A couple of years ago, we announced a five-year plan stating that revenue would grow 10 to 14 percent compounded annually, with the primary driver being new business opportunities. Projections at that time were based on the assumption that the global economy would remain strong, and that we would not fall into a recession during our planning horizon. Obviously, that hasn’t been the case.
Clearly, the global economy is in a deep recession and, beginning in the fall, we began to see a significant negative impact on carloadings at all of the North American railroads. This decline has come after several years of strong conditions in the rail industry, where we saw a combination of volume growth, pricing strength and improvements in operating efficiencies. This combination of positive factors resulted in a rapid rise in railroad profitability and return on capital.
The greatest change, or challenge, that I see in 2009 is for the railroad industry to adapt to the changing economic environment by continuing to improve operating efficiencies and asset utilization and reduce costs while continuing to improve customer service. Railroads provide an outstanding transportation value to their customers. The challenge is to demonstrate that we can sustain that value proposition in a less favorable business climate.
We remain very positive about the long-term outlook for cross-border operations.
We recognize, however, that some of these growth plans may be delayed because of the current economic conditions. In addition, we are seeing volumes decline that are closely correlated to global economic conditions, such as steel, automobiles and construction materials. We are making every effort to respond to these changing conditions by rethinking the way we run our business and thoroughly examining all aspects of our cost structure and capital spending programs.
One thing we cannot do is sacrifice customer service. We will prioritize our spending to make sure we keep our customers happy through this downturn and are prepared to respond quickly when the recovery occurs.