Trinity: Layoffs partof cyclical industry

By Michael Roknick
Herald Business Editor

A little more than two years ago workers at Trinity Industries — Greenville Rail Car Division practically got into fist fights over parking spaces.

Facing a backlog of rail-car orders, the company embarked on a hiring frenzy. The number of employees surged to 2,000 — about double the plant’s typical 1,000 to 1,100 payroll.

These days there is no backlog and the plant’s parking lots are almost bare. Over the last year Dallas-based Trinity laid off more than 1,600 at its Greenville division; there are now 360 or so working at the plant. With no major orders in sight, that figure could dip further. By comparison, the layoffs at Trinity are the equivalent of all the jobs at Wheatland Tube Co., AK Steel Co., Sawhill Tubular Division, and Sharon Tube Co. combined.

But swift and enormous changes in work levels are common at the plant. In 1997 for example, the year before Trinity’s hiring binge, fewer than 500 workers were drawing a paycheck. That is the cyclical nature of rail-car production, where boom times can vanish faster than a runaway locomotive. The industry is clearly in a downturn and it’s possible that things could get worse before they get better.

Over the last two years the industry has been riding high with 75,000 rail cars delivered each year in North America. This year, industry analysts estimate, between 45,000 and 50,000 cars will be delivered — a hefty 45 percent cut.

As North America’s largest rail-car producer, Trinity is on track for similar numbers. In its last fiscal year, the company pumped out 28,000 cars and in the fiscal year ending March 31, 24,000 cars will have rolled out of its plants. In the upcoming year, Trinity estimates it will produce between 16,000 and 19,000 cars.

Rail-car orders have fallen off, said Michael Conley, director of investor relations for Trinity. “It gives rise to the cycles we see. You’re seeing virtually every manufacturer lower their production volume.’’

There have been huge swings in rail car demand in 20 years. In 1979 manufacturers pulled out the stops in delivering 95,000 cars, but in 1984 an anemic 6,000 were produced and delivered.

Factoring in that history, business isn’t as awful as it appears to be, Conley noted. “You can see even with the retraction in rail car demand it is historically at a strong level,’’ he said.

“We’ve been through down markets before,’’ Conley said. Trinity has shown the company is skillful in squeezing out more efficient operations. Over the last three quarters, revenues for Trinity’s rail-car group fell from $1.2 billion in the first nine months of fiscal 1999 to $1.16 billion in its most recent nine months. But the company’s operating profit increased from $122 million to $126.3 million over the same period. There are signs that an upturn is approaching, Conley said. The average age of a railroad boxcar on the tracks is 30 years — which is near the end of its lifespan. Boxcars are the lifeblood of the Greenville plant.

Also, Trinity is gearing up to produce an 86-foot-long boxcar, which is more than a third longer than the 50-foot boxcar which is the mainstay of the railroad industry. In the past, federal restrictions limited boxcar length.

Trinity is now retooling its Greenville south plant to produce the longer cars. A longer boxcar will allow railroads to carry heavier loads and could boost rail-car orders, Conley said. And despite plant workers’ suspicions, Trinity has continually insisted it has no plans to mothball the Greenville plant and transfer production to Mexico.

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Trinity: Layoffs part of cyclical industry

Trinity: Layoffs partof cyclical industry