Buffett's Railroad CEO Sees Economic Recovery on Surge in Volume of Cargo

Berkshire Hathaway Inc.’s Burlington Northern Santa Fe, the railroad Warren Buffett bought this year as an “all-in wager” on the U.S., said the economy is growing as the industry posted its first across-the-board increase in freight volumes since 2004.

“It’s striking,” Matthew Rose, chief executive officer of the Fort Worth, Texas-based railroad, said in a Bloomberg Television interview on the sidelines of the Berkshire annual meeting in Omaha, Nebraska on May 1. “We’re seeing the economy grow.”

The Association of American Railroads reported increases in U.S.-originated hauling of trailers, containers and each one of 19 carload commodity groups in the week ended April 24. It was the first time in more than five years that all categories rose, said Holly Arthur, a trade group spokeswoman. Berkshire swung to profit in the first quarter and Buffett, the firm’s CEO, told shareholders the economy “picked up steam.”

“We are seeing an uptick,” in businesses that serve broad industries, like railroads, said Buffett, who paid $27 billion for Burlington in February in his biggest takeover.

Rose, who’s led Burlington since 2000, oversees the second- biggest railroad in the U.S. with about 35,000 employees and 6,700 locomotives that haul coal, grain and consumer goods. Buffett, 79, negotiated the acquisition to give Berkshire access to shipping routes in the country’s West.

Photographer: Steve Crise/Burlington Northern Santa Fe Corp. via Bloomberg

A Burlington Northern Santa Fe (BNSF) train moves through Cajon Pass near San Bernardino, California. Close

A Burlington Northern Santa Fe (BNSF) train moves through Cajon Pass near San Bernardino, California.

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Photographer: Steve Crise/Burlington Northern Santa Fe Corp. via Bloomberg

A Burlington Northern Santa Fe (BNSF) train moves through Cajon Pass near San Bernardino, California.

“Railroads are the one area we are most excited about,” said Walter Spracklin, an analyst at RBC Capital Markets, who also covers trucking firms and airlines. Industry data since the end of March suggest “that the recovery is well under way and that’s all we need to get earnings out of this rail group.”

Union Pacific Corp., the country’s No. 1 railroad by sales, has advanced 17 percent this year on the New York Stock Exchange. CSX Corp., the third-biggest rail hauler, and No. 4 Norfolk Southern Corp. are both up 14 percent in 2010.

Hauling More Freight

Hauling of metallic ores more than doubled, while metals and products loads jumped 80 percent. Waste and scrap material transport rose 60 percent, and rail shipments of farm products, excluding grain, gained 49 percent. The increases were calculated against freight volumes in the same period of 2009.

“The question is what sustainability it has,” said Rose, 51, of the economic recovery.

The Commerce Department reported last week the U.S. economy grew at a 3.2 percent rate in the first quarter. U.S. freight carloads averaged about 265,000 a week in 2009, 16 percent fewer than in 2008, according to data from the association complied by Bloomberg.

To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net; Betty Liu in Omaha at bliu17@bloomberg.net.

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