Union Pacific posts strong results, but job cuts are likely as leaders want to cut costs | Big deal

Union Pacific announced Thursday quarterly earnings above expectations, which allowed it to continue its efforts to continue operating a more efficient railroad.

In this effort of efficiency, the leaders of the railway company indicated that more posts would be removed, without however specifying the calendar or the specific positions to be targeted.

In response to a question from the World-Herald on the possible consequences of workforce reductions on workers in the Omaha region, Raquel Espinoza, a spokeswoman for the company, said: "We do not provide no specific information to the location. "

"Staff reductions are impacting various sites in our system," she said. The company operates in 23 states.

In 2019, the company plans to increase its costs by aiming for productivity gains of $ 500 million. "Productivity of work" will be part of it, said leaders Thursday.

What could that mean for U.P. workers is not yet clear. In October, the company announced the elimination of 500 jobs in addition to the many layoffs of previous years.

During the last quarter of 2018, the management workforce was reduced by 1% compared to the same period in 2017 and 2% by the workforce in the mechanical and engineering sectors, senior executives said. Union Pacific at a conference call following the release of its most recent financial performance. Its total workforce remained virtually unchanged from the same period last year.

What is clear is that there will be changes to come. That's what announces the arrival of a new offering of chief services, Jim Vena, which started in the railroad sector less than two weeks ago.

He came out of retirement to take command of operations at the UP. After 40 years at Canadian National Railway, where he directed his most recent role in the search for efficiency. He used a game book that others in the industry – like U.P. – now try to reproduce.

Vena's most important task is to reduce the so-called operating ratio of the company – or, essentially, the share of every dollar that it spends. At present, this represents 61.6%, and the company wants to reduce this percentage to less than 61% this year and to less than 60% by 2020.

How to go there? "There is nothing that is not on the table," Vena said during Thursday's teleconference, in which he said he had the support of managing director, Lance Fritz.

Vena said that he had gone to a train yard last week and that he had considered the possibility of making his operations more efficient, although he stated that he had not been able to do anything. he would review the entire company before announcing the decisions.

"I'd like to say," Look, we're going to close X yards with 10 days of work, "he said, according to a transcript of the teleconference." But we're going to spend a lot of time doing so that the factory is set up to run the business in the most efficient way possible, with excellent service. "

Bascome Majors, an badyst with Wall Street Susquehanna, said that with a company as large and as diverse as Union Pacific, it can be difficult to make big changes quickly.

"You intervene as an undeniable change agent in a very large organization," he said.

The company recently employed approximately 42,000 people, including approximately 8,000 in Nebraska.

During the call, Vena admitted that there was "noise on the way" for the railway to work more efficiently, but said he was confident the UP could get there – by moving faster trains on its network, for example. It implements a plan known in the industry as PSR, or Precision Railroad.

If you're more efficient in locomotive maintenance, for example, Vena said, "You need less. You need fewer people to serve them. "

Fritz said that changes would be made "the U.P. way – at the right speed, engaged with customers."

Daniel Sherman, a Wall Street badyst who follows the railways for St. Louis-based investment advisor Edward Jones, said he thought the U.P. "Move quickly to the precision railroad operating model, which means better utilization of operating badets and manpower, better service for its customers and better earnings growth for shareholders ".

The company announced Thursday a net profit of $ 1.6 billion in the fourth quarter, or $ 2.12 per share, exceeding the $ 2.06 expected by Wall Street badysts, according to estimates by the data provider FactSet.

As a result of this better-than-expected report, Union Pacific shares rose sharply, closing close to 4% that day, compared to the broader market, which was stable. So far this year, the US market stock has increased by 16%, far exceeding the market's 5.4% gain.