to see old acquaintances and friends here. I appreciate you all coming to help us out here. Without objection, your full statement will be inserted into the record. [Material referred to follows:] STATEMENT OF RICHARD M. BRESSLER CHAIRMAN AND CHIEF EXECUTIVE OFFICER BURLINGTON NORTHERN INC. My name is Richard M. Bressler. I am Chairman and Chief Executive Officer of Burlington Northern Inc. I am appearing today at the request of Senator Baucus to discuss the formation of Burlington Northern's holding company, and what it means for the future of the Burlington Northern Railroad. There are two basic reasons why we formed the holding company. First of all, we wanted to give all of our businesses a chance to develop to their fullest potential. In order to do that, the management of each of our companies, including the railroad, needed to devote full attention to its own business. Our natural resources and land holdings have always been managed separately from the railroad. But we lacked a clearly defined corporate structure for each part of our business. Because of that, some of our managers had to divert their attention from their primary business into other areas where their level of expertise was not as great. Our new structure makes our managers more effective. The creation of separate operating companies also makes it easier to attract the best executives in specialized fields such as oil exploration and timber management. There's another good reason for the formation of our holding company. It allows Burlington Northern access to the capital markets in order to support the growth of all our operations. Formerly, as a railroad corporation, we were only permitted by law to issue securities for transportation purposes. This meant that if we wanted to develop other parts of our business, we had to use internally generated funds of the company, most of which came from railroad operations. So instead of threatening to divert funds from railroad operations, the new structure allows us to raise money independently of the railroad for development of our other properties. Fortunately, we are not faced with an "either/or" situation in the development of our railroad and our natural resource properties. We intend to develop both vigorously, and the holding company structure is the best means to reach this goal. Some have expressed the fear that the formation of a holding company will mean a downgrading in the importance and financial resources of the Burlington Northern Railroad. Nothing could be further from the truth. Last year, the railroad provided nearly 75 percent of Burlington Northern's operating income, up from 66 percent the year before. The Burlington Northern Railroad is the crown jewel of our corporate family and we are very proud of it. Because we believe that the Burlington Northern Railroad has a good future, we continue to invest heavily in it. Over the past three years, we have spent over $1.4 billion on maintaining and improving the railroad's track structure. Our 1981 expenses in this category were up 18 percent over 1980. Economic conditions permitting, we plan to increase spending on our track structure significantly again in 1982. At this time, we are not investing heavily in additional freight cars and locomotives because we currently have over 27,000 cars and over 460 locomotives stored and standing idle. I would like to share with you our strategy for the future of our railroad. While we are pleased with the accomplishments to date, we are still not satisfied. We intend to make the Burlington Northern Railroad one of the most efficient carriers in the industry. To achieve this goal and to insure our financial health and stability, we will continue our efforts to improve productivity and to increase operating efficiency. Part of this strategy involves increasing our investment in highly efficient track maintenance machines. Our expenditure for this type of equipment will more than triple in 1982 compared with 1981. Other productivity improvements will require a further trimming of our labor force. Of course, no one likes to lay off people. But we are all familiar with basic industries such as steel and automobiles that have not been very successful in improving their productivity over the years. There is no security in holding a job with a declining company in a declining industry. All of our management efforts are directed toward the goal of keeping the Burlington Northern Railroad a company which is growing in traffic volume and profitability. This, we believe, is the best way to preserve jobs in the long run. Before I leave the subject of our plans for the railroad, Senator Baucus, I would like to quote from a newsletter that you sent to your constituents last December: "We must all be prepared to acknowlege that |