Houston-based Union Tank Car Co. plans to lay off 224 workers at its Alexandria plant beginning in late June because of a drop in demand for railcars.
The Alexandria facility will remain open and employ about 359 people, the company said Tuesday in a notification to the Louisiana Workforce Commission.
The $100 million plant opened in June 2006. At the time, company officials expected employment to reach 850 people within two years. During Gov. Kathleen Blanco’s administration, the state and local governments offered Union Tank Car $65 million in tax incentives and infrastructure improvements based on its job performance. However, by 2008, with the nation mired in the Great Recession and the plant’s employment at 600 people, Union Tank Car successfully renegotiated its agreement with state and local governments. Instead of jobs, the state incentives were tied to payroll levels.
Still, the company failed to reach the payroll requirements and had to return $1.8 million to the state, according to the Louisiana Economic Development department.
But the company recovered along with the economy. The latest figures the company reported to LED showed Union Tank Car had 683 workers as of June 30.
Last month, the company announced it was cutting railcar production by 50 percent and that layoffs were coming.
The 224 layoffs, which are permanent, will begin on or within 14 days of June 24. The workforce commission’s Rapid Response team will conduct orientation sessions for affected employees next week.
Rail tank car makers like Union have been hit hard by oil’s collapse. Tank cars had played a major role in the shale oil boom because major production areas like the Bakken Shale in North Dakota weren’t connected to pipelines. This opened the door to crude-by-rail shipments.
Those shipments peaked in late 2014 at more than 900,000 barrels a day, close to 30 times what they were five years earlier, according to a report from RBN Energy LLC.
When oil prices cratered, so did demand for the railcars.
The Gulf Coast region, for example, can handle a dozen times the 142,000 barrels shipped each day in January, according to RBN Energy. Monthly lease rates had fallen from a high of $2,750 to $325.