Norfolk Southern to Scale Back Coal, Rail Operations
The Norfolk Southern Corp. plans to idle its Ashtabula, Ohio, Coal Pier and shift operations to its Sandusky, Ohio, Dock as part of its recently-unveiled, five-year restructuring plan “to streamline operations and drive profitability and growth.”
According to the company, the Ashtabula facility will continue to operate until all coal inventories have been transloaded, which is expected to be completed by May 2016. The facility will remain idled until and if market conditions warrant reopening, the NS said.
Norfolk Southern has owned and operated the Ashtabula coal pier since 1999. The facility, which handles an average seven million tons of coal annually, serves the thermal coal market, transloading coal from Ohio, Pennsylvania, and West Virginia to electric generating utilities and cement producers in Canada and the Great Lakes Basin by ship. Rival CSX also has rights to use the Ashtabula dock.
In addition to consolidating its Great Lakes coal operations, the strategy also calls for downgrading 1,500 miles of track associated with declining coal business over the next two years, eliminating 1,200 jobs by the end of this year, closing some and combining other operations, and paring back both capital spending and stock buybacks.
According to industry analysts, the five-year plan is clearly aimed at fending off another hostile takeover attempt by Canadian Pacific Railway Ltd.
In mid-November, the Canadian Pacific disclosed its $28 billion offer to buy Norfolk Southern. The offer was rejected by a unanimous vote of the NS Board with both customers and lawmakers complaining to the federal government’s Surface Transportation Board that Canadian Pacific would gut the U.S. railroad by reducing the size of its workforce and paring back its investments.
The NS, the nation’s 4th largest rail carrier, said it expects to “achieve annual productivity savings of more than $650 million by 2020, with approximately $130 million to be realized in 2016,” and is “confident in its ability to achieve an operating ratio below 65 percent by 2020.”
“This plan will enable us to achieve significant annual expense savings beginning in 2016 without compromising the company’s ability to capitalize on volume and revenue growth opportunities,” said James A. Squires, Norfolk Southern’s chairman, president and CEO.
The carrier, he added, “is making progress despite a challenging operating environment, including successfully restoring our rail service to previous high levels, realigning resources, and completing strategic capacity investments to improve efficiency and productivity.”
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