Railroad Freight Companies Cutting Service Ahead Of Potential Nationwide Strike
A CSX Transportation Inc. freight train travels in Louisville, Kentucky, U.S., on Wednesday, Jan. 8, 2020. CSX Corp. is scheduled to release earnings figures on January 16.
Luke Sharrett/Bloomberg via Getty Images

Four of the nation’s largest railroad companies have begun scaling back service ahead of a potential nationwide strike that could result in massive supply chain delays.

BNSF, CSX, Norfolk Southern, and Union Pacific announced embargoes on selected shipments this week. Negotiations with two of the nation’s largest rail unions, the International Association of Sheet Metal, Air, Rail, and Transportation Workers, Transportation Division (SMART-TD) and the Brotherhood of Locomotive Engineers and Trainmen (BLET), have until Friday to avoid a shutdown.

“Although the rail industry has reached tentative agreements with 10 of the 12 unions involved in current negotiations, two holdouts have been unwilling to come to an agreement based on the recommendations of President Joe Biden’s Presidential Emergency Board,” Norfolk Southern said in a statement on Friday.

“As a result, Norfolk Southern must now begin to prepare for the possibility of a strike at the conclusion of the current cooling-off period on September 16. Most importantly, we must ensure that hazardous and other security-sensitive freight is properly secured so it is not left stranded in the event of a sudden strike,” it added.

The company plans to resume full operations if a strike is avoided, according to the company’s statement.

The Association of American Railroads (AAR) released a report this month that expressed concern regarding the economic impact a freight railroad shutdown poses to the nation.

“Daily lost economic output due to a nationwide rail shutdown could be more than $2 billion,” the AAR reported.

“The lost output would harm manufacturers, distributors, retailers and consumers; it would mean increased fuel consumption and greenhouse gas emissions; and it would have a strong negative impact on our nation’s taxpayer-funded highway system,” the report added.

The White House held a meeting on Tuesday to review contingency plans regarding water and energy supplies if the railroad strike moves ahead. President Joe Biden was also briefed on the issue Tuesday morning, according to a Washington Post report.

In July, the Biden administration appointed an emergency board to address the dispute between the labor unions and railroad companies. Although nine unions involved have reached agreements, two of the largest and a smaller union remain without a deal.

Part of the conflict revolves around a points-based attendance system initiated by two of the largest railroad companies, BNSF and Union Pacific. More than 700 BNSF workers have reportedly quit since the launch of the policy in February, according to the Post.

Last month, the Biden administration also sought to intervene regarding pay raises. The Presidential Emergency Board proposed a 24% pay raise, gradually increasing until 2024. The AAR stated that the recommended changes would result in more than $11,000 per employee on average if ratified.

“President Biden’s PEB issued recommendations that should set the framework for a negotiated agreement between railroads and unions,” AAR President and CEO Ian Jefferies said in the statement. “The recommendations would provide 24% compounded wage increases by 2024, with 14.1% of those increases effective immediately, along with additional service recognition bonuses totaling $5,000 over the course of the contract. An agreement based on these terms would lead to the largest general wage increase in nearly 40 years.”

“While the Biden PEB’s recommendations markedly exceed the rail carriers’ proposal, they provide a useful basis to reach a resolution. In the interests of all rail stakeholders, now is the time for railroads and their unions to reach a contract.”

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