Freight rail service appalling even without threat of strike

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The fact that a freight rail strike didn’t start on Friday is a huge win for the US economy and its still struggling supply chain. However, this does not mean that freight railways serve their customers well.

Many of the problems that clutter the supply chain, drive prices up and slow the economy can be traced back to the steady decline in freight rail service in recent years. Even the railroads themselves admit that the country’s current shipping service is a problem; this is primarily due to fewer calls to pick up or drop off freight cars, the routine, prolonged delays and the general unreliability that plagues the industry, critics and customers.

“Railways understand that service is not at the level customers expect or deserve. Aggressive measures are being taken to put the right plans, people, and equipment in place to improve service and reliability, according to a statement last fall from the American Railroad Association, the industry’s trade group.

“Over the past year, Union Pacific stepped up our recruitment efforts and we achieved our goal of hiring 1,400 employees, of which approximately 1,000 are trained,” said a statement from Union Pacific, one of the four major railroads that collectively handle 90 percent of the union. the country’s rail transport. “As a result of our recruitment efforts and the hard work of our employees, Union Pacific has made progress to increase fluidity and better meet our customers’ demands, and we will continue to do so to provide the service our customers expect and need.”

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

Some experts, representing rail customers who have complained about the service in the past, say the service has gotten better since earlier this year.

“We haven’t quite gone back, but things have improved from the spring and summer for most carriers,” Max Fisher, chief economist and treasurer of the National Grain and Feed Association, told CNN. “There’s still room for improvement.”

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

“Now that the potential for a strike is behind us, we hope the rail industry will shift its focus to improving timeliness, stability and affordability for customers in the ethanol and agriculture sectors,” said Geoff Cooper, CEO of the Renewable Fuels Association.

Cooper and other groups representing rail customers said they were relieved that Congress took action a week earlier to stop a strike that could begin last Friday.

“However, it’s important to note that ‘normal service’ is still incredibly bad and increasingly expensive for shippers and consumers,” said Rob Benedict, vice president of American Fuel & Petrochemical Manufacturers, a trade group that represents the nation’s refineries. “With the threat of a complete business shutdown, the next Congress should raise the long-overdue issue of freight rail reform to finally fix these abuses of service.

A recent survey of Benedict’s trade group members revealed that rail shipments from all respondents were delayed or held for three days or more. One member noted that more than 350 cars were delayed by more than 72 hours at the time they completed the survey.

Many railroad businesses are reluctant to speak publicly about the issues, even if they raise their concerns to rail regulators. Businesses have little alternative but to try to keep their relationship with the railroads as smooth as possible. Professional associations, however, are less reluctant to speak publicly.

So are the railroad unions, many of whom are outraged that Congress has been barred from striking. They say the contracts imposed on their members will only increase worker dissatisfaction and cause workers to resign, creating more staff shortages and transport service that is even worse than it is now.

“The American railroad worker spoke like an American railroad hauler,” said the transport division of the Sheet Metal, Air, Rail Freight union, the largest rail union, representing approximately 28,000 conductors. “The national freight rail network has deteriorated and the need for long-term rail reform is clear. Workers and transporters are united on this front.”

The Brotherhood of Maintenance of Way Employes said Congressional action to prevent strikes and impose unpopular contracts on workers “will exacerbate supply chain problems and make railroad workers sick, infuriated and disenfranchised, as they continue to shoulder the burden of railroad mismanagement.” The division is the third largest rail union.

The biggest concern of shippers is the reduction of service calls made by the railways to pick up the freight and the time it takes to deliver the goods. The wagons themselves are mostly owned by customers who are worried about returning their empty wagons to once again fill them with freight.

According to the Renewable Fuels Association, the ethanol industry ships about 400,000 carloads per year. But Cooper said trains carrying ethanol are now idle 30% more than a year ago and 40% more than before the pandemic.

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

The problems date back to before the pandemic. According to Pete Swan, professor of logistics and operations management at Penn State Harrisburg, statistics show rail service is much worse this century than it was at the beginning of the century, and has deteriorated particularly over the past five years.

“Railway management is focused on maximizing payouts to shareholders and return on assets, not service quality,” said Swan. “What’s getting us in trouble right now is that there is no incentive to provide good service. There are many incentives to damage service and cut costs.”

And profits have definitely increased. Union Pacific (UNP), Norfolk Southern (NSC) and Berkshire Hathaway’s (BRKA) Burlington Northern Santa Fe reported record earnings in 2021.

Railway customers have virtually no alternatives for the products they ship. Trucking has its own shortcomings and service issues and cannot competitively transport freight volumes the distance that railroad can.

Many rail customers are companies known in the industry as “captive shippers”, serviced by a single railroad and unable to negotiate better prices between different providers.

Swan said that no other business could survive by providing as low-quality service as railroads. “What other line of business has the monopoly power that the railroads have?” said.

This is one reason business groups are pushing for tighter regulations and penalties on railroads that cause delays or service issues.

“We’re all for free market solutions, but it’s not a free market,” said Benedict. “That’s why you need some government support.”

The Road Transport Board, one of the federal regulators of railroads, has held hearings to consider penalties for bad service, and there’s also a bill before Congress.

It’s not surprising that the railroads claim this is the wrong solution.

“Today’s temporary service challenges in no way justify a return to market-based principles that have pushed the industry from the brink of the abyss and paved the way for the safest, most efficient freight rail service in the world,” said AAR in a statement.

The industry argues that these proposals “will have far-reaching, adverse effects on the efficiency of the freight rail network, but the combination of them will be devastating to long-term U.S. rail service, reliability and investment.”

Meanwhile, the idea of ​​increasing regulation on railroads is gaining widespread support in much of the business community seeking better service.

“Railways Washington is very adept at the insider game, which is why these conditions have lasted this long, but I think the tide has turned,” said Chris Jahn, CEO of the American Chemistry Council, a trade group that represents the US chemical industry. . “Congress and the Road Transport Board have more work to do to address freight rail issues that continue to curb the US economy and prolong the supply chain crisis.”

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