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Ports Tangle Won't Clear Until COVID is Under Control

Union Pacific CEO tells Jim Cramer labor shortages are driving the bottlenecks at U.S. ports.

In the 19th century, Union Pacific,  (UNP) - Get Union Pacific Corporation Report helped meet the challenge of the first transcontinental railroad. Today, the company faces labor and supply shortage problems that a golden spike can’t cure.

Lance Fritz, chairman, president and CEO of Union Pacific talked to Mad Money’s Jim Cramer recently about the crisis in the USA’s ports that has had container ships backed up off Southern California. Backlogs in the nation’s freight system have caused spot shortages and higher prices. Find out more about how you can profit from Real Money columnists' ideas here

Fritz told Cramer that the problems continue largely due to a continued labor shortage and the Delta variant. He argued that generous unemployment benefits (now mostly concluded) and COVID-19 have combined to keep people from work, which has led to a shortage of truck drivers and warehouse workers needed to move products efficiently. Fritz said getting COVID-19 under control is what it will take to get port workers back.

When asked how long that might take, Fritz said he views many of the industry's problems as transitory, but it will likely take more than six months to fully recover.

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As for Union Pacific's earnings, Fritz contends that his railroad remains prudent and fluid and is doing fine despite all of the unprecedented challenges from the pandemic. Rail is just one part of the overall supply chain however, so there's only so much they can do when containers are stuck at ports and trucks are waiting for drivers to take them to warehouses at the other end.

Fritz became chairman of the board of Union Pacific effective October 1, 2015. Fritz became president and chief executive officer Feb. 5, 2015, when he also was elected to the corporation’s board of directors.

Union Pacific built more than 1000 miles of the transcontinental railroad between 1863-1869, starting in Nebraska and extending westward to Promontory Summit, Utah, where it connected with tracks that ran to the San Francisco Bay.

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