CSX Corp., Jacksonville’s largest Fortune 500 company, is undergoing a striking corporate realignment, announcing it will cut 1,000 management jobs as its two top executives prepare to retire in May.
Most of the job cuts will be in Jacksonville by late March. That would be one of the largest layoffs among companies statewide over the past almost 20 years.
Company spokesman Gary Sease said it was an involuntary separation program. He said there are more than 2,500 CSX management employees in Jacksonville.
The strategic moves for the Downtown-based transportation company come as former Canadian Pacific Railway Ltd. CEO Hunter Harrison negotiates with CSX’s board of directors to become chief executive.
Talks stalled over Harrison’s requested compensation package, estimated at $300 million, and the makeup of the board of directors.
Hedge fund Mantle Ridge, which is working with Harrison, wants six of 14 seats on CSX’s board. Mantle Ridge controls 4.9 percent of CSX’s stock.
CSX plans to schedule a special meeting to let shareholders decide if they want to accept Harrison’s and Mantle Ridge’s demands.
Wolfe Research analyst Scott Group said in a research note Tuesday he met with Harrison and Mantle Ridge CEO Paul Hilal on Friday, and they are both confident they will reach an agreement with CSX.
Group thinks it will happen within five months.
It’s been a bustling five weeks for CSX, which provides rail, intermodal and rail-to-truck services to customers in markets that include energy, industrial, construction, agricultural and consumer products.
News of the Harrison-Hilal partnership broke Jan. 18 when Canadian Pacific announced Harrison was leaving his CEO post early.
While CSX had been working on a succession plan, it said that “in light of Mr. Harrison’s notable experience and accomplishments,” the board decided to open talks with Harrison when he expressed interest.
Early Tuesday morning, CSX announced the May 31 retirement of Chairman and CEO Michael Ward, 66, and President Clarence Gooden, calling those changes “part of an orderly transition of the company’s senior leadership that the board has been considering for more than a year.”
CSX Executive Vice President Fredrik Eliasson, 46, was named president, effective Feb. 15, but no CEO was identified.
But later Tuesday, word got out that CSX told employees about the 1,000 job cuts.
Sease said the cuts were announced Tuesday morning to employees and that enhanced separation benefits are being extended to the workers affected.
He said a majority of the employees being let go are in Jacksonville across multiple locations and subsidiaries, but some affected management employees also are in the transportation company’s field organization.
Ward had planned to retire in 2016 before his heir apparent, then-CSX President Oscar Munoz, left in September 2015 to become CEO of United Continental Holdings Inc.
Ward then agreed to stay on as CEO for three more years.
Soon after Harrison’s intention to target CSX surfaced in mid-January, Fortune.com pondered whether Harrison, a 72-year-old executive who has revived three troubled railroads, could “add boxcars of profits” at CSX, the country’s third largest carrier and the largest on the East Coast.
Fortune reported Harrison pioneered a “precision railroading” strategy and cost-cutting.
The Associated Press reported Harrison came out of retirement in 2012 to lead Canadian Pacific after Pershing Square Capital took a large stake in the railroad and forced management changes.
The AP said Canadian Pacific more than doubled its earnings per share to $10.63 in Canadian dollars from 2012 to 2016 while cutting more than 6,000 jobs and using fewer locomotives.
After Harrison expressed interest, CSX’s stock surged. It closed on $45.51 on Jan. 19, up from $36.88 on Jan. 18.
It closed Tuesday at $48.91.
An ‘aggressive move’
Jacksonville economic developers are keeping a close watch on what happens with one of the city’s leading corporate citizens.
“That is an aggressive move — 1,000 people,” said JAXUSA Partnership President Jerry Mallot, who leads the JAX Chamber’s economic development division.
While the job cut is large, Mallot said it probably was helpful it is happening while the area economy is healthy and adding jobs.
“There certainly will be many opportunities here, but there will be displacement,” he said.
Mallot said he hopes the net result is good for CSX, “but it is painful in the process.”
“CSX will end up being a stronger company for it and more competitive,” he said.
The cost-cutting makes the company more lean and mean, he said.
“They are in a reality that when you have a transition by external forces, that’s what happens,” Mallot said.
A layoff of large proportions
A cut of 1,000 management jobs could shock parts of the economy, given that those positions typically pay more than the average wage.
And 1,000 is a big number also in light of the chamber’s claim that Amazon.com’s intention to add 1,500 jobs, most of them paying $12-$15 an hour, was the city’s single largest job announcement in history.
A review of state records shows at least 11 layoff notices of 1,000 jobs or more since 1998, the first year for which Worker Adjustment and Retraining Notification notices in Florida are posted online.
CSX, which hasn’t filed a notice for the current layoff, was one of those 11.
In late 2003, it notified the state it would lay off 1,000 employees by April 2004.
At the time, published reports said the company would cut 800 to 1,000 non-union jobs as it embarked on a redesign of its management structure.
It also said most of the cuts would occur in Jacksonville, where 60 percent of its 5,000 managerial employees were based.
CSX said then its goal was to transform itself into a leaner company better able to meet the needs of its customers.
Two years ago, CSX also trimmed jobs as it restructured some of its headquarters departments.
In January 2015, CSX said it cut 52 more jobs in its headquarters operations, after 298 employees opted to take buy-outs.
The previous November, it sought to cut 300 jobs by offering some employees an enhanced retirement package.
CSX said it had seen a sharp reduction in coal shipments while looking to grow in other merchandise and intermodal markets.
CSX is one of the city's top employers
CSX is one of Jacksonville’s largest employers, with an estimated 3,600 workers in Northeast Florida, according to an undated list on the JAX Chamber’s website.
That list ranks CSX as the area’s eighth largest private employer, tied with UF Health. A cut of 1,000 jobs would drop it to No. 14.
By revenue, CSX is the largest Fortune 500 company based in Jacksonville.
In June, the magazine’s annual list of the largest U.S. companies found that CSX, with $11.8 billion in revenue in 2015, was No. 239.
The other two Jacksonville-based companies were Fidelity National Financial Inc. at No. 311 with $9.1 billion in review and Fidelity National Information Services Inc. at No. 392 with $6.6 billion.
As of December, the company employed about 27,000 people systemwide, of which about 22,000 were union employees.
CSX also is a highly visible corporate citizen, owning and occupying the riverfront 500 Water St. building and the nearby 550 Water St. structure.
The company and Ward also have been strong civic supporters.
CSX maintains a strong presence on the Northbank Downtown and was considering adding to it.
Sease could not immediately say how the management cuts will affect the company’s request for city assistance to move 550 jobs from Southside to the Bank of America Tower Downtown.
Contributing writer Mark Basch contributed to this report.
| Rank | Name | NE Florida employees |
| 1. | Baptist Health | 9,800 |
| 2. | Bank of America Merrill Lynch | 8,000 |
| 3. | Florida Blue | 6,000 |
| 4. | Southeastern Grocers | 5,700 |
| 5. | Mayo Clinic | 5,500 |
| 6. | JPMorgan Chase | 3,900 |
| 7. | Citigroup Inc. | 3,700 |
| 8. | CSX Corp. | 3,600 |
| 9. | UF Health | 3,600 |
| 10. | Wells Fargo | 3,500 |
Source: JAX Chamber
Since 1998, at least 11 companies notified the state they intended to lay off at least 1,000 positions through Worker Adjustment and Retraining Notification notices. Some employees might have been retained by successor companies or contracts.
| Company | Year | Location | Number of employees |
| Albertsons | 2008 | Statewide | 5,131 |
| United Space Alliance | 2011 | Titusville | 1,942 |
| JPMorgan Chase | 2005 | Tampa | 1,900 |
| Space Gateway Support LLC | 2008 | Kennedy Space Center | 1,725 |
| PRC Miami | 2007 | Miami | 1,500 |
| EG&G Florida Inc. | 1998 | Kennedy Space Center | 1,499 |
| American Airlines | 2012 | Statewide | 1,414 |
| Eckerd Corp. | 2004-05 | Largo | 1,400 |
| Spirit Airlines Inc. | 2010 | Miramar | 1,277 |
| ABC Distributing LLC | 2006 | Hialeah and North Miami | 1,035 |
| CSX Corp. | 2003-04 | Jacksonville | 1,000 |
Source: Florida Department of Economic Opportunity Office of Workforce Services
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