UPDATE: CSX management layoffs to save company $175 million annually

Figure exceeds previous annual cost-cutting target by $25 million
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JACKSONVILLE, Fla. – CSX Transportation expects to save at least $175 million annually by laying off more than 20 percent of its management employees, the railroad said in a regulatory filing on Monday.

The reduction of up to 1,000 management positions, announced last week, is expected to be complete by the middle of March, the railroad says. CSX will take a pre-tax charge of at least $160 million related to employee termination benefits, including severance, pension, and stock compensation costs.

The laid off employees will be eligible for severance pay that equals two times their base salary, plus their target bonus and a prorated bonus payment. They also will be credited with three additional years of age and two additional years of service under the company pension plan.

CEO Michael Ward said the layoffs are “essential to CSX’s ability to remain competitive in a challenging and changing market.” The railroad has lost $2 billion in coal revenue over the past five years.

Last year, when coal revenue plunged $470 million, CSX slashed costs by a record $430 million. Previously CSX executives said they expected efficiency and productivity savings of $150 million this year.

The management layoff savings of $175 million are on top of the $150 million originally envisioned, CSX spokesman Gary Sease says. That puts CSX on track to cut costs by more than $280 million this year.

“We expect a pro-rata share of the $175 million this year because two months of 2017 are almost complete,” Sease says.

The same regulatory filing also outlined CSX’s long-term incentive program for its executives. The program includes three components – performance units, restricted stock units, and stock options – which account for 50 percent, 25 percent, and 25 percent of the awards, respectively.

The filing also details the compensation package for former chief marketing officer Fredrik Eliasson, who was named the railroad’s president last week. Eliasson’s annual base salary was increased to $700,000; his short-term incentive opportunity was increased to 100 percent of annual base salary; and his target long-term equity incentive award value was increased to $2.5 million.

Eliasson succeeds Clarence Gooden as president. Gooden retires on May 31 along with Ward. CSX did not name a replacement for Ward, leaving the door open for E. Hunter Harrison, who has been negotiating a management shakeup at the railroad along with his activist investor partner, Mantle Ridge.

UPDATE: Comments from CSX Corp. communications VP. Feb. 28, 2017, 12:21 p.m. Central time.

NEWSWIRETrains News Wire

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