Norfolk Southern: East Palestine derailment costs over $1 billion, layoffs coming

Norfolk Southern: East Palestine costs over $1 billion, announces layoffs

Norfolk Southern's costs related to East Palestine have hit $1.1 billion
Roughly 75% of that total has been for environmental-related costs
The railroad said it's reducing management headcount by roughly 7%

Updated: Jan 26, 2024 / 11:03 AM CST

FILE – This photo taken with a drone shows portions of a Norfolk Southern freight train that derailed the night before in East Palestine, Ohio, still on fire at mid-day on Feb. 4, 2023. The railroad industry is trying to make sure that emergency responders can quickly look up what is on a train when they respond to a derailment. In the chaos after a Norfolk Southern train derailed and caught fire in eastern Ohio in February, firefighters couldn’t find that information for roughly 45 minutes. (AP Photo/Gene J. Puskar, File)

(NewsNation) — Norfolk Southern’s costs related to the East Palestine train derailment have grown to more than $1 billion, and the railroad plans to cut 7% of its managers this year, company officials said on a quarterly earnings call Friday.

Norfolk Southern’s total estimated cost tied to the February 2023 derailment is now $1.1 billion, up $150 million from the previous quarter.

That total includes $836 million for environmental-related costs, as well as $381 million for legal costs and community assistance. The company said it has recovered $101 million from insurance so far, lowering the total financial impact.

“I’m proud that our team responded decisively and responsibly to protect this great franchise and our shareholders and to address the community’s concerns,” Norfolk Southern CEO Alan Shaw said of the derailment.

Shaw also said the company plans to reduce “management headcount” by roughly 7% to “offset (cost) increases in critical operating areas.” That works out to around 330 non-union workers, according to Market W atch.

The company has paid out $652 million related to the East Palestine incident over the past year, but costs are expected to grow over time because the cleanup is still ongoing and the railroad faces several lawsuits. It’s unclear how much insurance will cover.

The latest numbers come nearly one year after a Norfolk Southern train carrying hazardous chemicals derailed in East Palestine, Ohio, forcing nearby residents to evacuate their homes. Days after the accident, authorities burned and released toxic vinyl chloride from five tanker cars to prevent an explosion.

Since then, community members have reported serious health issues and continue to urge President Joe Biden to issue a disaster declaration.

Norfolk Southern has committed more than $103 million in aid to the area so far, according to the railroad’s website.

Shaw said the company has kept its promises in Ohio and made safety improvements, noting on Friday’s call that the railroad saw a 42% reduction in the mainline accident rate compared to the year before.

The railroad’s fourth-quarter profit fell 33% from the year prior, dropping from $790 million in Q4 2022 to $527 million during the latest quarter.