WASHINGTON — Amtrak President and CEO David L. Gunn told The Washington Post Wednesday that he was optimistic that the railroad could land a $205 million loan and avert a shutdown in July, according to Trains.com.
But he made it clear that any shutdown would involve the entire system, not just certain routes such as long-distance trains. Gunn told employees Wednesday that the railroad would run out of cash by July if it couldn’t obtain a loan to tide the railroad over to the beginning of the fiscal year in October.
Gunn was to unveil his restructuring plan Thursday to the Amtrak Board of Directors. It includes reducing the number of vice president positions from 84 to about 20, he told The Post.
In addition, the plan will eliminate the Northeast Corridor, Intercity and West Coast Strategic Business Units, replacing them with a traditional railroad structure built around departments. Final decisions would be made by Gunn and his management team in Washington.
“The old structure did not foster rapid decision-making — did not clearly assign authority and responsibility to individuals, and it was cumbersome,” Gunn told The Post. “It lacked in the levels of more technical expertise that is required in this business.”
That Gunn is a tradition-minded railroad man is apparent to anyone who visits his office. The first photo to hang on the wall is a portrait of late Amtrak President Graham Claytor; other photos include 15 to 20 steam locomotive prints pulled from Claytor’s stored collection.
Gunn has been on the job just three weeks, and Amtrak’s financial condition has been deteriorating even faster than he had anticipated before taking the job.
In March testimony before Congress, former Amtrak President and CEO George Warrington insisted that the railroad had enough cash to make it through the fiscal year.
Gunn told The Post that previous Amtrak management “should have blown the whistle on this thing much sooner.”
The railroad is running behind on its plan to cut costs by $285 million this year, a source said, and revenue has not met targets either.
Amtrak has been unable to settle a dispute with its outside auditor, KPMG, over whether the railroad is a “going concern” considering its financial condition. Until the matter is settled, Amtrak can’t tap a line of credit it had arranged with a consortium of banks.
Some Amtrak station agents have reported that although they still receive their paychecks on Fridays, they are now dated for Mondays — a move that may allow Amtrak to conserve cash over weekends.
Despite the talk of a shutdown, Amtrak urged passengers holding reservations beyond July 1 to keep them. Travel agents contacted by Trains today didn’t report any unusual activity among clients holding Amtrak reservations for summer travel.
If Amtrak had to shut down, the effects would extend far beyond the lack of intercity rail transportation.
Amtrak maintains and dispatches the Northeast Corridor, which is used by thousands of commuter trains daily in cities from Washington, D.C., to Boston. Any shutdown plan would have to address a transition that would allow commuter operations to continue.
Federal Railroad Administration spokesman Rob Gould said it was premature for the agency to comment on a potential Amtrak shutdown and what role, if any, the FRA may play. He referred questions to Amtrak.
A shutdown also could put a strain on the Railroad Retirement system, which last year paid out a total of $8 billion to 700,000 recipients. It’s possible that a complete Amtrak shutdown could cause cash-flow problems at the fund 20 years from now, said Railroad Retirement Board spokesman Bill Poulos. But that’s a “manageable problem,” he said.
Currently, with Amtrak contributing about 5 percent of the payroll taxes that flow into the fund, the system doesn’t foresee any cash flow problems down the road, he said.
A complete shutdown also would cause short-term problems for the unemployment insurance fund run by the board, he said.
Most observers, however, don’t expect Amtrak to be forced to shut down.