we need a vigorous, independent press to ensure our public policy discussions, debates are grounded in fact and reason. one area of policy that could use more fact and reason today maybe than ever before his international trade which is exactly why i am here today. in the past an issue like trade policy might be esoteric, abstract but let me assure you we at pacific railroad, nation's freight railroads it is anything but. the decisions made here in washington about trade affect my hometown in omaha, nebraska and the 7300 communities union pacific serves and 10,000 customers. i will describe the impact that

i see and what i think is interesting for american workers, consumers, businesses and the communities we serve if our government continues to see trade as a 0-sum game. i would like to share some thoughts on the role of technology in the debate, how our industry can help workers adjusted technological disruption and we can use technology to provide a safer and more reliable service. to understand how union pacific looks at trade and thinks about the future it is helpful to know a little about our past. we restarted 156 years ago by pres. lincoln when he signed his into existence with pacific railway labor act in 1862. it always startles me when i say that because you just need to put yourself back in lincoln's shoes. 1862 the union was losing the war badly. there were southern troops

within 40 miles of the capital and it was all but a certain thing and common knowledge that the war would end soon and would end in a divided nation and a lot of the dialogue was about what is going to happen when we have two united states, not one and what would they be called and at that time the president has the foresight and intestinal fortitude to think there is going to be one nation after this conflict, that nation is going to have to have something that stitches it back together and he thought what better than the exploration, growth, development of the west and what better mechanism to do that than a transcontinental railroad. that is exactly what he was thinking when he took that action and signing that up and over time we play that vital role he had in mind in helping us freight rail industry become the envy of the world.

and irreplaceable national asset that enhances our nation's standard of living and our competitiveness globally. freight railroads are the bloodstream of the us economy, we support every sector of our economy. we are so tightly linked to our economy that we are considered a bellwether of economic progress. things show up in our carloads before they show up in statistics. we operate in 23 states, 32,000 miles a track, i have 42,000 employees and we serve 10,000 customers and market is over $100 billion, between ourselves and ups we trade the title as the world's most valuable public traded transportation company. we have a long history of opening new frontiers and new markets and play an important role in the supply chain and international trade. 40% of our shipments originated

outside the united states before and after coming into and out of canada, mexico, asia, europe, south america, literally around the globe and we are the only railroad with service to 6 gateways to and from mexico and we enjoy 70% of that business. increases in demand for autos, beer, plastics and other products show up on us again before they show up in statistics. all of that means i see how international trade benefits our country every day in stories of americans we serve. i see it in the iowa farmers who raise soybeans shipped bias to mexico and they get crushed into oil and meal and oil comes across the border is vegetable oil. i see it when ohio autoworker molds plastic dashboards shipped to mexico or canada,

built into a car across the border to be sold, i see it in texas, we serve a factory that makes glass bottles, we ship scrap glass into the factory, turned into bottles, we ship those to mexico and they are filled with one of our be favorite beers and get shipped to the united states for distribution in restaurants. that cycle happens over and over every day, tens of thousands, hundreds of thousands of times a day so from my vantage point it is crystal clear the us economy is quite strong. doubtless some part of that, maybe a large part of that is due to the corporate and individual tax reform that was passed, some part of it is due to the sensible regulation our government is approaching business with right now. very positive news from our

customers that they both tax reform and the sensible approach to regulation are generating strong consumer optimism and growing their confidence in capital investment but our potential exit from the north american free trade agreement or nafta along with a growing list of tariffs and escalating trade tensions with our trade partners threaten to undo much of that progress. let me give you a few examples. one of our key hubs we serve is long beach, california and new quotas over the last few weeks, we haven't been sitting, a shift has been sitting outside court with a shipment of steel that normally would land in the port and we would ship it then to our customer. the reason it has been sitting offshore is there is a dispute over who is going to pay the tariff. we see it in our own consumption of steel, we buy a portion of our rail we put into

the railroad from japan. it is premium steel built to a dimension we have a hard time and cannot find in the united states. our first shipment of that steel post tariffs happened in may and the boat set in san francisco harbor for four weeks while there was a dispute over who would pay the tariff which was $6 million and ultimately if we got an exemption which we filed with the commerce department whether or not there would be a refund. you know what happens in soybeans, that is a critical crop for midwestern farmers. they use our rail lines to get those to foreign markets in the middle of the country. roughly one out of every two acres is planted for export and any soybean farmer today, what they are worried about our retaliatory tariffs.

because china has imposed a 25% tariff on soybeans in retaliation of tariffs on chinese goods and that is sharply curtailed by the purchase of soybeans in the united states. it doesn't help that soybean prices are at a 10 year low. the president of the arkansas farm bureau said we are getting to the point it will be difficult for a farmer to make a profit, prices down and increase in prices for everything else and i see it in lumber. union pacific lumber for western canada into locations throughout the us, the tariffs were enacted last year driving up prices and hurting american business and american consumers. lumber tariffs have added to the cost of living in housing in the us at a time when housing is difficult to afford. cost of 1000 feet of lumber from western canada is up 80% over the last 12 months, 40% happened this year alone in the record high lumber prices have

added $9000 for a new single-family home according to national home dealers association. those are just a few anecdotal examples and they are hardly the only warning signs. tariffs were hurt us jobs. according to a study from the trade partnership worldwide, for every us steel or aluminum job protected by a tariff, 16 jobs in other sectors of the us economy would be lost. according to a study commissioned by the consumer technology association and national retail federation, 134,000 jobs are threatened by the first round of new tariffs on china and that could be amplified, and according to studies by the chamber of commerce a combined 760,000 jobs are lost from tariffs already and acted and those being considered in place on autos, and to undo the benefits

of tax reform, and an economist named mark zandi estimated us households gained $900 from the tax legislation and the widespread tariffs could consume 80% of that. the drive up, i want to be clear, we applaud the administration for its efforts at leveling the playing field for american workers when it comes to trade. and aggressive trade practices, absolutely the right goal and i agree, it is modernized. the administration proposed changes will do more harm than good. on nafta we are seeking a sunset clause that would automatically terminate nafta

after five years and was all three countries agreed to continue. that causes significant uncertainty for long-term business planning which words be in the united states and nafta trade agreements but a more straightforward agreement would achieve the same, sunset clause with the review mechanism. after a go of time, can choose the review of a nafta element on an ongoing basis so you can force the other parties to get to a negotiation, and didn't need to be changed in the current agreement and the investor dispute settlement, the nafta government to treat investors and other property owners, basic private property

standards guaranteed in us law. and to claims directly against government in the packed before an independent international arbitration, and the outright seizure of property. with undermining that processing and process principles. we should find and focus on mending, not ending the i sds. in mexico, clear path to protecting their investments. withdrawing from nafta would be disastrous. it could damage the economy, heard 14 million jobs that depend on trade with mexico and canada including 5 million directly attributable to nafta.

administration needs to find a better way to address trade challenges by strengthening and modernizing agreements, china's behavior, we need to work with allies, not start trade wars with them, with enforceable rules, not just impose tariffs and raise prices, to understand global trade will continue with or without the us and they are concerned america could fall behind, they strike trade agreements of their own but particularly concerned 11 nations in the transpacific partnership decided to press ahead with a new pact despite the us decision to withdraw from the deal. and the rules of global trade, no more than happy to write them for us. it is not necessarily unfair or

weak trade agreements but how to provide meaningful work in decent wages for workers whose jobs are threatened by technological change was i want to return to the topic of trade's impact on jobs in the workforce landscape. and jobs entirely on international trade is wrong and even countries that export more than they import in germany and japan, overtime lost substantial amounts of manufacturing jobs. and they did a study on factors as possible for declining, manufacturing employment in the united states and they found a 5.6 million jobs lost between 2000, and 2010, could be accounted for, 88% of the

5.6 million jobs lost in that decade and 12% accounted for by a negative trade balance. most economists believe nafta's most significant impact on jobs would be more high school, high wage jobs and low-wage jobs, and silicon valley, the growth is an important contributor to the job evolution and manufacturing output has been trending up in the us, increased productivity and advancements in technology, accomplished with fewer workers, decline manufacturing is global. and unique just to us. with the decline in the us, our country is based on the second largest manufacturer in the world. the manufacturing output reached an all-time high of $2.5 trillion last year. advancements in technology mean our economy will only become more productive over time and more jobs we provide a better paying and safer. and changes the railroad

industry as well. when you think big data, artificial intelligence and ultrasonic sensors, don't immediately come to mind. and over the last 10 years we made substantial investments, with technology platforms, we maintain advanced communications across the system, 1300 cell towers and 700 microwave towers. a leading number of leading technology companies partner with us to use that infrastructure for their owners with one of the other areas of technology called net control, comprehensive logistics software platform built on micro services architecture. we implemented 3000 micro

services and 50 million lines of application code. we are aware of only one other company in the world that has a larger micro service implementation. the way you think about that, the same technology platform, netflix uses, only one other company have larger application. our technology platforms deploy advanced automation, deep analytics, like machine learning and integrate quickly and effectively for customers operational logistics systems for things like apis. we provide internet of things capabilities to leverage more streamlined processes. several years ago our engineering teams realize lasers can inspect trains, and it is a big mri for a train that combines lasers, sophisticated high-speed digital cameras and in a system

that could detect crystal-clear 3-d image of a train at 70 miles an hour, takes 50,000 images a second, enhance and accelerate the train inspection and repair process that reduces delays and improves reliability to customer service. we are using machine learning to improve the customer experience through technology we call smart eta built from scratch by technology experts and it is an advanced machine learning model that incorporates gps data, train speed, train schedule data and builds a model to make estimated train arrival times and 20% average improvement since we launched it, and it is as good as 80% and rolling that across the system right now. we the poor gaming simulators to engineers at early stages of

testing 3-d printing to speed up equipment repair and maintenance of our equipment and using drones to help us inspect bridges and telecommunication towers i mentioned earlier. we are aggressive about recruiting top-tier talent and created a dedicated career path inside our it function so if you're an individual contributor, and got out of that work we value and going to a management job. it was not to create one cool innovation but a perpetual posture of constant innovation. and autonomous technology driving change in the transportation industry and our competition isn't standing still was the auto and trucking industries pursue autonomous operations for some time but

make advancements despite some initial setbacks. pilot of autonomous tracking are active and underway around the world. the rail industry is keeping pace with these trends and finding ways to adopt similar technologies in a manner that makes sense in the operating environment and competitive environment. the first autonomous driver free train completed a journey in australia. ultimately it is a very long road to autonomous trains but we have to be open-minded given the technology and competitive challenges and the platform exists in positive train control or ptc. ptc is a suite of technologies designed to stop a train in four circumstances. before train to train collision occurs, before the rail it occurs, before train movement

go through a switch or a work zone unauthorized. by end 2018 ptc will be installed in union pacific and about 75% to 80% of required lines implemented with the agency. i want to emphasize 100% of passenger lines will be equipped and available for passenger trains by the end of this year and as we implement ptc across the network, in the united states and operational issues naturally developed. the resiliency and fluidity of the rail network, and it is an unstoppable first was we want to protect american jobs to focus on enhancing america's ability to compete globally and helping us workers adapt to technological change. we must train our workforce for

the jobs now and in the future as opposed to the jobs of yesterday. two examples of jobs that require trained workforce are things like automotive service bay or railroad diesel mechanics. i have a friend in omaha who owns 20 car dealerships and his service base pay $70,000-$80,000 for skilled technician with a great benefits package and quite a bit of job security in this. he can't find a workforce to fill it and isn't big enough to create a program to train his own. at union pacific we are big enough to train our own but bigger pools to hire from. looking for technically trained employees or employees that have an aptitude towards being

technical and apprenticeship programs. and to train our workers so they can fill the gaps so other employers more readily, they think it could be better for today's jobs. americans spend 1/10 of 1% of gdp on the federal level on job retraining. that is a sixth or seventh of what other rich countries spend and that is probably not enough. we need to improve the educational system to train students to fill high skilled technical jobs across a variety of industries. we have got to stop teaching our kids the college is the only way to go when if you work for a railroad you can earn $70,000, $90,000 a year with an excellent benefits package doing work that is very rewarding. we have got to protect the us workers rights to complete up level playing field by increasing state owned enterprises and intellectual

property rights. the best thing we can do for american workers is create new jobs and the best way to create new jobs is trade. for every billion dollars in trade the united states creates 5800 new jobs and on average, 18% more than other jobs. i'm going back to the beginning, our company was founded by abraham lincoln 156 years ago to connect america. today as our country's largest freight railroad we continue to provide means to american businesses to compete on a global scale. our government has the chance, for american workers and businesses, only if we maintain long-standing commitment and the best step the government can take is create a climate in

which businesses have the confidence to invest and create jobs. they created uncertainty that cause capital investment and to address trade balances by modernizing agreements like nafta, not ending them and working with allies constructively instead of starting trade wars. very happy to take any questions. [applause] >> if you have questions please hand them to my colleague and we will jump right in. you mentioned a lot on trade and tariffs and how they will impact commodities and other sectors. how will it impact free rail? >> freight rail thrives when

consumers consume things and producing, when international trade is healthy, impact all three of those sectors. tariffs and disruptive trade tend to be attacks on consumption driving up pricing so we will see consumption be less robust than it would be. uncertainty like we see in nafta causes the industrial economy to slow down on its investments in the industrial economy, the lifeblood of that is capital investment in that is impacted. and retaliatory mechanisms whether it is bias or trading partners and the scariest part isn't the immediate impact about the industry participant like freight railroad, supply chains, once customers alter a supply chain and learn to live

with it and optimize it, they never come back to the original supply chain. this will change where we made investments or where trade flows. >> how expensive is a mile of track? >> $3 million or a little more. >> what about steel tariffs? >> that boat out in the harbor, from japan which we were paying a premium, the 25% tariff cost $6 million, pretty significant amount, 3 quarters of $1 million. >> you mentioned the tax cuts and i want to get to that. the things we are seeing across companies, and we have seen that as well.

>> we are a great beneficiary of corporate tax reform because we are a us-based big asset. arise that based depreciated is $70 billion, spending $3.5 billion in capital a year. and incremental cash flow, we did uptick capital spend this year, our wages and wage base and benefits are very attractive and we are increasing the amount of cash we are giving back to shareholders. it is their cash to begin with. >> and buybacks and other things, are you doing a lot of additional capital expenditures? >> this year's capital spending versus last year's is $200 million, that is a significant amount for any company.

benefit from corporate tax might be in the neighborhood of $1 billion in annual cash flow and the rest, hopefully job growth as the economy percolates, and returning to shareholders. >> one of the things you are working on is well time, trade velocity, basic block and tackle statistics and you all have said you are trying to increase capacity, and over the last of recorders, rising velocity. >> right now we published statistics weekly with the association of american railroads, to substantially call it in the neighborhood of

29 hours with every railcar on the railroad and sitting in a terminal. and every mile of the railroad through terminals, and in a given hour. we have congestion last year and the beginning of this year. and hurricane harvey, we have been working to get those statistics on the road and largely back to being the way the railroad is designed. we are in earshot, 20% plus or minus of being where we want to

be, excellent service. that is what they expect of us and on our way to being that. >> other companies, our direct competitors, they are slightly better. when are we going to catch that? >> there are not slightly -- depends on what you are looking at, let's deconstruct the industry. we think winning in business is generating the most cash flow from operations and most operating income. and operating income by 3 quarters of 1 billion, and they like us to continue doing better. winning is described more broadly creating long-term shareholder value in a sustainable way, the most

valuable transportation, we are doing a fair job. when you run out out further, we have key stakeholders, customers depend us to win in the marketplace. they fulfill themselves, depend on us to be safe, reliable and billed directly, and an attractive return and all categories making progress. >> two of the main things, and these are two things they talked about having an effect, this president has made no secret of wanting more coal, more shipping on call, and

changing business, in a way that would allow you to carry more. we are not necessarily seeing matching the rhetoric. >> the society has made a decision to rebalance our electricity generation and rebalance away from cold. we see call is an industry, a secular repositioning, used to generate half the nation's electricity 10 or 15 years, today it generates 30%. i don't think that grows from where it is today. it is important for our economy to have a good balance support of multiple fuels generating electricity, coal is excellent because you can store the fuel source outside on property and highly reliable and got a lot

of it. >> when we are looking at growth, and against projections. is that what you are saying? that we could be hitting? >> as we look out at the future, a government entity that looks at the energy industry, blending out of the curve and long-term that percentage is still going to drop to some degree. i don't think it goes away, not good for the nation for it to go away. it has got more downward pressure than upward pressure. >> what price do we need to add for that to start coming up for 5 years ago. >> oil is not directly

connected to call consumption. natural gas is directly connected to call consumption, natural gas and oil have some connectivity, recently they have been disconnected to a degree. we have generated so much more incremental oil production in the united states that we are awash in natural gas. our natural gas prices have been pretty stable in $3 range or less for quite a bit of time. that will change because it will prompt consumption, demand will start consuming the excess supply but we are in a place that has plenty of natural gas and that is going to retard full demand on the demand side. >> talking about cash influx, you have a long history of

opening new markets and new places. what is new? where are you going? any new markets you are opening? >> what is new in the markets of railroads is consumerization of customer base, regardless of your age, probably air b&b, you know -- amazon prime, and the fedex equivalent. what you see is instant pricing in, lots of options. the buyers have that personal experience, in your industry why not? what is happening rapidly, and the customer experience. and applying to the outside of

the business. and interact with us, making that experience rapid, easy and something they want to do more of. that is a seachange for us in that industry. >> another question has to do with this. mergers and acquisitions that people talk about. and we are talking about m&a. >> mna has been relatively small, think of adjacency to core business. within the last year and a half we have cold storage warehouse business because it fit well with the service product we call cold connect where we ship fruits and vegetables from the west coast to the middle of the country and the east coast. most of our m&a activity will be in areas like that, value

add for customer base, for industry consolidation, i don't anticipate that will be occurring anytime soon. not right now. >> is that actually, i think we had multiple people ask me to ask you. is there going to be that in the future or is the industry happy? >> the industry has been in this current state for quite some time and there could be benefits of additional consolidation. you could take redundancies out but the path forward is to go through the stb for authorization to acquire another railroad. and in that process they are committed to evaluate not just

competitive dynamics but to enhance competition in the industry through acquisition which is more competitive, not less and full control of the remedies and consider the downstream impacts of the first transcontinental merger or class one merger. all that being said, we think those economics mean more value destroyed and value created. right now we don't think that is the right path. >> a fine point on that. you mentioned a lot of your business relationship with mexico, companies in mexico. let's be clear. >> lead to everybody, one more. >> what would it be to the union pacific? >> it would be a disaster. first and foremost it would be bad for our economy. we could have a downward

pressure on jobs, downward pressure on trade and upward pressure on price. we thrive when the economy thrives. there are some other concerns that are more granular and specific, those are less conservative than the general impact. >> let me think about the safety things you mentioned, positive train control by the end of the year. how confident are you, 100%? >> everybody trained for it. all the bandwidth we need and 75% of railroad implemented, looking under ptc. 2020 to do the rest.

it is all done -- >> other questions from the audience dealing with safety. in your network area, i don't know what the number can be, a lot. and something other countries try to minimize, a major source of accidents, vehicle or points, are you doing anything to try to reduce the number, do you have a goal? >> we have 32,000 miles of railroad, about one a mile and that is spread out. the issue is driver behavior accounts for virtually all crossing accidents and the crossing accidents a day on average. really discouraging.

what we are doing about that is a couple things. one is big data and analytics. we enroll smart phds on the outside and they came up with a 27 factor model to determine relative risk of crossings and that drives our team on the riskiest crossings to work with local community to mitigate the risk all over the place. >> given the fact a fair number of republican legislators in a train earlier this year that hit a vehicle at a crossing, are you seeing any legislative move toward benefits? >> what i am seeing is those conversations are more meaningful and we can drive to personal experience which always helps. the other thing that is important is 70% of the

crossing accidents on all railroads happen with active warning devices, gates or flashing lights. i don't think it is about adding more flashing lights but we have got to harden the infrastructure to the greatest degree and shunt drivers to those places and next thing you got to do, when developing the economy build traffic law into the autonomous vehicle and if it is not clear don't go. that autonomy will help us tremendously. >> are accidents up or down? >> crossing accidents are marginally up but what they are really doing over the course of the last few years, very frustrating for a company that cares deeply about safety there's nothing more frustrating than trespass incidents. >> are you -- we have a lot of talk about immigration, a big

focus in the trump administration on reducing illegal immigration. are you seeing anything in terms of that connected with freight rail network? >> the way we think about immigration is a job source. if you look at the united states, we have labor participation rate below 63%. economists say there's a reason for to drop, some are within our control. the opioid epidemic is creating felons. and the younger population we have got to deal with. we are going to need immigration to feed the workforce to keep the economy going, and the number of open

jobs individuals seeking a job. >> the pres. may or may not be listening on this topic. this is a president that has come out just the other day outlined $200 billion in possible tariffs from china, a lot of the free trade, who is the open door? >> don't have to be a friend t

administration that fundamentally get the end game right whether it is wilbur ross, commerce, larry kudlow, and worried about the tactics. >> one of the questions from the audience i wanted to put you do you think the trade wars coming to an immediate climax sometimes soon and what to enduring the trump presidency and beyond? >> either way is bad from my perspective. if we get to a place where we wake up this time next year and there is still uncertainty about nafta we are retarding investment. essentially now to at a half years of uncertainty, and sure that is impacting people's decisions about where to make their investment and what

degree. there is a bad outcome. i prefer to tread water and be in dialogue and make a bad decision. the best outcome is let's close this up quickly and stop picking fights with some of our trade partners and focus our full attention and might on the issues at hand which is fair and equitable trade investment with china. >> union pacific had a nonemployee layoff, a non-agreement position. in retrospect would it be done differently? >> if you ever lead an organization, i would be like if i said i would do it exactly the same every time. there are some things i would do differently. they were made for the right reason. union pacific has to be more agile. have to allow technology to do the work that is necessary and

to compete both in our freight railroad market and the outside world whether it is barge or geographic competition or truck. what i would do differently, focus more attention on the change management process. the leadership team and i did not do a particularly stellar job at that and given an opportunity to do it again, i spend more time and energy on it. >> captured a large bit of the imagination. what do you think of the hyper loop? is that realistic? >> we pay attention. >> are you going to build one? >> we were invited to participate but chose not to at this point. hyper loop right now largely is defined as moving passengers. there is a context for trying to move freight but the context

is a small quantity and there are a lot of challenges. big mass accelerating rapidly and decelerating rapidly. there's a lot of physics to that. it is not real obvious that there is an immediate direct competitive threat. the application of technology to our relationships with customers much more immediate and attention grabbing. >> there is movement underway to build a magnetic levitation train from washington to baltimore and eventually new york, realistic? not realistic? >> that is for you guys to decide on the east coast. >> you want one in texas? >> i do not need one. >> passenger rail runs on your tracks i believe and amtrak has had well-publicized issues especially with on time rates.

how do you rate amtrak, where is that going, and if you could give us any idea how it looks under previous years? >> i will do the unconscionable and communication teams are starting to cringe. in the context of amtrak and our relationship with amtrak. we have an obligation, amtrak have a contract to run with authority for free traffic and we take that seriously. the contract we entered into knowingly and when the we honor and are very proud of providing the best service level of long called amtrak anywhere on any system. we care about that. having said that we are not looking to run more amtrak trains, we don't make money in that marketplace and an outsized footprint on the

railroad. i look at amtrak and i think so long as the united states once passenger rail to exist the united states needs to figure out how to fund it adequately and reliably. we don't do that now. amtrak big for their subsidy every year and it is going up and down and that is a bad place to be so i would advocate that we as a country we want long-haul passenger rail service in the northeast corridor and state sponsored service and funding mechanisms, put them in place. >> one of the best success stories is the northeast region, there is talk about doing a little more like that in your footprint, houston, dallas, etc..

do you see anything like that in the immediate future. is that realistic? with the market place support that or is everyone wedded to southwest? >> one of those has already occurred on us between chicago and st. louis and we had a long-term agreement in the state of illinois that under certain circumstances we would increase or at least host passenger service on that line. that has happened and it is a higher speed rail line buildout to i want to say 120 miles an hour on certain segments and is hosted by amtrak and they are making significant capital investment along with the state and federal government. we are already a participant in that. i don't think ridership is going to explode on that service between chicago and st. louis. >> we are coming to the end. i did promise to be prompt and i would like to respect

everyone's time. i know you're used to promptness. i would like, right before we close up, we do have one last question is a tradition. before that let me make some announcements while i have you here is a captive audience, future of natural press club with major speakers july 16th, luncheon with rob manfred, you can ask about the all-star game. july 18th, the director of niaid. august 13th a book event with sean spicer. i think that will be very well attended. just as anthony scaramucci was earlier this year. i would like to present you with the national press club mug. a tradition we do for speakers.

[applause] >> i can confidently say it fits within any possible gift limit. >> there is only one way to get it. >> my final question to you is as many people in this country, familiarity with freight rail started at a very young age, do you see yourself as a thomas? >> i'm a thomas. i try hard to. i am a grinder. i will take on a challenge as a team and succeed. >> a very useful engine, thank you for being here at the national press club. >> great job on the questions. [applause] >> thank you all. [inaudible conversations]

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