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Wabtec to reduce headcount as rail industry copes with lower volumes

U.S. Class I headcount also down by nearby 14% in September; FreightCar America finalizes plans to move its manufacturing operations to Mexico

A Wabtec locomotive. (Photo: Wabtec)

Wabtec (NYSE: WAB) plans to let go of 150 employees at its facility in Erie, Pennsylvania, amid ongoing rail volume softness exacerbated by the COVID-19 pandemic.

The headcount reduction comes as the Surface Transportation Board (STB) released data this week that showed that employment levels within the U.S. operations of the Class I railroads fell 13.7% in September year-over-year (see below).

Wabtec, a rail equipment and technology provider, said the reduction was made “to align with today’s volume realities.” Roughly 150 hourly and front-line employees will be affected by Wabtec’s decision. 

Wabtec attributed its decision to persistently lower freight rail volumes. 

“The freight locomotive market continues to be challenging with carload volume significantly down versus last year and the COVID-19 pandemic continuing to impact communities and the economy,” Wabtec said. “As of October 1, 2020, North American rail carloads and US rail traffic are down roughly 10%, respectively, versus last year and locomotive parkings remain at a high.”

The layoffs, which will occur during the fourth quarter, are on top of a 5% reduction in headcount in the second quarter. During Wabtec’s second-quarter earnings call in July, the company said its headcount was down by over 10% year-over-year.

“Decisions like this are never easy, but it comes as the result of an in-depth evaluation of the market and how to best position the company for success given today’s unprecedented environment,” Wabtec said. “The company remains fully committed to all customer commitments and providing impacted employees with resources and benefits.”

Wabtec will release its third-quarter results Oct. 29.

According to its website, the Erie plant was one that was previously affiliated with GE Transportation. Wabtec and GE Transportation, which made locomotives, merged in 2019. 

FreightWaves reported in September 2019 that Wabtec closed a business unit in Boise, Idaho, transferring its manufacturing operations to Erie. 

U.S. Class I rail headcount falls nearly 14%

Wabtec’s decision comes as the broader industry has also reduced employment levels to cope with lower rail volumes. 

For instance, railcar manufacturer FreightCar America (NASDAQ: RAIL) confirmed Monday that it would be closing its Shoals facility in Alabama now that it has full ownership of a manufacturing facility in Castaños, Mexico, from Fasemex. The company had announced last month that it was planning to move all of its manufacturing operations to Mexico pending a deal with Fasemex, which jointly owned the Castaños facility with FreightCar America. FreightCar America also closed a facility in Roanoke, Virginia, in 2019.

FreightCar America, which expects to begin manufacturing railcars in Mexico by February, said in September that “the ongoing impact of the industry downturn has been further intensified by the COVID-19 pandemic and required an additional and significant response to both protect our franchise and reposition the business for immediate success post-downturn.”

Meanwhile, the STB released figures this week that showed that headcount levels among the U.S. operations of the Class I railroads fell 13.7% in September year-over-year to 118,123 employees.

However, between August and September, total employee headcount was flat to higher, at 0.3%. September’s total was the highest since June.

In the train and engine (T&E) category, headcount totaled 47,037 employees, which is 17.7% lower than September 2019 but 1.7% higher than August 2020. The T&E category tends to be more sensitive to market demand for rail service.

Indeed, U.S. rail volumes in September totaled 2.5 million carloads and intermodal units, a 1% decline from September 2019, according to the Association of American Railroads. But while intermodal volumes were up 7% in September to 1.4 million containers and trailers, carloads were down 9.7% to 1.1 million.

On a sequential basis, U.S. rail volumes rose 26% between August and September, with carloads growing by 25% and intermodal units increasing by 27%.

Click here for more FreightWaves articles by Joanna Marsh.

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FreightCar America closing Alabama facility, consolidating operations to Mexico

US Class I rail headcount rises for the first time since April

US intermodal traffic climbs 7% year-over-year in September

Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.