NATIONAL TRANSPORTATION SAFETY BOARD

UNION PACIFIC PUBLIC HEARING

Springfield Hilton
6550 Louisdale Road
Springfield, Virginia
Wednesday, March 18, 1998
9:00 a.m.

NTSB Board of Inquiry Members

Technical Panel Members

United Transportation Union Representatives

Brotherhood of Locomotive Engineers Representatives

Union Pacific Railroad Representatives

Federal Railroad Commission Representatives

Texas Railroad Commission Representatives

A G E N D A

AGENDA ITEM

Afternoon Session

Adjournment

P R O C E E D I N G S
-----------------------------

9:00 a.m.

Introductions and Call to Order

CHAIRMAN GOGLIA: Good morning, ladies and gentlemen.

This public hearing has been convened by the National Transportation Safety Board under the authority of Section 304(b) of the Independent Safety Board Act of 1974.

This hearing is part of the Safety Board's investigation of 15 accidents that have occurred on the Union Pacific Railroad since October 4th, 1996. As a result of these 15 accidents, there were 23 passengers and 16 employees injured. There were two trespassers and five employees fatally injured. The total damage from these accidents were estimated to be in excess of $27 million.

I am John Goglia, a member of the National Transportation Safety Board, and chairman of these proceedings.

Other members of the Board of Inquiry from the National Transportation Safety Board in Washington, D.C., are Mr. James Dunn, Hearing Officer. He's the Chief of the Regional Investigation Branch of the Office of Railroad Safety. Mr. Robert C. Lauby, Director, the Office of Railroad Safety. Ms. Julie Beal, Chief Safety Accomplishments -- Chief of the Safety Accomplishments Division, Office of Safety Recommendations. Mr. Vern Ellingstad, Director of Office of Research and Engineering.

The 15 accidents mentioned above have been investigated by the National Transportation Safety Board. We have been assisted in some of the field investigations by representatives of the parties in this hearing.

The purpose of this hearing is to (1) go beyond our field investigation tests and interviews to develop a record for determining the cause or causes of these accidents; (2) to report the facts, conditions and circumstances relating to these accidents; and (3) to assist the National Transportation Safety Board in making recommendations to prevent similar accidents.

We plan on concluding this hearing on Friday after taking testimony for three days. This hearing is an administrative fact-finding proceeding with no adverse interests and no adverse parties. It is not our purpose to assign blame or to determine the legal rights and/or liabilities of persons or organizations, and the Safety Board will not make any attempt to do so. Matters directly related to such rights and liabilities will be excluded from these proceedings.

Pursuant to the Safety Board rules, a pre-hearing conference was held in Washington, D.C., three weeks ago. The hearing conference was attended by the members of the Board of Inquiry, the members of the Technical Panel, and the parties to the hearing. The witnesses for the hearing and the areas in which they are to be questioned were discussed and agreed upon by the parties. The issues to be addressed at this hearing were also discussed and agreed upon.

In addition, exhibits to be introduced into evidence were identified. Copies of the witness lists developed for this hearing have been made available. Ms. Shelly Hazel, a Safety Board public affairs officer, is here to assist the press and the public and can furnish a copy of the witness lists and provide access to the exhibits.

A public docket will contain the exhibits and the transcript of the testimony will be taken and any other related materials. The docket will be available for inspection at the Safety Board's Washington, D.C., Headquarters. Copies of the transcripts, exhibits, individual documents and photographs introduced during this hearing may be obtained for a fee from the court reporter.

The conduct of this hearing will be governed by the Safety Board's Rules of Practice. Under these rules, the witnesses will be first questioned by the Technical Panel, then by a spokesman for each party, and finally by the Board of Inquiry. Cross examination in the legal sense will not be permitted.

After one round of questioning by the parties, I may go around a second time with any follow-up questions and/or clarifications. However, I expect follow-up questions to be limited to those necessary to clarify the record or to address a new matter that has been raised.

The formal issues which will be addressed in the public hearing and to which testimony and questioning will be limited are as follows:

(1) the Union Pacific Railroad Management Safety Oversight;
(2) state and federal safety oversight of the Union Pacific Railroad; and
(3) the role of organized labor in the safe operation of the Union Pacific Railroad.

The parties to this hearing will have the opportunity to submit proposed findings of facts, conclusions and recommendations to the Board of Inquiry after the close of this hearing. I strongly encourage the parties to make use of this opportunity.

If you decide to submit proposed findings, conclusions and/or recommendations, please send them to the National Transportation Safety Board within 60 calendar days after the close of this hearing. You should also send copies of any such submissions to each of the other parties.

Any proposals will be made part of the public docket of the investigation and will receive careful consideration during the Safety Board's analysis of evidence and preparation of the final report of these accidents.

At this time, I would like to introduce the members of the Safety Board's Technical Panel. Mr. James S. Dunn, Chairman of the Technical Panel; Mr. George E. Cochran, Investigator-In-Charge; Mr. Jay Kivowitz, Investigator-In-Charge; Dr. Gerald Weeks, Human Performance Specialist; Mr. Rick Narvell, Human Performance Specialist; Mr. Patrick Sullivan, Signal Specialist; Mr. Ruben Payan, Signal Specialist; and Dr. Mitch Garber, Medical Officer.

Also present here Ms. Shelly Hazel from the Safety Board's Office of Public Affairs; Mr. Kevin Peterson and Ms. Linda Jones and Mr. Michael Bartran from my staff; and Ms. Evelyn Hemingway from the Office of Railroad Safety for administrative assistance.

I will now call the parties to the hearing and ask each spokesperson to stand and identify themselves, their affiliation with the party they represent, and introduce those other persons at their table.

Union Pacific Railroad?

MR. JERRY DAVIS: I'm Jerry Davis, President, Union Pacific Railroad. At our table, I have Dennis Duffy, who is Vice President, SACP; Mr. John Klaus; Mr. Roby Brown; Mr. Mike Baker, who is consultant for Union Pacific; and our attorney, Ray Hasiak.

CHAIRMAN GOGLIA: The Federal Railroad Administration? You don't have to stand.

MS. MOLITORIS: Mr. Goglia, I'm Jolene Molitoris. I'm the Administrator of the Federal Railroad Administration, and we have a large team of participants who will be part of the proceedings over the next days.

I'd like to introduce the Deputy Administrator, Don Itzkoff; Dan Smith from our Chief Counsel's Office; Norma Krayem, who is here at the table, our Chief of Staff; George Gavalla, Associate Administrator of Safety; and Ed Pritchard, Hazardous Materials Director in our Office of Safety.

CHAIRMAN GOGLIA: Thank you, Administrator Molitoris.

Texas Railroad Commission?

MR. MARTIN: Good morning, Chairman. My name is Jerry Martin. I am the Director of the Railroad Division for the Railroad Commission of Texas, and with me at the hearing is Leonard Gray, Operating Practices Inspector in Houston, Texas.

CHAIRMAN GOGLIA: Thank you, Mr. Martin, and you will be the spokesperson?

MR. MARTIN: Yes, sir.

CHAIRMAN GOGLIA: Thank you.

The Brotherhood of the Locomotive Engineers?

MR. WALPERT: Good morning. I'm Bill Walpert, Vice President, Brotherhood of Locomotive Engineers, and I will be the spokesperson.

With me, I have George Hucker, Vice President and Canadian National Legislative Representative. I have Jim Bradford, Special Representative; John Tolman, Special Representative; and Raymond Holmes, Texas State Legislative Board Chairman.

CHAIRMAN GOGLIA: Okay. And for the United Transportation Union?

MR. BOYD: Good morning. I'm Byron Boyd, Assistant President of the United Transportation Union, and with us this morning is Vice President Larry Davis; Local Chairman Tom Sullivan from North Platte, Nebraska; and Scott Belden, our Staff Coordinator in our Washington office, and I will be the spokesman here.

CHAIRMAN GOGLIA: Thank you, Mr. Boyd. Thank you all, ladies and gentlemen.

Today, we are pleased to have with us the Federal Railroad Administrator, Administrator Molitoris, and who has agreed to make a statement on the record concerning these accidents.

Administrator Molitoris?

STATEMENT OF JOLENE M. MOLITORIS
FEDERAL RAILROAD ADMINISTRATOR

MS. MOLITORIS: Chairman Goglia, I want to thank you very much for deciding to have this important hearing. Perhaps you know but perhaps our audience does not that we believe this is the first time that a Federal Railroad Administrator has appeared to make a statement before an inquiry such as this, and I think it is important because it indicates the focus and the level of importance that we are giving to this hearing, but certainly most importantly to the subject of safety in the railroad industry.

I want to thank all of your staff who have worked hard to prepare this event, and on behalf of all of the professional staff at the Federal Railroad Administration, I want to extend my thanks for having a hearing on the issue which really embodies the mission, the vision and the function of our agency and, of course, that issue is safety.

I'd like to talk for a few moments about the context in which we all have to look at rail safety because if we look at rail safety in a narrow sense, we're going to miss the real issues which provide the opportunity for us to reach zero tolerance of any safety hazard which is, I know, your goal, the NTSB goal, and the goal of the Clinton Administration.

The rail industry in the United States has changed dramatically in just the past few years. We know if we look back at the early '80s the Staggers Act gave the rail industry a de-regulated environment and an opportunity to compete which generated vast sums of capital investment. In fact, since 1990 -- since 1990, over $90 billion in capital investment private dollars have gone into the infrastructure of the railroad systems.

Consequently, the improvement in those years between 1980 and 1985 was great, actually a 70-percent decrease in train accidents, but between '86 and '93, the train accident rate essentially flattened out with human factors becoming the greatest cause for tragedies, and mergers and spin-offs beginning to create a whole new kind of industry for FRA to oversee.

We must oversee over 500 short-line railroads and, beginning in '95, mega-railroads with the appearance of merger companies, BNSF, then Union Pacific-Southern Pacific, and soon to be decided by the STB the acquisition of Conrail by NF&CSX, and already on the horizon the proposal to merge CN and IC.

At the very same time that this tremendous change in the architecture of the railroad industry was going on, traffic increased by over 30 percent, and employment levels were at the lowest in this century.

If you put all of those factors together, you really see a dramatically-new railroad industry. These changes in the railroad industry have posed significant challenges for FRA. The growth in the traffic, the rise of the mega-railroads, some of them covering two-thirds of the United States and affecting more than six of our regional areas, plus the proliferation of smaller carriers impose a significant challenge to the FRA's safety enforcement program.

Our 400 safety professionals, plus a dedicated group of state inspectors, must oversee safety of the nationwide industry composed of 1.2 million freight cars, 20,000 locomotives, 220,000 miles of track, 265,000 employees, and thousands of facilities.

The Clinton Administration has increased safety investment in FRA significantly over the first term, with a budget growth in the Office of Safety of 24 percent, plus adding eight grade-crossing managers and three safety project coordinators.

But it was clear to me when I came to FRA in 1993 that if FRA was to precipitate real and sustained increases in rail safety, that is, get the train accident rate going down consistently and to achieve safety increases in every other element that we measure, that real change in the safety program had to occur.

Also, we recognized that by 1994, human factors were the greatest cause of injury and death, and that meant we had to deal with issues never traditionally dealt with by FRA or by regulation. For example, fatigue, an underlying cause of injury and death in all transportation industries, staffing levels, communication and training.

To meet these safety challenges, FRA looked to the principles espoused by the Clinton Administration's National Performance Review and the Government Performance and Results Act enacted by Congress in 1993. Our primary focus became safety results, and we developed strategic plans to achieve those results and the performance goals necessary to measure their success.

The basis for a new safety initiative, we felt, was a collaborative process, and we believed that that was important because all parties had to take responsibility for reaching zero tolerance, that such a process could leverage FRA's small resources, and that an opportunity existed to go beyond regulations to actually achieve the levels of safety necessary to reach zero deaths, zero injuries and zero incidents.

Mr. Goglia, we had no manual to follow. We were creating a whole new process out of whole cloth. Of course, we used best practices garnered from other industries, but clearly the rail industry had to have a process designed for its unique history and culture. Change is never easy, and because fundamentally changing a safety culture demanded changing the attitudes, the behaviors, and the relationships that had been ingrained for over a hundred years, there were many skeptics about our chance for success.

But I will say to you on this record that the leadership of courageous individuals is labor and management and among FRA's professionals truly has created a process which is a whole new way of communicating and working together to achieve safety results.

And I think, and I want to express gratitude to you, sir, for taking the time and the effort to go to Omaha, to meet with the real people who are doing this every day, and I think that you saw and heard the kind of hope, the kind of excitement, the kind of confidence that these new coalitions have in their ability to really reach zero.

A couple of comments about the safety assurance and compliance process which is what we call this work, about what it does. The safety assurance and compliance process or SACP includes outreach through listening sessions to railroad employees, supervisors, labor representatives and managers. After all, no one knows about where the safety problems are more than the men and women who sit behind the throttle, pound the spikes and carry out railroad operations day in and day out.

This SACP has created a new entity through which labor, management and FRA focus on root causes and solutions across whole railroad systems. The first step in the process has an FRA team analyzing the information gathered at these listening sessions, site inspections, team inspections, and from FRA's own statistical database to identify systemic safety issues and appropriate counter-measures.

FRA presents its findings to senior railroad management who then become responsible for devising a safety action plan to address the safety concerns raised by FRA, labor and management themselves. In this way, FRA obtains the commitment of rail management who have the authority to allocate the necessary resources to improve safety.

Within the past two years, FRA has helped facilitate joint labor-management-FRA safety committees on most of the major railroads, including the Union Pacific, and may I say you are going to hear today from Jerry Davis, who is a really stellar example of that railroad management leadership, who has taken the responsibility from his position as president to make this process work, and I think all of the people that you'll hear from over these days or at least a significant portion of them will tell you about their role and their responsibility in creating new opportunities for more safety.

This safety action plan, which includes both long-term and interim safety measures, is subject to FRA approval. FRA conducts follow-up safety inspections to ensure that the plan is properly implemented, and that it's effective in mitigating the safety hazard.

Let me emphasize SACP has not replaced our traditional safety enforcement techniques and tools. FRA still conducts tens of thousands of inspections in any given year. We continue to issue civil penalties as appropriate.

The SACP is a complementary and enhancing safety process, which provides an effective way to assure that labor, management and FRA are finding system-wide solutions to safety hazards and implementing them as soon as possible, and I think it's worth mentioning, Mr. Goglia, that one of my personal goals, excuse me, is to get the investment to the front lines as soon as possible, where it's going to protect the lives and limbs of men and women who risk their lives the most.

The enforcement process is very important. The fines are very important, but we need to realize that those fines go to the general treasury. The kinds of investment that SACP leverages is dollar-for-dollar going to investments, capital investments, signaling, dispatching improvements, across the board, all the things we're dealing with that actually protect the lives of people right now.

So, I think that partnership of putting the enforcement-finding process together with leveraging new dollars and increased dollars for protecting the employees in the railroad industry is to me crucial.

With this as the background, sir, I'd like to address the specific issue of safety on the Union Pacific Railroad and the incidents that NTSB is reviewing over the next days.

My colleagues, who you will hear throughout these days, will provide an incident-by-incident review. My purpose at this time will be to address the overall safety record on the Union Pacific from '93, the tragedies of '97, and the progress made since the SACP took hold on the Union Pacific.

Before I detail the safety record of the Union Pacific, I would like us all to remember the nine employees that lost their lives in '97 in the line of duty, five with the collisions, four yard fatalities, doing their jobs as safely as possible in an industry where safety is a constant challenge.

As you know, Mr. Goglia, the NTSB and the FRA are usually the first on the scenes at these tragic collisions, and you all know too well the devastation that evolves when trains collide.

Our thoughts go to the families of those employees whose lives were tragically cut short last year. It is the memory of these individuals and the memory of all employees, passengers and those lost at grade crossings and on railroad property that motivate us at the FRA to dedicate our every effort in the pursuit of reaching zero tolerance, and I look forward to the time when we can come to a meeting like this to talk about the fact that we have reached it.

One of the FRA's earliest SACP efforts occurred on the UP in 1995. It's crucial to realize that the Union Pacific was a vastly-different railroad at that time. It was approximately two-thirds smaller than it is today. Neither the Chicago Northwestern nor the Southern Pacific were yet a part of that system.

The FRA identified regulatory compliance issues. They were essentially regional in character, and the Union Pacific responded. We should also look at the situation in 1995. Accident rates were on the decline on the UP system as a whole. UP was following the trend that characterized the rail industry in general. Traffic was rising, the size of the work-force and infrastructure declining, and safety was showing steady improvement.

Between '95 and '97, inclusive, the train accident rate on the combined UP system dropped from 3.88 to 3.36. That's with 10 months of final data. The total number of train accidents from 694 to 476, and this trend held true for every major accident cause factor.

The human factor accidents declined by 39 percent while track-caused accidents fell 24 percent over this period. Even in Texas, where four major train collisions occurred in 1997, the overall number of train accidents on the combined UP system fell by 25 percent, and the number of human factor accidents fell by 13 percent in '97.

Safety progress was measurable until an eight-week period, beginning in June 22nd, 1997, when five major train collisions over that period caused the deaths of five employees and two trespassers.

These tragic collisions in mid-summer marked a sharp reversal of the positive safety trends that the UP had experienced. In August of that year, realizing that we were dealing with something that was different, we decided to send the largest single force of inspectors we had ever used on a single property. In fact, 25 percent of our inspection workforce was sent out on the Union Pacific to stop these deadly series of collisions and find out what caused this deadly trend.

An FRA team set up a command center at UP's corporate headquarters in Omaha. Commencing on August 23rd, FRA sent more than 85 federal and state safety inspectors to conduct a two-week 24-hour-a-day team inspection across the entire system. This sweep was followed up by a five-day system-wide team inspection involving 87 inspectors starting on November 3rd to verify that the changes that we had identified were being taken place.

Between the two sweeps, the FRA held literally hundreds of listening sessions with rank-and-file railroad workers to gain a ground-level perspective of UP's safety problems. I myself, Mr. Goglia, went to the -- went to Omaha twice to speak with management and labor over very long days to assure myself that I understood the issues that we had to address and that Union Pacific had to address.

Based on the information developed through our investigations and these very intense SACP activities, the FRA issued a series of safety advisories to immediately address several safety critical topics.

They were Advisories 97.1, .2 and .3. 97.1 recommended safety practices for certain locomotives equipped with emergency emule fuel line cut-off. 97.2 were safety practices to reduce the risk of casualties from runaway locomotives, cars and trains caused by a failure to properly secure, and 97.3, safety practices to reduce the risk of accidents arising from authorization of train movements past stop indications of absolute signals, and these safety advisories have been submitted for your record as Exhibit 7-A.

Furthermore, beginning in September, joint labor-management-FRA safety committees were formed to address the issues that had been found and identified by FRA through the entire process.

As we crystallized our findings and recommendations, we have maintained a very close contact with labor and management to actively seek solutions to the problems.

Let me identify four inter-related problems that we felt permeated all of the issues. Number 1, under-staffing; Number 2, fatigue; Number 3, insufficient levels of supervision; and Number 4, dispatching deficiencies.

FRA found insufficient staffing levels particularly among train and engine service personnel, supervisors and dispatchers. Long hours, unpredictable work schedules, many consecutive days of service, excessive time waiting for transportation to and from assignments, all combined to create high levels of both acute and cumulative fatigue among the UP workforce.

Although FRA found little evidence of UP employees exceeding statutory hours of service limitations, the fatigue problem was evident.

A third major concern was insufficient levels of supervision. FRA found that UP supervisors were inundated with paper work due to a cutback in clerical personnel.

Also, as the railroad began experiencing service problems, all qualified supervisors and managers were pressed into service running trains. The result was that the supervisory workforce was unable to perform fully its intended safety functions of over-sight, planning and coordination.

Finally, the deficiencies at the Harriman Dispatching Centers. There were simply too few dispatchers causing many of the positions to be burdened with too much work, and the level of supervision was not sufficient. We also found that the training of both dispatchers and managers were -- was deficient.

I'd like to talk now about the kind of comprehensive steps that the Union Pacific has taken to address all of these crucial issues.

In February, FRA conducted another senior management meeting with senior representatives from Union Pacific, rail labor and the FRA. We talked about the root causes of the safety problems that led to the collisions and derailments of the previous six months and identified recommendations to prevent their recurrence.

Let me emphasize all during that period, we had been working and UP had been working to change issues related to the findings of our sweeps, but this was the formal action plan comprehensively identifying everything across the whole system.

The UP formally presented its action plan developed with the input of rail labor and FRA's guidance detailing both long-term and interim measures to correct and increase safety.

The results of these actions, Mr. Goglia, are significant. Under the plan, staffing levels are being increased at a rate three to four times greater than in previous years. The Union Pacific projects hiring more than 4,300 railroad workers this year, at least 1,200 of which are train and engine service personnel.

Even more significant, the Union Pacific has formed a team to evaluate staffing needs and assumptions through the year 2015, and it has invited labor representatives to review its staffing plans to make sure there is a reality check to the plans that are on the table.

To address the critical shortage of safety supervisors, the Union Pacific has hired or is in the process of hiring approximately 134 supervisors.

In addition, the fatigue counter-measures. I want to emphasize these, Mr. Goglia, because I think it identifies for you and your staff that FRA recognizes it must be involved in areas where no FRA has been involved before because the issue of fatigue under-girds so many safety hazards.

In addition, it is a transportation safety hazard across all modes of transportation. You know well the issues of fatigue as relates to the aviation industry and many others.

We identified this problem early with Union Pacific, and they took a very courageous step. They have hired a leading fatigue management expert who you will hear from later in this process, Dr. Mark Rosekind, who is formally a fatigue consultant to NASA. With this expert guidance, the Union Pacific plans to develop and implement a comprehensive fatigue management program addressing a broad spectrum of fatigue mitigation measures, including work-rest cycles that permit time off, calling windows, a napping policy, improved work assignment predictability, improved rest facilities, and reducing dead-heading time.

These are issues, Mr. Goglia, that we heard from -- directly from hundreds of Union Pacific employees who called us, wrote us, or faxed us or e-mailed us when I offered that avenue of communication to them through a video that President Davis and I made for consumption by all of the employees of Union Pacific.

As an interim measure, the Union Pacific has already instituted a system-wide policy that provides train and engine service personnel with guaranteed right to receive a day off after working seven days, seven consecutive days.

While we recognize this is just an interim step to address fatigue, I think it emphasizes their real commitment to the issue, and I want to note that the Union Pacific is the first railroad in this country to have this system-wide policy of guaranteed day off after seven consecutive days.

At the Harriman Dispatching Center, which was a place I spent a good deal of time in talking to the employees, and I was very, very touched by (a) their commitment to doing a safe job, and (b) their frustration and concern that they couldn't do all of the things that they were being asked to do.

As a result of our work with Union Pacific, they have hired 46 new dispatchers since last year. They have reduced the workload of 11 dispatchers already there. They have tripled the number of dispatcher managers, and they will soon add two new dispatcher desks.

They've also implemented a new training program to benefit both dispatchers and their supervisors.

The SACP approach has provided FRA the opportunity to address issues unprecedented in this industry. We are aware that the safety action plans in and of themselves won't make the Union Pacific safer, but the fully-implemented plans and implemented in a timely manner, we believe, will bring around the enormous safety and safety culture change that is required to reach zero tolerance.

The FRA is fully committed to ensuring that sufficient follow-up is conducted of the UP safety action plan, to monitor the plan's implementation and effectiveness.

Mr. Goglia, last summer was really a tragic one, not only for the families who lost their loved ones but for all of us, because these issues really do affect the whole railroad industry and the FRA in a very significant way.

It would be another tragedy if we did not learn from these experiences. Ever since last summer, we at the FRA have asked ourselves over and over again why would a railroad with a proven safety record, almost up to a certain point in time, have such a tragic change? How can we prevent them from ever happening again? Was there something else, some pointers, some predicate, which could have warned us of these tragedies?

After eight months of analyzing this turn of events, I can honestly say to you that clear indicators weren't there. I've already told you that the statistics collected through our process showed a clear safety improvement, and actually a dramatic safety improvement.

Do we have, Jim, the statistics on -- or the -- on Union Pacific, if you look at their actual reductions, and I think we have those, you will see that overall, the improvement in safety between '96 and '97 was actually more dramatic than even the years before.

Now, what we learned from that is that statistics alone simply can't get you there. We must have the on-going presence on the properties with this continuous, constant communication with labor and management because I believe, Mr. Goglia, that with the appearance of mega-railroads in this country, whole new ways of doing business, of managing companies, of regulating companies, are necessary for these companies to run safely and achieve the zero tolerance that they want and we want.

We have to have a process, and I think SACP is that process, to give us quicker means of prevention because prevention is what we want.

I believe that because the communication lines are so much stronger, because there are relationships that have never been there before, and I think you will hear from our inspectors the dramatic change in being able to find an open door from Jerry Davis through Dennis Duffy and all the way through the organization as soon as anything jumps up as a hazard that must be corrected immediately.

All of the statistics from our safety programs and data provided by the industry show that rates and numbers of train accidents were continuing to decline. Class 1 railroads were undergoing what appeared to be successful consolidation where increasing traffic volume, shrinking workforce and physical plant, steadily improving safety all were going hand-in-hand.

The events on the Union Pacific this past summer marked a sea change. We have learned from this experience that a paradigm shift in the railroad industry can occur suddenly, and with only traditional ways of dealing behind us, we cannot stop them. We cannot prevent them before they hurt or kill people.

We have the ability now to identify and quickly respond to fundamental changes that affect railroad operating safety. In fact, as you know, we have taken the unprecedented step this year for the first time in history to file with the STB a filing which says that these mega-mergers must have detailed safety implementation plans in order for such mergers or combinations or acquisitions to really be evaluated fully.

As you know, in the past, the competitive issues were the real issues of consideration before the STB. We have learned that mega-railroads demand other kind of considerations before those decisions are made, and STB and the Federal Railroad Administration will do a joint rulemaking to make this -- which will propose

-- of course, we have to go through the rulemaking process, to make this mandatory in any future merger or acquisition.

The Union Pacific experience demonstrates that SACP provides FRA with new tools to expand our reach, identify and address critical safety issues that have traditionally been outside the realm of our regulation.

Our response to the events on the UP went well beyond the SACP process with implications for the entire industry. We now recognize that a pro-active preventative approach to safety is absolutely essential to the railroad industry, particularly when railroads are engaged in consolidations, mergers and acquisitions.

In closing, Mr. Goglia, I'd like to say that at the FRA, we are constantly re-examining our rail safety programs to ensure that they keep pace with the evolution of this dramatically-changing railroad industry.

We try to learn from the problems we encounter, and we seek new ways to make our safety programs more effective. Our experience with the UP was certainly no exception. That experience has enabled us to further refine and improve our own SACP process so that we can effectively take safety in the railroad industry to new levels.

The SIP, the Safety Improvement Plan, process that I mentioned with regard to our filing to the STB will provide the railroad industry itself with new tools to become more pro-active in anticipating safety concerns and preventing safety problems before they occur.

Armed with these tools and working in concert with rail labor and management, we are convinced that we can move even closer to our goal of zero tolerance for railroad accidents, injuries and fatalities, and, Mr. Goglia, to respect everyone's time, I will not review the ripple effect that this SACP process has had throughout the country.

I will mention one item just to give you an idea. Yesterday, I spoke to a very large number, 50 or 60 people, who were sitting together in a new organization called NARAP, the North American Rail Alertness Partnership.

This is a group of individuals from railroad management, labor, suppliers and FRA, who decided that rail industry fatigue was something beyond what any single railroad can do enough about, and they decided to come together in this historic new national partnership to attack the problems of fatigue and solve them.

I think that that is only one indicator, I could mention many more, and perhaps should submit some of those things for the record, of the kind of implication for safety partnerships that have come out of working on a whole new way of doing business with FRA, rail management and rail labor.

I can say to you that the FRA was challenged because we didn't have a boilerplate or a manual. We had to create it out of whole cloth, and our staff had to create in themselves through training and hard work skills that were never ever before called for in the work at FRA, but if we all, NTSB, FRA, together are going to achieve our goals, which is zero tolerance for any safety hazard, I believe that all of us must really do a self-assessment on how we're doing business and how we can not only stop but prevent the kinds of tragedies that we're discussing today.

Again, my thanks for giving me the opportunity to talk about a safety story that has achieved much and that can achieve much more.

Thank you, Mr. Goglia.

CHAIRMAN GOGLIA: Thank you very much, Administrator Molitoris.

We have -- I have a number of questions, and I'm sure, based upon the way I notice everybody writing here, I think that we all may have some, and I will go around and give everybody at the head table here the opportunity.

I just would like to just say one thing before I forget it, is that I would like to have for the record those high points that you just talked about, and with that, I'll start with Ms. Beal. Do you have any questions?

MS. BEAL: I do. Good morning, Ms. Molitoris.

Can you tell me what plans will be implemented up until the joint rulemaking that you spoke of to ensure that future large mergers don't result in similar safety problems?

MS. MOLITORIS: Is it Ms. Beal?

MS. BEAL: Hm-hmm.

MS. MOLITORIS: Thank you. The STB accepted our recommendation with regard to the proposed acquisition of Conrail by Norfolk Southern and CSX, and those plans were filed with the STB.

We have worked with the railroads practically daily. We have a team on the -- at the FRA who's working on nothing but this, and once they were filed, we were not at all finished because we continued and are continuing, present tense, to work with them to develop a level of detail committed to paper which in a sense becomes an action plan and a contract which we will hold these railroads to and will monitor closely their implementation of same.

We believe that the joint rulemaking could be completed by the end of this calendar year and consequently would be in place to require these things for future merger considerations, but if, for some reason, it was not, we would do the same thing that we have done with this proposed acquisition, and that is to file to say that these kinds of mergers and acquisitions cannot be fully evaluated without that kind of safety consideration.

MS. BEAL: One other question. In talking about SACP, could you give us a concrete example of how the SACP process has actually come about to implement a change that you feel is noteworthy?

MS. MOLITORIS: That I feel is -- I didn't hear the end.

MS. BEAL: Noteworthy.

MS. MOLITORIS: Well, I would suggest to you that all of the items that I identified in my testimony with regard to the decisions by Union Pacific came out of the working partnership at the table.

I know Jerry Davis himself has gone to meetings himself to listen firsthand to the concerns about fatigue, about under-staffing, about lack of enough supervision. They are dealing with things like train line-ups which, in terms of the kind of input we got from the hundreds of individual employees who wrote or called or e-mailed or faxed, was one of their most crucial concerns because they were expressing extreme fatigue, and the issues revolved around crew calling, around train line ops, were at the heart of their frustration, and right now, there are -- there is both an interim and a longer-term plan in place by Union Pacific, and perhaps one of their testifiers or one of ours will go into detail, but it has to do with the software development which will assure that when employees call up, they get a real reading on how many hours or how many trains out they are or might be to -- to getting called.

This gives them an opportunity to get some real rest and rest that will not be disturbed. There are issues around computer systems actually where there was a glitch, and the computer system kept calling. So, the person's trying to sleep and continues to be awakened. This is a very, very frustrating thing.

The one thing I want to mention about the large majority of people who contacted us personally and reports from what I -- the reports I received from my people on the property is that the Union Pacific employees are dedicated to this railroad. They want it to be the best. They have a tradition and a history of feeling that they are the best, and they want these things fixed so they can perform their best and operate at peak performance.

I think and would be happy to submit for the record, in fact, we have an action plan that we can give you which identifies all of the initiatives. The fatigue mitigation and the hiring of Dr. Rosekind alone is an investment of some $4 million, which is focused directly on the problems that employees say are leading to catastrophe.

So, I think these kinds of investments coming out of the SACP process are extremely worthy, and we'd be happy to submit, you know, -- I will tell you truthfully it is almost difficult to capture all that is going on because they have actually had 339 meetings across the entire system of the Union Pacific listening, gathering, identifying ways to make things better.

This is a huge amount of work with hundreds of people over a period of six months.

MS. BEAL: Thank you. No further questions, Mr. Chairman.

MS. MOLITORIS: Thank you.

CHAIRMAN GOGLIA: All right. Mr. Ellingstad?

MR. ELLINGSTAD: Thank you, Mr. Chairman.

Ms. Molitoris, you had indicated that -- or you had claimed that there were no clear indicators of the pending problems that appeared on the Union Pacific.

I assume that you're talking about your routine monitoring of -- of statistical indicators of accidents, etc. Could you comment on -- on other indicators that -- that -- that might have been available to -- to assess these under-staffing issues, the fatigue problems and this kind of a thing, and apart from -- from the development of these particular plans, does the FRA have data systems and data monitoring activities in place that are sufficient or that have been improved by this experience to avoid these kinds of problems in the future?

MS. MOLITORIS: That's a long question, Mr. Ellingstad. I'll try and answer its parts.

MR. ELLINGSTAD: Okay.

MS. MOLITORIS: Let's go back to 1995 because that was one of our first SACP efforts. Clearly we were not as expert at probing questions, but the things that we found were primarily regional in nature, and they were addressed by the Union Pacific.

Again I want to emphasize it was not the same Union Pacific as 1997, and I think that's a crucial issue. They were two-thirds smaller than they were in 1997.

We continued to get good information through the normal thousands of inspection processes that we continue to do, and it's a very crucial part of our database.

What we know is that that database isn't -- I mean that collection process isn't fast enough because obviously we have hundreds of inspectors across the country, each of them is covering hundreds, sometimes thousands, of miles, and since some of the mega-systems now cover two-thirds of the United States, putting all of these together in a way that shows the trend takes too much time.

Adding to the normal process, the SACP process gives us a timeliness, gives us a quick response component that is absolutely essential in this day and age of our railroad industry, and I think our best weapon, prevention weapon, is the kind of communication avenues that are now in place so that if I, a signal employee or BMWE or a locomotive engineer, have a problem and identify this as a safety hazard that's going to hurt somebody or kill somebody, I have a way of getting action now.

(A) I can go to my supervisor. In the best of all worlds, that supervisor is going to realize that safety's first. The safety culture is going to be so in place that they will not rest until that is solved. (2) Say that doesn't happen, they have our regional people that they can go to, and with our reorganization, we are identifying specific FRA people at the properties, because one of the things we realized as the whole architecture changed is that we as an organization were more structured for the railroads of the '60s than we were for the railroads of the '90s, and, so, we needed more people at the headquarters and heartbeat of the railroad as well as we needed more people in listening sessions.

Let me give you one example which may clarify. This is an example on the Burlington Northern Santa Fe, where one of -- two of our inspectors went to a listening session. The engineers there identified a frustration and a worry. They said signals were dropping red just as they got to an interchange, and they said we've got two choices, and they're both bad. We either go through it and risk our certification or we throw it into emergency, and we risk derailment.

Those are not two choices anybody wants to have. As a result of that, we went to the headquarters. We worked with the NSF. We began to dig. We found a glitch in the software system. This glitch was doing exactly what these employees said.

Not only at the places they told us but at 400 places on the railroad, and, so, that communication opportunity and the cooperative working partnership that exists was enabling that problem to be fixed at 400 locations.

Now, I think that gives you an order of magnitude and time that these processes together can prevent rather than having to go with you to places where tragedy happened.

MR. ELLINGSTAD: Okay. Thank you.

Does the FRA have sufficient authority to -- to deal in all of the safety areas, for example, with respect to fatigue, with respect to hours of service regulations, these kinds of things?

MS. MOLITORIS: Mr. Ellingstad, we have the responsibility for safety, and I consider that a very broad and a very serious responsibility.

As I tried to illuminate in my comments, SACP gives us the opportunity to work with companies and employees on issues where there is no regulation right now. It gives us, as I have said to some people, an opportunity where those before me have feared to tread because there was no specific mandate on specific supervisory levels, specific hiring levels, specific implications from cutback decisions, whether it be dollars or people.

What SACP gives us the opportunity to do is to work with companies on those areas which leverage safety beyond regulation, and I believe that's the only way we're going to get to zero, because you can't have a regulation that covers every single safety hazard that could be.

We have very good regulations in many areas. We have many, many more coming through the pipeline, and I think you'll hear about that from Mr. Itzkoff when he talks about the RSAC process. We've tried to bring some of these best practices into the regulatory arena as well.

I believe we've had good response from the railroads because at least as expressed to me, and you'll have to ask them directly, there is a realization that this kind of cooperative effort helps them.

We in a sense, FRA in a sense, has become a bridge, a facilitator, between labor and management where, for many, many, many years, over a hundred years, collective bargaining issues have set up a hostile environment.

Safety is not anything that can be negotiated. Safety is Number 1 priority for all people, especially the employees whose risk is the highest. So, I think that although specific legislative written authority to cover every single instance that you might be alluding to is not in place, the overall mandate to achieve safety in the rail industry is the one we follow.

MR. ELLINGSTAD: So, you're saying you do not need any additional regulatory authority?

MS. MOLITORIS: No, I'm not saying that, because obviously we have many, many regulatory initiatives coming through the pipeline. What I'm saying is we will not wait for each of the regulatory processes to be completed. We must simultaneously work this other process as we move the regulatory process forward.

I sort of see it as a pincher movement with all of the methods to increase safety working simultaneously.

MR. ELLINGSTAD: Thank you. No further questions, Mr. Chairman.

CHAIRMAN GOGLIA: Mr. Dunn?

MR. JAMES P. DUNN: Thank you. Good morning, Ms. Molitoris.

MS. MOLITORIS: Good morning, Mr. Dunn.

MR. JAMES P. DUNN: In your remarks, you mentioned that there were not clear indicators or the statistics did not give you clear indicators of what was about to happen on UP.

Do you think the FRA is adequately staffed to -- and that's against the background also of indicating the need for the strong presence on the property. Is the FRA adequately --

MS. MOLITORIS: Did you say what kind of presence? Smaller?

MR. JAMES P. DUNN: No. Strong.

MS. MOLITORIS: Stronger.

MR. JAMES P. DUNN: I believe you indicated

--

MS. MOLITORIS: Yes, that's right.

MR. JAMES P. DUNN: -- you need a strong presence.

MS. MOLITORIS: That's right.

MR. JAMES P. DUNN: And the question I have is do you think the FRA is adequately staffed to maintain that strong presence on the property and also go forward with SACP? Is staffing an issue for you at the agency?

MS. MOLITORIS: As you know from my remarks and the President's '99 budget, the President has recommended 32 new inspectors and professionals to help us with this effort. I've also mentioned that there was a 24-percent increase over the Clinton Administration so far with 11 new staffing until the '99 budget.

I would say to you, Mr. Dunn, that addressing an industry of our size, and I have that in my comments, how many thousands of miles and employees and vehicles and facilities, is a tremendous challenge.

I have to say to you I have a respect, a personal respect for our staff that exceeds anything I ever knew I could have because I see how they give of themselves, how committed they are to this mission, and how much they have to stretch themselves because you can even take the example of the first sweep in August. 25 percent of our inspection workforce was out there on one project, and that doesn't count all the people in Headquarters and the regional offices that are supporting, trying to support this effort.

We had Regooch, who I believe you will hear from, who was three months in Omaha with staff and support. These people are giving up a lot with their families. It's not only as you so much do with the response to tragedies that you go out to and sometimes you have to miss the graduation or the birthday dinner or whatever it is, but this is going on constantly, and the other part that I will say to you is that we under-stand more fully than we ever have what really has to be done to get to zero. It's enormous.

What I do know, I'm very grateful that the SACP process has helped us leverage a very small workforce because, for example, in the regulatory arena, we have over 500 active participants, labor, management, FRA.

Now you don't get that kind of investment if you operate sort of on your own, and that's the challenge we face all the time. I am very, very proud of my people because not only have they given of themselves in terms of time and effort and commitment, they have learned. They've had to learn new skills. They've had to learn not to be afraid to go to Jerry Davis's office.

You know, in the old paradigm, an inspector from the FRA would never have the idea that they could possibly go to Jerry. Now Jerry would say he's always the open door guy, and I can verify that he is, but just in general, with our organizational structure and our traditions, people saw themselves at certain levels, and, you know, who would they be to -- to go to a high-ranking official of a railroad or even in the FRA?

I think what is happening is that our work-force, and I think you're going to hear from our inspectors, and in talking to them, I think all of them have told me stories of how they are empowered because they realize the weight of safety is as much on them as is on everybody.

So, we individually and collectively are taking tremendous responsibility for this. We appreciate the kind of support and guidance and help the NTSB gives us because we know we need all the help we can get from every place.

MR. JAMES P. DUNN: Thank you. In the safety assurance assessment that FRA released in February, there was a conclusion that we have discussed at the Safety -- that staff has discussed, and that was that FRA concluded on UP that a fundamental breakdown existed in some of the basic railroad operating procedures and practices essential to maintain a safe operation.

Was -- was that conclusion discussed with Union Pacific, and, if so, what was their response to that?

MS. MOLITORIS: Well, I think Jerry Davis and I had almost daily conversations during those tragic times, and I -- I know that is -- is a statement that's been pulled out.

I think it's accurate, Mr. Dunn, and I think the fact is that one of the reasons the Union Pacific welcomed us was that they were terribly frustrated and startled by this terrible turn of events, too.

There's no way to specifically and scientifically make a lot of these connections, but I will say to you that in my own mind, as I listened to employees and talked to Jerry and Dennis Duffy and so many of the professionals at Union Pacific, as well as, let me say, Burlington Northern and CSX, too, that I believe there is a point where the growth escalates to such a level that the old systems just don't work any more, and because of the tradition of safety that Union Pacific always was proud of and always had, sort of the venerable Union Pacific, they expected and anticipated that the systems would continue to work.

I think what we've all learned is in order to get bigger, so that railroads can be competitive in a very competitive transportation world, that new systems, fundamental new systems, have to be in place to manage it, to operate it, to communicate with it, and to keep it safe.

MR. JAMES P. DUNN: Thank you, Ms. Molitoris. That's all the questions I have.

CHAIRMAN GOGLIA: Mr. Lauby?

MR. LAUBY: Thank you.

MS. MOLITORIS: Thank you.

MR. LAUBY: Always a pleasure, Ms. Molitoris. I had a basic question. I listened very carefully to your presentation, and I had a basic question concerning how we measure safety on the railroad, and I heard you discuss that in 1995, we started a SACP with the Union Pacific, but with a railroad that was entirely different from the form it took today, and that even though the statistics did not indicate a problem, we ended up with -- with a railroad that was under-staffed, that we had severe fatigue problems, that we had supervisors inundated with paperwork and could not provide the supervision that they needed to, and we had problems at a dispatching center with too few employees and inadequate training, and again this is -- this is with the back-ground that the statistics continue to improve.

My question for you is how can we measure rail safety when the statistics are -- are not giving us a good read?

MS. MOLITORIS: Mr. Lauby, first of all, Mr. Goglia, I want to compliment Mr. Lauby because Mr. Lauby, of all your people, has been most involved with our SACP process. He has welcomed our staff to discuss ways to improve the way that we both work together on safety. So, I want to recognize that, Mr. Lauby, and thank you very much.

One thing I would answer to your question, Mr. Lauby, is that we don't measure it one way. There is not a silver bullet for measuring safety. Clearly the statistics that we collect on an on-going basis are very, very important, but what I see is that the timeliness -- I mean, for example, the statistics I was giving you were 10 months final from '97. We still have the last two months to finalize. It's a huge industry. Getting them all in, checking everything.

So, there's a time issue, a time gap involved there.

I believe, first of all, the Number 1 way that you measure is how close to zero are they? Zero injuries, zero incidents, and zero deaths. How close are they? I mean Jerry checks that every day. We check it every day.

Number 2. The results gained by the SACP are a very timely way of measuring success. I'll just mention a little story to you because I think it's sort of a common sense way of measuring. When I first got to the FRA, which was in 1993, one of my most unattractive times for me was when I had to do the mail, Mr. Lauby, because the mail to the FRA in 1993 was not a pleasant thing. Lots and lots of people wrote to us about our deficiencies. We weren't fast enough. We weren't quick enough. We didn't listen well enough. We didn't do enough.

It was very depressing because I saw lots and lots of people working very, very hard at the FRA, and, so, the first 10 to 12 months, we spent a lot of time, as you well know, bringing lots of people in from every part of our industry to listen so that I could hear and see them firsthand, what can we do better, and what I said to my colleagues is we will know that we're doing better in lots of ways. How fast our letters go out, all kinds of traditional measurements, but one way we'll really know is when our mail changes.

We're going to know that we're starting to do better when the response from the American public and our customers comes in in a different way. That has happened.

I think the same kinds of measurements come out of the SACP process because management and labor are talking together. FRA is there. It's a firsthand understanding of what's really happening day-to-day on the railroad.

So, what I expect is that we will never stop recognizing and using our data for long-term trends, for ways of evaluating things throughout the industry, but we have to have SACP as that right-on-the-spot important communication and results entity that can, with a snap of a finger, get something to happen to save a life. That's to me what is so crucially important and also bring information to management that under other -- without that entity, they might not know.

MR. LAUBY: I have one final question along those same lines. Do -- do you believe that the SACP process, along with the statistics, have the ability to detect the types of problems that occurred on UP before they get to the extent that we had last summer?

MS. MOLITORIS: Yes, I do.

MR. LAUBY: Thank you very much.

CHAIRMAN GOGLIA: Administrator Molitoris, two issues or two items I would like you to submit for the record, and you mentioned it earlier. One was the SACP process, the entire package, and if you have it electronically, you don't have to cut down half a forest, and the other is we'd like to have a copy of your filing, the joint filing or if you're both going to file separately, that's okay, but for the safety improvement plans, and now I know why Jim Hall, the Chairman of the NTSB, always asks his questions first, because everybody has asked mine.

So, with that, on behalf of the Board and also a personal thank you for appearing here today.

MS. MOLITORIS: Thank you very much, Mr. Goglia.

CHAIRMAN GOGLIA: We will now take a short break. I think coffee is up on everybody from the squirming I noticed in front of me. 15 minutes sharp.

(Whereupon, a recess was taken.)

CHAIRMAN GOGLIA: Okay. We will go back on the record, and at this point, the Hearing Officer, James P. Dunn, will introduce the exhibits to be used in the hearing and then begin the calling of witnesses and the taking of testimony.

Mr. Dunn?

MR. JAMES P. DUNN: Thank you, Member Goglia.

Pre-hearing conference was held at the Safety Board Headquarters on February 27th. At that pre-hearing conference, the witness list and all the exhibits were gone over and agreed to by the parties to the investigation. So, we won't go over each of them individually at this time.

However, since that time, the Safety Board has received exhibits, additional exhibits from the Union Pacific and the Federal Railroad Administration. Those exhibits are 6-A, B and C and 7-A, B and C, respectively. Copies of those exhibits have been sent to the parties.

There is one change to the witness list. Mr. John Megary, Witness Number 10, is unable to attend the proceedings due to a serious illness in his immediate family, and please send our message that we hope everything turns out well for Mr. Megary.

At this time, the National Transportation Safety Board calls James S. Dunn. Mr. Dunn, would you stand and raise your right hand, please?

Whereupon,

having been first duly sworn, was called as a witness herein and was examined and testified as follows:

MR. JAMES P. DUNN: Thank you.

STATEMENT OF JAMES S. DUNN
NTSB, CHAIRMAN OF THE TECHNICAL PANEL

MR. JAMES S. DUNN: Good morning, ladies and gentlemen.

On October 29th, 1997, the Navasoto, Texas, accident occurred. The National Transportation Safety Board launched a team of investigators to begin a special investigation of the Union Pacific Railroad. The Navasoto accident represented the latest in a series of accidents that the National Transportation Safety Board has had under investigation in the past year.

In all, there were 15 accidents that resulted in seven fatalities, 39 injuries and over $27 million in damages. Included in these 15 accidents are 10 collisions, three derailments related to equipment, and two derailments related to track, one of which resulted in a derailment of an Amtrak train.

At this time, I would like to give you a brief overview of those 15 accidents.

On October 11th, 1996, in Cheyenne, Wyoming, a series of collisions occurred when a run-away cut of cars with an unmanned locomotive collided with a Union Pacific westbound freight train. The crew of the west-bound train saw the run-away cars and jumped from the train sustaining minor injuries. An eastbound Union Pacific freight train traveling on the adjacent track derailed when it struck a set of wheels from the derailed equipment.

On January 12th, 1997, in Kelso, California, 68 cars of a Union Pacific freight train derailed when an engineer inadvertently activated the engine shut-down switch, eliminating the train's dynamic braking capability and caused the train to run away. Speeds reached 75 mile per hour. Luckily there were no fatalities or injuries in this accident.

Then on January 13th, 1997, in Granite, Wyoming, Amtrak Train Number 25 derailed at the second and third locomotive units in all nine cars. The derailment occurred at a welded area for the track which broke under the train. 20 passengers, three on-board service personnel, and one operating crew member sustained minor injuries.

On February 7th, 1997, in Gurney, Illinois, a southbound Union Pacific freight train derailed the 34th through the 47th head cars. The 14 loaded freight cars derailed as a result of a draw bar that broke in the 32nd head car.

February 13th, 1997, Wellington, Kansas, a Union Pacific freight train was traveling about 40 mile per hour on the main track when the crew observed a switch improperly aligned for a siding. The engineer made an emergency brake application, but the train continued into the siding, derailing and striking track equipment that was in the siding.

February 21st, in Odem, Texas, a Union Pacific freight train collided with the rear car of a stopped Union Pacific freight train. The post-accident investigation revealed that the crew of the standing train received an incorrect computerized car count and left 32 cars south of the yard limit sign following the main track. The two-man crew of the striking train were injured when they had to jump from the train.

March 16th, Pinter, Arizona, nine cars of a Union Pacific freight train derailed while the train was traveling at 40 mile an hour when the brakes applied into emergency. A truck on one of the derailed cars was found to be defective.

May 27th, Marshall, Missouri, 27 cars of a 102-car coal train derailed when a piece of defective rail broke under the train.

June 22nd, Devine, Texas, two Union Pacific freight trains collided head-on, derailing five locomotives and 11 cars. As a result of the collision, two crew members were fatally injured and two sustained injuries. Two passengers -- trespassers riding in one of the locomotive units were also killed.

July 2nd, Delia, Kansas, two Union Pacific freight trains derailed when the lead locomotive of the westbound train collided with the sixth car of an east-bound train. A total of 18 cars and two locomotives were derailed. The engineer on the striking train was killed and the conductor was injured.

August 20th, Fort Worth, Texas, a four-unit Union Pacific locomotive consist traveling eastbound in an unoccupied condition and an estimated speed of 60 mile per hour collided with the lead locomotive unit of a westbound UP freight train. An engineer and an engineer pilot were fatally injured. A conductor was also injured.

August 23rd, Shawnee Junction, Wyoming, a Union Pacific-loaded coal train collided with the rear car of a standing Burlington Northern Santa Fe coal train. The locomotive engineer and the conductor from the Union Pacific train sustained minor injuries.

August 31st, Barstow, California, a Union Pacific freight train struck the rear car of a Burlington Northern Santa Fe freight train.

October 25th, 1997, Houston, Texas, a Union Pacific intermodal stack train collided head-on with a Union Pacific freight train at West Junction in Houston, Texas. The engineer on the intermodal train stated that the train had received an initial terminal air test about 10 miles from the accident. He said that he received an approach signal to West Junction, and when he applied the brake, the train was not responding the way he felt it should. He said he made a full service reduction of the automatic brake and then placed the train into emergency braking.

He stated that he and the conductor saw a headlight of an approaching train on the same track, and that the conductor called out on the radio and told the crew on the approaching train to jump. All four crew members from both trains were injured when they jumped from their trains.

October 29th, 1997, Navasoto, Texas, accident, a Union Pacific freight train collided with the rear car of a standing Union Pacific freight train. The crew of the striking train told investigators they had fell asleep on the train prior to the collision. The engineer's post-accident blood test was positive for alcohol. There was one injury as a result of the collision, and that concludes my overview of the 15 accidents.

MR. JAMES P. DUNN: Thank you, Mr. Dunn.

The National Transportation Safety Board calls Jerry R. Davis.

Whereupon,

having been first duly sworn, was called as a witness herein and was examined and testified as follows:

MR. JAMES P. DUNN: Thank you. Please be seated.

TESTIMONY OF JERRY R. DAVIS
PRESIDENT AND CHIEF OPERATING OFFICER
UNION PACIFIC RAILROAD

MR. JAMES P. DUNN: For the record, would you please state your name and spell the last name, please?

MR. JERRY R. DAVIS: Jerry R. Davis, D-A-V-I-S.

MR. JAMES P. DUNN: And what is your current position with Union Pacific, Mr. Davis?

MR. JERRY R. DAVIS: I'm President and Chief Operating Officer.

MR. JAMES P. DUNN: And how long have you held that position?

MR. JERRY R. DAVIS: A little over a year.

MR. JAMES P. DUNN: Thank you. I understand you have a statement to -- to open up with?

MR. JERRY R. DAVIS: Yes, I do, and thank you, Mr. Dunn, and thank you, Mr. Chairman, and other members of the National Transportation Safety Board, for inviting me here today to participate in this hearing.

1997 was a year of tragedy for all of us at Union Pacific. Myself and 53,000 other employees of our company felt that. 11 of our fellow employees died in these rail accidents that Mr. Dunn talked about earlier.

As a company, we take full responsibility for those lives and the sorrow of the families and their friends, and as a company, we are absolutely committed to making sure that nothing like this ever happens again on our railroad.

On a personal note, I've worked in the railroad industry for over 40 years. I started as a union telegrapher. I've worked as a train dispatcher. I have worked in many field management responsibilities. I've also worked on three different railroads as chief operating officers, and on each of these railroads, I had overall responsibility for safety.

In all of that time, 1997 was by far, I say again by far, the most turbulent year in my railroad career. I take safety very personally. I take it seriously, and when an employee loses his or her life on our railroad, it is a very, very serious matter.

There is nothing, and I repeat nothing, that I wouldn't do to change what happened last year. But I think now our choice as a company is to learn and learn from the past and focus on the future.

We believe that the seeds of opportunity have been planted by last year's safety and service difficulties, and that's what I want to talk to you about today. Maybe it's best to first set the stage by explaining the operating environment in which these accidents occurred. I think this is important because 1997 was anything but a typical year for Union Pacific.

As you know, last year, we began to implement the largest and most important complex merger in railroad history, the Union Pacific and the Southern Pacific Railroads. Among the principal reasons we decided to merge was to add much-needed resources to Southern Pacific's deteriorating infrastructure and service levels, while at the same time expanding Union Pacific's capacity to handle increased demand.

One of the areas where the merger synergies had the greatest impact is in the Gulf Coast areas of Texas and Louisiana. With the rapid growth in traffic in that area, Southern Pacific's service was significantly hampered by physical plant problems, and Union Pacific was approaching capacity limits.

The merger was really an ideal situation to solve both problems. Unfortunately, before we could implement labor agreements or important systems, two absolutely essential components to a merger, a number of events took place that resulted in some serious congestion in this area.

These ranged from the growth in the plastics business to manpower shortages and capacity constraints and compounding all of that were weather-related interruptions, like Hurricane Danny. So, we were in a situation where we had not physically merged and consequently could not take advantage of the benefits of a merged operation, and without the efficiencies of a merged operation, it's nearly impossible to counter the escalating congestion and service problems that we had.

Ultimately, these service problems affected every aspect of our operation, including safety. Had these events occurred singly or at any other time, we probably would have managed through them. Together and at this particular time, they triggered congestion, problems that were initially isolated in the Gulf area, but later on spread throughout the entire Union Pacific system.

When these problems emerged, we took immediate action, but I have to emphasize that the problems we encountered were truly unprecedented. We certainly never had such severe congestion on Union Pacific. In dealing with it, we spared no expense, in manpower or in dollars, in trying to return service to normal levels as rapidly as possible.

We initially addressed the problem by taking a variety of traditional corrective actions. We diverted locomotives and crews from other locations on the system. We leased every available locomotive available in North America. We created special command centers for managing local traffic. We negotiated new labor agreements, and we instituted an aggressive hiring program.

Since these efforts alone could not stem the congestion spiral, we had to put in place an aggressive recovery plan; in fact, the most far-reaching railroad recovery plan ever. This plan involved turning over substantial volumes of traffic to other railroads or trucks, transferring some switching operations to other railroads, reducing horsepower on our intermodal trains to free up locomotives, and temporarily withdrawing from selected markets where alternate means of transportation were available.

These measures helped us to make some progress, and we were showing that. We sustained a financial loss in the fourth quarter of last year and had to cut our dividend for the first time in this century.

Let me address one other issue that has been raised as a concern, and that's the use of management crews in Texas. If it had not been for the service issues and the crew shortages on the Southern Pacific, we would never have opted to use management crews. As it was, we didn't have much choice.

While other field managers were able to pick up most of the slack in terms of management oversight, it did place additional pressure on our normal processes involving efficiency testing, engineer certification, and qualification.

But even during that time, service did improve, at least for awhile. By the end of last November, train speed was increasing on the railroad, system inventory was dropping, and congestion was being reduced at a rate that had us hoping the problem would be over by the end of 1997.

However, we knew that any long-term solution could not be reached without taking the steps needed to truly merge the Union Pacific with Southern Pacific systems and to achieve the synergies and efficiencies that only a true merger could produce.

This required three actions. Number 1, putting Union Pacific and Southern Pacific operations on the same computerized control systems for car ordering and car management. 2, implementing new labor agreements as required by the merger, which involves realignment of crew territories, and, Number 3, introducing directional running on the Union Pacific and Southern Pacific lines and yards in to and out of eastern Texas and Arkansas.

The long-term impact of these innovations will be hugely positive and essential to finding a permanent solution to our current congestion problems. But each of the three major changes had an initial traumatic effect on our operations. Like any major surgery, they caused additional pain before recovery could begin to take place.

I hope this gives you a bit of a sense of how turbulent 1997 was for Union Pacific. We're trying to juggle two sets of balls with one set of hands, tackling all the tasks that a merger of this size requires while dealing with unprecedented service problems.

But we believe, and our daily review of field operations supports this, that the worst is now behind us. It is far from over, and that the changes that we are introducing and have introduced are beginning to work.

I believe that's enough on safety, but I came here to discuss -- excuse me. I think that's enough on service, and I'm here to talk to you about safety and what our safety plans are.

We want to explain our safety processes, address the main issues raised by the NTSB and answer each and every question that you have. First, I want to answer two questions that I think all of you might be asking yourselves, and that is did our operational problems cause Union Pacific to put a hold on safety? And, secondly, did Union Pacific cut back on its safety efforts?

These questions, we've asked ourselves over and over as we worked through our analysis of last year's accidents in reviewing each and every one of them. I can clearly say that the answer to both of these questions is a resounding no.

I'll begin with train dispatching. We have implemented a number of changes in our dispatch center ranging from training of dispatchers and managers to changes in authorizing track warrants.

Some of these improvements include a revised training curriculum for new dispatchers, annual training for all dispatchers, safety and production briefing sessions prior to each shift, a safety hotline to report dispatching concerns, multiple software improvements, reinforced emphasis on dispatching efficiency testing.

We have 46 new dispatchers brought on in 1997, and we plan to hire 65 in 1998. An increase in our dispatcher quality control and training staff, an analysis of the workload of every dispatching position in our Harriman Dispatch Center. We have modified the workload on 11 positions and as has been spoke earlier, we have added two additional positions in this center.

We have also committed $50 million over the next few years to develop and upgrade our computer-aided dispatching technology.

I want to also say that I personally, having been a dispatcher and understanding the safety-sensitive jobs that these are, I personally talk to every new train dispatcher that we bring on to our railroad, so that they can hear from me as to what I feel the importance of their job and the importance that they have for the safety of our railroad.

Another area that was identified in the reports dealt with mechanical inspections. Right off the bat, I'd like to discuss an exhibit that I saw that shows a 10-minute terminal air test in Houston, Texas. This is not our standard. Our standard is to take whatever time is needed to perform a proper test. This was handled with the individual concerned and with other -- other people in our mechanical department.

Let me go back a bit and talk about those questions of did we take our eye off of safety? I can assure you that at no time did we do that, not even for a minute. Our focus on safety at every level of our company from my office, the chairman's office, to every field operation, large and small, we take it serious.

In fact, we spent significant time comparing Southern Pacific and Union Pacific safety processes to ensure we had a constant approach to safety. We compared about 20 different program elements ranging from safety auditing processes to derailment prevention practices. This was all done before we ever merged our operations. We wanted to make sure that we were completely integrated in our safety management practices.

Fortunately, this was not a particularly difficult task. After comparing two railroad safety processes, we found many similarities between these processes of Union Pacific and Southern Pacific.

What we did fail to recognize is that the safety process that was effective under normal operating circumstances needed to be fortified under the extremes of a complex merger and severe service problems.

Given the merger service difficulties, the weather-related problems, our management structure was significantly challenged and that was a key lesson, the need to set up -- to step up the safety focus in every area and have the resources to do so.

As I said, we conducted some very extensive investigations in each and every accident. While we didn't find any leakages or patterns among these accidents, we did find some specific areas that needed improvement. Those areas have been identified in the specific action plans that have been submitted for your review.

The elements in those action plans, coupled with the assessment recommendations made by the FRA, and our own initial findings, are the basis of the corrective actions that we have implemented.

I'd like to continue summarizing them for you. I have talked to you about our train dispatching, our mechanical design and inspections. I would also like to talk to you about track, what we have done there, our train crew performance, staffing, our management oversight, drug and alcohol testing, and elaborate a bit more on what we are doing about alcohol testing.

In the area of track-related issues, they have been thoroughly addressed. I believe we had a sound and systematic process for scheduling and conducting rail inspections, but as long as we have track-related accidents, we'll continue to evaluate our process to find better methods and technology.

To address the specific track-related derailment issues, we've done a number of things. We have upgraded the 119-pound rail for new a 133-pound rail on our river subdivision in Missouri. We have provided additional training and reissued procedures for welding rail ends. We have conducted a safety blitz with all of our maintenance employees on proper equipment tie-up procedures, and we are purchasing 11 new detector cars with the latest technology.

The next issue, the performance of our operating train crews. This was also raised. Let me tell you what we're doing to ensure our crews are working in the safest manner possible. I'll begin with our locomotive engineers.

We have a comprehensive process that covers the hiring, the certification, the qualification and the training of these engineers. To carry out this process, we have a 165 managers of operating practices, more commonly known as road foremen of engines. These individuals are responsible for supervising, training and evaluating locomotive engineers. These managers utilize a supervisory process called EQMS or Engineer Quality Management System.

This system tracks and records information on each engineer and includes field tests, required written examinations, training, qualifying trips, performance testing, and certification requirements.

In addition to our managers of operating practices, we have put on eight full-time managers of operating technology. Their sole responsibility is to keep our engineers updated on all new technology and new equipment we are bringing on to the railroad.

Closely related to the engineer performance is the performance of the entire train crew. To begin, we have taken steps to correct all of the specific issues noted regarding rule compliance. This is to ensure that train crew employees understand the factors contributing to serious accidents and derailments.

We have implemented numerous testing and awareness synergies and strategies. In addition, we re-emphasized the violated rules in our efficiency tests and locomotive event recorder analysis. Our goal is not only to educate our employees about serious accidents but also to ensure that the education and training is understood and applied.

We have also initiated a new training program for our TE&YE, our Train Engine and Yard Employees. This program is divided into two parts, both of which our TE&Y employees will go through in the next two years.

Part 1 consists of a full day of operating rules training and an examination. Part 2 consists of another full day of critical safety-related training, which includes fatigue management training, developed -- this has been developed by Alertness Solutions, which is our fatigue management consultant, who you will hear from later, instructions on locomotive and train inspections, an update on key rule changes, rules that are frequently violated, and rules related to recent accidents and derailments, and, lastly, crew resource management training, which is a program developed by the airline industry.

This training centers around the concept of building communication between crew members and the cockpit or, in our case, the locomotive cab. The objective is to ensure that employees understand where communication is critical, how communication breakdowns can lead to accidents, and how to be more aware of the operating environment.

As a side note, crew resource management training was one of the safety-related issues brought over from the former Southern Pacific Railroad.

By combining basic rules training with critical safety-related practices, our intent is to have employees that are well-rounded when it comes to safety. Employees that know the rules and can safely respond to the variety of challenges in the operating environment.

There was also a question raised regarding management oversight. I'd like to address this issue in some detail because it cuts across everything that we do from monitoring train crews to ensuring proper mechanical inspections.

We have renewed our emphasis in two specific areas: staffing and accountability. To improve our management staffing levels, we have added approximately 250 new jobs in the field since last summer. This is an increase of about 20 percent to our base 1,200 managers. This increase in field managers will help from two perspectives: management oversight of our operations and the quality of life for our managers.

In terms of accountability, we have a number of on-going incentives and initiatives. First, every manager in every craft has very specific activities spelled out in his or her job agreement regarding operating oversight accountabilities.

Secondly, we have a number of mechanisms that provide feedback to our managers regarding performance in this area. These range from a system of measures that track key management activities to field trips taken by senior managers to address our safety process.

Lastly, through our safety assurance and compliance program, we are tracking various crucial issues dealing with management accountability.

Another issue raised in the exhibits was drug and alcohol testing. Before I begin, I want to make one point. Of all of the incidents that occurred in 1997, including the 15 accidents that Mr. Dunn just reviewed with us, 83 employees were required by federal regulations to be tested for drugs and alcohol. Of this population, there was one individual that tested positive and that was for alcohol.

My point here is only that we do not believe that drug and alcohol use is rampant on our railroad. However, even one case is unacceptable and is cause to continually improve our drug and alcohol detection process.

Later on, when you hear from our drug and alcohol -- about our drug and alcohol detection process, and what we are doing to improve it, I think you'll see that we take our responsibility in this area very serious.

The issue of fatigue was talked about a lot. Over the past few years, fatigue has become an industry-wide issue, and we have come to view it in a very different light.

There are smarter and safer ways of dealing with fatigue, and we're doing just that. But you'll be hearing much more about that later, and now I'll just say that we know the fatigue will require both operational and cultural changes on our railroad, and we're prepared to deal with that in both fronts.

I've already mentioned how we have been dealing with manpower shortages in our field management. We are absolutely committed to eliminating TE&Y staffing issues. Last year, we hired over 1,000 people, and in 1998, we plan to hire about 1,500 additional transportation employees.

In addition to hiring more employees, we have totally revamped our manpower planning and resource process. Our strong intent is to never to get caught in such a manpower shortage again.

The next topic I'd like to address is the safety assurance and compliance program, as Jolene Molitoris, the Administrator of the FRA, has talked so eloquently on.

As you know, the FRA conducted an assessment on Union Pacific last year. One of its recommendations along with many was to initiate SACP. This is a process that brings together all of the key stake- holders in what we do, rail management, the FRA, our labor unions.

I don't know whose concept SACP was, but it is a welcomed addition to Union Pacific. We have a strong safety program when I look at our safety committees, our safety captains, that is down on the ground, its ground root, but the SACP process brings together those elements that are necessary to change the overall major processes on our railroad. Be it fatigue, whatever those broad issues are, this group will come together to solve those.

A number of things have been identified by the SACP process at Union Pacific already. They deal with system-wide safety issues and cultural issues. It was asked earlier what some of these items were. We identified -- we have identified crew management issues, our train line-up accuracy, inspection and testing processes, train dispatcher workload, discipline, and, of course, fatigue reduction.

All in all, we have over 200 people at Union Pacific involved on SACP teams, and I can assure you that all 53,000 of our employees are working towards one end, and that is to make Union Pacific the safest and the best company to work for, and that's why we have left nothing off the table in terms of improving the way we do business. We want to improve, and we will improve.

The entire SACP process is based on a partnership, a united partnership between management, labor and the FRA. Our best hope for sustained progress in safety is for everyone to be in the same camp and working together.

The last thing I want to convey today is that of all the changes and improvements that I've talked about over the past few minutes are part of an on-going long-term plan, and I can guarantee you is not a one-shot deal.

Exhibit 6-B on your record contains several graphs illustrating our performance in three key areas of safety: employee injuries, grade crossing incidents, and derailments.

I'm not going to go over those graphs this morning, but I'd like to point out that we have shown substantial improvements in all three of these indicators over the past several years. I'm pointing this out only for one reason, to assure you that the accidents we experienced last year were not the result of a company that disregards safety. We have always taken safety seriously at Union Pacific, but at a time we know better than anyone else that we have a long way to go to reach our goal of zero accidents.

The costly lessons that we learned last year is a constant reminder that we will never let up on our efforts to improve safety.

Before closing, I would like to personally thank the FRA Administrator, Jolene Molitoris, for her help and cooperation in setting SACP underway and in helping Union Pacific to enhance their safety processes.

I would also like to thank our labor unions and especially the UTU and the BLE for their efforts in our recovery plan and our safety process. We have a long way to go. The Administrator talked about the new program of seven and one. I know we are not a hundred percent on that yet, but we will work towards complying with those agreements and those -- those plans that we have there.

Again, I thank you very much, Mr. Chairman.

CHAIRMAN GOGLIA: Thank you, Mr. Davis.

The Technical Panel, Mr. Dunn, are you prepared to ask questions?

MR. JAMES S. DUNN: Yes. I think Mr. Cochran and Mr. Kivowitz have a few questions of you, Mr. Davis.

MR. COCHRAN: Good morning, and thank you, Mr. Davis.

Mr. Davis, as president and chief operating officer, who reports directly to you regarding safety on a daily basis?

MR. JERRY R. DAVIS: Well, first of all, I'm the one responsible for safety. Reporting directly to me is Dennis Duffy, our Vice President of Safety Assurance Compliance Processes, who reports to me for the SACP process.

In addition to that as the Vice President of Operations, when you look at safety on the railroad, 99 percent of it is in the operating area. The Vice President of -- the Executive Vice President of Operations would report direct to me.

MR. COCHRAN: How long has Mr. Duffy been in that position?

MR. JERRY R. DAVIS: Six months.

MR. COCHRAN: Has there been any changes to his position since he assumed that duty?

MR. JERRY R. DAVIS: Not that I know of.

MR. COCHRAN: And could you tell us was there a pre-merger safety integration plan developed prior to the merger?

MR. JERRY R. DAVIS: The -- I talked about briefly in my testimony about before -- before the merger, that the -- the operating people and safety people got together, looked at the processes, both on Union Pacific and Union Pacific primarily to take the better of the two. So, there was definitely planning in that area that was underway in the safety programs.

MR. COCHRAN: Were all levels of managers that are in safety-sensitive positions included in those plans?

MR. JERRY R. DAVIS: I just can't tell you from the Union Pacific side. I was on the Southern Pacific on -- on the pre-merger discussions.

MR. COCHRAN: Has everyone on the EQMS been fully integrated relative to former SP engineers as well as UP engineers?

MR. JERRY R. DAVIS: It includes both SP and UP engineers.

MR. COCHRAN: Thank you. I have no further questions.

CHAIRMAN GOGLIA: Mr. Kivowitz?

MR. KIVOWITZ: Yes, I do. Thank you, Mr. Davis.

I'd like to ask you, looking back at the merger, the -- specifically the Federal Railroad Administration, the Texas Railroad Commission or any of the state regulatory agencies, were they involved in any of your pre-merger safety planning?

MR. JERRY R. DAVIS: As far as I know, they were not.

MR. KIVOWITZ: Were the unions involved in any of your pre-merger safety planning?

MR. JERRY R. DAVIS: From the Southern Pacific side, I cannot answer that particularly from the Union Pacific side, but I do not believe other than through the safety committees for which they would be involved with. Our safety committees, as I talked earlier, are our ground roots and the foundation of our safety programs. All of our unions are very much involved. As to whether they were -- were included specifically on discussions pre-merger, I cannot answer that. Definitely they were involved with what -- what are the safety processes, what are the better ones that should be implemented.

The Southern Pacific had a strong safety program as well as the Union Pacific prior to merger.

MR. KIVOWITZ: Well, now looking back at the last, say, 16 months since the merger, do you think it would be beneficial to consider a safety integration plan involving all the different parties before a railroad would actually merge?

MR. JERRY R. DAVIS: Yeah. Well, I think indirectly, you know, all of our labor unions are involved in the planning. I mean when you bring to the table what are the safety programs, what are the processes, they are indirectly involved.

Whether it should be done more on a -- on a -- on a process basis or -- or escalated, I -- I don't think that would be a bad idea at all.

MR. KIVOWITZ: Looking at the -- the managers working the first level and third level supervisory positions, performing their normal service functions plus the added responsibilities of the increased service demands and moving traffic to Mexico, the chemical business, etc., when you couple that plus the increased demands on their time, plus operating trains, do you think there was enough time for those managers to really perform their normal oversight functions?

MR. JERRY R. DAVIS: Well, first of all, let me clear up maybe for the record, also, we -- on our manager of operating practices or our road foreman of engines, when we move those people into Texas to help out on the service recovery, all of them from the railroad was not moved into Texas.

I believe at the maximum at any one time, we had only 25 percent of our MOPs in the system in the Texas area, and people filled in behind them. Definitely when we looked at our -- our manning issues and the management positions in the field, we did not have enough. That is why we have added 250 people in the field.

The -- and that is -- you know, we do that based on the activity that we see out there. Do we miss it sometimes? I'm certainly sure we do. We felt with the additional people that we moved into the Texas area and the backfilling of those jobs that they came off of by other managers in those areas that we were adequately covered.

Did we make some mistakes? Certainly we did. But I -- I felt that, you know, with the 250 additional people we are putting on there, that we have definitely addressed this problem.

MR. KIVOWITZ: Thank you. The -- this SACP process which is relatively new in the railroad industry, this process, can you describe for us how you feel it's going to be a positive impact on the safety on your railroad and the other carriers in the country?

MR. JERRY R. DAVIS: Well, as I've said earlier, one thing that the process does is to bring to the table all of the people necessary to make safety happen, and -- and I believe the Administrator testified earlier that -- that one -- one group of those -- those people cannot make it happen by themselves, and by having those three -- three groups to the table discussing what are the safety needs out there, what changes are necessary, particularly in the areas of culture and fatigue, I think this whole thing of culture -- I mean I'm not sure what the definition of that is, but I do know that -- that things have to change.

The way we work people, the workforce that is out there, it's a much different workforce out there today than what was there in 1957 when I went to work. Just the values of people and the values of work.

I've talked to my managers many times, and it's hard for me to understand these young people today not wanting to work seven days a week, 24 hours a day, 365 days a year the way I did. I mean what's wrong with them? I know what's wrong with them. It's a different lifestyle today. There are demands on family. There are demands on time off. They're much, much different.

I understand that, and I understand that if we are going to succeed as a railroad in the future, and to take care of the demands of our customers, and that is to move their freight on a seven-day-a-week, 24-hour-a-day, 365-day-a-year basis, we have got to change.

I am willing to do that, and I am willing to listen to our labor unions, the FRA, our management people, wherever I can get information that will help me understand what is it going to take to change that culture on the railroad, I stand ready to do that, and I believe this process heads us in that direction.

Is it the answer to all ends? I'm sure it's not. But I'll tell you it's the best thing I've seen come along in a long time.

MR. KIVOWITZ: Thank you very much, Mr. Davis. I have no further questions.

CHAIRMAN GOGLIA: Okay. To the parties, Texas Railroad Commission.

MR. MARTIN: Mr. Davis, if I can just ask you one question. It's kind of a follow-up on Mr. Kivowitz's question.

You talked about hiring a thousand people in 1997, and you're proposing to hire 1,500 in 1998, and you indicated that you -- your company did get caught short on a number of employees directly at the time of the merger and these incidents, and you talked about the fact that the service aspect does have an impact on safety.

My question to you is, as you said, your company was not going to be caught short again, and, so, my question is, is how -- how do you intend to -- to not be caught short again?

MR. JERRY R. DAVIS: Well, let me tell you -- let me back up just a little bit why -- why we got short or why we got caught short. When we did the merger planning, there was a number of things that we looked at.

We had taken into consideration the new labor agreements that we were -- we were negotiating at the time with our labor unions, what we called the hub and spoke agreements, where crews have different seniority -- the seniority has changed. The routes that they operate on are changed.

The timing on that, we missed, and it wasn't because of any of our labor unions refusing to negotiate. That -- that was not the case. We missed the timing on that. We also missed the impact that that would have on the retraining of our crews.

We also figured we would have excess crews in various parts of the railroad that we would loan out into the Texas area or into the areas that we were short of crews. That did not happen.

In addition to that, I believe that our process that we were using at the time in looking at -- at our crew demands possibly had some flaws. We have completely revamped our process in looking at crew needs.

Another issue that I think is pretty obvious that caused crew shortages also was this congestion that we talked about in the Gulf Coast area. When we had this congestion, unfortunately our federal tie-ups go up, what I call we burn crews. Instead of using one crew to go from Houston to Lafayette, we may use three. That takes a much larger demand on our -- on our crew base than we had anticipated.

So, with this new process in looking at the crews and the way we hire, we are looking at it much more aggressively than we ever had in the future, and I am very confident that this process is much better than we ever had in the past.

MR. MARTIN: Thank you. That's all I have.

CHAIRMAN GOGLIA: Federal Railroad Administration?

MR. GAVALLA: Mr. Davis, you mentioned UP service recovery plan. Is this service recovery plan still underway?

MR. JERRY R. DAVIS: Yes, it is. We still have areas of service on our railroad that has to be -- has to be improved, and primarily in the -- in the Gulf Coast areas.

MR. GAVALLA: You also mentioned the use of management crews in Texas. Is this still occurring? Are they still being used to run trains?

MR. JERRY R. DAVIS: On a very limited basis, and I might add, Mr. Gavalla, it is done with a collective bargaining agreement with our unions.

MR. GAVALLA: You have mentioned the efforts that the UP has undertaken to improve dispatching practices, including hiring 46 new dispatchers with 90 -- with 65 slated for hiring in '98, additional desks, $50 million improvement to, I believe, would it be the CAD-3 system?

MR. JERRY R. DAVIS: Yes.

MR. GAVALLA: Were any of these issues subject of the SACP working group regarding dispatcher safety?

MR. JERRY R. DAVIS: Yes. A number of them have been. A number of them, as you well know, were on some inspections and -- and audits that were made by Union Pacific and the FRA on our Harriman Dispatch Center.

MR. GAVALLA: Sir, you also mentioned increased levels of management staffing and processes in place to ensure accountability of managers in regards to their safety oversight functions.

Do you recall if this was also an issue in one of the SACP working groups with FRA, UP and labor?

MR. JERRY R. DAVIS: I believe it was addressed, although I think after the FRA audit and our discussions with the FRA and internal management discussions, it was decided that we would do that, although to my knowledge, it was not one of the major SACP processes.

MR. GAVALLA: You also mentioned the issues undertaken by Union Pacific to address fatigue, and I realize we're going to have a presentation on that later on, but is that also an SACP initiative regarding the labor and management people?

MR. JERRY R. DAVIS: Yes, very much so, it is.

MR. GAVALLA: Sir, do you have any sense on how the SACP process has affected the communications between UP management and its workforce and labor representatives?

MR. JERRY R. DAVIS: Well, I think needless to say, when you're all setting at the table trying to -- trying to solve a very common problem, I think it helps communications. I think we have a lot of work yet to do on the railroad to communicate what is going on in the SACP process throughout our organization, and we have plans to enhance that.

I could go over it in some detail with you how we intend to do that, but I think that -- that end of the process has to be strengthened a bit.

MR. GAVALLA: Do you have -- are you prepared to discuss in any general terms some plans to increase communications?

MR. JERRY R. DAVIS: Let me say in -- in -- in -- we have various ways of communicating on the railroad. We have what we call our Info Magazine, which is a quarterly magazine that has had articles and talked about the SACP process, had a three-pager, I believe, in the last update that we had.

We have what we call on-line. It's a summary of progress that we make each month. It's -- it's an on-line daily electronic newsletter that any of our employees can -- can access.

We have information television that we have at many locations across our railroad that has news flashed on a 24-hour basis throughout our system. We also have, as you well know, what we call a SACP bulletin. It is a bulletin that was put out strictly to talk and communicate the SACP process. It's put out monthly. It's an informational bulletin, and it's also transmitted electronically to all of our field managers.

We have our union newsletters. We also have our -- our division newsletters that communicate SACP and what is going on. In addition to that, we have what we call business television. It transmits television broadcasts throughout our system. I give quarterly updates on the B tv. We also have monthly safety captains meetings and videos that are -- that are communicated throughout our railroad.

But I think the big thing, Mr. Gavalla, is the communication -- the one-on-one communication that we have with our people. I have town hall meetings with the people. I visit many locations throughout our railroad talking about SACP, talking about safety.

The other managers have this same process, call it an overlapping process or whatever, but I think that is one of the better ways to communicate throughout our -- throughout our railroad and to get the SACP tentacles throughout all of our organization at Union Pacific.

MR. GAVALLA: Thank you, Mr. Davis. No further questions.

CHAIRMAN GOGLIA: Brotherhood of Locomotive Engineers?

MR. WALPERT: Yes. Yes, I have a few questions. Can you hear me? Yes, I have a few questions.

Mr. Davis, you mentioned in your opening remarks a training program for TE&Y employees. You also mentioned that the program would be two parts, one day for new rules, training exams, discussion of rule violations which led to accidents. Then a second day of safety-related issues, such as fatigue, locomotive inspection, rules, and you also mentioned the crew resource management training.

My question to you is -- is do you think two days is a sufficient amount of time to cover all that?

MR. JERRY R. DAVIS: My people seem to think it is. I mean what is sufficient? I -- I'm not sure. I think that covers the basics, and what we're talking about here is retraining, also. We're talking about training experienced professional people that we are retraining in these classes.

MR. WALPERT: Okay. In regard to the promotion and/or hiring of locomotive engineers, you've indicated how many operating employees that you intend to hire. Can you break that down specifically for locomotive engineers?

MR. JERRY R. DAVIS: I don't have that available to me. I can get that for you, but I do not have that readily available.

MR. WALPERT: Okay. If you could provide that, I'd ask the Board if we could have -- be provided that information?

CHAIRMAN GOGLIA: I believe we plan on asking that question ourselves a little bit later.

MR. WALPERT: All right. Thank you.

The safety assurance and compliance program report issued by the FRA also mentioned the -- made a recommendation that UP adopt labor management safety partnerships.

Can you tell if any -- can you tell me if any progress has been made in developing those partnerships?

MR. JERRY R. DAVIS: The -- I can't talk in specifics, although we are willing to do that, to set down with any of our labor unions to what I -- what I would call safety partnerships.

I think we have always had on the railroad and in our industry partnerships with our labor unions. In some years, they have worked better than others, you know, and we struggle with those. We have quality processes that we work with our labor unions on. I call these partnerships.

Whatever partnerships are necessary to strengthen and -- and -- and to bring together on the railroad, we are willing to do that.

MR. WALPERT: Okay. Can you speak to the crew management service and train line-ups? Has any effort been made to improve the crew management services and train line-ups?

MR. JERRY R. DAVIS: Yeah. Let me -- let me say you bring up a very sensitive subject for me. One thing that I haven't talked about today, and part of my discussions with Jolene Molitoris, the Administrator of the FRA, she recommended to me that I put in a safety hotline that would come directly to my office.

What she felt in talking with a lot of our people on the railroad and also when I talked with them, they felt that sometimes I was being shielded by my own management as to what the safety problems were throughout the railroad, and she had recommended to me that I put in a safety hotline, which I did.

It was put in last September. I can't remember the exact numbers, but I received approximately 2,200 phone calls on that safety hotline. 28 percent of those calls have dealt with your question right there. Crew management, what we call equals TL or our train line-ups and what can we do to improve them? What -- what can you do for the crews out there to improve their quality of life in trying to identify as to when they will be going to work?

We have a number of fronts open on that. That is one of the Number 1 things involved with SACP. We have both the BLE involved with this as well as the UTU. We have one group that is doing nothing but looking at what can we do to enhance these line-ups.

We have put on a desk in the Harriman Center with four people manned 24 hours a day to help improve the quality of these line-ups. I look at a report on a daily basis as to the accuracy of train line-ups for every district on our railroad, and I review that with Dennis Duffy and his people as to what are we doing to improve that?

The crew management. We put on, I believe, four new crew balancers. This is another issue with our crews out there, that we sent away from home too long, that why aren't we dead-heading, why aren't we balancing these crews? We are putting people on to look at that.

In addition to numerous other things that I won't elaborate on today, but I can tell you it is one of our primary focuses out there. When I hear that 28 percent of our employees who call on that hotline have an issue with that, it -- we take it very seriously.

MR. WALPERT: Thank you. One -- one final question. Also in the SACP program report, there is a mention that some employees felt that there were some intimidation and harassment tactics by some management people on UP in regard to, for example, not reporting -- emphasis on not reporting possible accidents or injuries to keep the reporting low on UP.

Has any effort been made to address those alleged intimidation and/or harassment tactics?

MR. JERRY R. DAVIS: Yeah. Let me -- let me elaborate a little bit on that. I -- I hear that, you know, maybe not so loud and clear today, that the railroads cover up accidents. They conceal them from the FRA. They're not reporting them truly.

I -- I open up to the Administrator and the FRA, and I tell them audit us at any time. One thing that we do on the Union Pacific, and I might add that most other railroads do in this country, is that they look at the accident report that the employee has filed and compare that against a report filed with the claim department.

If the injury is serious enough to be reported and to have a claim filed, that -- those files are cross-referenced. In addition to, any employee has the opportunity to turn in any accident at any time.

I open Union Pacific's records for audit at any time.

Now, to answer your question specifically, I do also get those remarks on the safety hotline, that I am being intimidated by a manager. Let me assure you each and every one of those calls that come in where they feel they have been harassed by a manager, I have personally talked to that employee, and I have personally talked to that manager about what are the issues here, and why does that employee feel they have been harassed?

I might add I have never had a follow-up call after discussing that with both employees. Most of the harassment that I hear on that -- on the safety hotline has to do with crew management, and that why -- why are you calling me when I'm not rested? Why are you calling me not in accordance with my agreement? Why are you calling me to go to work, you know, today? I want to lay off. I mean those type of issues.

Let me add one other thing. My discussions with managers on Union Pacific when it has to deal with covering up injuries, my conversation with them goes something like this, that if you harass an employee or ask them to cover up an injury and not report it, you have put your job on the line.

In my railroad career, as an operating vice president, I have always had that policy. In my railroad career, there have been three managers that have put their jobs on the line doing that, who are no longer railroad managers today.

MR. WALPERT: Okay. Thank you, Mr. Davis. That's all I have.

CHAIRMAN GOGLIA: United Transportation Union?

MR. BOYD: Thank you, Mr. Chairman. First, Mr. Chairman, on behalf of UTU, I'd like to thank the Transportation Board for having these hearings, and my questions to Mr. Davis will be based on his tenure.

We can't do a lot about the past. We need to start addressing the future, and I think one of the best indications of that was this morning when I was talking to one of the widows at breakfast from one of these incidents, and that was her expression to me, that she wanted to see something good come out of this that may help somebody in the future, and my questions are based on that spirit.

I might add for the Board's edification, I've dealt with Mr. Davis for about 25 years or maybe a little longer, and we've had some bad days, more than not we've had good days, and I do appreciate having to work with you, and I -- I agree with what the Administrator said with regard to your openness in dealing with people, and it's been a pleasure to work with you over those years.

Now I've got some tough questions for you, though, Mr. Davis.

MR. JERRY R. DAVIS: Yes, sir. I would expect nothing else from you, Mr. Boyd.

MR. BOYD: Thank you. I believe we've -- we all accept the fact that fatigue is accumulative, and the longer it exists, the worse it is. With that in mind, you could have a staffing level of what you think would be a needed level. If that level is subjected to prolonged periods of fatigue, it will diminish its ability to serve you, the level will, with the number of people.

When you look at the number of people needed to staff the trains, is the number of days of rest or the number of days of ability put into that formula that you use within the corporation and through the SACP process?

In other words, do you count what -- how much rest is needed in addition to how much work is needed from an employee?

MR. JERRY R. DAVIS: Yeah. Most certainly, Mr. Boyd, and, you know, whether that formula is right, I don't know. For some people, -- and, you know, fatigue is an interesting thing to me. I mean it's something that is not unique to this industry. I mean any trucking company, airline, space, NASA, whoever, that deal with -- with 24-hour-a-day, seven-day-a-week issues, deal with fatigue and the people that are involved with that.

I understand that. I'm trying personally to understand more about fatigue, but one thing I'm sure of is that people are different. Now when you try to put that number in your computer, what is that number? We have employees out there as you well know, if I restricted them to working five days a week, they'd be pounding on my desk and yours, too. They want to work seven days a week. Then we have a lot of people who do not want to do that. I know that.

So, what is the right number? We'll continue to play with that. We'll continue to have that in our formula. I understand people need rest. Some people need more than others. But it is definitely part of our formula in figuring our manpower numbers.

MR. BOYD: Thank you. It was stated earlier that in 1997, UP was approximately two-thirds larger than it was in 1996 because of the C&W and SP acquisitions.

That being the case, and I'll confine myself to SP, the former SP territory, that being the case, do you see part of the problem being related to the former practices regarding safety of the Southern Pacific and managing practices or the adoption of the UP safety and managing practices over the former SP territory as being part of the problem for, you know, the great number of incidents that occurred on Southern Pacific or do you not see that being a factor at all?

MR. JERRY R. DAVIS: Well, Mr. Boyd, when I look at those accidents and the 15 that were looked at and the safety problems that we had across the railroad, I did not see a pattern related to the Southern Pacific at all.

When I looked back on the safety numbers of both Union Pacific and Southern Pacific prior to merger, let's say two years prior to merger with Southern Pacific for which I am more familiar, they were showing the same rate of improvement that the Union Pacific was showing, not only in personal injuries to our employees but also in the derailment numbers. So, they were showing big improvements.

But as far as looking at -- at the safety concerns across the railroad that we talked about earlier, I did not see that it was specific to the Southern Pacific over the Union Pacific. To the contrary, most of the accidents did happen on the old Union Pacific territory.

MR. BOYD: Couple more questions. You stated that UP was hiring additional managers, I think approximately 250, over the approximately 1,200 you now have?

MR. JERRY R. DAVIS: Yes, sir.

MR. BOYD: Where are most of those managers coming from?

MR. JERRY R. DAVIS: Most of them will come from the ranks of the railroad.

MR. BOYD: Will a substantial part come from outside the crafts?

MR. JERRY R. DAVIS: Not -- hopefully not. We have -- let me say on some of those numbers, on the Union Pacific, our train dispatchers are non-agreement. There are a number of train dispatchers coming into our company who are hired off the street, but I would say they are a small percent of the total number.

The majority of those new managers and manager positions will come from -- from outside the ranks. Let me say the first-level managers will come from the ranks.

MR. BOYD: The managers that will manage the TE, the trains and engine service people, will they come from primarily outside the ranks or from within the ranks? And when I say crafts, I'm not talking about union representation, I'm talking about the actual operating crafts, who are represented, but that's not what I'm talking about.

MR. JERRY R. DAVIS: Yes, they will.

MR. BOYD: Okay. The new operating managers that will be brought on board, do you have any knowledge about their experience in relation to the employees they will be supervising? In other words, are they fairly new employees or are they people who have some tenure with the company?

MR. JERRY R. DAVIS: Well, I hope I can offer some of these -- these employees who have some tenure with the company, and let me say, you know, the majority of management on the railroad have always come from within the ranks, from the union ranks of our company, and as well as I said here, I have to say that, you know, we have a pretty good failure rate, and let me say where the failure rate comes from is that normally you look at an individual, their technical skills. They have great technical skills, but I think where we have made a lot of mistakes in the past is that we have not -- we have viewed more on the technical skills more than the -- what I call people-handling skills, and I would like to lean more to the people-handling side of this business.

We have a lot of good technicians out there. They're all great professionals. But our failure rate is not -- is a little higher than I would like to see it, and I hope that either one way to incite these people to take these management jobs that we can get some experienced managers coming in there. It's always a challenge, Mr. Boyd.

MR. BOYD: In response to one of the questions you were asked earlier, the problems with crew management and crew management system really are directly related to the number of employees that are available for service, and that compounds the problem not only with the availability of employees but the availabilities of your managers within the crew management system to -- to utilize those employees, and -- and the infrastructure will implode upon itself if that isn't adjusted.

You've said you're taking some steps there, but I think that's -- would you agree that that's the primary cause for most of the CMS problems?

MR. JERRY R. DAVIS: The number of employees?

MR. BOYD: Yes.

MR. JERRY R. DAVIS: The -- I think in some areas, it could be, but I -- I believe what the majority problem has been is the congestion that we've experienced across the railroad in what I call burning crews, using way too many crews to get trains across the railroad than is needed, and I think that has been the primary reason.

MR. BOYD: Okay. Thank you, Mr. Chairman.

CHAIRMAN GOGLIA: Union Pacific, no guts.