Union Pacific Cutting Hundreds of Management Jobs
Last week, Union Pacific announced it had plans to cut the jobs of “several hundred” people who hold management positions. The cuts will come from “terminations and attrition”, according to their statement. Based in Omaha, there are close to 8,000 Nebraskans employed by the company, making up part of the 50,000 people nationwide that hold jobs with U.P. The company operates in 23 states.
The company took a huge hit in the 2009 economic crisis, and said they would cup up to 350 of the 6,000 management jobs they had at the time. By the time 2011 rolled around, there was a breath of life returning to the economy with a burst of shale oil. U.P managed to pick up some of that transporting business and planned to add 4,500 new workers to their corporation.
But more recently, shippers are using trains for hauling freight, especially coal and crude-oil, less and less, causing major cuts to sales and overall profits for U.P. This past July, their sales saw a 7.7% decrease over the same time last year. Overall, their shares over the past year has dropped 22%, from over $6 billion to just under $5.5 billion, in the midst of falling cargo volume. Coal volume plummeted 26% this past quarter for Union Pacific and most believe demand will stay low until the end of the year. Crude-oil fell 29%. When oil prices are low, the shale fields produce less product, leaving U.P. with nothing to ship from their usual business partners. Stock analysts at BB&T Capital Markets summed it up when they said, “Energy is proving to be a royal pain in the butt for North America’s largest rail franchise.”
In their statement they commented that the planned cuts “takes the necessary steps to align resources with current business requirements.” Lance Fritz, the company’s president and chief executive, said, “For our company’s long-term success, we must take these painful actions to balance workforce levels with today’s business demand.”
Last month, U.P. temporarily laid off 1,200 of their “train, engine, and yard” workers, who are mostly union members that work with trains and their cargo over 32,000 miles of track. Compared to the 5,300 of these kind of workers laid off in 2009, this particular cut is relatively small. But the new cuts announced last week are not temporary; they are permanent job eliminations, according to Pacific spokesman Aaron Hunt. Hunt didn’t say what positions the cuts would begin in or give a specific number, but did say the railroad plans to offer severance packages to those that lose their jobs.
Union Pacific, a Fortune-500 company, is America’s largest railroad with an operating revenue near $24 billion, and they aren’t the only railroad seeing a decrease in demand of freight volume. The Association of American Railroads stated carloads across the board have fallen, with about 1% just for the August 8th week.
In the statement released by the company, it said that those employee who were going to lose their jobs would be contacted in the next several months, but that “no buyout options will be available for employees who retire or voluntarily leave the railroad.”
Though they are undergoing an acute loss of business for hauling freight in the recent months and years, Union Pacific is in no long-term danger and is still profitable, holing about $2 billion in cash.