U.P. graphic

Union Pacific said Wednesday it plans to eliminate “several hundred” management jobs in Omaha and elsewhere in the coming months, as the largest U.S. freight railroad faces slumping cargo volume.

The job cuts will come from “terminations and attrition,” said Omaha-based Union Pacific, employer of about 8,000 Nebraskans and almost 50,000 people nationwide.

The railroad in the depths of the economic crisis in 2009 slashed its employment rolls as revenue fell sharply. The company at the time said it would cut up to 350 of its 6,000 management jobs across the 23-state region where it operates.

By 2011, with the global economy coming back to life and a boom in U.S. shale oil — which needed to be transported — U.P. was hiring again, announcing a plan to bring 4,500 new workers aboard.

But recent falling demand for freight hauling has cut into the sales, profits and share price of the major Omaha employer. The company in July reported a 7.7 percent decline in second-quarter profit from last year.

Union Pacific said the plan for staff cuts “takes the necessary steps to align resources with current business requirements.”

“For our company’s long-term success, we must take these painful actions to balance workforce levels with today’s business demands,” Lance Fritz, the company’s president and chief executive, said in a statement.

As of July’s earnings, the company had “furloughed,” or temporarily laid off, 1,200 employees who work in what the industry terms “train, engine and yard.”

Those are mostly union members who handle trains and cargo along the railroad’s 32,000-mile network. In 2009, during the economic crisis, the company furloughed as many as 5,300 of these types of workers, a spokesman said earlier this year.

Now, declining cargo volumes are affecting office workers in places such as the company’s headquarters in downtown Omaha. Union Pacific wouldn’t say exactly how many employees work in Omaha and it didn’t specify what job categories are part of the latest staff reductions.

Cargo volumes at the railroad fell 6 percent in the second quarter of the year from 2014. Coal and crude-oil volumes fell especially hard, with drops of 26 percent and 29 percent, respectively. Lower oil prices led to reduced production from the shale fields served by Union Pacific.

“Energy is proving to be a royal pain in the butt for North America’s largest rail franchise,” stock analysts at BB&T Capital Markets said in late July, after U.P. reported the sharp declines in oil and coal shipments.

Demand for freight hauling has slumped not just at Union Pacific. The Association of American Railroads reported this week that weekly U.S. carloads fell about 1 percent for the week ended Aug. 8.

In the face of slumping volume, the company said last month it is unlikely to beat or match last year’s record earnings per-share of $5.75. Its annual operating revenue of about $24 billion makes it the country’s largest railroad.

Union Pacific shares have fallen 22 percent in the past year. The shares were little-changed Wednesday and closed at $92.82 on the New York Stock Exchange. The company released its staff-reduction plan to The World-Herald after the stock market closed for the day.

The company said it would offer severance packages to employees who are terminated. “Communication to impacted employees will occur over the next few months,” it said in a statement, adding, “no buyout options will be available for employees who retire or voluntarily leave the railroad.”

Despite recent challenges, Union Pacific, a Fortune 500 company, appears to be in no long-term difficulty. The company still is profitable, albeit somewhat less so, and has $2 billion in cash.

Contact the writer: 402-444-3197, russell.hubbard@owh.com

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