Railroaders place to shoot the shit.

Shipments of goods ranging from lumber for home building to cars and electronics from Asia fell so much that Union Pacific Corp. mothballed 45,000 freight cars, idled 1,700 locomotives and furloughed 5,000 workers.

But a recent increase in rail shipping volumes suggests the economy has ended a "near free fall," said James Young , Union Pacific's chairman and chief executive.

Billionaire investor Warren Buffett is bullish enough about the industry's long-term prospects that he recently made the biggest bet of his career, agreeing to buy Burlington Northern Sante Fe Corp. for $26.3 billion.

Union Pacific is winning new business by persuading companies that traditionally ship by truck that rail is cheaper and more efficient.

"We're seeing a lot of new customers that may not have considered rail before," said Mr. Young, 57 years old. New customers include pipeline manufacturers, Midwestern paper and wind-energy companies, he said.

Investments to speed deliveries are helping railroads lure customers from trucking companies, which have cut capital spending, according to a report from Moody's Investors Service. Though it also trimmed capital spending, the company, based in Omaha, Neb., still spent $2.6 billion in 2009. It opened new container facilities in San Antonio and Tacoma, Wash., and broke ground on a new terminal in Joliet, Ill.

To expand its work force speedily should the economy rebound quickly, Union Pacific is spending $50 million a year to keep 1,600 furloughed workers trained, with full benefits and wages. The company can bring those workers back within 30 days, rather than 90 days typically needed for a furloughed employee to return.

Shipping of autos, chemicals, containers, and agricultural goods are all "showing some strength," Mr. Young said. Still, Mr. Young said he had expected industrial-goods shipments to be doing better by now, given federal stimulus money available for infrastructure.

Mr. Young, who is chairman of the Association of American Railroads, sees potential railroad regulations as a major risk for the industry in 2010.

Some railroad operators are chafing at proposed federal rules that would mandate billions of dollars in new hardware to prevent collisions. "The government needs to be very careful it doesn't get this wrong," he said.

(This item appeared Dec. 28, 2009, in the Wall Street Journal.)