HERMON – Faced with unanticipated expenses and a significant loss of revenue, the Montreal, Maine & Atlantic Railway will reduce expenditures by about 5 percent for the rest of the year and has asked employees to take voluntary layoffs or transfers.

The general work force was notified of the need to reduce services on Thursday, according to Robert C. Grindrod, MM&A’s president and CEO, although memos regarding the decision circulated earlier this week.

“The reason for the reduction in train service is a considerable drop in the use of our rail service,” Grindrod said Thursday.

He cited the closure of the Georgia-Pacific mill in Old Town in March and the collision in Hampden in which a tractor-trailer collided with one of the MM&A locomotives along with other unfortunate events in Maine and Canada that have increased expenses and resulted in lost revenue.

Because there are about 20 open positions within the company, it may be possible to relocate all the affected employees in other positions, according to Grindrod.

“Some employees may be laid off if they refuse other work in the company,” he said.

But, he added that it might not be necessary to lay off anyone.

Grindrod acknowledged that the jobs being offered do not pay as much as those that will be vacated, but indicated that the job shifts are intended to be temporary and the changes are necessary to maintain the financial health of the company.

MM&A currently employs about 350 people and maintains a total of 32 locomotives, with 25 locomotives operating daily. As a result of the reduction in service, Grindrod said, some of those trains will operate less frequently with some locomotives that usually operate six days a week being cut to five, and some that operate five days a week cut to three. Some may not be affected at all, he said.

“This is our best effort to match the amount of service with the amount of traffic that’s being offered to us by our customers,” he said.

Those who choose voluntary layoffs will not receive compensation, but will retain insurance coverage for up to six months and will be paid for unused vacation and comp time, according to a memo from Gaynor Ryan, vice president for human resources. They also will be subject to recall for up to two years.

Those who move to other positions within the company also will be able to transfer back into their old jobs based on seniority.

The rail line has been hit with a string of bad luck since February that has substantially increased expenses and decreased revenue. Several derailments and detours in Canada as well as the Hampden accident and Georgia-Pacific shutdown were noted. Although the mill is served by the Guilford Rail System, the shut down has affected MM&A business, according to Grindrod.

“Of importance to MMA in this event is the loss of the hardwood chips which are loaded at Portage and transloaded at South LaGrange on our line,” Grindrod wrote in a company memo. “This produces about 4 percent of MMA revenue each month.”

MM&A also lost business after an explosion and fire at a Canadian particleboard plant, reducing revenue by another 6 percent.

Unanticipated expenses will total $2,640,000. The Hampden accident will account for about $250,000 and MM&A expects to recover that from the trucker’s insurance company.

The largest single expense comes from unanticipated repairs to remove “slow orders” on about 65 miles of the company’s rail line in Canada, according to Grindrod’s memo. In April, the Canadian government imposed a reduction in the line’s operating speed from 25 mph to 10 mph on that stretch of line, citing unspecified deficiencies in the line. Improvements will cost an estimated $2 million.

Although most of the issues are one-time occurrences, the situation at the Old Town Georgia-Pacific mill appears to be key to boosting service again.

“If and when Old Town is sold, that should cause us to increase our level of service again,” he said.

The target date for transfers and layoffs is May 22.