(The following article by Grace Shim was published in the January 14 online edition of the Omaha World-Herald.)
OMAHA — The president of Union Pacific Railroad warned employees in a recent e-mail that aggressive cost-cutting and job cuts were coming in the first quarter of 2003. One round of those cuts came Monday, when 53 employees in the information technology department lost jobs.
President Ike Evans warned in a Thursday e-mail sent to employees that each department would have to cut costs.
“While the scope of these plans will vary by department, these cost reductions will be felt across all areas of the company, primarily in administrative functions,” he said in the e-mail.
Union Pacific spokeswoman Kathryn Blackwell would not say how many employees lost jobs Monday but did say it was likely some of those affected were managers. Blackwell said the job cuts were immediate.
An Omaha employee of Union Pacific, who spoke on the condition of anonymity, said 53 workers in the information technology department in Omaha lost jobs Monday. The employee also said at least 26 workers in the crew management department in Omaha lost jobs last week.
Two crew management employees in Omaha, who also spoke on the condition that they not be named, said more job cuts are anticipated in the department.
Union Pacific Corp., the Omaha-based company whose largest unit is its railroad, had announced in December that it was drafting a plan to cut costs by as much as 20 percent.
Evans said in a recent e-mail to employees that 2002 was “a very good year,” but cited these factors as the reason for cuts in 2003: higher employee wages, double-digit increases in health care benefits, higher fuel prices resulting from the threat of war in the Middle East and political strife in Venezuela, and soaring insurance costs since the Sept. 11 terrorist attacks.
“A continuing soft economy is a backdrop to all of these challenges,” Evans said in the e-mail.
In the past, Evans said, the company met similar challenges through productivity improvements, price increases and careful budgeting, but the company is not earning its cost of capital, which is the basic return that investors and lenders expect from their investment in the company.
“We need to take a bolder step,” he said of 2003.
U.P.’s cuts come at a time of improved earnings for the company, which reported record revenues of $3.2 billion for the third quarter.
For the first nine months of 2002, the company reported net income of $963 million. During the first nine months of 2001, the company posted $691 million in net income.
U.P. will report its fourth-quarter 2002 results Jan. 22.
“Some have asked why we need to take these tough actions at a time when we are setting financial and operating records. The answer is simple: It is better to act from a position of strength while you have choices, rather than to wait until financial weakness forces even more severe actions,” Evans wrote in the e-mail.
Union Pacific spokeswoman Blackwell said employees are not being offered early retirement. She said that severance packages were based on years of service but declined to give details.
One of the Union Pacific employees said managers who lose their jobs would get a maximum of one year’s pay if they have 20 or more years’ tenure. If a manager chose to revert to union membership, then the union member with the least seniority would lose his job, the employee said.
The employee said no department is being asked to cut more than 20 percent of its staff.
When Union Pacific cut jobs in 2001, employees were offered a severance package and a buyout program.
In this round of cuts, Blackwell said there may be many instances where affected people won’t be of retirement age.
Blackwell said the company is targeting aspects of the business that don’t add value. The company can do more things efficiently because of technology and does not need as many people, she said.