Latest freight railroad layoffs and Wall Street pressure renew concerns about safety and service

OMAHA, Neb. (AP) — The latest rail layoffs this week, combined with an investment fund's ongoing campaign for control of Norfolk Southern, are renewing concerns among unions and regulators about the effects all the cuts might have on safety and service.

The worries about the lean operating model the major freight railroads have embraced for several years as they cut roughly one-third of their workforce are not new. It relies on fewer, longer trains that require fewer locomotives, workers and railcars. The railroads have defended their approach as a sound strategy to make the most of their resources without jeopardizing safety. But the industry has acknowledged that service suffered particularly in 2022 after the railroads cut too deep during the pandemic.

All the major freight railroads — and the Ancora Holdings investors targeting Norfolk Southern — have repeatedly stressed they are committed to improving safety, especially after last year's disastrous derailment in East Palestine, Ohio. Efforts to impose new safety rules on the industry have largely stalled since that crash, though the industry has taken several steps on its own like installing hundreds more trackside detectors to help spot mechanical problems.

But the chairman of the Surface Transportation Board, Martin Oberman, told an industry gathering this week that he believes Wall Street's focus on boosting short-term profits, stock buybacks and dividends undermines safety and service. And he said the recent investor pressure on Norfolk Southern and Union Pacific could prompt every rail CEO to back away from investing for the long run.