Loads of grain trundled down toward Mexico as summer ended, and strong crude prices drove up the number of rail cars hauling petroleum or liquefied gas by 40 percent. But Union Pacific ended a record third quarter with an announcement that nearly 700 jobs would be cut.
Most of those workers were management and contractors based in the Midwest.
The railroad industry is not one of the big revenue drivers in Wyoming, though trains hauling coal in the northeast or trona along the south are a common sight. The network of transportation carrying Wyoming’s goods, and the people who man those arteries, are as ubiquitous as sage brush in Wyoming. Workers in the north were shook when coal declined precipitously in 2015 and 2016, but that business has found some stability. The layoffs at UP, and the reasoning behind them, however, have driven new uncertainty into the industry.
“What the future holds I’m not sure,” said Rep. Stan Blake, D-Green River, the state legislative director for SMART, a transportation union. “It’s kind of hush hush, but it’s scary. Are they going to shut down the switching yard in Green River? I hope not.”
Union Pacific’s goal is to streamline its business through regional consolidation and cutting extraneous costs to boost revenue. Pretty much everything other than hauling freight is weighed for removal.
The company declined to provide Wyoming-specific numbers on the ongoing cuts, though railmen in Wyoming note that some positions appear to have been lost in the Cheyenne area.
Union Pacific rails crisscross nearly two dozen states and the company employs more than 40,000 people. Most UP workers are unionized.
In a call with investors recently, company executives lauded the new approach, called Unified Plan 2020. The strategy follows a plan immortalized by the late Hunter Harrison, who led the third-largest carrier, CSX, until his death last year.
Under Harrison’s efficiency model, the volume of shipments fell slightly, the workforce was cut, and the railroad network was constrained to hubs where cars were reshuffled back into the network of rails. The ratio of cost to revenue reached unheard of lows.
In a profile on Harrison after his death, Fortune Magazine, wrote that Harrison had created “a new paradigm for railroading in a new market.”
More recently, Union Pacific has done quite well, reporting $1.6 billion in net earnings Oct. 31, a 33 percent jump from last year and its highest ever third quarter earnings. And though the company officially launched Unified Plan 2020 at the end of the third quarter, it had already begun its work in streamlining.
The company noted in its earnings call that 625 locomotives had been removed from UP’s active fleet with 150 planned for removal by the end of the year.
Executives told investors that they were taking a close look at the company’s broad network of contractors as part of the cost-cutting strategy going forward.
“To the extent that we can find low value-added work or ways to do that more efficiently, that’s another bucket of costs that we’re targeting,” said Lance Fritz, company president and CEO.
The company shared its plans with workers in an Oct. 16 email: 475 positions would be eliminated by the end of the year, as would 200 additional contract positions. It would also reshuffle organization nationally, consolidating its three regions into two and closing five service units, including the one in Denver that served Wyoming.
“Workforce reductions are extremely difficult decisions to make because we recognize the impact they have on families, friends and co-workers,” said Fritz in the note to employees. “We are taking steps today to ensure Union Pacific remains a strong, competitive and vibrant company. These steps are part of reducing our general and administrative support structure by roughly 30 percent by 2020. We also will need to drive efficiencies in all other parts of the railroad.”
UP’s new goals have unsettled the rank and file. It’s “corporate Kool-Aid,” one Union Pacific railman in Cheyenne said.
One bright spot in the recent UP announcement, from the railmen’s perspective, was the closing of a lavish conference property outside St. Louis. But railmen, who would not speak on the record with the Star-Tribune, say Union Pacific’s direction puts profits over people despite strong revenue.
“Hunter Harrison was no fan of the railroad employees,” said Blake, the Wyoming lawmaker and conductor from Green River. “Probably he was a big fan of railroad stockholders because he did get results.”
Blake said he’d be more concerned about his job if he were a younger man. Seniority is king in the industry and in some cases those who’ve been moved up to management have the option to keep their job during layoffs by climbing back down the ladder to be engineers or conductors again — if they have the seniority, he said.
Cheyenne Mayor Marian Orr said she had been watching the Union Pacific situation closely and has been in close contact with the company. This immediate round of layoffs is not expected to have a dramatic effect on the Cheyenne area and will mostly effect management, Orr said, echoing the understanding throughout the industry.
Those are still jobs for people, she said, and it’s a warning for down the road.
“I think it signals, certainly, a greater concern of more to come, and I think that what we can do proactively is be poised to help relocate workers into new jobs,” she said, noting the support she can depend on at the state’s Department of Workforce Services.
“What’s best is to stay on top of it and not stick our head in the sand,” the mayor said.
In Wyoming, of course, the trains are part of the larger industries that fuel the state, said Blake, the Green River lawmaker and conductor for Union Pacific.
“I don’t want any shippers to be harmed by this, especially here in southwest Wyoming,” he said. “We have to keep servicing our trona mines and everyone in between.”
What happens next for the UP workers in Wyoming is uncertain, Blake said.
“Things are definitely changing on the Union Pacific,” he said.