U.S. economy seen up on housing

By Nick Carey

NEW YORK (Reuters) - U.S. railroad Burlington Northern Santa Fe Corp. (BNI.N: Quote, Profile, Research, Stock Buzz) sees softness in the U.S. economy, driven primarily by the housing slowdown, but expects the sector to drive recovery later in 2007, the company's top executive said on Tuesday.

"Housing is clearly number one in terms of softness," Chief Executive Matt Rose said, speaking at the Reuters Manufacturing Summit in New York.

"We went into the year thinking the second half would be stronger than the first all along, primarily driven by housing," he said.

In the fourth quarter of 2006 Burlington Northern had a "strong" auction for lumber cars, which sometimes indicates expected housing construction activity six to nine months in advance, Rose said.

Rose also said the company would be willing to cut prices to compete for market share if U.S. trucking companies start taking business from the Fort Worth, Texas-based railroad.

"If we felt we were losing shipments because of incredible trucking capacity, then we would adjust," he said. "But they'd have to cut (prices) significantly" to take business away from the railroad.

Rose said only its domestic intermodal business could be at risk from competition from trucking companies, and that its international intermodal business would be unaffected.

Intermodal services use standardized containers that can be moved between trucks, ships or trains. As it takes less fuel to move goods by train, the longer the distance, the more attractive the rails become to customers.

International intermodal shipments tend to move much further than domestic intermodal ones.

The CEO added that the shortage of long-haul truck drivers would also limit the ability of trucking companies to take business from the railroad.

Rose said the railroad is also working on two new facilities to handle consumer goods imported from Asia -- it calls the facilities "logistics parks" -- that have not yet been announced, Rose said.

Imports from Asia, in particular from China, have been a major catalyst for growth at the railroads.

The railroad also continues to work closely with the Chinese government on plans to build railroads, Rose said.

"At some point in time there will be a privatization play" in China, which the company may look at, he added.

Its shares closed down $2.81, or 3.44 percent, at $78.89 on the New York Stock Exchange.