Intermodal TeamJoe Leppert

Business DimensionsIntermodal - 2001 Revenue $1.9 BillionBusiness DimensionsIntermodal - 2001 Revenue $1.9 Billion

Domestic 49%

International 51%

Pacer28%

Steamship34%

CSXI8%

Premium6%

IMC /Truckload

24%Pacer28%

Steamship34%

CSXI8%

Premium6%

IMC /Truckload

24%

RevenueRevenue

Organizational StructureIntermodalOrganizational StructureIntermodal

Commercial

Finance

NetworkDesign

Operations

1999 2000 2001 20021999 2000 2001 20021999 2000 2001 20021999 2000 2001 2002

Contribution CAGR = 13%Contribution CAGR = 13%

Revenue CAGR = 4%Revenue CAGR = 4%

19991999 20002000 20012001 20022002

Total RevenueTotal Revenue Total ContributionTotal Contribution

Revenue and ContributionIntermodalRevenue and ContributionIntermodal

Business DriversIntermodalBusiness DriversIntermodal

Market

- Strong International Trade

- Domestic Economic Growth

Price

- Premium Products

- Capture Asset Value

Penetration

- New Chicago Facility

- Premium & Domestic

- Major Growth Lanes

Market

- Strong International Trade

- Domestic Economic Growth

Price

- Premium Products

- Capture Asset Value

Penetration

- New Chicago Facility

- Premium & Domestic

- Major Growth Lanes

Business Development InitiativesIntermodalBusiness Development InitiativesIntermodal

• Strategic Partnerships

• Mexico Market

• Market Research Initiatives

– Lane Balance Opportunities

– Non-Seasonal Baseload Customers

– Non-Peak Vs. Peak

• Growth in Major Lanes

• Strategic Partnerships

• Mexico Market

• Market Research Initiatives

– Lane Balance Opportunities

– Non-Seasonal Baseload Customers

– Non-Peak Vs. Peak

• Growth in Major Lanes

Major Growth LanesMajor Growth Lanes

L.A. to MemphisL.A. to Memphis

L.A. to New OrleansL.A. to New Orleans

Oakland to ChicagoOakland to Chicago

Chicago to L.A.Chicago to L.A.

Chicago to MexicoChicago to Mexico

Chicago to PortlandChicago to Portland

Major LanesMajor Lanes

Cost Advantagevs. Truck

Cost Advantagevs. Truck

Market Size($ Billions)

Market Size($ Billions)

$1.5$1.5$0$0 50%50%0%0%

Oakland

MemphisLosAngelesLosAngeles

Chicago

New Orleans

HoustonHouston

Dallas

Major LanesIntermodalMajor LanesIntermodal

PortlandPortland

MexicoMexico

Margin Improvement TargetIntermodalMargin Improvement TargetIntermodal

0

25

50

75

100

PricePrice Volume& Mix

Volume& Mix

DoubleStack

DoubleStack

TrainLengthTrain

LengthHP/TTHP/TT OtherOther

(%)(%)

+40% fromRevenueGrowth

+40% fromRevenueGrowth

+60% fromProductivity

& AssetUtilization

+60% fromProductivity

& AssetUtilization

DriversDrivers

Intermodal TeamJohn Newman

ContributionIntermodalContributionIntermodal

ProductivityProductivity

20002000 20012001 20022002

VolumeVolumeMargin Im

provement 57%

Margin Improvement 57%

PricePrice

ProductivityProductivity

VolumeVolume PricePrice

L.A. to Houston/New OrleansIntermodalL.A. to Houston/New OrleansIntermodal

So. CalifSo. CalifNew OrleansNew Orleans

HoustonHouston

20002000 20022002

Margin ImprovementMargin Improvement

+82%+82% • Day-of-Week

Rationalization

• Price Improvement

• Double Stack

Efficiency

• Network Redesign

• Day-of-Week

Rationalization

• Price Improvement

• Double Stack

Efficiency

• Network Redesign20012001

Lane by Lane Analysis

Lane ContributionIntermodalLane ContributionIntermodal

Trains by LaneDetail

Lane ContributionIntermodalLane ContributionIntermodal

Day-of-WeekDemand

Lane ContributionIntermodalLane ContributionIntermodal

Customer Detail

Lane ContributionIntermodalLane ContributionIntermodal

Scorecard - L.A. to Houston/New Orleans2002 versus 2001Scorecard - L.A. to Houston/New Orleans2002 versus 2001

Unfavorable FavorableUnfavorable Favorable

Avg. Revenue / Car

Volume

Fuel Price

Wage Inflation

Others

C-Rate

Slot Utilization

Double Stack

Horsepower/TT

Train Length

Others

Avg. Revenue / Car

Volume

Fuel Price

Wage Inflation

Others

C-Rate

Slot Utilization

Double Stack

Horsepower/TT

Train Length

Others

Lane Evaluation

Description

Units +4%

Revenue +5%

Revenue Per Car +1%

Traffic (% of Lane)

Domestic 31%

International 69%

Operating Statistics

Train Starts +3%

Loads Per Train +7%

Double Stack Percent +9%

Horsepower/Trailing Ton -7%

Train Length +2%

Lane Evaluation

Description

Units +4%

Revenue +5%

Revenue Per Car +1%

Traffic (% of Lane)

Domestic 31%

International 69%

Operating Statistics

Train Starts +3%

Loads Per Train +7%

Double Stack Percent +9%

Horsepower/Trailing Ton -7%

Train Length +2%

Co

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Pro

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Margin ImprovementMargin Improvement + 21%+ 21%- Decrease / + Increase- Decrease / + Increase

Change in ContributionChange in Contribution

Profitability ManagementIntermodalProfitability ManagementIntermodal

• Lane Organizational Structure

• Tactical Working Team

• Quarterly Lane Reviews

• Monthly Business Team Reviews

• Quarterly Senior Management Reviews

• Lane Organizational Structure

• Tactical Working Team

• Quarterly Lane Reviews

• Monthly Business Team Reviews

• Quarterly Senior Management Reviews

Intermodal TeamBarry Michaels

Operating InitiativesIntermodalOperating InitiativesIntermodal

Line-of-Road

– Train Frequency

– Train Size

– Slot & Stack Utilization

– Horsepower per Trailing Ton

Terminal

– Lift Productivity

– Dwell Time

– Gate Processing

Line-of-Road

– Train Frequency

– Train Size

– Slot & Stack Utilization

– Horsepower per Trailing Ton

Terminal

– Lift Productivity

– Dwell Time

– Gate Processing

Productivity / Efficiency MeasuresIntermodalProductivity / Efficiency MeasuresIntermodal

• Operational Drivers

• Network Redesign

– Day of Week Volume

– Customer Commitment Rationalization

– Business Rules - Annulments/Consolidations

• Operational Drivers

• Network Redesign

– Day of Week Volume

– Customer Commitment Rationalization

– Business Rules - Annulments/Consolidations

Train LengthFeet

Train LengthFeet

3,000

3,500

4,000

4,500

5,000

5,500

1999 2000 2001 20023,000

3,500

4,000

4,500

5,000

5,500

1999 2000 2001 2002

Productivity / Efficiency MeasuresIntermodalProductivity / Efficiency MeasuresIntermodal

Double Stack PercentDouble Stack Percent

79%79%

89%89%+13%+13%

19991999 20022002

• Operational Drivers

• Terminal Management

– Asset Utilization

• Containerization

• Car Type

• Operational Drivers

• Terminal Management

– Asset Utilization

• Containerization

• Car Type

Productivity / Efficiency MeasuresIntermodalProductivity / Efficiency MeasuresIntermodal

Lifts Per UnitLifts Per Unit

1.60

1.65

1.70

1.75

1999 2000 2001 2002

1.60

1.65

1.70

1.75

1999 2000 2001 2002

Operational Drivers

– On-Dock Operations

– Interchange Partners

Operational Drivers

– On-Dock Operations

– Interchange Partners

19991999 20022002

Terminal DwellDays

Terminal DwellDays

Productivity / Efficiency MeasuresIntermodalProductivity / Efficiency MeasuresIntermodal

2.772.77

2.372.37

-14%-14%

Operational Drivers

– Customer - Data Sharing

– Assessorial Collection

– Reduced Free Time

– Increased Storage Rates

Operational Drivers

– Customer - Data Sharing

– Assessorial Collection

– Reduced Free Time

– Increased Storage Rates

L.A. to Dallas/MemphisIntermodalL.A. to Dallas/MemphisIntermodal

So. CalifSo. Calif

Margin ImprovementMargin Improvement

+64%+64%

• Differentiated Product

• Interchange Partnerships

• Line-of-Road Productivity

• Differentiated Product

• Interchange Partnerships

• Line-of-Road Productivity

MemphisMemphis

DallasDallas

20002000 2002200220012001

Scorecard - L.A. to Dallas/Memphis2002 versus 2001Scorecard - L.A. to Dallas/Memphis2002 versus 2001

Unfavorable FavorableUnfavorable Favorable

Avg. Revenue / Car

Volume

Fuel Price

Wage Inflation

Others

C-Rate

Slot Utilization

Double Stack

Horsepower/TT

Train Length

Others

Avg. Revenue / Car

Volume

Fuel Price

Wage Inflation

Others

C-Rate

Slot Utilization

Double Stack

Horsepower/TT

Train Length

Others

Lane Evaluation

Description

Units +24%Revenue +20%

Revenue Per Car -3%

Traffic (% of Lane)

Domestic 35%

International 65%

Operating Statistics

Train Starts +12%

Loads Per Train +11%

Double Stack Percent +4%

Horsepower/Trailing Ton -3%

Train Length +11%

Lane Evaluation

Description

Units +24%Revenue +20%

Revenue Per Car -3%

Traffic (% of Lane)

Domestic 35%

International 65%

Operating Statistics

Train Starts +12%

Loads Per Train +11%

Double Stack Percent +4%

Horsepower/Trailing Ton -3%

Train Length +11%

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Margin ImprovementMargin Improvement + 13%+ 13%- Decrease / + Increase- Decrease / + Increase

Change in ContributionChange in Contribution

Future Margin InitiativesIntermodalFuture Margin InitiativesIntermodal

• Increase Train Length

• Reduce Terminal Gate Processing Time

• Reduce Lifts per Unit Handled

• Price Improvement

• Truck-Like Fuel Price Recovery

• Increase Train Length

• Reduce Terminal Gate Processing Time

• Reduce Lifts per Unit Handled

• Price Improvement

• Truck-Like Fuel Price Recovery

0%0% 1%1% 2%2% 3%3% 4%4% 5%5% 6%6% 7%7%

TOTALTOTAL

IntermodalIntermodal

Industrial ProductsIndustrial Products

EnergyEnergy

ChemicalsChemicals

AutosAutos

Ag ProductsAg Products

Revenue Growth PotentialIntermodalRevenue Growth PotentialIntermodal

GD

PG

DP

Union Pacific