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Rail Strike Threat Bares PSR Flaws

News reports assured Americans that we had dodged an economic disaster when the Biden administration announced the tentative settlement of a threatened nationwide strike by rail workers, but the threat remains until union rank-and-file members vote to okay the new five-year contract.

If the strike of 100,000 rail workers had materialized, it would have cost the economy $2 billion, according to the Association of American Railroads. Others had predicted that such a strike would do much worse damage.

In fact, the economic damage already done to the country in the run-up to the strike deadline has yet to be fully calculated.

Among other actions, Amtrak cancelled its long-distance rail passenger service outside of major East and West Coast corridors and mass transit agencies across the U.S. prepared for potential disruption by cutting back schedules or stopping service.

In addition, freight rail service cutbacks had already begun on many lines as the railroads began restricting service in anticipation of the strike.

In the last week before the strike deadline, White House staff scrambled to secure water and trucking transportation alternatives to make up for the pending loss of most rail capacity

Unfortunately, they didn’t grasp that this initiative was a forlorn hope because it would require 460,000 more trucks each day than currently exist, as American Trucking Associations informed them, along with reminding the White House that the industry is currently short about 80,000 drivers required to meet current needs, much less step in to help make up for the loss of rail service.

The Sept. 15 deadline for reaching an agreement had been set by Biden-appointed mediators after the president ordered a “cooling off” period. The original deadline for that period had been Nov. 15, but the Biden mediators changed it to September, which they did without explanation and without precedent in the long history of rail union and management negotiations.

The contract agreement was arrived at the last minute after Labor Secretary Marty Walsh intervened to lead the negotiations. Of the 12 railroad unions involved, the last holdouts were the two that represent engineers and conductors.

Few details were released about the agreements, and union members will need to vote on the terms. (The membership of one of the 12 unions, the International Association of Machinists, earlier voted to reject a tentative contract, which means it will have to be renegotiated.)

In the immediate aftermath of the tentative agreement, some union members told reporters they are dubious about the terms of the new contract until they can learn more about the details.

What mystified and confused some in the news media was that the crux of the dispute had nothing to do with pay. Those terms already had been worked out much earlier without much trouble.

The main disagreement was over how to deal with the horrendous working conditions that had arisen directly from the extreme cost-cutting operations model called Precision Scheduled Railroading (PSR), which called for slashing railroad workforces to point where remaining staff were overworked and eventually left their jobs in droves.

PSR had been imposed on major railroads by Wall Street hedge fund managers to drive up their stock prices, eventually to the point when they could sell off their stock at a big profit.

After embracing the PSR model, major railroads fired more than 45,000 operating personnel, as well as mothballing equipment, closing rail yards, cutting service and pulling back from investing in lower profit lines of business, such as intermodal freight and spur line services.

When the Covid 19 pandemic hit, they laid off even more employees and didn’t start trying to replace them until after rail service cratered, contributing to the supply chain crisis.

Congress and the Surface Transportation Board held hearings earlier this year where railroad executives sought to blame the pandemic cutbacks for poor service that has continued to deteriorate.

However, it was learned that in fact the railroads had failed to start adding back staff even though rail demand rebounded at the end of 2020, well before the end of the first full year of the pandemic.

Testimony revealed that these workers had been burned out by the extra demands on their time that forced them to miss family events like their children’s birthdays and holidays. Many who were making six-figure salaries and enjoyed decades of experience simply walked away from their jobs because they couldn’t take it anymore.

In response to mounting concerns over service, the railroads initiated a big recruiting and training campaign for operating personnel.

Because it takes six months to train an engineer, this was too late to do any immediate good. Later reports surfaced that some of the new recruits were walking away from training sessions after learning how terrible current working conditions are.

One immediate issue that caused the most outrage among working conductors and engineers is an attendance point system adopted by major railroads. Employees receive a number of daily points for coming into work. Points can be deducted for not coming into work, calling in sick or failing to answer the phone when they are off work because they are considered on call all of the time.

The discipline imposed for loss of points can be severe and can even lead to termination.  It was these attendance points policies that turned out to be a major sticking point in the negotiations for the two operating unions and rail management, which didn’t want to give them up.

While we don’t know yet whether the rail union members will approve the tentative pact, we do know that the misery has yet to end for rail shippers, who continue to suffer from lack of available service, poor service when it is available, as well as from blatantly exploitative demurrage and accessorial fee practices the railroads have failed to justify to the STB.

But the railroads don’t seem to have any respect for the STB’s enforcement capabilities. The railroads’ arrogant failure to follow the board’s service directives or to submit required data, angered board members, who have threatened to fine rail lines for their management’s disrespectful behavior.

New reform legislation would grant additional authority to the STB intended to allow it to rein in the railroads’ worst practices, but it is not known when – if ever — it will be passed. So far, only a handful of Democrat members support the bill.

PSR seems to have claimed at least one high level casualty after it was announced that CSX CEO Jim Foote was being replaced. Earlier this year he shocked those watching an STB hearing when he angrily upbraided a board member. In May at a shippers meeting, Foote delivered an emotional speech sympathizing with rail worker suffering, while the labor negotiations were still ongoing.

Foote became CEO of CSX immediately following the death of E. Hunter Harrison, the inventor of PSR, at the end of 2017. Foote’s replacement is Joseph R. Hinrichs, who formerly served as president of Ford Motor Co.’s automotive business.

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