More UP furlough news

BoxcabE50 Aug 9, 2015

Thread Status:
Not open for further replies.
  1. BoxcabE50

    BoxcabE50 HOn30 & N Scales Staff Member TrainBoard Supporter

    67,558
    22,732
    653
    Received this from a friend, late last month. Forgot I had it. He did not quote his source:

    "
    The Union Pacific Railroad has temporarily laid off 1,200 employees who work in what the industry terms “train, engine and yard.” That’s an increase from 900 furloughs announced earlier this year. CEO Lance Fritz said he hopes that normal attrition will suffice but more layoffs are possible as the railroad confronts sharply lower freight volumes. The plummeting demand for freight hauling is cutting into the sales, profits and share price of the major Omaha employer. “What I would communicate to our employees is that right now volumes are down and we have to get our costs in line,” Fritz told The World-Herald in early July after the company reported a 7.7% decline in second-quarter profit from last year.
    About 85% of the company’s 48,000 workers are represented by unions made up of members who perform on-the-ground work, such as operating trains, maintaining track and repairing locomotives. That leaves about 8,000 workers in management, salaried and office positions. Many of those workers are in the company’s downtown Omaha headquarters. Fritz added that he hoped that normal attrition, such as retirements and other routine separations, will suffice when it comes to getting payrolls aligned with lower freight-hauling demand.
    Still, “if we have to, we will do whatever else we need to,” Fritz said about possible job reductions. He said the company’s normal attrition level is about 7% per year, suggesting about 3,360 people leave each year under circumstances other than layoffs. He nor the company takes it lightly when the subject is payroll reductions. He said the company is being “fair, sensitive and transparent” in reducing the payroll.
    The determination to cut costs comes amid a serious drop in cargo. Union Pacific, employer of about 8,000 Nebraskans, reported second-quarter earnings that beat Wall Street expectations by three cents a share on results that included an 8 cent-per-share gain on one-time asset sales. Sales fell 10% to $5.4 billion, lower than Wall Street analyst forecasts of $5.6 billion.
    Perhaps more worrisome, freight volumes slumped 6%. Shares fell about 5.7% to $92.12 on the New York Stock Exchange, following a 17% drop so far this year leading up to the earnings announcement.
    The obvious biggest falloff in second-quarter shipments came in coal. Union Pacific, a major transporter of coal used to power electric utility plants, saw demand fall as utilities can burn either coal or natural gas. Currently, natural gas, is now cheaper. UP marketing chief Eric Butler told investors and analysts on a conference call that coal accounted for 32% of U.S. electricity generation in the second quarter, down from 39% a year earlier.
    All told, Union Pacific’s coal volumes fell 26%. Crude oil shipments dropped 29%, Ag-product cargo declined 7% on lower global demand for U.S. grain, while shipments of industrial products dropped 13%.
    The company said it expects weakness in some of those main cargo categories to persist throughout 2015. Chief Financial Officer Rob Knight said the company does not expect to meet or exceed last year’s record earnings of $5.75 a share. The second-quarter earnings included a $113 million one-time gain from selling some real estate in California.
    On the earnings, “for the most part there were no real surprises up or down,” said Logan Purk, a transportation industry analyst for wealth adviser Edward Jones. But they looked better on paper than in reality, Purk said, because they included the one-time gain from the real-estate sale.
    As the company faces the cargo slump, it also is dealing with sizable regulatory costs. One is called Positive Train Control, a system of sensors, controls and central oversight that can stop or slow a train remotely if danger is detected on the rails.
    PTC was mandated by federal law after a fatal collision in 2008 of a Southern California commuter train and a Union Pacific train; Union Pacific was not found to be at fault.
    The whole system of wireless sensors, software and other equipment is expected to cost the industry about $20 billion, by some estimates. The railroads will have to pick up the tab for that mandated expense.
    CEO Fritz said Thursday that none of the seven Class I freight railroads operating in the United States is even close to meeting the 2015 deadline for implementing PTC across wide swaths of the rail network. He said getting a congressional extension on the timetable is the company’s biggest regulatory priority. Union Pacific budgeted almost $400 million for PTC implementation in its 2015 capital budget.
    Currently, S&P Capital IQ cut its 12-month price target on UP shares to $112 from $137. Analyst Jim Corridore said he didn’t expect demand in key freight categories to rebound in the near-term for Union Pacific, the second-largest U.S. freight railroad by ton-miles."

    This kind of news, which seems to be ongoing, has me wondering about our "recovering" economy. Sounds a bit soft to me.
     
  2. subwayaz

    subwayaz TrainBoard Member

    3,222
    106
    44
    Boxcab, I tend to agree our economic picture looks a little soft.
     
  3. BoxcabE50

    BoxcabE50 HOn30 & N Scales Staff Member TrainBoard Supporter

    67,558
    22,732
    653
    I keep hearing rosy reports, telling us of new job numbers. No mention of seasonal workers, and adjusting for that fact. Seems more like they're trying to talk it into happening, than what is actually ongoing. There have been a bunch of these reports since Spring, for BNSF and UP. Of course the oil downturn is a factor, but that is till not truly good news.
     
    Hardcoaler and J911 like this.
  4. J911

    J911 TrainBoard Member

    496
    31
    10
    A friend of mine a UP engineer was telling me the same thing yesterday. He said the future looks dark. Economy is horrible and no traffic on the rails. His prediction is the Los Angeles Ports are in a world of hurt due to the nearing of new ports opening up in Mexico. Why pay someone $100 an hour to operate a krane here in the U.S. when in Mexico you can pay someone $5 an hour.

    Sent from my SM-G920P using Tapatalk
     
  5. BoxcabE50

    BoxcabE50 HOn30 & N Scales Staff Member TrainBoard Supporter

    67,558
    22,732
    653
    I wrote about this happening, quite a few years ago, when Lazaro Cardenas was being enlarged... And people just laughed at me. Now, folks? It also bypasses the labor issues in California, so those people had best watch out. This is why KCS invested into Mexico, as they could see it coming.
     
    J911 likes this.
  6. J911

    J911 TrainBoard Member

    496
    31
    10
    It's scary to think of what's in store.

    Sent from my SM-G920P using Tapatalk
     
  7. subwayaz

    subwayaz TrainBoard Member

    3,222
    106
    44
    It sure is scary and has been in the works for years now. We're not an Industrial nation anymore and far too dependent on other countries: i.e.; China, Mexico, Taiwan. Yes a dark outlook
     
  8. Hardcoaler

    Hardcoaler TrainBoard Member

    10,673
    44,835
    142
    Anti-coal legislation in Washington has hit rail coal loadings hard and this tonnage is unlikely to return as utilities convert to natural gas. Some remark that it's because natural gas is cheaper, which belies the fact that meeting ever-increasing coal emissions regulations is a no-win process and is extremely expensive. Lawmakers have made coal expensive, not the free market. Duke Power is converting a coal-fired plant near Asheville, NC to natural gas at a cost of $1.1 Billion to be borne by Duke customers.

    Significant high wage job losses on the railroad, in the mines, at power stations and in industry are rarely mentioned by the media. No need to confuse readers with economic reality.
     
  9. BoxcabE50

    BoxcabE50 HOn30 & N Scales Staff Member TrainBoard Supporter

    67,558
    22,732
    653
    And just about the time it's ready to roll, someone will come up with a dire warning about how dangerous natural gas is, and.... Meanwhile, we tear down dams, can't build nuke plants, can't burn coal and ever increasing numbers of people need winter heat, etc, etc. One of these days, that bad math will strike home hard.
     
    Hardcoaler likes this.
  10. Hardcoaler

    Hardcoaler TrainBoard Member

    10,673
    44,835
    142
    I agree that nothing will ever be clean enough nor safe enough for lawmakers. I also agree on the math, and when natural gas prices rise, nary a word will be written about the stake that was driven through the heart of the U.S. coal industry by government.

    I hope that crude oil rail revenues recover when oil prices gain their footing. This traffic has so much promise.
     
  11. BoxcabE50

    BoxcabE50 HOn30 & N Scales Staff Member TrainBoard Supporter

    67,558
    22,732
    653
    Pundits are forecasting that the oil prices may stay low, or even lower, for the next four or five years. This means train watching will be a bit different from what we were seeing.
     
  12. Charlie

    Charlie TrainBoard Member

    1,910
    183
    39
    I think this discussion has gotten a bit too political and off topic.

    Charlie
     
  13. ScaleCraft

    ScaleCraft TrainBoard Member

    2,176
    98
    26
    Off of what topic? How is it too political?

    The original post, quoted, mentions coal revenues, and the discussion carefully followed the original posting.
    Nobody that I saw dragged in any politics, unless you feel any discussion of the limiting of coal as a natural resource for power is something you favour.

    "UP marketing chief Eric Butler told investors and analysts on a conference call that coal accounted for 32% of U.S. electricity generation in the second quarter, down from 39% a year earlier.
    All told, Union Pacific’s coal volumes fell 26%. Crude oil shipments dropped 29%, Ag-product cargo declined 7% on lower global demand for U.S. grain, while shipments of industrial products dropped 13%."

    Please explain. You may have a point, and I may have missed the political and off-topic posting.

    Thanks.

    Dave
     
  14. Eagle2

    Eagle2 Staff Member TrainBoard Supporter

    5,727
    479
    82
    A lot of these distinctions are "eye of the beholder" things. So far things seem to have stayed in reasonable connection to the topic, otherwise action would have been taken.
     
  15. Charlie

    Charlie TrainBoard Member

    1,910
    183
    39
    This discussion was about furloughs on the UP and has wound up being a discussion about "green" ethics and policy. None of us know for sure what has triggered furloughs on the UP other than speculation about the coal industry. Any of you who follow the news should be well aware of the decline in coal mining and usage in the past two decades. That is no big economic secret. Those of you with any knowledge of the railroad industry know that furloughs are, and have always been, a part of railroad employment. EVERY railroader has experienced them. Furloughs.like the seasons,are cyclic. If you want to tie them to coal, go right ahead but parsing the reason why the UPRR is cutting back on staff is best answered AND solved by their management. The political angle is that you are blaming Washington for the "problem with coal". Washington is responding to a genuine need to reduce dependency of fossil fuel of all types. To tie Washington to the UPs need to furlough people via coal or whatever is poor logic and disingenuous. Does that answer your question

    Charlie
     
  16. BoxcabE50

    BoxcabE50 HOn30 & N Scales Staff Member TrainBoard Supporter

    67,558
    22,732
    653
    I started the discussion and if I wish to allow it to shift, that is my privilege. You do not determine it's course!

    It is not at all disingenuous. Use of coal is and has been directly effected via constant mandates out of DC. Some are able to comply, others have sought a source of coal which more easily meets these requirements. Other commodities have been taking share of market away from coal. That does directly effect the market, which in turn directly effects the shippers/haulers of the commodity. The article clearly states, directly from UP : "Union Pacific, a major transporter of coal used to power electric utility plants, saw demand fall as utilities can burn either coal or natural gas. Currently, natural gas, is now cheaper. UP marketing chief Eric Butler told investors and analysts on a conference call that coal accounted for 32% of U.S. electricity generation in the second quarter, down from 39% a year earlier." This is not speculation, by Union Pacific. It's a fact.

    The economy is constantly evolving. The oil boom in MT/ND has subsided, much sooner than originally expected. BNSF has stored many tank cars, plus furloughed. That was unpredictable, not cyclic.

    Economic cycles beyond seasonal work, are not exact. They are can be quite variable.

    If you dislike a topic, you may:

    1) Report the posts/topic (which I will see!);

    2) Ignore it.

    But don't seek to regulate it. That's the job of TrainBoard Staff.

    Let those who wish to discuss, do so. My editing button is now all warmed up and ready to use!
     
    J911 likes this.
  17. BoxcabE50

    BoxcabE50 HOn30 & N Scales Staff Member TrainBoard Supporter

    67,558
    22,732
    653
  18. J911

    J911 TrainBoard Member

    496
    31
    10
Thread Status:
Not open for further replies.

Share This Page