(Bloomberg News circulated the following story by Rip Watson on November 11.)
WASHINGTON, D.C. — CSX Corp., the third-largest U.S. railroad, plans to fire from 800 to 1,000 management workers in the next six months to reduce expenses and streamline decision making after profits declined.
The reductions, as much as 20 percent of management ranks, will cost between $60 million and $80 million, mostly in the next two quarters, the Jacksonville, Fla.-based company said on its Web site. CSX, whose 34,000 employees include about 5,000 managers, said it will realize savings from the move by mid-2004, without giving an estimate.
CSX last month said net income through three quarters fell to $123 million from $287 million in the year-ago period as sales slid 4.1 percent and costs rose 3.7 percent. Eastern U.S. rival Norfolk Southern Co.p. last week said it would have fourth-quarter costs of $107 million after 553 nonunion workers accepted buyouts. Rail labor contracts make it hard to cut union jobs.
“CSX has a productivity problem, and they appear to be actively addressing it,” said UBS analyst Rick Paterson, who rates the company a “buy” and doesn’t own its stock. “CSX appears to be taking action to bring its financial performance more in line with its peers’.”
Chief Executive Michael Ward, who took over in January, said in a prepared statement that he was “not satisfied with our efforts to control costs.” Total expenses through three quarters this year increased to $5.48 billion from $5.28 billion.
The move will trim management layers to eight from 11, the company said.
The managers who lose their jobs will get lump-sum payments equal to three months’ to 12 months’ salary, based on length of service, and also will receive health care benefits, CSX spokesman Adam Hollingsworth said.
Hollingsworth wouldn’t say how much CSX would save from the job cuts. The company’s nonunion workers each are paid an average of about $60,000 a year, he said.
CSX’s profit margin before interest and through three quarters of this year was the lowest among major U.S. railroads, at 12 cents per dollar of sales. That figure also excludes asbestos claims costs. Burlington Northern Santa Fe Corp., the second-largest U.S. railroad, had the next lowest profit margin, at 17 cents per dollar of sales.
CSX shares fell 45 cents to $33.35 Monday in New York Stock Exchange composite trading. They have gained 18 percent this year.