As the economy rebounds, many companies are coming
under fire for hoarding cash instead of making capital
investments that could spur job creation.
Based on their 2011 capital expenditure plans, it would be
hard to lump U.S. and Canadian railroads in that category.
In recent weeks, the seven biggest U.S. and Canadian railroads have disclosed robust capital expenditure (CapEx)
plans for 2011, coming to market with budgets that, in
aggregate, are at or close to all-time records for the venerable industry.
Leading the way is the privately held Burlington
Northern Santa Fe (BNSF), with a company record $3.5 billion capital expenditure budget—up from $2.6 billion in
2010. No one with an institutional memory remembers any
railroad with such a large CapEx budget in either constant-dollar or inflation-adjusted terms.
BNSF, a unit of Warren E. Buffett’s Berkshire Hathaway
empire, will spend $2 billion on what it calls “core network
initiatives and related assets,” industry lingo for infrastruc-
ture maintenance. It has budgeted $450 million to buy 227
locomotives, and $350 million for freight cars and equip-
ment. The program also includes $300 million for terminal,
line, and intermodal expansion projects focused on improv-
ing coal routes and routes in North America’s midsection.
Perhaps mindful of Buffett’s comments in 2009 that his
purchase of BNSF—the largest in Berkshire’s history—rep-
resented an “all-in bet” on the future of the U.S. economy,
BNSF Chief Matt Rose said the railroad “remains commit-
ted to making the necessary investments to maintain and
grow the value of our franchise’s capacity.”
But BNSF isn’t the only rail bringing a big wallet to the
game. Following close behind is the Union Pacific Railroad
Co. (UP), whose $3.2 billion CapEx budget for 2011 repre-
sents a 23-percent jump from 2010 levels. CSX Corp.’s $2
billion spend is an 11-percent increase from year-earlier
levels; Norfolk Southern Corp.’s $1.74 billion budget repre-
sents a 19-percent increase; and Canadian Pacific’s budget
of $950 million to $1 billion represents a 25-percent
increase.
Railroads boost capital spending
