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Railroads Brace for Possible Strike

Railroads have yet to strike tentative agreements with two remaining unions, prompting carriers to begin embargoes of dangerous and time-sensitive shipments in preparation for a strike that could come as early as Friday. 

Railroads began issuing customer advisories at the end of last week and into the weekend, warning of embargoes on the shipment of hazardous freight and time-sensitive materials, along with some bulk and automotive service in certain markets. 

“We asked the two holdout unions for a commitment not to strike so we could continue normal operations, but they have declined,” Norfolk Southern executive vice president and chief marketing officer Ed Elkins told customers in a note Friday. “As a result, we must take steps to ensure we can shut down operations safely if a strike occurs and be positioned to restart quickly when operations resume.” 

Norfolk Southern went on to inform customers Sunday it would halt operations at its intermodal terminals beginning Tuesday and will no longer accept containers coming from port facilities. Automotive shipments will be halted beginning Wednesday, the railroad said.  

“We have asked the holdout unions to come to the table and finalize an agreement based on the recommendations of the PEB, and we will continue to seek a voluntary agreement,” Elkins said. “If the position of the unions changes and the threat of a strike is retracted, we will seek to resume normal operations as quickly as possible.” 

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BNSF Railway and Union Pacific issued similar announcements to customers that also urged shippers to reach out to members of Congress. 

“If there is a labor strike on Sept. 16, Congress can intervene to prevent or quickly resolve the disruption,” BNSF executive vice president and chief marketing officer Steve Bobb said to customers. “We would ask that you urge Congress to impose the recommendations of President Biden’s Presidential Emergency Board [PEB], which formed the basis for agreements already reached with several of the unions.”

The shutdown preparations came as the unions and carriers continued negotiations during the weekend. Two out of a dozen unions have yet to strike tentative agreements with employers. 

The SMART-Transportation Division (SMART-TD) and Brother of Locomotive Engineers and Trainmen (BLET) called the railroads’ actions in recent days “completely unnecessary.”

“Our unions remain at the bargaining table and have given the rail carriers a proposal that we would be willing to submit to our members for ratification, but it is the rail carriers that refuse to reach an acceptable agreement,” Dennis Pierce and Jeremy Ferguson, presidents of BLET and SMART-TD, respectively, said in a joint statement Sunday. “In fact, it was abundantly clear from our negotiations over the past few days that the railroads show no intentions of reaching an agreement with our unions, but they cannot legally lock out our members until the end of the cooling-off period. Instead, they are locking out their customers beginning on Monday and further harming the supply chain in an effort to provoke Congressional action.” 

The two union heads called out the need for improvements in working conditions as a sticking point in the remaining contract talks, specifically highlighting sick leave policies.  

They went on to reiterate an earlier stated message that Congress should refrain from getting involved in the contract dispute and let the two sides work out deals on their own. 

Unions and carriers went back to the negotiating table last month after the PEB released its report of recommendations that included a compounded wage increase of 24 percent across the contract’s five-year period among several other suggestions for compensation and benefits. The proposed percentage reflected a middle ground between what the railroads and unions pitched. 

The PEB was established by President Biden in July after the two sides were unable to reach an agreement with the help of the National Mediation Board. The two sides have until Sept. 16 to reach deals on new contracts before the current cooling off period ends. A strike or lockout would then be possible if an agreement is not reached, or Congress has the authority to step in to avoid a shutdown of the national rail system.

The start of embargoes on some shipments is expected to have a ripple effect on the broader supply chain once stability returns, given the already existing rail congestion.  

The American Association of Railroads said last week a national rail strike would cost the country at least $2 billion a day and could likely see shippers turn to an already pressured trucking industry to fulfill their transportation needs. 

The American Trucking Associations president and CEO Chris Spear asked that lawmakers craft a contract for the unions based on the PEB recommendations in an effort to reach a final resolution rather than give the two sides additional time to continue negotiations. 

“Merely delaying a possible strike through Congressional action will simply exacerbate the concerns of consumers and industry,” Spear said in the letter to Congress. “A possible strike or lockout in October or November is arguably worse than one next week—although any disruption will cost the nation billions of dollars of lost productivity.” 

Spear went on to point out the trucking industry would be unable to offset the impact of a strike or lockout due to the lack of equipment and driver shortage and said, “any rail service disruption will create havoc in the supply chain and fuel inflationary pressures across the board.”