The failure of a freight railroad strike to begin on Friday is a huge win for the US economy and its still struggling supply chain. But that does not mean that freight railways provide good service to their customers.
Many of the issues hampering the supply chain, driving up prices and slowing the economy can be traced to the steady decline in freight rail service over the past few years. Even the railroads themselves admit that the country’s current freight service is a problem, mainly due to fewer calls to pick up or set down freight cars, routine, long delays and lack of reliability problem plaguing the industry, according to critics and customers.
“The railways understand that service is not at the level that customers expect or deserve. Aggressive steps are underway to put in place the right plans, people and equipment to improve service and reliability,” said a statement last fall from the Association of American Railroads, the railroad’s trade group. industry.
“Over the past year, Union Pacific has accelerated its hiring efforts and we have achieved our goal of hiring 1,400 employees, of which nearly 1,000 have been trained,” said a statement from Union Pacific – one of the four major railways that collectively handle 90% of the nation’s rail freight. “Through our hiring efforts and the hard work of our employees, Union Pacific has made strides to increase fluidity and better respond to our customers’ requests and we will continue to do so to provide the service our customers expect and need. they need.”
Union Pacific, AAR and other major railroads all say statistics show service levels are improving, even before all the new workers are in place.
Some experts who represent rail customers who have complained about service in the past say service has improved since the start of this year.
“We haven’t fully recovered, but for most carriers things have improved from the spring and summer,” Max Fisher, chief economist and treasurer of the National Grain and Feed Association, told CNN. . “There is still room for improvement.”
But many other business groups are publicly complaining about poor service, including longer transit times and fewer rail trips to pick up goods or return empty railcars to the businesses they serve.
“With the potential for a strike now behind us, we hope the rail industry will focus on improving speed, stability and affordability for customers in the ethanol and fuel sectors. agriculture,” said Geoff Cooper, CEO of Renewable Fuels Association.
Cooper and other groups representing railroad customers said they were relieved that Congress acted a week ago to stop a strike that could have started last Friday.
“It’s important to note, however, that ‘normal service’ is still incredibly bad and increasingly costly for shippers and consumers alike,” said Rob Benedict, vice president of American Fuel & Petrochemical Manufacturers, a trade group that represents the country’s refineries. “With the threat of a full work stoppage on the table, the next Congress must raise the long-awaited issue of freight rail reform to finally correct these abuses of service.
A recent survey Benedict’s Trade Group conducted of its members found that all respondents experienced rail shipments being delayed or held up for three days or more. One member noted that at the time they filled out their survey, they had over 350 cars delayed in transit for over 72 hours.
Many businesses that rely on rail are reluctant to speak publicly about the issues, even if they publicly express their concern to rail regulators. Businesses have little choice but to try to keep relations with the railways as smooth as possible. Their professional associations, however, are less reluctant to speak out publicly.
So are the railroad unions, many of whom are furious at being barred from striking by Congress. Contracts imposed on their members, they say, will only add to worker discontent and workers will quit, creating more staff shortages and even worse freight service than it is now.
“The American railroad worker has spoken, as have the American rail loaders,” said a statement from the transportation division of the Sheet Metal, Air, Rail Transportation union, the largest rail union, which represents about 28,000 drivers. “The national freight rail network is broken down and the need for long-term rail reform is clear. Workers and shippers are united on this front.
Congressional action that blocked the strike and imposed unpopular contracts on workers “will compound supply chain problems and further sicken, infuriate and deprive railroad workers as they continue to shoulder the burden of the mismanagement of the railways,” said the Brotherhood of Track Employee Maintenance. Division, the third largest railway union.
The biggest concern for shippers is the reduction in service calls the railways make to pick up goods and the time it takes for the goods to be delivered. The wagons themselves are mostly owned by customers, who are eager to collect their empty wagons to fill them with freight again.
The ethanol industry ships nearly 400,000 rail cars a year, according to the Renewable Fuels Association. But trains carrying ethanol are now idle 30% more often than a year ago, and 40% more than before the pandemic, Cooper said.
Rail delays are also a big part of the problem with the flow of goods through the Port of Los Angeles and the nearby Port of Long Beach, major entry points for shipping containers from Asia.
The problems date back to long before the pandemic. According to Pete Swan, professor of logistics and operations management at Penn State Harrisburg, statistics show that rail service is now much worse than it was at the start of this century and that it has particularly deteriorated in the over the past five years.
“Railway management has focused on maximizing payouts to shareholders and their return on assets, not quality of service,” Swan said. “What gets us in trouble now is that there is no incentive to provide good service. There are plenty of incentives to make service suffer and cut costs.
And profits are definitely up. Union Pacific (UNP), Norfolk Southern (NSC) and Berkshire Hathaway’s Burlington Northern Santa Fe (BRKA) all posted record profits in 2021.
Rail customers have almost no alternatives for the products they ship. Trucking has its own shortages and service issues, and cannot competitively transport the volume of freight the distance that rail can.
Many rail customers are what are known in the industry as “captive shippers”, companies served by a single railroad and unable to negotiate better rates between different suppliers.
Swan said it was unlikely any other company could stay afloat providing the same poor quality of service as the railways. “What other company has the monopoly power that the railroads do?” he said.
It’s one of the reasons business groups are pushing for tougher regulations and penalties to be imposed on railways that cause delays or have service problems.
“We’re all for free market solutions, but it’s not a free market,” Benedict said. “That’s why you need government support.”
The Surface Transportation Board, one of the federal railroad regulators, has held hearings to consider penalties for poor service, and legislation is also before Congress.
Unsurprisingly, the railways argue that this is not the right solution.
“Today’s temporary service challenges in no way warrant an about-face on the market-based principles that have brought the industry back from the brink and paved the way for the safest and most secure freight rail service the most effective in the world,” the AAR said. statement.
The industry argues that these proposals “would have significant negative impacts on the efficiency of the freight rail network, but combined they would be devastating to long-term U.S. rail service, reliability, and investment.”
Meanwhile, the idea of increasing regulation on the railways gained widespread support across much of the business community seeking better service.
“Railroads are very adept at the Washington insider game, which is why these conditions have lasted so long, but I think the tide has turned,” said Chris Jahn, CEO of the American Chemistry Council, the trade group that represents the US chemical industry. . “Congress and the Surface Transportation Board still have work to do to address the rail freight issues that continue to dampen the U.S. economy and prolong the supply chain crisis.”
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