Union Pacific to shed 750 jobs

Eliminated positions will save railroad $110M annually

A Union Pacific employee climbs aboard a locomotive in a rail yard in Council Bluffs, Iowa, in July. The railroad said Wednesday that it is eliminating 750 jobs.
A Union Pacific employee climbs aboard a locomotive in a rail yard in Council Bluffs, Iowa, in July. The railroad said Wednesday that it is eliminating 750 jobs.

OMAHA, Neb. -- Union Pacific is eliminating 500 management positions and 250 other jobs to save about $110 million annually and delete about 8 percent of the railroad's managers from payroll.

The railroad told the affected workers Wednesday that their jobs will be eliminated by mid-September.

Union Pacific Chief Executive Officer Lance Fritz said that eliminating open positions through attrition and improving productivity isn't enough to cut costs.

"Union Pacific for some time has leveraged employee attrition and technology to reduce general and administrative costs," Fritz said. "Unfortunately, attrition alone will not keep pace with our need and ability to reduce these costs."

Most of the jobs eliminated will be at the railroad's headquarters in Omaha, Neb., but they will affect Union Pacific's 23-state network.

Messages left Wednesday with a railroad spokesman asking about the number of jobs in Arkansas included in the cuts were not returned.

Union Pacific's Jenks Shop locomotive complex near downtown North Little Rock employs more than 1,100 "skilled and dedicated workers," according to the railroad's website. The shop complex is named for Downing B. Jenks, a former chairman of Missouri Pacific Railroad, which merged with Union Pacific in 1982, the website said.

In the second quarter, Union Pacific had about 42,000 employees.

Union Pacific said the eliminated jobs are expected to produce about $110 million in annual cost savings, but the railroad will record $90 million in pretax severance costs -- mostly in the third quarter -- because of them.

Edward Jones analyst Dan Sherman said the move suggests Union Pacific's cost-cutting efforts aren't keeping up with the railroad's goals.

"They just decided they will push cost-cutting more strongly than they were before," Sherman said.

Railroads have been under pressure to reduce costs because of modest growth in freight shipments overall and a sharp decline in coal shipments in recent years. Both of the major freight railroads in the eastern United States -- CSX and Norfolk Southern -- have announced more aggressive cost-cutting efforts in the past year.

CSX has announced 2,300 layoffs this year as part of a major restructuring under new CEO Hunter Harrison, who took over in March.

Norfolk Southern is working to reduce its expenses by $650 million and improve efficiency by 2020. The railroad expects to cut more than $100 million in costs this year after trimming $250 million last year.

Business on 08/17/2017

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