Posts Tagged ‘class 1 railroads’

Rail PEB Seems to Split Differences in Report

August 17, 2022

The presidential emergency board appointed to recommend a settlement of the contract talks between Class 1 railroads and their unions has decided to split the differences.

Various news reports, including those by Trains magazine and the Reuters news agency, said the PEB is recommending that the railroads drop their demand that conductors be removed from locomotive cabs but also recommended pay increases that are well below what the unions were seeking.

If both sides agree to adopt the PEB recommendations, workers would receive a 22 percent pay hike over the life of the contract as well as $1,000 in service recognition bonus payments per year over the five years of the contract. The two sides could also agree to use the PEB findings as a basis for a new contract agreement.

The unions, which represent 115,000 railroad workers, had reportedly sought a 28 percent pay increase while the carriers offered 16 percent.

The PEB’s recommended pay increase works out to between 4 percent and 7 percent a year through 2024. Workers would receive back pay increases of 3 percent for 2020 and 3.5 percent for 2021.

Workers should receive an additional paid day off each year, the PEB recommended.

As for health care benefits, the PEB recommended what it termed modest changes that would include no reductions in benefits or a shift in cost-sharing, aside from a previously agreed upon 15 percent employee contribution per month.

The recommendations called for railroads and their unions to continue negotiating over the scheduling of work shifts for train and engine workers and if no agreement can be reached submitting the issue to binding arbitration.

Along those lines, the PEB recommended that the matter of making conductors ground-based positions be negotiated at the local rather than national level.

By federal law, work stoppages are prohibited for the next 30 days. If one or both of the parties in the contract impasse rejects the PEB findings, they will be free to either strike, in the case of the unions, or lock out workers in the case of railroad management.

If one or both of those occur, Congress could step in and impose a settlement.

Contract talks began in early 2020. By law, railroad contracts never expire but can be amended from time to time.

Historically, contract talks often take years to resolve. The last national railroad strike occurred in 1992.

The three-member PEB was appointed by President Joseph Biden in July and given a month to investigate the contract situation and issue recommendations for a settlement.

An article about the PEB recommendations can be found at the website of Trains magazine at https://www.trains.com/trn/news-reviews/news-wire/presidential-emergency-board-issues-rail-contract-recommendations-meant-to-avert-strike/

The article includes a link to download the PEB report.

Chemical Shippers See No Meaningful Improvements in Rail Freight Service

August 17, 2022

The American Chemistry Council last week said that efforts by Class 1 railroads to improve their freight service have yet to yield any “meaningful service improvements.”

The trade group said it reached that conclusion after surveying its members. It shared results of that survey with the U.S. Surface Transportation Board.

Nearly half of the respondents (46 percent) said that during July “rail delays/service challenges had gotten worse since the fourth quarter of 2021.”

Just 7 percent of respondents said service has improved. When the ACC asked the same question of its members in March, 39 percent said service has worsened.

In the most recent survey, 90 percent of respondents said they had experienced “longer transit times for rail service” while 66 percent reported having experienced missed switches, 64 percent said they had experienced reduced service days, 59 percent said they had incurred increased demurrage charges and 59 percent said they had seen increased rates.

Oberman Says RRs Need to Pay Crews More

August 7, 2022

U.S. Surface Transportation Board Chairman Martin J. Oberman appears to be putting his thumb on the scales in favor of labor unions in their negotiations for a new contract with the nation’s major railroads.

In an interview with Trains magazine, Oberman said rail freight service is suffering because BNSF, CSX, Norfolk Southern, and Union Pacific are not paying enough to retain and recruit train crews.

“There is a price that will get you enough workers,” Oberman told Trains during the interview, which was conducted before a congressional hearing. “I don’t know what that price is. But everything has a price.”

Oberman said during the interview that federal regulators have no plans to mandate crew levels even though he linked those to the quality of service that railroads provide.

However, he made it clear his belief that paying crews more money would alleviate the crew shortages that the carriers say are the root cause of their service issues.

“If you need another 400 crews to move those trains that are sitting out there, pay whatever price you need to get them,” Oberman told Trains. “Don’t come in and tell me it’s hard to hire. And it’s not like they can’t afford it. They’re paying out billions and billions every year in stock buybacks. You could use some of that to get the workforce you need.”

During hearings held by the STB last spring to investigate the ongoing rail freight service issues, Class 1 railroad executives argued the crew shortages are due to factors that are largely out of their control.

Specifically, the executives said, workers who were furloughed during a recession triggered by the COVID-19 pandemic didn’t return to work once recalled. The railroad executives also cited higher than normal attrition rates among its work force and a tight labor market.

Some executives even talked about it being tough to hire conductors due to the nature of the job involving working outdoors at all hours in all kinds of weather, and being away from home a lot.

Wages and benefits have been a major sticking point in labor negotiations over the past three years with unions reportedly seeking more money than the carriers are willing to pay.

By some reports, the unions are seeking a 31 percent wage increase while the railroads have offered 17 percent over a five-year period.

The dispute is now being reviewed by a presidential emergency board that will make non-binding recommendations for a settlement.

If either side rejects those recommendations, they would be free to engage in a strike or lockout a month after the PEB issues its findings.

Although railroads have raised the wages of their new conductors and offered signing bonuses to new hires and retention bonuses to existing train operating personnel, Oberman told Trains those financial incentives are falling short and that railroad employment has yet to reach pre-pandemic levels.

“The railroads are not offering sufficient rewards – a combination of quality of life and compensation – to keep people there,” he said. “There’s a price at which people will stay.”

The story can be read at https://www.trains.com/trn/news-reviews/news-wire/stb-chairman-says-higher-pay-would-help-solve-railroad-crew-shortages/

Intermodal Business There for the Taking if Railroads Can Resolve Staffing, Service Issues

July 15, 2022

Class 1 railroad executives and industry observers say there is plenty of intermodal business out there for the taking.

The Intermodal Association of North America projects that domestic container volume will increase this year by 6.4 percent when compared to 2021 traffic.

But an analysis published on the website of Progressive Railroading found that landing that business will require the carriers to hire and train new operating personnel, solve equipment availability issues, and offer better and more consistent service.

The trade magazine’s analysis found that railroads are making some progress in addressing these issues, have a ways to go and it remains to be seen if the carriers can capture the volume growth that IANA predicts is out there.

Shippers also face issues stemming from higher fuel prices and railroads taking steps to limit congestion on their busiest routes.

These development could play out in adverse ways for shippers as they are gearing up for their peak season later this year. They also could play out during a time when consumer demand for retail goods is strong.

Working in favor of railroads is the fact that for now they are enjoying an economic advantage over trucks due to the latter having to grapple with driver shortages, tight capacity and higher fuel prices.

In some instances, railroads have developed alliances with trucking companies, ocean ports and shippers to better understand supply chain changes.

As has been the case for several months, railroads must deal with equipment imbalances that stem from containers not being unloaded promptly and returned for terminals.

This is being caused by, among other things, understaffed warehouses and distribution centers.

In particular this has led to a chassis shortage that industry observers expect to last into 2023.

A chassis is used to transport containers among ports, rail yards, container depots and shipper facilities. 

The challenge for the Class 1 railroads is taking steps to overcome these issues so that they can tap into the business that is available if they can handle it.

“It’s an exciting time in intermodal,” said CSX Vice President of Intermodal and Automotive Maryclare Kenney. “There are opportunities out there. Demand is strong for the intermodal product.” 

Figures provided by IANA show Class 1 intermodal volume in the first quarter of this year fell 6.6 percent.

The trade association expects intermodal volume to be up 1 percent for all of 2022 buoyed by additional container capacity service routes and increasing staff in the intermodal sector.

Those interviewed by Progressive Railroading all agree that a key to railroads realizing intermodal traffic gains is hiring additional operating personnel.

CSX, for example, has 6,700 train and engine workers but needs 300 more. In a normal year its T&E worker attrition rate is 7 percent. But of late it has risen to 10 percent.

Another key is providing more consistent service, a factor over which railroads have more control.

NS recently began implementing a new operating plan that focused on improving its intermodal operations.

The carrier is revamping intermodal operations to make them more consistent by balancing the flow of shipments through terminals, intermediate yards and the overall network.

It is seeking to eliminate choke points, reduce how much freight is handled en route and changing train schedules to improve and speed up network velocity.

CSX officials say they have reduced dwell time in recent months so that on-time intermodal performance has reached the low 90 percent range as opposed to 87 percent in the first quarter of this year.

The carrier is seeking to get that on-time percentage into the high 90s range.

The article can be read at https://www.progressiverailroading.com/intermodal/article/Class-I-railroads-expect-intermodal-boost-after-several-disruptive-supply-chain-kinks-smooth-out–67015

Little Class 1 Traffic Growth in 2nd Quarter

July 12, 2022

The second quarter was a rough one for North America’s Class 1 railroads.

Trains magazine reported on its website that only Canadian National gained traffic during the quarter, seeing a gain of 0.4 percent compared with the same period of 2022.

U.S. carload volume is down 8.5 percent for the first half of 2022 compared with 2019, according to figures compiled by the Association of American Railroads.

During the first quarter CSX and Canadian Pacific were the only Class 1 carriers to see growth in intermodal traffic.

For more information, read the article at https://www.trains.com/trn/news-reviews/news-wire/cn-posts-slight-quarterly-traffic-gain-while-other-big-systems-see-volume-declines/

The Fault Lies Largely With Wall Street

June 22, 2022

Blame Wall Street. That is the major takeaway from an analysis published on the website of Trains magazine that explains why U.S. Class 1 railroads are having crew shortages, service problems, and paltry traffic growth.

The points made in the analysis are not new. Much has been written in various publications, including Trains, about how Class 1 railroads have reacted to relentless pressure from Wall Street investors demanding that railroads continue to lower their operating ratio, which is the percentage of revenue devoted to expenses.

But the Trains analysis explains it in easy-to-understand language.

The crux of the matter is that railroads are caught betwixt and between.

To achieve traffic growth, particularly by diverting traffic away from trucks, would require spending more money which in turn would drive up the operating ratio. But Wall Street investors are loath to accept that.

It has become a vicious cycle that has played out many times during the past decade and it shows no signs of relenting.

To be sure, there have been mitigating factors that have exacerbated the situation, including the COVID-19 pandemic triggering supply chain issues and heavy-handed attendance policies that have driven many operating employees into retirement or seeking employment elsewhere.

But in the end it comes down to the unbreakable thirst of Wall Street investors for cost cutting in order to drive up profits.

Railroads have also raised rates faster than costs have risen, which brought hearty applause from investors.

It led to a golden age for railroad investors, but that has reached the territory where the law of diminishing returns has kicked in.

“The party is over,” wrote Trains correspondent Bill Stephens. “Investors still push for lower operating ratios, but there’s not much juice left to squeeze.”

The article can be read at https://www.trains.com/trn/news-reviews/news-wire/how-wall-street-holds-railroads-hostage-analysis/

Data Shows Decline of Class 1 Freight Service

June 10, 2022

An analysis by Trains magazine of data recently submitted by four Class 1 rail systems to the U.S. Surface Transportation Board found that all of them have seen their on-time delivery performance plummet since May 2019.

Before the pandemic, CSX, Norfolk Southern, Union Pacific and BNSF averaged an 85 percent on-time delivery rate but during the last week of May that had fallen to 67 percent.

The STB considers a shipment to be on time if it arrives at its destination within 24 hours of the projected delivery time given the shipper.

However, the Trains report cautioned that railroads often create trip plans for individual shipments that are tighter than the STB standard.

It also said comparing the performance of railroads against each other can be misleading because of variance in how each carrier collects information and calculates on-time performance and such performance metrics as terminal dwell time and average train speed.

The railroad industry has largely blamed shortages of operating crews for the service issues they have experienced in the past year.

As the average speed of trains has fallen, that has created congestion, which in turn has led to the need for more crews and locomotives.

The problems intensify because new crews and motive power are out of place from where they are needed.

CSX reported its overall on-time performance since May 2019 has slid from 96 percent to 85 percent.

The carrier said the most current figures show carload traffic posted a 66 percent on time rate whereas intermodal shipments were 95 percent on time.

Norfolk Southern said that for the 12 months ending in April 2020, its overall on time figure was 87 percent. It has since fallen to 52 percent.

The report can be read at https://www.trains.com/trn/news-reviews/news-wire/data-reported-to-federal-regulators-reveal-extent-of-deterioration-in-rail-service/

STB to Requires Class 1s to Report More Data

May 7, 2022

The U.S. Surface Transportation Board this week issued a regulation with eight parts that will require Class 1 railroads to provide more comprehensive performance and employment information.

The Board voted unanimously in favor of the rule, which largely is targeted at BNSF, CSX, Norfolk Southern and Union Pacific.

The carriers will be required to create by May 20 service recovery plans that are to be followed up with biweekly conference calls with STB staff.

The rule will be in effect for the next six months.

In its decision, the Board cited problems with rail freight service brought out in hearings it held in late April. It also said the rule is aimed at providing “industry-wide transparency, accountability, and improvements in rail service.”

All Class I railroads are being directed to submit weekly performance data and monthly employment data.

The information being sought by the STB included weekly average terminal dwell times, measured in hours, for each carrier’s 11th through 20th largest terminals.

Railroads are also directed to provide the weekly average number of train starts per day.

There are requirements to report on rail cars in storage, the number of cars in service with no mileage, the number of rail cars in service with the weekly average number of car-miles per day, and the aggregate number of car-miles per week.

Other information to be reported includes information on re-crews, the percentage of scheduled spots and pulls that were fulfilled, the weekly average number of local trains cancelled per day, the aggregate number of local trains cancelled per week, and the percentage of cars constructively or actually placed at destination within 24 hours of the original estimated time of arrival.

Railway Age columnist Frank Wilner described the reporting requirements as an effort to prompt carriers to solve their service problems on their own, beginning with transparency.

In a statement the Association of American Railroads said it was studying the STB’s rule but said its members will continue to work through the service problems they acknowledged having.

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

May 1, 2022

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

Shippers, Workers Vent at STB Hearings

April 27, 2022

Years of frustration spilled out in the opening day of U.S. Surface Transportation Board hearings on Tuesday regarding the state of freight railroad service.

Witnesses representing rail shippers and railroad labor unions took turns blasting Class 1 railroads for their obsession with cost cutting, which they claim has brought the nation’s railroad network to a crawl.

One frequent target of the ire of the witnesses was the adoption in recent years of the precision scheduled railroading operating model that has resulted in fewer and longer trains, the closing of some classification yards, and the furloughing of thousands of rail operating workers.

Some of the witnesses argued that Class 1 railroads are more interested in pleasing shareholders who seek deeper spending cuts and higher profits.

The STB is holding the two-day hearings after receiving a deluge of complaints about poor rail freight service.

Statistics kept by the agency based upon reports provided by the railroads show that the average train speed is down and dwell time of cars in terminals has risen.

Shipper witnesses spoke of railroads missing scheduled switching, not picking up carloads in a timely manner, and non-responsive customer service departments.

For their part the railroads have blamed service issues on crew shortages and the effects of the CVOID-19 pandemic including congestion in the global supply chain. The railroads have said PSR is a more efficient way to operate.

The shipper witnesses cited a litany of adverse effects from poor rail service including ranchers facing decisions about thinning their livestock herds because they can’t get the feed they need to feed them.

“This is not a pandemic-related issue. We’re dealing with years of cuts that have gutted the rail network that’s making these service issues inevitable,” said Chris John, President and CEO of the American Chemistry Council. “Precision Scheduled Railroading is just doing less with less.”

In response to STB member questions, some shipper witnesses said some rail customers have avoided speaking out publicly about their problems for fear of retaliation from the railroads.

That led STB Chairman Martin Oberman to say such responses by railroads would be “completely unacceptable” and if proven should be dealt with in the “harshest way.”

Labor representatives said Class 1 railroads practicing PSR have reduced their workforce by 29 percent, or 45,000 workers.

They contended railroads have pared their workforces in an effort to lower their operating ratios, which is the percentage of revenue devoted to paying expenses.

Union witnesses who are also operating railroad employees said another cost-cutting move has been to limit the speeds of trains in an effort to save on fuel costs. However, the witnesses said, this means trains are unable to make track speed which results in congestion.

Chris Bond, a BNSF engineer and union official in Texas, said his employer recently eliminated some throttle restrictions ahead of the STB hearing in what was perhaps an effort to show progress in advance of the STB hearings.

More about the first day of the hearings can be read at  https://railfan.com/absolute-gridlock-shippers-labor-blame-precision-scheduled-railroading-for-service-woes/