U.S. railroads had fewer employees on their payroll in June amid lower rail volumes overall and company decisions to trim workforce levels as part of changes to their operating models.
The U.S. operations of the Class I railroads employed 141,360 employees in June, a 4 percent drop from employee levels in June 2018 and a 1.1 percent drop from May 2019, according to the U.S. Surface Transportation Board.
The largest number of employees shed year-over-year were executives, officials and staff assistants, which decreased 7.5 percent, and maintenance of equipment and stores, which dropped by 5.3 percent.
The category with the most employees, the train and engine category, had 3.9 percent fewer employees in June 2019 compared with June 2018. Compared with May 2019, the U.S. Class I rail operations had 1.5 percent fewer train and engine crew members on their rosters.
The drop in rail headcount comes as the railroads are hauling lower volumes this year compared with last year. The railroads tend to cut employee levels as they match rail capacity with demand.
The workforce reduction also coincides with efforts by some Class I railroads to deploy precision scheduled railroading (PSR), an operating model that seeks to streamline operations and rail schedules. Switching to the operating model results in railroads having fewer employees. Union Pacific (NYSE: UNP), Norfolk Southern (NYSE: NSC) and Kansas City Southern (NYSE: KSU) are among the companies that have deployed some version of PSR over the past year. CSX (NYSE: CSX) chief executive officer Jim Foote also talked about looking at ways to reduce headcount levels during CSX’s second quarter earnings call recently.
UNP chief executive officer Lance Fritz also spoke about the topic on his company’s recent earnings call. “When volumes get softer, we know how to adjust our resources to match what volume represents. But I would have to say, the lion’s share of what you saw was about Unified Plan 2020 [UNP’s version of PSR] and productivity. And you can see that kind of across the board. We had to adjust the amount of resources we put at locomotives as we parked about a quarter of the locomotive fleet if not more.”
Fritz continued, “And you can see that directly related to the headcount, to the manpower that we have attached to maintaining locomotives. The same is true on maintaining cars. The same is true on the TE&Y [train, engine and yard] workforce. We’ve taken a lot of work out of the network and it’s being reflected now in our manpower. And we’ve got – there are more of those adjustments to be made as the network continues to stabilize and as we continue to find opportunity.”
KSU’s chief financial officer Mike Upchurch said, “We did begin to see approximately $1 million in savings from crew start reductions and continue to believe our overall headcount will be down for the year as we continue to make progress with PSR, particularly once our new transportation service plan is finalized.”
