New York CNN —
Union Pacific, one of the major rail freight companies that successfully fought off union demands for paid sick leave for workers in contentious labor negotiations in 2022, on Tuesday reported another year of record earnings.
The company, along with CSX, Norfolk Southern and Burlington Northern Sante Fe, narrowly avoided a strike by its unionized workers when Congress imposed new contracts on about half of its union members in December.
During the year, the company’s employee salaries and benefits grew about $500 million, or 12%, to $4.6 billion, far less than the $6.3 billion that Union Pacific spent to buy back issued shares.
“Rather than buying back its own stock, UP should invest in its employees by offering paid sick leave, decent hours and a better quality of life for railroad workers,” said Ed Hall, new president of the Brotherhood of Locomotive Engineers, the engineering union. “This is the only way Deutsche Bahn can solve its recruitment and retention problems and keep the trains running.”
Hall was still an active engineer at the company as late as December before taking over the union’s top position.
The new employment contracts gave employees an immediate pay increase of 14%, including back payments. However, many of the unions rejected the agreements because they did not give members the paid sick leave they wanted. Even the unions that voted to ratify the accords had a significant proportion of rank and file members who voted against.
Not all of the costs of those contracts impacted Union Pacific’s fourth-quarter results reported Tuesday. Some costs, mainly related to back wage payments, have been recorded as an adjustment to previous results. And union member signing bonuses paid in January will be visible when the company’s first-quarter results are released in April.
Still, the higher labor costs did not have a major impact on the railroad’s profitability. Elevated Fuel costs weighed on earnings much more than wage increases, rising $1.4 billion, or 68%, to $3.4 billion.
For the year, the company’s net income rose to a record $7 billion, up about $500 million, or 7%, from the previous record 2021 profit. While total operating expenses for 2022 increased $2.5 billion, this was offset by increased revenue of $3 billion to a record $24.9 billion for the year.
Fourth-quarter results were slightly weaker than forecast as net income fell 4% year over year. The railroad attributed much of this decline to higher operating costs due to a poor winter across much of its service area in December. Shares of UP fell almost 3% in afternoon trading.
Two other major rail freight companies, CSX (CSX) and Norfolk Southern (NSC), will report their results on Wednesday. Both are expected to report improved fourth quarter and full year results. The fourth major rail freight company, Burlington Northern Sante Fe, is a wholly owned subsidiary of Berkshire Hathaway (BRKA), which has not yet announced its fourth-quarter results.