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BNSF Railway's High Profit, Low Performance by Editorial Board Capital Press, March 23, 2023

BNSF is extraordinarily profitable.
Last year alone, it made $5.9 billion.

Readers outside the world of finance may not recognize the name Berkshire Hathaway. It is a conglomerate based in Omaha, Neb., and the board chairman is Warren Buffett, one of the richest men on the planet.

Even if you don't recognize the Berkshire Hathaway name, you would recognize the companies it owns or partially owns -- American Express, Bank of America, Coca-Cola, Occidental Petroleum, Kraft Heinz and Geico Insurance, to name a few.

Berkshire Hathaway is all around the region. Sees Candies is wholly owned. So are International Dairy Queen and Tony Lama boots. Electric utilities Pacific Power, Nevada Power and Mountain States Power are his, as are a collection of natural gas pipelines, 83 car dealerships and a 38% share of Pilot truck stops.

Need a jet for that trip to Paris? Buffett owns Netjets, too. Or how about a ring for that special person? Ben Bridge Jewelers is his.

Thinking about a recreational vehicle? Or new batteries for your flashlight? Or a new pair of skivvies?

Berkshire Hathaway owns RV maker Forest River, Duracell and Fruit of the Loom.

His companies make Benjamin Moore paint, Johns Manville insulation, Shaw carpet and even houses.

Precision Castparts, a manufacturer based in Oregon, is a recent purchase.

And this is just a partial list.

Altogether, Berkshire Hathaway is extraordinarily successful. Since its founding in 1965 as a textile manufacturer, the company's share value is up 3,787,464%.

Last year, Berkshire Hathaway had record operating earnings of $30.8 billion, Buffett wrote in his letter to shareholders.

We mention this as way to put into context one of Berkshire Hathaway's holdings: BNSF Railway.

Two things are notable about BNSF.

First, it is extraordinarily profitable. Last year alone, it made $5.9 billion. That's about about 19% of Berkshire Hathaway's total operating earnings. BNSF operates more than 50,000 miles of track routes, sidings and yard tracks in 28 states. It owns over 23,000 miles of track. Last year, it spent $2 billion on repairs and maintenance.

Second, BNSF has struggled for years to provide timely service to its customers, 23% of whom are involved in agriculture.

Most recently, BSNF has been setting the standard for poor performance by Class I railroads.

Take, for example, the week of March 8. According to the federal Surface Transportation Board, which tracks the performance of the nation's major railroads, there were 8,696 late or unfilled grain car orders. More than half -- 4,946 -- were more than 11 days late.

Here's the part that should make Buffett's ears stand up. Most of those late or no-show cars -- 7,074 -- belonged to his railroad, BNSF.

That's bad enough, but according to the board, from December through mid-January BNSF's weekly number of unfilled or late grain cars was about 15,000.

Several years ago, Buffett issued an apology.

“During the year, BNSF disappointed many of its customers,” he wrote in an annual letter to shareholders. “These shippers depend on us, and service failures can badly hurt their businesses.”

Considering BNSF's performance, he could write the same apology every week.

For a company that is swimming in money, BNSF can well afford to get on track.