Operations management at the number four U.S. railroad will now be run out of two distinct regions as part of a cost-saving initiative designed to stem profit declines.
Norfolk Southern is consolidating its three operating regions into two as part of an internal efficiency drive designed to accelerate profit growth, the company announced Tuesday.
The major eastern railroad is striving to slash expenses $650 million per year by 2020, under a five-year strategic plan released in December.
“We are committed to aggressively controlling costs while delivering the high levels of superior service that our customers value,” Chief Operating Officer Mike Wheeler said in a statement. “Consolidating our operating regions will generate productivity savings, not only through right-sizing, but also by leveraging advancements in train dispatch technologies that support more fluid and efficient movement of freight across the network. As we continue to execute on our five-year strategic plan, we are confident that these steps will make Norfolk Southern a faster, lower-cost, and more profitable railroad.”
Earlier this year, Norfolk Southern streamlined division operations by combining the former Virginia and Pocahontas divisions into a larger Pocahontas Division. The company has also recently downsized from three corporate office locations to two, restructured the Triple Crown Services subsidiary, integrated the D&H South Line to increase options for shippers, and idled of certain parts of the ‘West Virginia Secondary’ line.
Several of the changes are tied to the dramatic decline in coal shipments, which is impacting all railroads.
The railroad estimates it will achieve savings of about $130 million this year.
Norfolk Southern’s network spans 22 states in the eastern U.S. The railroad presently manages train operations across 10 operating divisions that are part of three larger operating regions – the Eastern, Western, and Northern regions.
Under the new structure, effective March 15, Norfolk Southern’s network will be divided into Northern and Southern regions only. The Northern Region will include the Harrisburg, Pittsburgh, Dearborn, Lake, and Illinois divisions. Greg Comstock, a 41-year veteran of Norfolk Southern operations, will be the region’s general manager.
The Southern Region will include the Piedmont, Alabama, Georgia, Central, and Pocahontas divisions. Todd Reynolds, a 22-year veteran of Norfolk Southern operations, will be the region’s general manager.
Each of the two consolidated regions will support approximately 1,000 daily crew starts for long-haul train operations.
NS reported a fourth quarter profit of $361 million, down 29.4 percent from $561 million in the same 2014 period. Railway operating revenues stood at $2.5 billion as the company saw sales drop in all three lines of business:
• Coal: $433 million in fourth quarter revenue compared with $543 million in the same period a year earlier;
• General merchandise: $1.52 billion compared with $1.68 billion;
• And Intermodal: $563 million compared with $649 million.
For the full year, NS posted a profit of $1.6 billion in 2015 compared with $2 billion in 2014. Revenues fell 9.5 percent to $10.5 billion for the year.
Norfolk Southern has also recently been the target of a hostile takeover bid by Canadian Pacific, which says it could wring more value out of NS through a combined operation.
Norfolk Southern streamlines operating regions
