OMAHA, Neb. — The head of the track workers’ union has warned federal regulators that Union Pacific aims to furlough up to 1,350 maintenance-of-way employees next month and will push the remainder of this year’s planned trackwork projects into 2024 as a cost-saving measure.
But the railroad says the move is nothing unusual. “This is a normal part of our capital planning process. Given the timing to post for the 2024 capital program bidding, we do not anticipate significant furloughs,” spokeswoman Kristen South says.
UP’s Engineering Department is running approximately $80 million over budget due to a combination of inflation and the impact of harsh weather on the railroad’s network this year, including a rare tropical storm that hit Southern California in August.
“Simply put, unforeseen, large-scale service interruptions greatly accelerated our spend through the first three quarters of the year,” Terrill Maxwell, the railroad’s general director of labor relations, wrote in an Oct. 13 email to leaders of the Brotherhood of Maintenance of Way Employes Division. “The need to balance the workforce was not readily apparent until very recently, thus leadership made the difficult decision to push a number of projects into 2024. It’s been about five years since we’ve had to cut gangs due to budget, so although many of our veteran employees have experienced this reality, it will be new to others. Although we have several open maintenance jobs on both the North and South, it’s conceivable we will have folks furloughed in December.”
The majority of the affected track and rail gangs will be abolished on Nov. 19. UP expects to re-post the jobs in mid-December with a start date of early January. “Most distribution teams will continue working, delivering material required for 2024 projects,” Maxwell wrote.
The furlough of 1,350 people – a total which UP now says is highly unlikely – would be a 16.7% cut to UP’s overall maintenance of way workforce, according to September employment data the railroad submitted to the Surface Transportation Board.
Pushing some track projects into 2024 comes amid what UP says is its highest capital spending in years.
“We continue to make record capital investments to increase capacity for our customers and harden the infrastructure across our 32,000-mile network,” Kenny Rocker, UP’s executive vice president of marketing and sales, wrote in an Oct. 27 customer update. “This year we plan to spend $3.7 billion, the highest we’ve seen in seven years. So far this year we have replaced three million railroad ties and over 400 miles of rail to keep the network running smooth.”
In the past four years, the average number of miles of track UP has resurfaced annually has declined by 10% compared to the average of the prior four years, according to data from the railroad’s annual reports. The decline is in line with the 9% drop in average annual gross ton-miles the railroad handled in each four-year period.
But UP replaced an average of 31.5% fewer miles of rail annually from 2019 to 2022 than it did from 2015 to 2018, according to the railroad’s data.
Tony Cardwell, president of the BMWED, claims that UP’s decision to postpone trackwork and furlough union members poses a safety risk.
“This drastic reduction in Maintenance of Way employees will only compromise the quality and frequency of inspections and necessary maintenance, thereby endangering the safety and reliability of our nation’s railroad infrastructure,” he wrote in an Oct. 27 letter to members of the STB.
Since adopting a Precision Scheduled Railroading operating model in October 2018, UP’s maintenance-of-way workforce has declined by 19.2%, according to STB data.
Cardwell wrote: “Union Pacific outright acknowledges that it is pushing projects into next year for fourth-quarter financial gain. In other words, Union Pacific intends to defer much-needed maintenance on its right of ways, tracks, buildings, and bridges for the sole purpose of showing a larger profit to its shareholders in the fourth quarter. As you are well aware, deferred maintenance will only lead to catastrophic outcomes.”
UP’s adjustments of its capital plan are normal at this time of year, Maqui Parkerson, vice president of labor relations at UP, wrote in an Oct. 30 letter to Cardwell that was posted on the STB website this week. The timing of potential furloughs comes at a time when track workers typically take vacations, Parkerson wrote.
“I am writing to correct your inaccurate assertions that Union Pacific’s current headcount levels are affecting safety on our railroad,” Parkerson wrote. “Most importantly, Union Pacific is committed to the safety of our operations. Our day-to-day work to maintain and inspect our railroad remains in place and will not be interrupted.”
Independent analyst Anthony B. Hatch says that while UP will be deferring seasonal trackwork projects for just a few weeks, “the optics are bad — not only for safety issues … but also given the STB’s focus on headcount and the opportunity UP has for a regulatory relationship reset.”
The STB has not yet responded to Cardwell’s letter. The Federal Railroad Administration, which oversees rail safety, is aware of the planned furlough and will be monitoring its impact on safety.
Note: Updated at 1 p.m. Central on Nov. 2 with comment from UP Vice President of Labor Relations Maqui Parkerson.
Remember, Jim Vena, expense slasher and corporate growth-killer extraordinaire, is running UP now. Just kicked about 5000 manager-types to the curb earlier this week, all in the name of streamlined and quicker decision making processes. Yeah right, Jim. Cut the nonsense and tell us like it is, it’s all about the glorified operating ratio. As a stockholder of UP, I have mixed feelings about Vena, the dividend will go up, but the foundation of the UP franchise will stagnate, just like it did during his earlier romp with the company.
When you have on-call, “instant” help from contractors like Hulcher, RJ Corman, etc., why have employees when you can outsource? Somebody needs to try convincing the bean counters differently.
Many companies like to build their cash position at the end of the year to make the annual report look better.
Reduced trackwork in Winter is normal. If the ground’s too cold to dig, you can do railwork. You’re going to need your gangs for snow duty.
Furlough of MOW workers, but I bet the stock buy back program is still running full speed ahead.
To layoff employees and hold off capital spending to increase profit for 4th quarter earnings ,seems like a shell game and not looking for the long term gains.Yes, they did lay off M of W employees in the winter years ago when railroads were less geographically diverse.TODAY,with all 6 major railroads each covering from the Gulf of Mexico to Canada you can use your assets,trained employees and equipment, much more efficiently by working in the north half the year and the southern part of railroad in winter.Here in New England this summer I met workers on the rail gangs who were from TN which is 1,000+ miles away.I am sure they did not want to travel this far, but were probably much more productive than if they were in Alabama in July.
They are not holding off capital spending to increase profits. If you read the article you would have seen that unforeseen weather events (like a tropical storm in California and Arizona) , caused over spending of the MOW budget (by 80 million) so they are doing what most construction companies do and that is laying off construction (here, MOW) employees for a few weeks in the winter until the start of the new year to reduce the deficit.
The union president is just bloviating to support his members and make the railroad look bad for being financially responsible. I wish our federal government would be as responsible but that is not how the Democratic led government operates. Maybe they should give it a try but that is just my opinion, FWIW…
To layoff employees and hold off capital spending to increase profit for 4th quarter earnings ,seems like a shell game and not looking for the long term gains.Yes, they did lay off M of W employees in the winter years ago when railroads were less geographically diverse.TODAY,with all 6 major railroads each covering from the Gulf of Mexico to Canada you can use your assets,trained employees and equipment, much more efficiently by working in the north half the year and the southern part of railroad in winter.Here in New England this summer I met workers on the rail gangs who were from TN which is 1,000+ miles away.I am sure they did not want to travel this far, but were probably much more productive than if they were in Alabama in July.Does anyone know if production gangs in Canada work in US and US workers in Canada.Do production gangs go on vacation at the same time,as auto assembly plants close down at new model changeover.UPRR IS A SCROOGE
Loram works everywhere they have a contract, US, Canada or Mexico… Railroad employees are, I’m sure, restricted to their own physical plant.
Regarding both this article and the following one:
When profit flags, the FIRST words out of the bean counter’s mouths are “cut the head count”, safety be damned.
Though too many layers of management does indeed lead to gross inefficiency.
Is the Vena-ism in action?
“”The Federal Railroad Administration, which oversees rail safety, is aware of the planned furlough and will be monitoring its impact on safety.””
They can monitor it all they want to, but there is nothing they can do about it. They can’t get any new regulations out, they just partner up with the railroads & allow them to do whatever they want.
I worked for a Class 1 railroad for over 30 years and this is nothing new. A lot of M-O-W employees were always laid off this time of year for a month our so.
True that Daryl. I worked for N&W/NS for 32 years, 11 of them on a tie gang, and layoffs during the winter were routine. During that layoff time the gang mechanics would service the machines and the company would have contractors take care of the camp cars/trailers.
So these employees just have to do without because of corporate indolence and laziness. Pathetic.
NO, they can collect a few weeks of unemployment and union subsidy. What the heck are the union dues for anyway? Making their leaders rich at their expense?
Good post Jim, your spelling like a true Canadian, eh?
When I was a kid in northeastern US (that’s the big country south of your own), the railroads deferred maintenace because they were all broke. UPRR isn’t broke but it defers maintenance because it can get away with it.
Hi Charles,
Glad you’ve learned the correct spelling of eh, so many of my American friends spell it wrong.
I’ll reply to you but it is in regards to Daryl’s comment about “nothing new”.
I have to agree with him, doing this type of work in the dead of winter when it’s minus is difficult if not technically not feasible but the moment UP tied it to the budget it does leave them wide open to scrutiny.
I guess the forth quarter results are trending towards a non favourable result for maximum bonus payouts.