Class Is cite workforce, production cutbacks during 4Q conferences

Because of steep traffic declines associated with weak freight demand, the Class Is are shrinking their workforces and whittling down their rolling stock fleets.

Senior executives at the six largest Class Is broached the subject during their fourth-quarter earnings conferences held the past week. Union Pacific Railroad EVP and COO Dennis Duffy said the Class I furloughed 3,150 workers — mostly train and engine-service crew members — and placed 48,000 cars in storage by 2008’s end. In addition, UP placed 1,200 locomotives in storage.

BNSF Railway Co. CEO Matt Rose said the railroad laid off about 2,000 workers by late 2008 and expects to furlough a total of 2,500 employees in first-quarter 2009, and Canadian Pacific CEO Fred Green said his road’s temporary furloughs peaked at 1,450 in late 2008 and currently number about 1,000.

But no senior exec went into as great a detail about workforce and production cutbacks as Norfolk Southern Corp. Vice Chairman and COO Stephen Tobias. During a Jan. 28 earnings conference, he said NS’ T&E forces had declined from 12,380 in April 2008 to 11,622 in mid-January 2009, mostly through furloughs and curtailed hiring.

“We began furloughing in October and anticipate furloughing an additional 100 T&E employees in the next 30 days, bringing the total to over 500,” said Tobias “Generally, as reductions in train operations are made, they are followed by reductions in other departments, such as mechanical.”

NS also stored about 20,000 cars — including coal, intermodal and multi-level equipment — by year’s end.

“Our timely car storage focus enables us to right-size our car types to customer requirements and minimize our costs,” said Tobias.

As transportation planners made significant reductions to NS’ operating plan in November and December, they adjusted the locomotives fleet’s size, as well. During the two-month period, the railroad reduced in-service locomotives by 127 units, including 79 through short-term lease turn-backs and 48 placed in storage, said Tobias.

Other “right-sizing” measures include train and terminal plan reductions. Beginning in mid-October and accelerating in mid-November, NS removed train starts from the operating plan.

“Over Thanksgiving, we curtailed operations for the first time in over a decade,” said Tobias.

By 2008’s end, the railroad cut more than 60 network trains from the operating plan, plus local and yard jobs totaling 43,800 train starts.

In terms of terminal plans, the Class I reduced operations at facilities in Columbus, Ohio, Sheffield, Ala., and Reading, Pa.

“We continue to analyze all of our yards and are making adjustments as appropriate,” said Tobias.

All Class Is likely will continue to adjust their workforces, especially if the recession persists. Layoffs have reached the point that 12 percent of United Transportation Union (UTU)-represented workers have been furloughed, said UTU National Legislative Director James Stem Jr. Jan. 28 at a hearing conducted by the House Transportation and Infrastructure Committee’s Subcommittee on Railroads, Pipelines and Hazardous Materials.

Unfortunately for the nation’s unemployment level — which continues to rise and soon will factor in tens of thousands of layoffs just announced by several major U.S. companies, such as Boeing, IBM and Starbucks — Stem expects that percentage to go up.