Union Pacific, Conrail and Other Freight Railroads: What’s Happening after the First FRIDAY Squarking Strikes?

The fact that a freight railroad strike didn’t start on Friday is a huge win for the US economy and its still struggling supply chain. But that doesn’t mean freight railroads are providing good service to their customers.

Rail customers have almost no alternative for the products they ship. Trucking has its own shortages and service issues, and can’t competitively move the volume of freight the distance that rail can.

Despite shifting to nonperishable goods, railroads did not stay profitable. By 1976, several railroad companies had gone bankrupt, threatening to collapse rail shipping along with them. Congress created Conrail to keep service going in the Northeast and Midwest. Its executives saw austerity as the way to profitability.

Railroads understand that service isn’t what customers want or deserve. Aggressive measures are underway to put the right plans, people and equipment in place to improve service and reliability,” said a statement last fall from the Association of American Railroads, the industry’s trade group.

According to a statement from Union Pacific, they have hired 1,400 employees over the past year and are training 1,000 of them. The hiring of new employees and hard work they have done has resulted in Union Pacific being more fluid and better able to meet the demands of their customers.

Union Pacific, the AAR and the other major railroads all say that statistics show service levels are improving, even before all the new workers are in place.

“We’re not all the way back, but for most carriers things are improved from the spring and summer,” Max Fisher, the National Grain and Feed Association’s chief economist and treasurer, told CNN. “There’s still room for improvement.”

The Rise and Fall of the Frequency Rail Problems: The Impact of the Railroads, Surface Transportation and the Surface Transportation Board on the Chemical Industry

But many other business groups are on record complaining about the poor service, including longer transit times and fewer trips by the railroads to pick up freight or return empty cars to the businesses they serve.

Last week Congress stopped a strike that could have begun on Friday according to groups that represent rail customers.

Many rail customers are what’s known in the industry as “captive shippers,” companies served by a single railroad and can’t negotiate for better rates between different providers.

The Renewable Fuels Association says that the industry ships 400,000 carloads a year. Cooper said trains carrying the stuff are sitting more often than a year ago, and more often than before the epidemic.

Rail delays are also a major part of the problem with the flow of goods through the Port of Los Angeles and the neighboring Port of Long Beach, the major entry points for shipping containers from Asia.

The problems date back to well before the pandemic. Pete Swan, professor of Logistics and Operations Management at Penn State Harrisburg, said rail service is worse than in the beginning of the century and has gotten worse during the last five years.

And profits are definitely up. Union Pacific

            (UNP), Norfolk Southern

            (NSC) and Berkshire Hathaway’s

            (BRKA) Burlington Northern Santa Fe all reported record earnings in 2021.

Swan said it’s unlikely any other business could stay afloat providing the same poor quality of service as the railroads. “What other business has the monopoly power that the railroads do?” He said something.

There are hearings being held by the Surface Transportation Board to consider penalties for bad service as well as legislation before Congress.

The AAR said that today’s temporary service challenges in no way justify an about-face on the principles that paved the way for the safest and most efficient freight rail service in the world.

Meanwhile, the idea to increase regulation on the railroads increased regulation has is gaining widespread support across much of the business community looking for better service.

“The railroads are very adept at the Washington insider game, that’s why these conditions have lasted this 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 have more work to do to resolve the freight rail problems that are continuing to put the brakes on the US economy and prolong the supply chain crisis.”