By GENE KEMMETER
of The Gazette
Canadian National (CN) announced Tuesday, Nov. 26, that 84 jobs will be cut in the locomotive and car shops in Stevens Point and Fond du Lac.
The cuts are part of 1,146 permanent job reductions CN announced in a renewed drive to improve productivity.
Mark Hallman, system director, media relations for CN, said the real impact on Stevens Point jobs isn't known because about 30 employees will be offered opportunities to relocate to the Woodcrest locomotive shop south of Chicago, Ill., which could result in a shift in personnel.
"In the future the Fond du Lac and Stevens Point locomotive shops will continue to perform services and minor repairs," Hallman said, "and the same for cars. The Fond du Lac shop will continue its role as the major shop for repair of rolling stock."
Hallman said the operations division and other functions in Stevens Point shouldn't be affected by the announcement.
Roughly 30 percent of the reductions will be achieved through normal attrition and retirement, CN said, and 45 percent through early retirement and the remaining 25 percent through severance packages.
"We take no joy in announcing these permanent job reductions," said Paul M. Tellier, president and chief executive officer of CN. "But CN must leave no stone unturned in this productivity initiative given difficult conditions in our bulk commodity businesses and escalating labor costs."
Labor and fringe benefit expenses account for roughly 40 percent of the total operating costs for CN, he said, and the capital budget exceeds $1 billion annually to continue to invest in the railway. "Anytime we are looking to control costs we must, by definition, look to control our labor costs."
CN expects to take a fourth quarter after-tax workforce adjustment charge of approximately $79 million for severance and other payments to affected employees.
"The permanent job reductions announced today reflect efficiencies from large-scale information technology investments in administrative functions and a small asset base - we have fewer locomotives and freight cars to repair and maintain because of productivity improvements from our scheduled railway operations," Tellier said.
CN also announced it is adopting an actuarial-based methodology to determine its provision for U.S. personal injury and other claims, such as hearing loss, carpal tunnel syndrome and asbestos-related disease, to be consistent with current U.S. rail industry practice.
With the actuarial-based approach, the cost of employee injuries and other claims are charged to expenses based on an actuarial estimate of the ultimate cost and the number of incidents in each year.
CN expects to take an after-tax charge of about $173 million in the fourth quarter for that expense, with approximately two-thirds of the charge for asbestos-related claims.
"The change reflects CN's growing presence in the U.S. where the rail industry is uniquely susceptible to litigation involving employee work-related injuries and occupations claims because of FELA (Federal Employers' Liability Act), an outmoded law passed in 1908 that applies to railroads," Tellier said. "CN is faced with a rising number of personal injury claims in the U.S., and we want to reflect our expected liability in a consistent and forthright manner."
Together, the two charges will have an after-tax effect of approximately $252 million, or $1.25 per diluted share, on CN's fourth-quarter financial results.
The railroad industry in Stevens Point has had its shares of ups and downs in recent decades, after relatively quiet periods during the first 100-plus years.
In October 2001, Canadian National took control of railroad operations here when it finalized its purchase of Wisconsin Central.
The railroad era came to Stevens Point on Nov. 5, 1871, when a construction train for the Wisconsin Central Railroad pulled into town to build tracks that would connect Menasha with the port of Superior through Stevens Point.
In 1909, the Minneapolis, St. Paul and Sault Ste. Marie Railroad, which became the Soo Line Railroad, took over operations and continued to operate in the area until 1987, when it divested itself of numerous tracks.
A group led by Thomas F. Power Jr. and Edward A. Burkhardt revived the Wisconsin Central name when it purchased the regional network of track from the Soo Line. Wisconsin Central became a strong regional railroad and also invested heavily in formerly government-owned railroads in New Zealand and the United Kingdom.
Wisconsin Central stock went public in 1991, and after reaching a high of $44 a share in January 1997, the stock value started to decline. Burkhardt was subsequently ousted as president and CEO, leading to the sale a short time later.