<COVER PAGE>                        
                              FORM 10-Q   
              
                            UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C.  20549-1004
  
  (Mark One)
  
  [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                     EXCHANGE ACT OF 1934                 
                                 
  For the quarterly period ended March 31, 1998
  
                              OR
  
  [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                     EXCHANGE ACT OF 1934
  
  For the transition period from___________________ to _____________________
  
                    Commission file number 1-6146
  
                   UNION PACIFIC RAILROAD COMPANY
       (Exact name of Registrant as specified in its charter)
  
         DELAWARE                                94-6001323
  (State or other jurisdiction of             (I.R.S. Employer
   incorporation or organization)           Identification No.)
  
                 1416 DODGE STREET, OMAHA, NEBRASKA
              (Address of principal executive offices)
  
                              68179
                            (Zip Code)
  
                         (402) 271-5000
         (Registrant's telephone number, including area code)
  
   Indicate by check mark whether the Registrant (1) has filed all
  reports required to be filed by Section 13 or 15(d) of the Securities
  Exchange Act of 1934 during the preceding 12 months (or for such shorter
  period that the registrant was required to file such reports), and (2) has
  been subject to such filing requirements for the past 90 days.
  
  YES   X     NO         
     ------      ------                                        
  
   As of April 30, 1998, the Registrant had outstanding 4,465 shares of
  Common Stock, $10 par value, and 388 shares of Class A Stock, $10 par
  value.
        
   THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
  INSTRUCTIONS H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS
    FORM WITH THE REDUCED DISCLOSURE FORMAT.                
    
<INDEX PAGE>   
    
                     UNION PACIFIC RAILROAD COMPANY
                                INDEX
  
  
                     PART I.  FINANCIAL INFORMATION
                     ------------------------------
                               
  
  
                                                                Page Number
                                                                -----------
                                                            
  
  ITEM 1:  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:                  
  
           CONDENSED STATEMENT OF CONSOLIDATED INCOME 
           AND RETAINED EARNINGS - For the Three 
           Months Ended March 31, 1998 and 1997 . . . . . . . . . .      1 
  
           CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL 
           POSITION - At March 31, 1998 and 
           December 31, 1997. . . . . . . . . . . . . . . . . . . .      2
  
           CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS 
           - For  the Three Months Ended 
           March 31, 1998 and 1997. . . . . . . . . . . . . . . . .      4
  
           NOTES TO CONDENSED CONSOLIDATED FINANCIAL 
           STATEMENTS . . . . . . . . . . . . . . . . . . . . . . .      5
                                                        
  ITEM 2:  MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS 
           OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . .     10
  
  
  
  
                       PART II.  OTHER INFORMATION
                       ----------------------------
                               
  
  ITEM 1:  LEGAL PROCEEDINGS. . . . . . . . . . . . . . .  . . . .      18
  
  ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K . . . . . .  . . . . .      20
  
  SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . .      22
  
  
<PAGE>1

  PART I - FINANCIAL INFORMATION
  ------------------------------
  
  ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  
     UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
  
       CONDENSED STATEMENT OF CONSOLIDATED INCOME AND RETAINED EARNINGS
            For The Three Months Ended March 31, 1998 and 1997
            --------------------------------------------------
                       (Millions of Dollars)
                            (Unaudited)
                                                1998           1997
                                             ---------      ---------
  Operating Revenues . . . . . . . . . .       $2,284         $2,563 
                                               ------         ------ 
  Operating Expenses:
   Salaries, wages and employee 
     benefits. . . . . . . . . . . . . .          884            855 
   Equipment and other rents . . . . . .          356            314 
   Fuel and utilities  (Note 3). . . . .          208            281 
   Depreciation and amortization . . . .          246            240 
   Materials and supplies. . . . . . . .          132            148 
   Purchased services. . . . . . . . . .          141            159 
   Other costs (Note 5). . . . . . . . .          264            213 
                                               ------         ------ 
     Total . . . . . . . . . . . . . . .        2,231          2,210 
  
  Operating Income . . . . . . . . . . .           53            353 
  Other Income - Net . . . . . . . . . .           18             36 
  Interest Expense (Note 3). . . . . . .         (134)          (122)
                                               ------          ------
  
  Income (Loss) Before Income Taxes. . .          (63)           267 
  Income Tax Expense (Benefit) . . . . .          (31)            97 
                                               ------         ------ 
     Net Income (Loss) . . . . . . . . .       $  (32)        $  170 
                                               ======         ====== 
  Retained Earnings:                                                          
   Beginning of period . . . . . . . . .        4,110          3,939 
   Net income (loss) (Note 6). . . . . .          (32)           170 
   Dividends to parent . . . . . . . . .         (110)          (109)
                                               ------         ------ 
        End of Period. . . . . . . . . .       $3,968         $4,000 
                                               ======         ====== 
  Ratio of Earnings to Fixed 
     Charges (Note 4). . . . . . . . . .           .6            2.5 
                                                   ==            === 
  
  
  The accompanying accounting policies and notes to condensed financial
  statements are an integral part of these statements.

<PAGE>2

    UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
  
        CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
        ------------------------------------------------------
                        (Millions of Dollars)
                            (Unaudited)
  
  
                                                  March 31,     December 31,
  ASSETS                                             1998           1997    
  ------                                        -----------     ------------
  Current Assets:
   Cash and temporary investments  . . . . .     $    48          $    50
   Accounts receivable - net (Note 3)  . . .         390              456
   Materials and supplies  . . . . . . . . .         301              288
   Other current assets  . . . . . . . . . .         193              251
                                                 -------          -------
     Total Current Assets  . . . . . . . . .         932            1,045
                                                 -------          -------
     
  Investments:                               
   Investments in and advances to            
    affiliated companies . . . . . . . . . .         652              595
   Other investments . . . . . . . . . . . .          29               29
                                                 -------          -------
     Total Investments . . . . . . . . . . .         681              624
                                                 -------          -------
  Properties, at cost:                                              
   Road and other  . . . . . . . . . . . . .      23,867           23,610
   Equipment . . . . . . . . . . . . . . . .       7,241            7,084
                                                 -------          -------
     Total Properties  . . . . . . . . . . .      31,108           30,694
   Less accumulated depreciation and 
     amortization  . . . . . . . . . . . . .       5,365            5,208
                                                 -------          -------
     Properties - Net  . . . . . . . . . . .      25,743           25,486
                                                 -------         --------
  Other Assets . . . . . . . . . . . . . . .         123               92
                                                 -------         --------
     Total Assets  . . . . . . . . . . . . .     $27,479          $27,247
                                                 =======          =======
  
  
  
  The accompanying accounting policies and notes to condensed financial
  statements are an integral part of these statements.

<PAGE>3

    UNION  PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
  
          CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
          ------------------------------------------------------
                          (Millions of Dollars)
                               (Unaudited)
  
  
                                               March 31,    December 31,
  LIABILITIES AND STOCKHOLDER'S EQUITY           1998           1997
  ------------------------------------         ---------    ------------
  Current Liabilities:
   Accounts payable  . . . . . . . . . . .      $   448       $   660
   Accrued wages and vacation  . . . . . .          377           382
   Taxes payable . . . . . . . . . . . . .          263           263
   Casualty and other reserves . . . . . .          365           364
   Debt due within one year  . . . . . . .          129           229
   Other current liabilities (Note 2). . .          800           869
                                                -------       -------
     Total Current Liabilities . . . . . .        2,382         2,767
                                                -------       -------
  Debt Due After One Year  . . . . . . . .        2,415         2,361
  
  Deferred Income Taxes  . . . . . . . . .        6,670         6,698
  
  Retiree Benefit Obligations  . . . . . .          759           749
  
  Due to UPC Long-Term . . . . . . . . . .        4,824         3,993
  
  Other Liabilities (Note 2 and 5) . . . .        1,650         1,758
  
  Redeemable Preference Shares . . . . . .           29            29
  
   Series A, $10,000 par value; 4,829 shares
   Series B, $10,000 par value; 436 shares
  
  Stockholder's Equity (Note 2):
   Common stock - $10.00 par value; 9,200 
     shares authorized and 4,465 . . . . .            -             -
   Class A stock - $10.00 par value; 800 
     shares authorized and 388 . . . . . .            -             -
  Capital surplus  . . . . . . . . . . . .        4,782         4,782
   Retained earnings . . . . . . . . . . .        3,968         4,110
                                                -------       -------
     Total Stockholder's Equity  . . . . .        8,750         8,892
                                                -------       ------- 
     Total Liabilities and Stockholder's 
        Equity . . . . . . . . . . . . . .      $27,479       $27,247
                                                =======       ======= 
  
  
  
  The accompanying accounting policies and notes to condensed financial
    statements are an integral part of these statements.
    
 <PAGE>4   
    
    UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
  
              CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
            For the Three Months Ended March 31, 1998 and 1997
            --------------------------------------------------
                          (Millions of Dollars)
                               (Unaudited)
  
  
                                                     1998             1997 
 Cash from Operations:                              
  
   Net Income (Loss) (Note 5). . . . . . . .       $ (32)           $ 170 
  
   Non-Cash Charges to Income:
     Depreciation and amortization . . . . .         246              240 
     Deferred income taxes . . . . . . . . .         (27)              35 
     Other - net . . . . . . . . . . . . . .         (54)             (48)
   Changes in current assets and 
     liabilities . . . . . . . . . . . . . .        (272)             (98)
                                                   -----            ----- 
     Cash Provided (Used) by 
             Operations. . . . . . . . . . .        (139)             299 
                                                   -----            ----- 
  Investing Activities:
  
   Capital investments . . . . . . . . . . .        (518)            (402)
   Other - net . . . . . . . . . . . . . . .         (25)             (30)
                                                   -----            ----- 
     Cash Used in Investing Activities . . .        (543)            (432)
                                                   -----            ----- 
  
  Equity and Financing Activities:
  
   Debt repaid . . . . . . . . . . . . . . .        (132)             (89)
   Financings  . . . . . . . . . . . . . . .          91               80 
   Dividends paid to parent . . . . .  . . .        (110)            (109)
   Advances from affiliated 
    companies - net. . . . . . . . . . . . .         831              237 
                                                   -----            ----- 
     Cash Provided by Equity and 
        Financing Activities . . . . . . . .         680              119 
                                                   -----            ----- 
     Net Change in Cash and Temporary
             Investments . . . . . . . . . .       $  (2)           $ (14)
                                                   =====            ===== 
  
  
  The accompanying accounting policies and notes to condensed financial
    statements are an integral part of these statements.
    
<PAGE>5    
    
     UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
  
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
       ------------------------------------------------------
                           (Unaudited)
  
  
  1. RESPONSIBILITIES FOR FINANCIAL STATEMENTS: The condensed consolidated
     inancial statements of Union Pacific Railroad Company (the Company or
     the Railroad) are unaudited and reflect all adjustments (consisting
     only of normal and recurring adjustments) that are, in the opinion of
     management, necessary for a fair presentation of the financial position
     and operating results for the interim periods. The condensed
     consolidated financial statements should be read in conjunction with
     the consolidated financial statements and notes thereto contained in
     the Company's Annual Report on Form 10-K for the year ended
     December 31, 1997.  The results of operations for the three months
     ended March 31, 1998 are not necessarily indicative of the results for
     the year ending December 31, 1998.  Certain 1997 amounts have been
     reclassified to conform to the 1998 financial statement presentation.
 
  2. ACQUISITION OF SOUTHERN PACIFIC RAIL CORPORATION (SOUTHERN PACIFIC OR
     SP):  Union Pacific Corporation (UPC or the Corporation) consummated
     the acquisition of Southern Pacific in September 1996.  The acquisition
     of Southern Pacific has been accounted for using the purchase method. 
     On February 1, 1998, Union Pacific Railroad Company, a Utah Corporation
     (UPRR-Utah), was merged with and into Southern Pacific Transportation
     Company, a Delaware Corporation (SPT), the principal SP rail affiliate
     (the SPT Merger), with SPT continuing as the surviving corporation and
     changing its name to "Union Pacific Railroad Company" (UPRR),
     immediately following the SPT Merger. Immediately prior to the SPT
     Merger, SPT was a wholly-owned, indirect subsidiary of UPC, and
     UPRR-Utah was a subsidiary of UPC, with all of the issued and
     outstanding shares of voting stock of UPRR-Utah being owned, directly
     or indirectly, by UPC. UPRR-Utah and SPT operated as a unified system
     before and after the SPT Merger.
  
     The SPT Merger has been accounted for in a manner similar to a 
     pooling-of-interest combination of entities under common control since 
     both entities involved in the merger were indirect wholly-owned 
     subsidiaries of UPC at the date of the SPT Merger and with the surviving 
     entity continuing as such.
  
     In connection with the continuing integration of UPRR-Utah and Southern
     Pacific's rail operations (collectively, the Railroad), the Company is
     continuing to eliminate duplicate positions, (primarily positions other
     than train crews), relocate positions, merge or dispose of redundant
     facilities, dispose of certain rail lines and cancel uneconomical and
     duplicative SP contracts.  The Company has also repaid certain of
     Southern Pacific's debt obligations. The Company recognized a $958     
     million liability in the Southern Pacific purchase price allocation for
     
<PAGE>6     
     
     costs associated with SP's portion of these activities. 
  
     Through March 31, 1998, approximately $323 million in merger-related
     costs were paid by the Company and charged against these reserves,
     principally composed of approximately $160 million and $70 million,
     respectively, for severance and relocation payments made to
     approximately 3,700 Southern Pacific employees and approximately $63
     million for labor protection payments.  The Company expects the
     remaining merger payments will be made over the course of the next five
     years as the rail operations of UPRR-Utah and the SP are integrated and
     labor negotiations are completed and implemented.
  
     In addition, the Company expects to incur approximately $206 million in
     acquisition-related costs through 1999 for severing or relocating 
     UPRR-Utah employees, disposing of certain UPRR-Utah facilities, training 
     and equipment upgrading.  These costs will be charged to expense as
     incurred over the next two years.  Results for the three months ended
     March 31, 1998 include $18 million (after tax) in acquisition-related
     operating costs.
  
  3. FINANCIAL INSTRUMENTS:  
  
     Risk Management: The Company uses derivative financial instruments in
     limited instances for other than trading purposes to manage risk as it
     relates to fuel prices and interest rates.  Where the Company has fixed
     interest rates or fuel prices through the use of swaps, futures or
     forward contracts, the Company has mitigated the downside risk of
     adverse price and rate movements; however, it has also limited future
     gains from favorable movements.  
  
     The Company addresses market risk related to these instruments by
     selecting instruments whose value fluctuations highly correlate with
     the underlying item being hedged.  Credit risk related to derivative
     financial instruments, which is minimal, is managed by requiring
     minimum credit standards for counterparties and monthly settlements. 
     The total credit risk associated with the Company's counterparties was
     $36 million at March 31, 1998.  The Company has not been required to
     provide, nor has it received, any collateral relating to its hedging
     activity.  
  
     The fair market value of the Company's derivative financial instrument
     positions at March 31, 1998 were determined based upon current fair
     market values as quoted by recognized dealers, or developed based on
     the present value of expected future cash flows discounted at the
     applicable zero coupon U.S. treasury rate and swap spread. 
  
     Fuel: Over the past three years, fuel costs approximated 10% of the
     Company's total operating expenses.  As a result of the significance of
     the fuel costs and the historical volatility of fuel prices, the
     Company periodically uses swaps, futures and forward contracts to
     mitigate the impact of fuel price volatility.  The intent of this
     program is to protect the Company's operating margins and overall
     
<PAGE>7     
     
     profitability from adverse fuel price changes.  At March 31, 1998, the
     Company had hedged 49% of its estimated remaining 1998 fuel consumption
     at $0.51 per gallon on a Gulf Coast basis and had outstanding swap
     agreements covering its fuel purchases of $267 million, with gross and
     net liability positions of $28 million.  Fuel hedging increased the
     Company's first quarter 1998 and 1997 fuel costs by $14.5 million and
     $.1 million, respectively.
  
     Interest Rates: The Company controls its overall risk relating to
     fluctuations in interest rates by managing the proportion of fixed and
     floating rate debt instruments within its debt portfolio over a given
     period.  Derivatives are used in limited circumstances as one of the
     tools to obtain the targeted mix.  The mix of fixed and floating rate
     debt is largely managed through the issuance of targeted amounts of
     such debt as debt maturities occur or as incremental borrowings are
     required.  The Company also obtains additional flexibility in managing
     interest cost and the interest rate mix within its debt portfolio by
     issuing callable fixed rate debt securities. 
  
     At March 31, 1998, the Company had outstanding interest rate swaps on
     $109 million of notional principal amount of debt (4% of the total debt
     portfolio, excluding obligations to the Corporation) with gross and net
     liability positions of $8 million. These contracts mature over the next
     one to eight years. Interest rate hedging activity increased interest
     expense in both the first quarter of 1998 and 1997 by less than $1
     million.
  
     Sale of Receivables:  The Company has sold, on a revolving basis, an
     undivided percentage ownership interest in a designated pool of
     accounts receivable.  At December 31, 1997 and March 31, 1998, accounts
     receivable are presented net of the $650 million of receivables sold. 
     
  4. RATIO OF EARNINGS TO FIXED CHARGES: The ratio of earnings to fixed
     charges has been computed on a total enterprise basis.  Earnings
     represent income from continuing operations less equity in
     undistributed earnings of unconsolidated affiliates, plus income taxes
     and fixed charges.  Fixed charges represent interest, amortization of 
     debt discount and expense, and the estimated interest portion of rental
     charges.  For the three months ended March 31, 1998, fixed charges
     exceeded earnings by approximately $73 million.
  
  5. COMMITMENTS AND CONTINGENCIES:  There are various claims and lawsuits
     pending against the Company.  Certain customers have submitted claims
     or stated their intention to submit claims to the Company for damages
     related to shipments delayed in transit as a result of congestion
     problems and certain customers have filed lawsuits seeking to recover
     damages for such delays.  The nature of the damages sought by claimants
     includes, but is not limited to, contractual liquidated damages,
     freight loss or damage, alternative transportation charges, additional
     production costs, lost business and lost profits.  In addition, some
     customers have asserted that they have the right to cancel contracts as
     a result of alleged material breaches of such contracts by the
     
<PAGE>8     
     
     Railroad.  The Company expects additional claims by shippers. The
     Company will continue to evaluate the adequacy of its reserves for
     claims and expects to add to such reserves as appropriate.
  
     The Railroad is also party to certain regulatory proceedings before the
     Surface Transportation Board of the U.S. Department of Transportation
     (STB).  One proceeding pertains to rail service problems in the western
     United States. As an outgrowth of this proceeding, the STB has issued
     an emergency service order imposing certain temporary measures on the
     Railroad designed, among other things, to reduce congestion on the
     Railroad's lines in the Houston, Texas area.  A second proceeding,
     initiated under the STB's continuing oversight jurisdiction with
     respect to the Corporation's acquisition of Southern Pacific and
     consolidation of Southern Pacific with UPRR-Utah (and separate from the
     STB's regularly-scheduled annual proceeding to review the
     implementation of the merger and the effectiveness of the conditions
     that the STB imposed on it), is for the purpose of considering the
     justification for and advisability of any proposals for new remedial
     conditions to the merger as they pertain to service in the Houston,
     Texas/Gulf Coast area, including, proposals by Kansas City Southern
     Railway Company (KCS), Texas Mexican Railway Company (Tex Mex) and the
     Greater Houston Partnership (GHP) for the forced transfer by the
     Railroad to Tex Mex of certain lines and facilities in and around
     Houston, the establishment of a "neutral" switching operation in the
     greater Houston area and the permanent adoption of provisions in the
     STB's emergency service order that expanded Tex Mex's right to handle
     traffic to and from Houston.  In addition, the STB has initiated
     various inquiries and formal rule-making proceedings regarding certain
     elements of rail regulation following two days of hearings by the STB
     at the request of two members of Congress and in response to shippers'
     expressions of concern regarding railroad service quality, railroad
     rates and allegedly inadequate regulatory remedies.  If the Railroad is
     unsuccessful in eliminating the remaining congestion and service
     problems affecting its system, the STB could issue a new emergency
     service order with the expiration of the current one and order the
     Railroad to take additional actions including, among other things,
     further diversions of traffic or the transfer of certain rail lines or
     other facilities to other railroads.  In addition, there can be no
     assurance that the proposals advanced by parties in the remedial
     conditions proceeding or the proceedings initiated in response to the
     rail regulation hearings will not be approved in some form.  Should the
     STB or Congress take aggressive action in the rail regulation
     proceedings (e.g., by making purportedly competition-enhancing changes
     in rate and route regulation and "access" provisions), the adverse
     effect on the Railroad and other rail carriers could be material.
  
     The Company is also subject to Federal, state and local environmental
     laws and regulations, and is currently participating in the
     investigation and remediation of numerous sites.  Where the remediation
     costs can be reasonably determined, and where such remediation is
     probable, the Company has recorded a liability.  In addition, the
     Company periodically enters into financial and other commitments and
     
<PAGE>9     
     
     has retained certain contingent liabilities upon the disposition of
     formerly-owned operations.
   
     In addition, UPC and certain of its officers and directors are
     currently defendants in two purported class action securities lawsuits,
     and certain current and former directors of the Corporation are
     currently defendants in a purported derivative action filed on behalf
     of the Corporation.  The class action suits allege, among other things,
     that management failed to properly disclose the Railroad's service and
     safety problems and thereby issued materially false and misleading
     statements concerning the merger with SP and the safe, efficient
     operation of its rail network.  The derivative action alleges, among
     other things, that the named current and former directors breached
     their fiduciary duties to the Corporation by approving the mergers of
     SP and Chicago and Northwestern Transportation Company into the
     Corporation without ensuring that the Corporation or the Railroad had
     adequate systems in place to effectively integrate those acquisitions
     into the operations of the Corporation and the Railroad.  Because both
     the size of the class and the damages are uncertain, UPC and the
     Railroad are unable at this time to determine the potential liability,
     if any, which might arise from these lawsuits.  Management believes
     that these claims are without merit and intends to defend them
     vigorously.
  
     It is not possible at this time for the Company to fully determine the
     effect of all unasserted claims on its consolidated financial
     condition, results of operations or liquidity; however, to the extent
     possible, where unasserted claims can be estimated and where such
     claims are considered probable, the Company has recorded a liability. 
     The Company does not expect that any known lawsuits, claims,
     environmental costs, commitments or guarantees will have a material
     adverse effect on its consolidated financial condition.
  
  6. ACCOUNTING PRONOUNCEMENTS: In June 1997, the Financial Accounting
     Standards Board (FASB) issued Statement No. 130, "Reporting
     Comprehensive Income" (FAS 130), that is effective for all periods in
     1998, including interim periods.  The Company has adopted the
     provisions of FAS 130 effective January 1, 1998.  The components of
     comprehensive income include, among other things, changes in the market
     value of futures contracts which qualify for hedge accounting and a net
     loss recognized as an additional pension liability but not yet
     recognized as net periodic pension cost. There is no impact from
     adopting FAS 130 for the three months ended March 31, 1998.
   
     Also in June 1997, the FASB issued Statement No. 131, "Disclosures
     about Segments of an Enterprise and Related Information," that is
     effective in 1998. The Company currently complies with most provisions
     of this Statement, and any incremental disclosure required by that
     Statement is expected to be minimal. 
     
<PAGE>10     
     
     In February 1998, the FASB issued Statement No. 132, "Employers'
     Disclosures about Pensions and Other Postretirement Benefits," that is
     effective in 1998 (FAS 132).  FAS 132 revises and standardizes
     disclosures required by FAS 87, 88, and 106. Restatement of the     
     retirement plans footnote will be required for all earlier periods
     presented in comparative financial statements at December 31, 1998.
  
  
  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS
  
    UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
  
        MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
  
        Three Months Ended March 31, 1998 Compared to March 31, 1997
        ------------------------------------------------------------
  
                           Mergers
                           -------
  
  On February 1, 1998, Union Pacific Railroad Company, a Utah Corporation
  (UPRR-Utah), was merged with and into Southern Pacific Transportation
  Company, a Delaware Corporation (SPT), the principal SP rail affiliate
  (the SPT Merger), with SPT continuing as the surviving corporation and
  changing its name to "Union Pacific Railroad Company" (UPRR), immediately
  following the SPT Merger. Immediately prior to the SPT Merger, SPT was a
  wholly-owned, indirect subsidiary of UPC, and UPRR-Utah was a subsidiary
  of UPC, with all of the issued and outstanding shares of voting stock of
  UPRR-Utah being owned, directly or indirectly, by UPC. UPRR-Utah and SPT
  operated as a unified system before and after the SPT Merger.
  
  The SPT Merger has been accounted for in a manner similar to a 
  pooling-of-interest combination of entities under common control since 
  both entities involved in the merger were indirect wholly-owned 
  subsidiaries of UPC at the date of the SPT Merger and with the surviving 
  entity continuing as such.
  
                        Congestion and Service Issues
                        -----------------------------
  
  As previously reported in the Company's 1997 Annual Report on Form 10-K,
  congestion in and around Houston and the coastal areas of Texas and
  Louisiana (the Gulf Coast region) began to have a material adverse effect
  on the Company's operations and earnings in the third quarter of 1997. 
  System congestion started in the Gulf Coast region and spread throughout
  the system as the Railroad shifted resources to help mitigate the problem
  in the Gulf Coast region.  The congestion was brought on by, among other
  things, crew shortages and restricted track access caused by necessary
  track maintenance on former Southern Pacific lines, increased demand,
  washouts due to severe weather, derailments and congestion at Texas/Mexico
  gateways.  Traffic slowed further as rail yards in the Gulf Coast region
  
<PAGE>11  
  
  filled, slowing access into and out of the yards and forcing trains to be
  held on sidings.  Slower average train velocity led to a greater need for
  locomotives in the region.  As traffic in the region backed up and the
  Railroad redeployed locomotives to the Gulf Coast region to help alleviate
  local congestion, congestion problems spread to other parts of the
  Railroad's system during the third and fourth quarters of 1997.
  
  To restore service to acceptable levels, the Railroad implemented a
  Service Recovery Plan (the Plan) in October, 1997.  The Plan focuses on
  reducing the number of cars on the system and restoring system velocity,
  which, in turn, results in more reliable service to customers. 
  Implementation of the Plan has resulted in improvement in the overall
  operation of the Railroad and is addressing congestion problems in the
  Gulf Coast region and the surrounding southeast portion of the Railroad's
  system (although intermittent periods of congestion continue to arise in
  other regions, primarily in the Midwest). In late March and early April
  1998, congestion in the Gulf Coast region was aggravated by several severe
  storms and congestion caused by operational problems on Mexican railroad
  lines south of Laredo, Texas.  However, operational initiatives
  subsequently implemented by the Railroad, including the Railroad's embargo
  of most southbound traffic destined for the Laredo gateway, have
  substantially reduced congestion on the Railroad's lines in the Gulf Coast
  region.
  
  In connection with its integration with Southern Pacific, the Company has
  implemented (i) TCS in the southeast portion of UPRR's system, which
  includes the Gulf Coast region, where the cut over to TCS occurred on
  December 1, 1997, (ii) directional running from Dexter Junction, Missouri,
  on the north, across Arkansas, western Louisiana and eastern Texas to the
  Houston and San Antonio areas on the south, beginning on February 1, 1998
  and (iii) the hub-and-spoke labor agreements in Texas and Arkansas. 
  Although the Company believes that the full implementation of these
  changes is essential to achieving significant long-term benefits, their
  implementation also contributed to the persistence of congestion in the
  affected Gulf Coast region during late 1997 and early 1998.
  
  On March 28, 1998, the Railroad embargoed most southbound traffic destined
  for the Laredo, Texas gateway to address worsening congestion at that
  gateway and clear the backlog of cars waiting to cross into Mexico.  The
  embargo applied to grain, chemicals, industrial products and coal, but not
  finished automobiles, auto parts or intermodal traffic or any northbound
  traffic through Laredo.  The Railroad rerouted some of the embargoed
  traffic through other Railroad gateways to Mexico, none of which were
  subject to the embargo.  The Railroad believed that this embargo was
  necessary because congestion problems principally within Mexico and
  agricultural inspection delays at the border that affected the Laredo
  gateway had worsened during the weeks preceding the imposition of the
  embargo and were affecting other areas within the southeast region of its
  system, resulting in a substantial backlog of cars waiting to move south
  to Laredo. Imposition of the embargo quickly resulted in a significant
  reduction in the backlog of cars.  Accordingly, on April 14, 1998, the
  
<PAGE>12  
        
  Railroad amended the embargo to introduce permitting to control traffic
  volumes.  The permitting system allowed customers to move traffic that had
  been embargoed while allowing the Railroad to meter southbound traffic to
  prevent any surge of business that could again block the Laredo crossing.
  On April 16, 1998, the Railroad further amended the embargo to eliminate
  permit requirements for domestic shipments terminating at Laredo, and on
  April 22, 1998, the Railroad canceled the embargo.
  
  Financial Impact of Congestion - The Railroad has estimated that the cost 
  of the congestion-related problems for the three months ended March 31,
  1998 was approximately $260 million, after tax, which reflected the
  combined effects of lost business, higher costs associated with system
  congestion, costs associated with implementation of the Plan, alternate
  transportation and customer claims.  Although progress has been made in
  improving service, the Railroad expects these problems to continue to have
  an adverse impact on 1998 results.  In addition, as a result of recent
  operating losses incurred by the Railroad and in order to fund its capital
  programs, the Corporation has incurred substantial incremental debt since
  December 31, 1997, and obtained additional financing on April 1, 1998 from
  a private placement of $1.5 billion of 6-1/4% preferred securities of
  Union Pacific Capital Trust, a statutory business trust sponsored by the
  Corporation, which securities are convertible into common stock of the
  Corporation at an initial conversion price of $68.90.  The timing of the
  Corporation's return to profitability will be determined by how rapidly it
  is able to eliminate congestion, and return to normal operations
  throughout its system.
  
                            Results of Operations
                            ----------------------
  
  The Company reported a loss of $32 million in the first quarter of 1998,
  compared to $170 million of reported net income in 1997.  This decline in
  earnings is the result of the continuing effects of congestion on the
  Company's operations, which was estimated to cost the Company
  approximately $260 million after-tax in the first quarter of 1998.  Both
  periods included the impact of one-time SP merger-related costs for
  severance, relocation and training of employees ($18 million reduction in
  net income in 1998 and $9 million reduction in net income in 1997).  
  
  The operating ratio for the first quarter of 1998 was 97.7, which included
  approximately 15 points estimated to be attributable to congestion costs
  (both lost business and incremental operating costs).  This compares to an
  operating ratio of 86.2 for the same period in 1997.  Operating revenues
  fell $279 million (11%) to $2.28 billion in 1998.  This decrease reflects
  continuing congestion, the impact of the Asian crisis on export grain and
  intermodal markets and weak grain demand as farmers delay shipments due to
  the current grain price environment.  Average commodity revenue per car
  (ARC) fell 1% to $1,149 per car, while total carloadings fell 9%
  (approximately 189,000 cars).  Commodity revenue in 1998 fell 10% over the
  same period in 1997 as shown in the table below:
                          

<PAGE>13                          
                          
                          
                              Commodity Revenue
                         Three Months Ended 3/31/98
                        ----------------------------
  
                                                         Versus 1997
                                          Commodity   -----------------
  (Revenue in 000's)     Cars     ARC      Revenue      Change       %  
  ------------------   -------  ------    ---------   ----------   ----
  
  Automotive           159,400  $1,446   $  230,464   $  (6,973)    (3)
  Agricultural         203,177   1,554      315,786     (87,410)   (22)
  Intermodal           590,115     606      357,506     (56,924)   (14)
  Chemicals            222,798   1,749      389,773     (43,719)   (10)
  Energy               442,094   1,124      496,988     (15,207)    (3)
  Industrial           320,602   1,359      435,709     (40,502)    (9)
                     ---------  ------   ----------   ----------   ----
  
  Total Commodity    1,938,186  $1,149   $2,226,226   $(250,735)   (10)
                     =========  ======   ==========   ==========   ====
  
  Automotive: Commodity revenue fell $7 million or 3% to $230 million,
  despite a 1% increase in carloadings, reflecting new business
  opportunities and steady economic conditions in the Automotive industry. 
  Strong demand and the new Ford business led the 3% increase in finished
  autos carloadings, while parts volumes fell 2% resulting from congestion-
  related diversions of traffic and inventory control by major
  manufacturers.  Average commodity revenue per car declined 4%, resulting
  from generally shorter-haul Ford business and less long-haul Mexico
  business. 
  
  Agricultural Products: Commodity revenue fell 22% to $316 million. 
  Carloadings declined 18% to 203,000 cars, primarily the result of a 25%
  decrease in corn volumes due to soft export demand (strong foreign
  production and the effect on exchange rates due to the Asian crisis), as
  well as, continued congestion.  Most agricultural products suffered from
  congestion problems and related equipment shortages; meals and oils were
  the only bright spot, as U.S. producers benefitted from strong export
  markets, primarily to Mexico.  Average commodity revenue per car declined
  5%, largely the result of weak exports, which significantly reduced the
  average length of haul.
  
  Intermodal: Commodity revenue declined 14% to $358 million, while
  carloadings fell 12% to 590,000 loads--the result of continued congestion
  and related diversions of traffic, as well as equipment imbalances caused
  by strong imports and weak exports.  Average commodity revenue per car
  fell 1%, as unfavorable mix was largely offset by new longer-haul
  business.
  
  Chemicals: Carloadings declined 6% to 223,000 cars and commodity revenue
  decreased $44 million (10%) to $390 million.  The decline in volume
  resulted principally from system congestion (partially the result of
  congestion of traffic crossing at the Mexican border), which more than
  

<PAGE>14  

  offset strong market demand.  Average commodity revenue per car declined
  4% due to generally shorter hauls (storage-in-transit moves for plastic
  and strong growth in short-haul potash moves) and unfavorable product mix.
  
  Energy (Primarily Coal): Commodity revenue fell 3% to $497 million in
  1998, driven by a 3% decrease in carloadings.  Continued congestion
  problems, diversions of business to competing roads and a late February
  blizzard led the decline, despite strong demand.  Average commodity
  revenue per car was flat quarter over quarter.  Powder River Basin (PRB)
  train cycles fell slightly from first quarter 1997, 24.8 in 1998 vs. 25.1
  in 1997; however, longer trains (117.6 cars/train in 1998 vs. 114.1 in
  1997) boosted loads by approximately 3,200 units helping to improve PRB
  business versus 1997. All other mine locations posted declines, largely
  due to congestion and related train cycle time issues.
  
  Industrial Products: Carloadings decreased 10%, while commodity revenue
  declined 9% to $436 million.  Volume declines resulted primarily from
  continued congestion (in the Southern tier and the Pacific Northwest), as
  well as, the Company's sale of its Duck Creek North line in 1997.  Average
  commodity revenue per car improved 1%, the result of the absence of
  shorter-haul Duck Creek North business and favorable mix changes.
  
  Operating expenses were $2,231 million, $21 million (1%) higher than the
  first quarter 1997 operating costs of $2,210 million.  Higher operating
  costs reflected approximately $77 million of congestion-related costs
  ($148 million of congestion-related costs offset by $71 million of volume
  savings from lower business levels).  The impact of congestion was
  partially offset by lower fuel costs, merger benefits and volume-related
  cost savings, as carloads were off 9% and gross-ton miles were down 10%.
      
  Labor expense was $29 million (3%) higher than 1997, as net congestion-
  related costs and wage inflation were partially offset by merger
  consolidation benefits.  Quarter-over-quarter, the work force levels were
  virtually flat, as merger-related staff reductions and attrition were
  offset by new hiring for train and engine crews.
  
  Depreciation expense grew $6 million or 3% to $246 million due to the
  Company's extensive capital program in 1997 and 1998.  The Company spent
  over $2 billion on capital projects in 1997 and anticipates spending $2.2
  billion in 1998 of which $400 million will be merger-related. 
  
  Materials and Supplies expenditures were down $16 million (11%) from first
  quarter 1997.  More rebuild projects (which are capitalized) and less
  maintenance projects in 1998 plus the absence of large program maintenance
  projects on freight cars in 1998 accounted for the quarter-over-quarter
  decline.
  
  Fuel and Utilities expenses were down $73 million or 26% from 1997,
  reflecting lower fuel prices and congestion-related volume declines. A
  reduction in gross-ton miles quarter-over-quarter (down 10%) generated
  volume-related fuel savings of $24 million versus 1997.  Prices were down
  11.7 cents per gallon to 63.6 cents, saving $33 million.  The fuel
  
  
<PAGE>15  
  
  consumption rate of 1.416 gallons per thousand gross-ton miles improved 3%
  from last year's 1.457 (largely slower locomotive speeds), lowering the
  Company's fuel costs by another $7 million.
    
  Rent Expense was up 13% ($42 million) versus 1997, as system congestion
  (which hindered car cycle times) combined with unfavorable rates (strong
  market demand for equipment) to drive up equipment rent costs.
  
  Other Costs (including purchased services) increased $33 million(9%) from
  1997, reflecting higher costs for customer claims and service recovery
  initiatives (focused on combating system congestion).  Congestion -related
  cost increases were partially offset by merger consolidation benefits
  (trackage rights reimbursements and contract pricing savings) and cost
  savings from company-wide cost control efforts.
  
  Operating income declined $300 million to $53 million in 1998, reflecting
  the effect of continued congestion and inflation.  Interest expense
  increased $12 million to $134 million, principally resulting from higher
  debt levels.  Other income, net declined $18 million due to the absence of
  the Duck Creek North branch line sale in 1997.  Income taxes decreased
  $128 million to a benefit of $31 million, primarily reflecting lower
  income before income taxes.
  
                                Other Matters
                                --------------
  
  Accounting Pronouncements: In June 1997, the Financial Accounting
  Standards Board (FASB) issued Statement No. 130, "Reporting Comprehensive
  Income" (FAS 130), that is effective for all periods in 1998, including
  interim periods.  The Company has adopted the provisions of FAS 130
  effective January 1, 1998.  The components of comprehensive income
  include, among other things, changes in the market value of futures
  contracts which qualify for hedge accounting and a net loss recognized as
  an additional pension liability but not yet recognized as net periodic
  pension cost. There is no impact from adopting FAS 130 for the three
  months ended March 31, 1998.
                                 
  Also in June 1997, the FASB issued Statement No. 131, "Disclosures about
  Segments of an Enterprise and Related Information," that is effective in
  1998. The Company currently complies with most provisions of this
  Statement, and any incremental disclosure required by that Statement is
  expected to be minimal. 
  
  In February 1998, the FASB issued Statement No. 132, "Employers'
  Disclosures about Pensions and Other Postretirement Benefits," that is
  effective in 1998 (FAS 132).  FAS 132 revises and standardizes disclosures
  required by FAS 87, 88, and 106. Restatement of the retirement plans
  footnote will be required for all earlier periods presented in comparative
  financial statements at December 31, 1998.
  
  Commitments and Contingencies - There are various claims and lawsuits
  pending against the Company.  Certain customers have submitted claims or
  
  
<PAGE>16  
  
  stated their intention to submit claims to the Company for damages related
  to shipments delayed in transit as a result of congestion problems and
  certain customers have filed lawsuits seeking to recover damages for such
  delays.  The nature of the damages sought by claimants includes, but is
  not limited to, contractual liquidated damages, freight loss or damage,
  alternative transportation charges, additional production costs, lost
  business and lost profits.  In addition, some customers have asserted that
  they have the right to cancel contracts as a result of alleged material
  breaches of such contracts by the Railroad.  The Company expects
  additional claims by shippers. The Company will continue to evaluate the
  adequacy of its reserves for claims and expects to add to such reserves as
  appropriate.
  
  The Railroad is also party to certain regulatory proceedings before the
  Surface Transportation Board of the U.S. Department of Transportation
  (STB).  One proceeding pertains to rail service problems in the western
  United States. As an outgrowth of this proceeding, the STB has issued an
  emergency service order imposing certain temporary measures on the
  Railroad designed, among other things, to reduce congestion on the
  Railroad's lines in the Houston, Texas area.  A second proceeding,
  initiated under the STB's continuing oversight jurisdiction with respect
  to the Corporation's acquisition of Southern Pacific and consolidation of
  Southern Pacific with UPRR-Utah (and separate from the STB's regularly-
  scheduled annual proceeding to review the implementation of the merger and
  the effectiveness of the conditions that the STB imposed on it), is for
  the purpose of considering the justification for and advisability of any
  proposals for new remedial conditions to the merger as they pertain to
  service in the Houston, Texas/Gulf Coast area, including, proposals by
  Kansas City Southern Railway Company (KCS), Texas Mexican Railway Company
  (Tex Mex) and the Greater Houston Partnership (GHP) for the forced
  transfer by the Railroad to Tex Mex of certain lines and facilities in and
  around Houston, the establishment of a "neutral" switching operation in
  the greater Houston area and the permanent adoption of provisions in the
  STB's emergency service order that expanded Tex Mex's right to handle
  traffic to and from Houston.  In addition, the STB has initiated various
  inquiries and formal rule-making proceedings regarding certain elements of
  rail regulation following two days of hearings by the STB at the request
  of two members of Congress and in response to shippers' expressions of
  concern regarding railroad service quality, railroad rates and allegedly
  inadequate regulatory remedies.  If the Railroad is unsuccessful in
  eliminating the remaining congestion and service problems affecting its
  system, the STB could issue a new emergency service order with the
  expiration of the current one and order the Railroad to take additional
  actions including, among other things, further diversions of traffic or
  the transfer of certain rail lines or other facilities to other railroads. 
  In addition, there can be no assurance that the proposals advanced by
  parties in the remedial conditions proceeding or the proceedings initiated
  in response to the rail regulation hearings will not be approved in some
  form.  Should the STB or Congress take aggressive action in the rail
  regulation proceedings (e.g., by making purportedly competition-enhancing
  changes in rate and route regulation and "access" provisions), the adverse
  effect on the Railroad and other rail carriers could be material.
  

<PAGE>17

  The Company is also subject to Federal, state and local environmental laws
  and regulations, and is currently participating in the investigation and
  remediation of numerous sites.  Where the remediation costs can be
  reasonably determined, and where such remediation is probable, the Company
  has recorded a liability.  In addition, the Company periodically enters
  into financial and other commitments and has retained certain contingent
  liabilities upon the disposition of formerly-owned operations.
   
  In addition, UPC and certain of its officers and directors are currently
  defendants in two purported class action securities lawsuits, and certain
  current and former directors of the Corporation are currently defendants
  in a purported derivative action filed on behalf of the Corporation.  The
  class action suits allege, among other things, that management failed to
  properly disclose the Railroad's service and safety problems and thereby
  issued materially false and misleading statements concerning the merger
  with SP and the safe, efficient operation of its rail network.  The
  derivative action alleges, among other things, that the named current and
  former directors breached their fiduciary duties to the Corporation by
  approving the mergers of SP and Chicago and Northwestern Transportation
  Company into the Corporation without ensuring that the Corporation or the
  Railroad had adequate systems in place to effectively integrate those
  acquisitions into the operations of the Corporation and the Railroad. 
  Because both the size of the class and the damages are uncertain, UPC and
  the Railroad are unable at this time to determine the potential liability,
  if any, which might arise from these lawsuits.  Management believes that
  these claims are without merit and intends to defend them vigorously.
  
  It is not possible at this time for the Company to fully determine the
  effect of all unasserted claims on its consolidated financial condition,
  results of operations or liquidity; however, to the extent possible, where
  unasserted claims can be estimated and where such claims are considered
  probable, the Company has recorded a liability.  The Company does not
  expect that any known lawsuits, claims, environmental costs, commitments
  or guarantees will have a material adverse effect on its consolidated
  financial condition.
  
                            Cautionary Information
                            ----------------------
  
  Certain information included in this report contains, and other materials
  filed or to be filed by the Company with the Securities and Exchange
  Commission (as well as information included in oral statements or other
  written statements made or to be made by the Company) contain or will
  contain, forward-looking statements within the meaning of Section 27A of
  the Securities Act of 1933, as amended, and Section 21E of the Securities
  Exchange Act of 1934, as amended.  Such forward-looking information may
  include, without limitation, statements that the Company does not expect
  that lawsuits, environmental costs, commitments, contingent liabilities,
  labor negotiations, claims or other matters will have a material adverse
  effect on its consolidated financial condition, results of operations or
  liquidity and other similar expressions concerning matters that are not
  historical facts, and projections or predictions as to the Company's
  
  
<PAGE>18  
  
  financial or operational results.  Such forward-looking information is or
  will be based on information available at that time, and is or will be
  subject to risks and uncertainties that could cause actual results to
  differ materially from those expressed in the statements.  Important
  factors that could cause such differences include, but are not limited to
  whether the Company is fully successful in overcoming its congestion-
  related problems and implementing the Plan and other operational and
  financial initiatives, industry competition and regulatory developments,
  natural events such as floods and earthquakes, the effects of adverse
  general economic conditions, fuel prices, labor strikes, the impact of
  year 2000 systems problems and the ultimate outcome of shipper claims
  related to congestion, environmental investigations or proceedings and
  other types of claims and litigation.
  
  PART II.  OTHER INFORMATION
  --------------------------- 
  
  Item 1. LEGAL PROCEEDINGS
  
  SOUTHERN PACIFIC ACQUISITION:  As previously reported in the Company's
  1997 Annual Report on Form 10-K, various appeals have been filed with
  respect to the STB's August 12, 1996 decision (the Decision) approving the
  acquisition of control of Southern Pacific by UPC.  All of the appeals
  have been consolidated in the U.S. Court of Appeals for the District of
  Columbia Circuit. Oral argument in the case is scheduled for September 11,
  1998.  Various appellants have withdrawn their appeals, leaving only
  Burlington Northern and Santa Fe Railway Company (BNSF), the Western Coal
  Traffic League (WCTL), Enterprise Products Company and the City of Reno,
  Nevada with appeals pending.  On April 10, 1998 WCTL filed a motion to
  vacate and remand the Decision in light of a proceeding the STB commenced
  on March 31, 1998, under its continuing oversight jurisdiction over the
  merger, to consider whether any additional conditions are justified and
  should be imposed to deal with service problems in the Houston/Gulf Coast
  area.  The STB, the Corporation, the Company and BNSF have opposed this
  motion.  The Corporation and the Company believe that it is unlikely that
  the disposition of the remaining appeals will have a material adverse
  impact on its consolidated financial condition or its results of
  operations.
  
  RAIL SERVICE PROCEEDINGS AND RELATED MATTERS:   As previously reported in
  the Company's 1997 Annual Report on Form 10-K, UPRR is currently subject
  to an emergency service order issued by the STB on October 31, 1997, as an
  outgrowth of a proceeding initiated by the STB on October 2, 1997 to
  investigate rail service problems in the western United States.  The
  original service order, which, among other things, imposed several
  temporary measures designed to reduce congestion on UPRR's lines in the
  Houston area, was modified and extended by a supplemental order dated
  December 4, 1997.  On February 25, 1998, the STB, citing the gravity of
  UPRR's congestion problems and characterizing them as "not yet close to
  being resolved," further modified the emergency service order and extended
  it until August 2, 1998, the maximum period allowable under the law for
  the original order.  
  

<PAGE>19

  On March 31, 1998, the STB initiated a proceeding under its continuing
  oversight jurisdiction with respect to the merger of the Corporation and
  Southern Pacific to consider proposals for new remedial conditions to the
  merger as they pertain to service in the Houston, Texas/Gulf Coast area. 
  This proceeding, which is separate from the STB's regularly scheduled
  annual proceeding to review the implementation of the merger and the
  effectiveness of the conditions that the STB imposed on it, was initiated
  in response to submissions by Texas Mexican Railway Company (Tex Mex) and
  Kansas City Southern Railway Company (KCS) and by the Greater Houston
  Partnership ("GHP"), proposing that the Railroad be directed to transfer
  certain lines and facilities in the Gulf Coast region to other rail
  carriers, that a "neutral" switching operation be established in the
  greater Houston area and that provisions in the STB's emergency service
  order that expanded Tex Mex's right to handle traffic to and from Houston
  be adopted permanently.  The STB's decision announcing the proceeding
  established a procedural schedule for the submission of evidence, replies
  and rebuttal.
  
  If continued implementation of the Plan and other operational and
  financial initiatives undertaken by the Company ultimately proves
  unsuccessful in alleviating the remaining congestion and related service
  problems experienced by the Railroad, the STB could issue a new emergency
  service order upon the expiration of the current one and order the
  Railroad to take additional actions including, among other things, further
  diversions of traffic or the transfer of certain of the Railroad's rail
  lines or other facilities to other railroads. In addition, there can be no
  assurance that the proposals advanced by Tex Mex, KCS, GHP or other
  parties in the remedial conditions proceeding will not be approved in some
  form. 
  
  RAIL ACCESS AND COMPETITION: Acting pursuant to requests from two members
  of Congress and responding to shippers' concerns about railroad service
  quality, railroad rates and allegedly inadequate regulatory remedies, the
  STB on April 17, 1998, following two days of hearings, issued a decision
  opening inquiries into certain elements of rail regulation. The STB noted
  that no parties to the hearings had shown how aggressive remedies designed
  to produce lower rates and enhance competition would permit the industry
  to cover system costs and support reinvestment.  Nevertheless, it (i)
  directed a panel of disinterested economic experts to recommend
  appropriate standards to measure railroad revenue adequacy, which is used
  to determine whether rates are lawful (this portion of the decision was
  subsequently modified to permit, as an alternative, discussions of this
  issue between railroad and shipper representatives); (ii) initiated a
  rule-making proceeding to consider revisions to "competitive access"
  regulations in order to address quality of service issues; (iii) ordered
  interested parties to identify modifications to regulations governing
  access on non-service-related grounds; (iv) began a proceeding to consider
  eliminating product and geographic competition as factors to be considered
  in deciding whether a railroad has market dominance over rail traffic; (v)
  ordered large and small railroads to negotiate arrangements that would
  increase the role of short-line rail carriers; and (vi) directed the
  railroads to establish "formalized dialogue" immediately with large and
  
<PAGE>20  
  
  
  small shippers and rail labor.  Should the STB or Congress take aggressive
  action, (e.g., by making purportedly competition-enhancing changes in rate
  and route regulation and "access" provisions), the adverse effect on the
  Railroad and other railroads could be material.
  
  ENVIRONMENTAL MATTERS: The Railroad has been named as a defendant in a
  civil action brought by the California Department of Fish and Game, Office
  of Spill Prevention and Response on April 10, 1998.  The complaint alleges
  violations of California Fish and Game Code Section 5650, California
  Business and Professions Code Section 17200, Civil Code Sections 3479 and
  3480, and damage to the waters of California for which the Department of
  Fish and Game allege trusteeship. The complaint results from derailments
  and alleged releases of diesel fuel oil during 1995 in the Feather River
  Canyon in Butte County, California. The Complaint seeks penalties,
  exemplary damages, natural resource damages and unspecified injunctive
  relief.
  
  The Railroad has been named as a defendant in a criminal misdemeanor
  action brought by the State of California in the Municipal Court of Placer
  County, California on February 24, 1998.  The complaint alleges a
  violation of California Fish and Game Code Section 5650 as a result of a
  diesel fuel spill in Norden, California in February 1997.  In addition,
  the California Department of Fish and Game is seeking penalties,
  monitoring costs and natural resource damages under state water statutes,
  and the U.S. Environmental Protection Agency (EPA) is seeking penalties
  for violation of the Clean Water Act in connection with the same incident.
  
  The Railroad and Clean Harbors, a waste disposal firm, are the subject of
  a criminal investigation by the EPA and the Federal Bureau of
  Investigation (FBI).  Tank cars containing hazardous waste billed to Clean
  Harbors' transload facility in Sterling, Colorado were held in the
  Railroad's Sterling, Colorado rail yard for periods longer than ten days
  prior to placement in Clean Harbor's facility, allegedly in violation of
  hazardous waste regulations.  A finding of violation could result in
  significant criminal or civil penalties.
  
  Item 6. EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------
                                               
          (a)  Exhibits
               --------
               3  - By-Laws of Union Pacific Railroad Company, as amended      
                    effective as of April 30, 1998.              
               
               12 - Ratio of Earnings to Fixed Charges
  
               27 - Financial Data Schedule.
                                                
         (b)   Reports on Form 8-K
               -------------------
         
               On January 23, 1998, the Company filed a Current Report on
               
<PAGE>21               
        
               Form 8-K discussing fourth quarter and full year 1997
               earnings of the Corporation.
  
               On February 26, 1998, the Company filed a Current Report on
               Form 8-K describing first quarter 1998 results and current
               actions taken by UPC's Board of Directors.
  
  
               On March 25, 1998, the Company filed a Current Report on
               Form 8-K announcing that the Company will embargo most
               southbound traffic destined for the Laredo, Texas gateway.
  
<SIGNITURES>                                                                   

                                 SIGNATURES
  
  
  Pursuant to the requirements of the Securities Exchange Act of 1934,
  Registrant has duly caused this report to be signed on its behalf by the
  undersigned thereunto duly authorized, on this 14th day of May, 1998.
  
  
  
  
                         UNION PACIFIC RAILROAD COMPANY
  
  
  
                                By  /s/John J. Koraleski                  
                                    -------------------- 
                                    John J. Koraleski
                                    Executive Vice President-Finance 
  
  
  
  
  
                                By  /s/ Joseph E. O'Connor, Jr.             
                                    ---------------------------
                                    Joseph E. O'Connor, Jr. 
                                    Chief Accounting Officer
  
  
  
  
  
  
<EXHIBIT INDEX> INDEX  
  
                     

      UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
  
                                  EXHIBIT INDEX
  
  Exhibit No.                 Description              
  -----------  -----------------------------------------
  
    3          By-Laws of Union Pacific Railroad Company, as                  
               amended effective April 30, 1998   
                                   
    12         Computation of Ratio of Earnings to
               Fixed Charges
  
    27         Financial Data Schedule