(The following Associated Press article was published in the January 14 issue of the Grand Island Independent.)
OMAHA — Union Pacific Railroad has started to eliminate jobs as part of an aggressive cost-cutting initiative.
Some of the first cuts were made Monday as some employees in the railroad’s information technology department were laid off. Union Pacific spokeswoman Kathryn Blackwell would not say how many employees lost jobs but did say it was likely some of those affected were managers.
An anonymous source with Union Pacific told the Omaha World-Herald newspaper that 53 workers in the information technology department in Omaha lost jobs Monday. The paper also reported that at least 26 workers in the crew management department in Omaha lost jobs last week.
The president of Union Pacific, the nation’s largest railroad, warned employees in an e-mail Thursday that job cuts were coming in the first quarter of 2003 as the company must aggressively cut costs.
“These cost reductions will be felt across all areas of the company, primarily in administrative functions,” President Ike Evans said in the e-mail.
The railroad’s parent company, Omaha-based Union Pacific Corp., had announced in December that it was drafting a plan to cut costs by as much as 20 percent.
In his e-mail, Evans cited several reasons for the cuts including 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 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.
Blackwell said employees are not being offered early retirement. She said that severance packages are based on years of service but declined to give details.
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.