OMAHA — Union Pacific Corp. is preparing cost cuts that may include the loss of at least 10 percent of the company’s administrative jobs, the Omaha World-Herald reported.
Most of the company’s administrative jobs are in Omaha, where it is based, or in St. Louis. Union Pacific has about 4,000 employees in Omaha and 48,000 throughout its 23-state territory.
A manager at Union Pacific’s Omaha headquarters, who commented on the condition of anonymity, said executives have been directed to formulate a plan for each department that would include employment reductions of at least 10 percent.
The manager said the exact percentage of job losses remains uncertain.
“It’s double digit,” he said.
The manager said the cuts will affect employees at the Omaha headquarters and other administrative sites around the company. The reductions are less likely to affect unionized employees who operate locomotives, maintain railcars and repair track, he said.
Union Pacific confirmed Friday that it is drafting a cost-cutting plan but would not say whether jobs are at risk.
Bob Turner, senior vice president of corporate relations, said the company is looking for ways to reduce costs by up to 20 percent. He declined to say where cuts might occur.
A cost-cutting plan will be completed by early 2003, Turner said, and changes could take place immediately or may take months.
For the first nine months of 2002, the company reported net income of $963 million on revenue of $9.3 billion.
Turner said trimming administrative costs is the primary target of the cost-cutting move.
Cost reductions are nothing new, Turner said. Executives prepare a business plan each year at this time and try to improve productivity, he said.
“If this process of identifying tasks that are no longer adding value to the company goes forward, as it is, there will be things that we’re doing today that we don’t do in the future,” he said. “The cost reductions are being done to make us a better company, more successful.
“By picking a big number, it will challenge all of us to really think critically about what we do.”
For those who follow the railroad industry, Turner’s words mean layoffs.
Ray Lineweber, United Transportation Union’s legislative director in Nebraska, said that in operations, U.P. is “pretty close to the bone.” The union represents conductors, brakemen, switchmen and ground service personnel.
However, Lineweber said, there are ways to cut fat. U.P. has too many field managers and is “top heavy” with management, he said.
Independent rail analyst Tony Hatch said “20 percent is a big number.” He said it’s too early to discern effects on the company.
Hatch said that Turner’s comments about how changes will impact the company are vague but that they will involve head-count reductions and productivity gains.
The company has talked about reducing its “cost of failure,” Hatch said, such as billing errors and railcars going to the wrong place.
“Administrative and clerical errors are big areas of opportunities in railroads as you further tie in information systems and drive technology, and Union Pacific is a leader in that regard,” he said. “As you simplify pricing, which is extraordinarily complex . . . there will be a need for fewer price clerks and fewer errors.”
Hatch said U.P., and railroads in general, have made strides in productivity since deregulation in 1980. Railroads continue to improve productivity with the introduction of technology and price simplification, he said.
Job cuts would not be new to Union Pacific. Since its merger with Southern Pacific in 1996, the company has announced elimination through attrition or layoffs of more than 5,000 jobs.
Turner said the company has averaged 6 percent to 8 percent productivity improvements each year for 15 years, even when the U.S. economy was growing only about 2 percent.
The bar gets higher every year for financial performance, Turner said. The expectations of investors and shareholders are that you improve your results, he said.
“We have met the challenge for the last two years, and our intention is to meet that challenge going forward. The fact that we have averaged 6.5 percent (in improvement), it was an estimate.
“Can we get to 20? . . .Until the analysis has been done, we don’t know whether it will be 20, 25 or 10.”
Turner said none of the cost-cutting is related to construction of the Union Pacific Center headquarters in downtown Omaha. The building is scheduled for completion in the summer of 2004.
“Our objective is to make this a very successful company,” he said. “The number of people you have is not the priority. Nor is the number of buildings you have or the number of offices you have.”