Norfolk Southern CEO vows aid for ‘as long as it takes’ after toxic Ohio derailment
Norfolk Southern Corporation President and CEO, Alan Shaw, testifies before a US Senate Committee on Environment and Public Works hearing on the environmental and public health threats from the Norfolk Southern February 3 train derailment, on March 9, 2023, in Washington, DC.
Brendan Smialowski | AFP | Getty Images
Norfolk Southern CEO Alan Shaw told a U.S. Senate panel Thursday that he plans to “make it right” after one of the company’s trains derailed in East Palestine, Ohio, last month.
Shaw appeared at a hearing of the U.S. Senate Committee on Environment and Public Works to address what committee Democrats called “environmental and public health threats” resulting from the derailment.
Shaw told the Senate panel he is “deeply sorry for the impact this derailment has had on the people of East Palestine and surrounding communities.”
He vowed the company will clean the site fully and that it’s making progress. “We will be in the community for as long as it takes,” he said, adding there are “no strings attached” to the company’s assistance.
As Shaw testified, news surfaced of another Norfolk Southern derailment, this time in Alabama. Around 30 train cars came off the tracks Thursday, though there were no reported injuries and no risk of hazardous material associated with the derailment.
“You’re coming here with three derailments within three months, and the average in the industry is one per month for the entire industry,” Sen. Jeff Merkley, D-Ore., told Shaw during the hearing “So congratulations on maybe some good luck over a few years, but at this moment, your team is the team that has the most derailments in the last three months.”
Shaw, for his part, said Norfolk Southern is committed to providing financial assistance to affected residents and first responders in the region. The company has pledged more than $21 million in reimbursements and investments.
The CEO appeared alongside Environmental Protection Agency regional administrator Debra Shore, Ohio EPA director Anne Vogel, Ohio River Valley Water Sanitation Commission executive director Richard Harrison, and Beaver County, Pennsylvania, Department of Emergency Services director Eric Brewer.
At about 9 p.m. local time on Feb. 3, an eastbound Norfolk Southern freight train with 11 tank cars carrying hazardous materials derailed near Ohio’s border with Pennsylvania and subsequently ignited. The chemicals included vinyl chloride, a highly flammable carcinogen, according to the National Transportation Safety Board.
The EPA screened about 600 homes in East Palestine and didn’t detect vinyl chloride or hydrogen chlorine, Shore said. She said the EPA is currently conducting 24/7 air monitoring at 21 stations throughout the community. Vogel added that the Ohio EPA has installed monitoring wells at the site of the derailment to test for potential groundwater contamination, as well as sentinel wells for long-term sampling of groundwater.
Shore said she expects waste from the site to move as soon as Thursday. The EPA waited a month before starting to order dioxin testing.
“We detected very low levels, which very quickly went even down to non-detect. Without those primary indicators, it was a very low probability that dioxins would have been created,” Shore said. “They are secondary byproducts of the burning of vinyl chloride, but we were listening to the community and they expressed significant concerns about toxins.”
There was not a script for this. There wasn’t a binder for me labeled ‘Train Wreck.’
Beaver County official
Texas and Michigan officials said they did not know soil and water from the site of the wreck would be transported to their jurisdictions.
“Michigan officials, the governor, myself, Sen. Peters, Michigan EPA, were not notified before that happened,” said Sen. Debbie Stabenow, D-Mich. “That’s not acceptable to us.”
The committee’s ranking member, Republican Sen. Shelley Moore Capito from West Virginia, said the issue came down to trust and accountability.
“If something like this happens again, God forbid they should also be able to trust the federal government will be quick, deliberate, transparent and clear in their response, and the guilty party parties will be held responsible,” Capito said.
The committee’s chairman, Sen. Tom Carper, D-Del., said there was miscommunication surrounding first responders who were under the impression that only one car would be vented and burned rather than five, which left some first responders scrambling. Brewer, the Beaver County official, said the decision was “jaw-dropping.”
“There was not a script for this. There wasn’t a binder for me labeled ‘Train Wreck,'” Brewer said.
The committee also heard from Ohio Sens. Sherrod Brown, a Democrat, and J.D. Vance, a Republican, as well as Sen. Bob Casey, D-Penn., who together introduced the Railway Safety Act of 2023. The bill aims to enhance safety procedures for trains transporting hazardous materials, establish requirements for wayside defect detectors, increase fines for wrongdoing and create a minimum requirement for two-person crews.
Shaw endorsed parts of the bill by committing to “the legislative intent to make rail safer.” Shaw said during the hearing that Norfolk Southern installed its first new wayside detector on Wednesday, though he said there is no indication these detectors were faulty before the East Palestine derailment. Shaw did not address a provision of the bill requiring a minimum of two-person crews on every locomotive.
Shaw refused to say whether Norfolk Southern would commit to ensuring families full compensation for diminished property values when questioned by Sen. Ed Markey, D-Mass.
No fatalities were reported after the East Palestine derailment, though residents and officials have raised concerns. Rail union representatives told Biden administration officials at a meeting last week that rail workers have fallen ill in East Palestine during the site cleanup.
Pressed by Sen. Bernie Sanders, a democratic socialist from Vermont, Shaw said “everything is on the table” regarding covering health care needs for East Palestine residents. He also did not directly say whether the company would provide sick days for all employees.
Ohio senators speak up
Vance expressed frustration at fellow Republicans who have opposed legislation to hold the company accountable, including those who “think that any public safety enhancements for the rail industry is somehow a violation of the free market.”
The NTSB released a preliminary report on Feb. 23 that pointed to an overheated wheel bearing as a factor in the derailment and fire. At the time, the train was instructed to stop, the bearing’s temperature measured 253 degrees hotter than ambient temperatures, above a threshold of 200 degrees hotter at which point temperatures are considered critical, according Norfolk Southern criteria.
On Saturday, another Norfolk Southern train derailed in Ohio, after which residents near Springfield were ordered to shelter in place. The train was not carrying hazardous materials, and no injuries were reported, though there were power outages in the area.
Hours after that derailment, internal emails obtained by CNBC indicated that Norfolk Southern was making broad safety adjustments to prevent future incidents. A company spokesman told CNBC the train carrier is now mandating trains over 10,000 feet long use distributed power, such that trains are powered from several locations across their length.
The Norfolk Southern incidents have spurred wide-sweeping reviews by government agencies. On Tuesday, the NTSB said it had opened a special investigation into the company’s organization and safety culture following the derailments. Separately, the Federal Railroad Administration announced it would conduct a 60-day supplement safety assessment of the company.
“We see what the company did with their massive profits. Norfolk Southern spent $3.4 billion on stock buybacks last year and are planning to do even more this year,” Brown said Thursday. “That’s money that could have gone to hiring inspectors to put in more hot box detectors along its rail lines and having more workers available to repair cars and repair tracks.”
The company has cut around 40% of its workforce since 2015, but Shaw said the company is now “aggressively hiring employees.”
On Wednesday, Norfolk Southern announced it will create a new regional training center in Ohio for first responders, as well as expand its Operation Awareness and Response program, which educates first responders on safely responding to rail incidents. Training classes will begin on March 22 at Norfolk Southern’s Bellevue, Ohio, yard.
Lucid to cut 1,300 workers amid signs of flagging demand for its EVs
Lucid Motors CEO Peter Rawlinson poses at the Nasdaq MarketSite as Lucid Motors (Nasdaq: LCID) begins trading on the Nasdaq stock exchange after completing its business combination with Churchill Capital Corp IV in New York City, New York, July 26, 2021.
Andrew Kelly | Reuters
Struggling EV maker Lucid said in a regulatory filing on Tuesday that it plans to cut about 18% of its workforce, or roughly 1,300 employees, as part of a larger restructuring to reduce costs as it works to ramp up production of its Air luxury sedan.
Lucid said it will incur one-time charges totaling between $24 million and $30 million related to the job cuts, with most of that amount being recognized in the first quarter of 2023.
News of the job cuts was first reported by Insider earlier on Tuesday. Lucid’s shares closed down over 7% on Tuesday following the Insider report.
In a letter to employees, CEO Peter Rawlinson said the job cuts will hit “nearly every organization and level, including executives,” and that affected employees will be notified over the next three days. Severance packages will include continued healthcare coverage paid by Lucid, as well as an acceleration of equity vesting, Rawlinson wrote.
Lucid ended 2022 with about $4.4 billion in cash on hand, enough to last until the first quarter of 2024, CFO Sherry House told CNBC last month ahead of the company’s fourth-quarter earnings report. But there have been signs that demand for the high-priced Air has fallen short of Lucid’s internal expectations, and the company may be struggling to convert early reservations to sold orders.
Lucid said that it had more than 28,000 reservations for the Air as of Feb. 21, its most recent update. But it also said that it plans to build just 10,000 to 14,000 vehicles in 2023, far fewer than the roughly 27,000 that Wall Street analysts had expected.
With Lucid’s factory currently set up to build about 34,000 vehicles per year, the company has warned of continuing losses.
“As we produce vehicles at low volumes on production lines designed for higher volumes, we have and we will continue to experience negative gross profit related to labor and overhead costs,” House said during Lucid’s earnings call on Feb. 22.
Lucid hasn’t yet announced a date for its first-quarter earnings report.
Virgin Orbit extends unpaid pause as Brown deal collapses, ‘dynamic’ talks continue
NEWQUAY, ENGLAND – JANUARY 09: A general view of Cosmic Girl, a Boeing 747-400 aircraft carrying the LauncherOne rocket under its left wing, as final preparations are made at Cornwall Airport Newquay on January 9, 2023 in Newquay, United Kingdom. Virgin Orbit launches its LauncherOne rocket from the spaceport in Cornwall, marking the first ever orbital launch from the UK. The mission has been named Start Me Up after the Rolling Stones hit. (Photo by Matthew Horwood/Getty Images)
Matthew Horwood | Getty Images News | Getty Images
Virgin Orbit is again extending its unpaid pause in operations to continue pursuing a lifeline investment, CEO Dan Hart told employees in a company-wide email.
Some of the company’s late-stage deal talks, including with private investor Matthew Brown, collapsed over the weekend, people familiar with the matter told CNBC.
Hart previously planned to update employees on the company’s operational status at an all-hands meeting at 4:30 p.m. ET on Monday afternoon, according to an email sent to employees Sunday night. At the last minute, that meeting was rescheduled “for no later than Thursday,” Hart said in the employee memo Monday.
“Our investment discussions have been very dynamic over the past few days, they are ongoing, and not yet at a stage where we can provide a fulsome update,” Hart wrote in the email to employees, which was viewed by CNBC.
Brown told CNBC’s “Worldwide Exchange” last week he was in final discussions to invest in the company. A person familiar with the terms told CNBC the investment would have amounted to $200 million and granted Brown a controlling stake. But discussions between Virgin Orbit and the Texas-based investor stalled and broke down late last week, a person familiar told CNBC. As of Saturday those discussions had ended, the person said.
Separately, another person said talks with a different potential buyer broke down on Sunday night.
The people asked to remain anonymous to discuss private negotiations. A representative for Virgin Orbit declined to comment.
Hart promised Virgin Orbit’s over 750 employees “daily” updates this week. Most of the staff remain on an unpaid furlough that Hart announced on Mar. 15. Last week, a “small” team of Virgin Orbit employees returned to work in what Hart described as the “first step” in an “incremental resumption of operations,” with the intention of preparing a rocket for the company’s next launch.
Virgin Orbit’s stock closed at 54 cents a share on Monday, having fallen below $1 a share after the company’s pause in operations.
Virgin Orbit developed a system that uses a modified 747 jet to send satellites into space by dropping a rocket from under the aircraft’s wing mid-flight. But the company’s last mission suffered a mid-flight failure, with an issue during the launch causing the rocket to not reach orbit and crash into the ocean.
The company has been looking for new funds for several months, with majority owner Sir Richard Branson unwilling to fund the company further.
Virgin Orbit was spun out of Branson’s Virgin Galactic in 2017 and counts the billionaire as its largest stakeholder, with 75% ownership. Mubadala, the Emirati sovereign wealth fund, holds the second-largest stake in Virgin Orbit, at 18%.
The company hired bankruptcy firms to draw up contingency plans in the event it is unable to find a buyer or investor. Branson has first priority over Virgin Orbit’s assets, as the company raised $60 million in debt from the investment arm of Virgin Group.
On the same day that Hart told employees that Virgin Orbit was pausing operations, its board of directors approved a “golden parachute” severance plan for top executives, in case they are terminated “following a change in control” of the company.
Historic UAW election picks reform leader who vows more aggressive approach to auto negotiations
Supporters wave signs during an address at the Time Warner Cable Arena in Charlotte, North Carolina, on September 5, 2012 on the second day of the Democratic National Convention (DNC).
Mladin Antonov | AFP | Getty Images
DETROIT – United Auto Workers members have ousted their president in the union’s first direct election, ushering in a new era for the prominent organized labor group ahead of negotiations later this year with the Detroit automakers.
The union’s new leader will be Shawn Fain, a member of the “UAW Members United” reform group and local leader for a Stellantis parts plant in Indiana. He came out ahead in a runoff election by hundreds of votes over incumbent Ray Curry, who was appointed president by union leaders in 2021.
Fain, in a statement Saturday, thanked UAW members who voted in the election. He also hailed the election results as a historic change in direction for the embattled union, which he says will take a “more aggressive approach” with its employers.
“This election was not just a race between two candidates, it was a referendum on the direction of the UAW. For too long, the UAW has been controlled by leadership with a top-down, company union philosophy who have been unwilling to confront management, and as a result, we’ve seen nothing but concessions, corruption, and plant closures,” Fain said.
Curry, who previously protested the narrow election results, said in a statement that Fain will be sworn in on Sunday and that Curry is “committed to ensuring that this transition is smooth and without disruptions.”
“I want to express my deep gratitude to all UAW staff, clerical support, leaders and most of all, our union’s active and retired members for the many years of support and solidarity. It has been the honor of my life to serve our great union,” Curry said.
More than 141,500 ballots were cast in the runoff election that also included two other board positions, a 33% increase from last year’s direct election in which neither of the presidential candidates received 50% or more of the votes.
The election was overseen by a federal monitor, who did not immediately confirm the results. The election results had been delayed several weeks due to a run-off election as well as the close final count.
Shawn Fain, candidate for UAW president, is in a run-off election with incumbent Ray Curry for the union’s highest-ranking position.
Jim West for UAW Members United
Fain’s election adds to the UAW’s largest upheaval in leadership in decades, as a majority of the union’ s International Executive Board will be made up of first-time directors who are not part of the “Administration Caucus” that has controlled the union for more than 70 years.
Fain and other members of his leadership slate ran on the promise of “No corruption. No concessions. No tiers.” The last being a reference to a tiered pay system implemented by the automakers during recent negotiations that members have asked to be removed.
The shuffle follows a yearslong federal investigation that uncovered systemic corruption involving bribery, embezzlement, and other crimes among the top ranks of the UAW.
Thirteen UAW officials were convicted as part of the probe, including two past presidents. As part of a settlement with the union in late 2020, a federal monitor was appointed to oversee the union and the organization held a direct election where each member has a vote, doing away with a weighted delegate process.
For investors, UAW negotiations with the Detroit automakers are typically a short-term headwind every four years that result in higher costs. But this year’s negotiations are anticipated to be among the most contentious and important in recent memory.
Fain has said the union will seek benefit gains for members, advocating for the return of a cost-of-living adjustment, or COLA, as well as raises and job security.
The change in the UAW comes against the backdrop of a broader organized labor movement across the country, a pro-union president and an industry in the transition to all-electric vehicles.
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