They’re ‘Mad as Hell’ But Are Going to Have to Take it a Little Bit Longer

As I read the various accounts of the two days of hearings conducted by the U.S. Surface Transportation Board last week about the shoddy service that Class 1 railroads have been giving their customers, I thought about Howard Beale, the fictional television evening news anchor in the 1976 black comedy drama Network.

One of the most iconic moments in Network occurs when Beale tells his viewers, “I’m as mad as hell and I’m not going to take it anymore.”

That prompts thousands of them to go to a window of their home and shout the phrase to no one in particular. It might have made them feel better in the moment, but did little, if anything, to address the underlying causes of their frustration and anger.

A lot of shippers and railroad workers channeled their inner Howard Beale during the STB hearings.

Although none of them used the “mad as hell” phrasing while addressing the STB, many were just that although more in control of their emotions than was Beale.

Another Beale rant perhaps best summarized the likely outcome of the hearings.

Beale, whose rants had led to his being given his own TV show in front of a live audience, tells viewers that television is an illusion that promotes fantasies that can never be realized.

Many, if not most, of those who testified before the STB have their own fantasies that are unlikely to be realized. That is not to say that bits of pieces of them won’t come to fruition.

The STB hearings served two primary purposes. They were a forum for shippers and others to vent about how Class 1 railroads are behaving these days.

Shippers told tales of woe about how poor and unreliable service has adversely affected their own businesses. Some warned of severe effects to the U.S. economy if things don’t improve.

The STB hearings provided validation for those concerns even as there was widespread agreement that there are no easy and quick fixes to railroad service problems.

The second purpose of the hearings was an opportunity for those who testified to push their pet agendas.

Shippers want more regulation of the railroad industry, particularly in the realm of rate regulation.

Unions want to preserve jobs, which have vanished at a precipitous rate as Class 1 railroads have furloughed thousands in the name of operating more efficiently. Railroad workers also want relief from increasingly restrictive attendance policies such as the controversial Hi Viz scheme implemented by BNSF earlier this year.

The railroads want to preserve the status quo, which has enabled them to make handsome profits, but they also want one-person crews.

CSX CEO James Foote implored regulators to allow railroads to operate with one person crews.

The Class 1 railroads want to remove most conductors from aboard trains in favor of roving ground-based conductors who would be responsible for multiple trains within a defined territory.

“Let us run trains with one employee and this problem is solved,” Foote said in reference to operating crew shortages.

Staffing aboard trains is one of many points of conflict between unions and management in the current round of contract talks that have drug on since early 2020.

Aside from a handful of tense exchanges with STB members, the railroad executives who testified during the two days of hearings were the antithesis of Howard Beale.

They spoke in a measured and calm manner, acknowledging their service is lacking in quality, but did so only because they could not easily deny that.

The railroad executives took responsibility for the service woes but refused to blame them on their own behavior.

Repeatedly, the Class 1 executives said the service problems are occurring because of crew shortages that they insisted they are doing everything they can to address.

That is a standard strategy that companies under attack for poor performance rely upon. Concede nothing and blame external forces that you seek to frame as being largely beyond your control.

Examples of the latter include fallout from the COVID-19 pandemic and a tight labor market.

It is not as though these things haven’t played a role. It is just that they are not the only forces at work causing service issues.

None of the railroad executives acknowledged having given in to the pressure of Wall Street investors who have pushed railroads to cut costs in order to drive up profits.

The executives argued that the precision scheduled railroading model makes them more efficient and showed no inclination to jettison the practice of operating fewer and longer trains.

Another tactic the Class 1 railroads used during the hearings was to deny the severity of the problems identified by their adversaries. In some instances, the executives suggested some of what witnesses were saying was simply not true.

A lot of what witnesses said during the STB hearings should not be taken at face value. It is not as though the speakers were telling falsehoods, but they were not always giving a complete picture either.

It is true that some witnesses were more credible than others in giving a reasonably complete overview of the root causes of the service problems.

To get that complete picture you have to consider the totality of the testimony while taking into account that all speakers were promoting their self interests which at times are in conflict with the self interests of Class 1 railroad management.

Promulgating self interests often leads speakers to exaggerate threats to their well being and to understate the consequence of their own behavior.

Nothing that Class 1 railroads have done in adopting PSR makes them unique among North American corporations.

Chances are that all or nearly every shipper who complained about poor rail service also has engaged in the type of cost cutting and business decision making that Class 1 railroads have practiced.

Many, if not most, railroad shippers are publicly-held companies that also are subject to pressures from Wall Street investors.

One underlying problem is with shippers who can’t easily switch to other forms of transportation because they are moving bulk commodities that are most efficiently and/or less costly to move by rail than truck, water or air. Gettig good rail transportation can be a dilemma for shippers even in the best of circumstances.

Railroads know that even if you’ll never hear a Class 1 executive say it.

In an analysis published in advance of the STB hearings, Trains magazine columnist Bill Stephens argued that the service problems of recent months by Class 1 railroads are nothing new. He cited a litany of past service meltdowns caused by weather and other calamities that unfolded long before PSR became a thing.

A similar point was made by a Wall Street analyst who researches railroad performance. He told regulators that every so often good service deteriorates into poor service, particularly when the operating climate becomes less than ideal.

Could railroads be better prepared for service downturns? Yes. Will they be? Probably not if the cost of doing so is more than they want to spend on operations.

There is little the STB can do in the short term in response to what it heard during the two-day hearings other than offer sympathy and empathy to shippers and workers while taking railroad executives to task for some of the meaningless and vague promises they’ve made in the past year about improving their service.

There is a long list of actions the STB lacks the authority to take and/or is reluctant to take for legal, practical and philosophical reasons.

The STB is not going to order railroads to stop practicing PSR. It is not going to order railroads to stop furloughing workers, and it won’t be telling them how many workers to keep on their payrolls.

What the STB can and might do is issue emergency orders to railroads to move certain types of freight by whatever means possible.

Regulators can and might promulgate or change existing rules on such things as reciprocal switching. This is where the underlying pet agendas of the various parties come into play.

The witnesses were laying groundwork for what they hope are future regulatory changes. As the old adage says, don’t let a crisis go to waste.

STB member also can keep the spotlight shining directly on railroad executives and their actions.

Class 1 railroad executives are aware of these potential moves and oppose all of them. Railroad executives may not like all facets of the status quo, but for the most part it serves them well.

Presumably the service woes will eventually ease although some underlying problems are likely to linger. The carriers might make some changes in an effort to show they are doing something other than trying to hire and train additional workers.

In the short run, shippers and unionized railroad workers may be mad as hell, but they have little recourse but to continue taking it while seeking to achieve fantasies that are unlikely to come to pass, at least in the manner that they envision them. Howard Beale, it seems, was on to something.

Commentary by Craig Sanders

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