"The previously planned expenditure of $950 million will be reduced by $200 million over the next three years.''
"While I & E has made solid progress over the last couple of years in upgrading the national and metropolitan rail networks we are now operating in tough trading conditions compounded by the Christchurch Earthquakes,'' he said.
He said to make savings the company had embarked on a consultation process with staff to cut costs.
This included plans to cut up to 220 of its 1000 staff.
"Reducing our network spend over the next three years helps to bring our investment curve back behind our earning growth. Making these changes to our original plan will help ensure KiwiRail remains on target to achieve financial sustainability by 2020,'' he said.
The Rail and Maritime Transport Union's general secretary Wayne Butson said consultation meetings began in the Far North two weeks ago.
Meetings with KiwiRail employees were being held this week in Marlborough, the West Coast, Dunedin and Invercargill.
"It's a shock to people. These people know the state of the tracks. Their job is to repair, maintain and upgrade the track and infrastructure. They know the condition of the asset after 1993 through to 2008, during the privatisation years. A lot of money has gone into the track, but the track is nowhere near being restored back to its pre-privatisation state."
He said the union expected worker numbers would decline at some stage - but not this soon.
The office of State Owned Enterprises Minister Tony Ryall has issued a statement saying he knew KiwiRail were consulting staff over possible staff reductions, as one of a number of measures.
He said it was a decision for KiwiRail and would not comment further.
Labour Party transport spokesperson Phil Twyford said KiwiRail was an important asset that needed to be properly funded.
"KiwiRail is being forced to make these lay-offs by unrealistic financial targets in its turn-around plan and the turn-around plan was designed before the Christchurch earthquakes and before the international financial crisis began to bite and as a result of that KiwiRail has been unable to meet revenue targets," said Mr Twyford.
"KiwiRail invests $4.5 billion in capital expenditures, but the Government only pays $750 million of this so KiwiRail has to find the rest from its own balance sheet - it's extremely ambitious."
New Zealand First transport spokesperson Brendan Horan said the cuts would create risks for staff and passengers who use the rail system, and it was another example of the Government's shocking record on risk management.
"It signals the start of a bigger plan to undermine the role of the rail network and prepare it to be sold off to a private investor," he said.
The Green Party said KiwiRail's decision to fire up to 220 workers was the consequence of National's ideologically-driven transport strategy.
Greens co-leader Russel Norman said job losses were the result of the National Party under-investing in rail and directing money to motorways.
"National has never displayed any commitment to KiwiRail. It has under-invested in rail upgrades and let valuable rolling stock contracts go offshore," said Dr Norman.
The KiwiRail consultation document says "the earnings we retain are not far enough ahead of our expenditure once government funding ends'' and as a result, "we need to reduce the people budget by $14 million or 20 per cent''.
"The KiwiRail document clearly blames lack of sufficient investment from the Government for the cost-cutting that could see over 200 skilled jobs lost.''
"Instead of investing in rail, National is pouring $12 billion into low and negative value motorways that won't help the economy and will leave New Zealanders lacking modern, clean transport alternatives.''
