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Renewed threat of rail strike has supply chain managers ramping up contingency
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Renewed threat of rail strike has supply chain managers ramping up contingency
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State of Freight




State of Freight


RENEWED THREAT OF RAIL STRIKE HAS SUPPLY CHAIN MANAGERS RAMPING UP CONTINGENCY
PLANS

Published Thu, Oct 20 20223:44 PM EDTUpdated Thu, Oct 20 20224:06 PM EDT
Lori Ann LaRocco@loriannlarocco
WATCH LIVE
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Key Points
 * Brotherhood of Maintenance of Way Employees Division of the International
   Brotherhood of Teamsters (BMWED), the third-largest rail union, rejected a
   labor deal with railroads that the Biden Administration had helped to
   negotiate.
 * Unions are able to strike starting on Nov. 19 unless Congress intervenes or a
   deal is reached.
 * A union rep told CNBC, “The railroads consistently underestimate the
   frustration and anger of the workers. Workers can’t take it anymore.”

In this article

 * CSX+28.86
 * UNP+196.04

Follow your favorite stocksCREATE FREE ACCOUNT
An aerial view of shipping containers and freight railway trains ahead of a
possible strike if there is no deal with the rail worker unions, at the BNSF Los
Angeles Intermodal Facility rail yard in Los Angeles, California, September 15,
2022.
Bing Guan | Reuters

Logistics managers are dusting off their plans for a possible railroad strike in
November that could wreak havoc on the supply chain and cost the U.S. economy up
to $2 billion a day.

The National Carriers’ Conference Committee (NCCC), representing the nation’s
freight railroads in the national collective bargaining, notified the
Brotherhood of Maintenance of Way Employees Division of the International
Brotherhood of Teamsters (BMWED) on Wednesday that the union’s latest proposal
will not be accepted. A deal between the rails and several large unions to avert
a strike, with recommendations from the Biden administration, was moving closer
to completion before being voted down by the BMWED last week.



“Now is not the time to introduce new demands that rekindle the prospect of a
railroad strike,” the NCCC said in a statement.



Tom Nightingale, CEO of AFS Logistics, tells CNBC that logistics managers are
fielding calls from customers in anticipation of a possible strike.

“Prudent shippers already had a plan in place a month ago, and most who did not
have now ramped up their contingency planning after the wakeup call last month,”
Nightingale said. “Proactivity is the key to supply chain success.”

For many intermodal shipments — shipments that use multiple modes of transport
such as ocean, trucking and freight rail — there can be a week between when
cargo is picked up and when it makes it onto the rail lines, according to
Nightingale.

“That lag time will exacerbate the effects of delays and service interruptions,
so effectively managing the risk of intermodal disruption means you must plan
early and often,” he said.



In anticipation of a strike in September, Norfolk Southern, Berkshire Hathaway
subsidiary BNSF, CSX, and Union Pacific all began ramping down freight
approximately five days ahead of the strike date in an effort to move critical
hazmat materials, such as chlorine and ethanol. That freight took priority over
common freight.

“Shippers had a lot of sensitivity to the potential rail strike,” Nightingale
said. “No shipper wants to lose their job or risk losing a customer when they
have had this much advance notice to a looming disruption.”

As a result, AFS saw a significant uptick in customers looking to shift loads
away from intermodal to other modes like truckload and even less-than-truckload
shipping (LTL).

“Shippers don’t want cargo with a limited shelf life sitting at a rail yard,
particularly commodities like chemicals and refrigerated food and beverage,” he
said.

watch now
VIDEO4:0704:07
Union Pacific CEO Lance Fritz discusses recent earnings and supply chain outlook
Squawk on the Street


Under the Railway Labor Act, Congress has the ability to impose the resolution
from Biden’s Presidential Emergency Board, or order the trains to operate as
usual with an extension of negotiations. Nov. 19 is the earliest that rail
unions can strike.

“While it is premature to make predictions about what could happen in
negotiations, railroads will take every necessary and prudent step to ensure the
safety and security of the network and the communities we serve,” a spokesperson
for the Association of American Railroads said in an email to CNBC. “The rail
network does not turn on and off like a light switch and advanced planning and
positioning of assets takes time. Should uncertainty remain ahead of the status
quo expiring with BMWED, past action is a good indicator of how those
operational plans are executed, and specific decisions on timing will be made as
events necessitate.”

“If you are in logistics and you are not already scenario planning for a
potential work stoppage you may be behind the curve right now,” said Brian
Bourke, chief growth officer of SEKO Logistics. “Everyone is waiting for after
the election for any additional movement or news, but the time to start planning
is now.”


ANGER AMONG UNION WORKERS

On October 18, the BMWED posted on its website a letter members could use to
send to their congressional representatives covering the quality of life and
benefits issues, which have been a major sticking point in negotiations over a
new contract. One of the key points of contention is the BMWED looking for more
paid time off, especially for sickness. 

“The push for paid sick time off could potentially lead to Congressional
action,” the letter said. “While we hope the carriers will acknowledge the
concerns of their employees and negotiate with us, it is important that we are
prepared for their unwillingness to address quality of life concerns.”

“The railroads consistently underestimate the frustration and anger of the
workers. Workers can’t take it anymore,” Richard Edelman, counsel for BMWED and
chief spokesperson in the collective bargaining, told CNBC. “The Presidential
Emergency Board (PEB) ruling is just a recommendation. It is not a lid. Carriers
have made the determination of not doing more than the net equivalent of the
PEB.”

Union Pacific CEO Lance Fritz told CNBC during an interview on “Squawk on the
Street” Thursday morning, “We’ve got some negotiating to do with that union and
we’ve agreed to status quo, we’re in status quo while we’re doing that. I am
confident we will find a way to craft an agreement that can be taken back out
for ratification. That doesn’t mean a strike is not possible, it just means in
my opinion I don’t think it’s probable. We’ve got plenty of runway to figure it
out.”

On Sept. 15, before the previous national strike deadline, an agreement was
announced by Labor Secretary Marty Walsh between the two largest unions, the
Brotherhood of Locomotive Engineers and Trainmen (BLET) and the Sheet Metal
Workers’ Transportation Division (SMART-TD) and the National Carriers’
Conference Committee. The BMWED is the third-largest union with 23,900 members.

“The railroads have made billions off of their workers,” Edelman said. “These
are incredibly skilled jobs where sophisticated pieces of equipment are used.
The workers do not feel valued.”

One of the worries among logistics experts is workers quitting, but the AAR
spokesperson told CNBC that train and engine service headcount was up 7.4% in
September compared with January. Fritz told CNBC that UP’s attrition rate is
near its historical norm this year and it’s hiring plan has been right on
target, with no indication of any “Great Resignation” at the rail carrier.

“Those new hires came on board for the same reason most railroaders stay for
life – railroading is a career that allows you to both support a family and take
deep pride in your work,” the AAR spokesperson said.

“Workers need to be able to take off when they are sick. Under the present
policy workers are penalized. Railroad executives are so deep into their own
bubbles they think all of this is okay,” Edelman said.

The AAR told CNBC it updated the leave policy explainer last week.


Related

 1. A second railroad union overwhelmingly rejects deal needed to avert
    nationwide strike
    
 2. New York extends its lead over California as home to nation’s new No. 1 port
    
 3. Wave of LNG tankers is overwhelming Europe in energy crisis and hitting
    natural gas prices
    
 4. China, ‘factory of the world,’ losing more of its manufacturing dominance,
    latest data shows
    
 5. Renewed threat of rail strike has supply chain managers ramping up
    contingency plans
    


MORE IN STATE OF FREIGHT

New York extends its lead over California as home to nation’s new No. 1 port
Lori Ann LaRocco4 hours ago
A second railroad union votes down labor deal needed to avoid nationwide strike
Lori Ann LaRocco
Wave of LNG tankers is overwhelming Europe in energy crisis and hitting natural
gas prices
Lori Ann LaRocco
Read More


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