Examining our options

February 9, 2009

By UTU International President Mike Futhey

While railroads oppose our efforts to obtain for new hires equal pay for equal training, responsibility and accountability, they are spending tens of millions of dollars to defend their pricing power that pads their bottom lines.

With NBC charging up to $6 million per minute for Super Bowl advertising, freight railroads bought time during the third quarter of the game to congratulate themselves on their impressive productivity, even though it is mostly the result of fewer train and engine service employees taking on more responsibilities.

In 2008, freight railroads spent some $40 million on lobbyists to protect their monopolies; and millions more on radio, television, magazine and newspaper ads to create a positive image.

Railroads have become so profitable that Warren Buffett’s Berkshire Hathaway fund has acquired 22 percent of BNSF stock; and hedge funds, banks and investment houses now own about one-third of railroad stock shares.

During 4th quarter 2008, with most industries on the financial ropes, UP earnings rose 35 percent; BNSF earnings rose 19 percent; Norfolk Southern, 17 percent; and CSX, 16 percent.

The Financial Times reported that “North America’s principal rail companies underlined their growing resilience and pricing power by reporting improved operating profits for the quarter while the economic downturn started in earnest.”

Wall Street analysts say that coal, grain and chemical shippers — those with no effective alternatives to shipping by rail — are so captive that the railroads will continue raising their freight rates (which translate into sharply increased profits) with little fear of losing the business.

Analysts report that railroads paid millions in year-end bonuses to their top executives in December, while fighting every attempt by the UTU to eliminate a two-tier wage structure that pays new hires considerably less, even though the new hires are given equivalent skills, responsibility and accountability as fellow conductors and yardmasters with at least five years of seniority.

Meanwhile, railroads have renewed their push to eliminate the craft of conductor and operate trains with one-person crews. Having been stopped by a federal court from making such demands in national handling, they are now pursuing that objective through local agreements.

For more than 40 years, rail labor has assisted the carriers in reducing government oversight and  collecting federal subsidies, which produced a frenzy of mergers, reduced head counts and permitted monopoly pricing.

The carriers’ repeated promises to share their increased wealth with employees evaporated when the time for sharing arrived.

Now, our most effective response is in the legislative arena, where railroads need labor’s political support to turn back captive shipper efforts to trim rail market power.

I met recently with the head of a shipper advocacy group to discuss their legislative effort to require the Surface Transportation Board be more aggressive in its oversight of the handful of major rail systems that now dominate the railroad map. The shippers also are seeking legislation placing railroads under the same antitrust laws as all other American industries.

This is not reregulation. It’s simply requiring regulators to do what the law tells them to do.

We are examining closely our Washington relationship with carriers and shippers. Our lobbying power before a labor-friendly Democratic-controlled Congress and White House may be our most effective tool to assure employees are treated equitably at the bargaining table.

We will also be continuing our efforts before a wage and rules panel to convince carriers that the time is now for reaching an equitable solution to the entry-level pay problem.

We remain optimistic that carrier CEOs will recognize the value of having a joint coalition with organized labor, where workers benefit from the railroad renaissance as executives and stockholders have been benefiting.

Now, let’s do it together.