U.S. freight railroads to cut services as union talks fail, report says

U.S. freight railroads will reduce their services starting Monday after two of the country’s largest rail unions failed to agree on a new contract this week, the Journal of Commerce reported.

The railroads began notifying customers about the service cuts, which are taking place ahead of a possible strike on Sept. 17, the publication said, citing a customer advisory from Norfolk Southern Corp. The Association of American Railroads confirmed in a statement Friday that six Class I freight railroads will begin to take steps to “manage and secure” shipments of some hazardous or sensitive materials from Monday.

Other freight customers may also experience delayed or suspended service over the next week, the railroad association said, adding that talks with the remaining unions will continue throughout the weekend.

“The railroads want, and continue to advocate for, a prompt resolution that would provide historic wage increases to rail employees—and allow the railroads to continue servicing customers and prevent further disruption to the struggling supply chain,” the association said in the statement.

With freight railroads serving agricultural, industrial, wholesale, retail and other parts of the US economy, a nationwide shutdown could cost up to $2 billion a day, the Association of American Railroads predicts. At a time of elevated inflation, the stoppage could result in plant shutdowns, lost jobs and higher costs for consumers and businesses, the group said.

A shutdown, with accompanying cost increases, ahead of the midterm elections could also carry a political risk for President Joe Biden and the Democrats as they struggle to rebuild their historic ties with union and blue-collar voters.

Railroads and workers have faced years of challenging negotiations, which began in January 2020, shortly after the labor contract froze at 2019 levels. After the National Mediation Board failed to carve out an agreement earlier this summer, the Biden administration appointed a mediation board that issued recommendations including wage increases and expanded health coverage.

The two unions that have not yet reached a deal—the Brotherhood of Locomotive Engineers and Trainmen and the International Association of Sheet Metal Air, Rail, and Transportation Workers—account for more than 90,000 rail employees, according to the report. Ten other unions have already struck contract deals.

Any stoppages would escalate the challenges confronting the freight rail system and would “drastically make inflation worse” for Americans, said the Agricultural Transportation Working Group, a collection of 31 agricultural organizations. In a letter to lawmakers Thursday, the group urged Congress to prepare to intervene, if necessary, to prevent a strike from taking place.

“The freight rail system already is significantly challenged and many rail customers are not receiving timely rail service,” the group said in the letter. If an agreement isn’t reached by Sept. 16, “we strongly urge Congress to act to avoid significant economic damage to U.S. supply chains and further uncertainty for rail customers.”

A freight rail stoppage would occur as America’s farmers harvest their crops and would exacerbate global food insecurity and likely contribute to further geopolitical instability in regions that experience famine, the letter said.

The American Bakers Association, a Washington-based trade group representing more than 300 companies, said it was “very concerned” about a rail stoppage and its effects on an “already fragile supply chain.”

“Even a temporary interruption would create a devastating ripple effect” that would create a shortage of materials and ingredients for baked goods, the group said in a press release.