Greetings;
Now of course we all know that the rail strike that would have been a disaster to the economy has been averted….sigh. The only surprise to me or any rational (experienced?) observer was that the resolution didn’t happen later tonight, closer to the clock striking twelve. The fact that “rail stocks rallied” in light of the news shows the elements of short-term money or muddled thinking. Meanwhile, there was a surprise in the rail world today, from an unexpected direction: CSX names a new CEO from outside of the industry, resolving the last big succession issue in the industry. Oh, and back to longer-term thinking on railroads, the IANA Intermodal EXPO was packed and positive.
First – from the tweets:
I told you so! (Hopefully after my voluntary Mea Culpa corrections you will indulge me in this….) “Crisis” averted as rail labor & management stuck to their time-honored scripts, played this to (almost) the very end, and achieved -as I predicted - the wage/plus gains as outlined in the PEB report. So the first strike since 1992 and the first major strike since 1877 was “averted”. Next up for RR labor - after ratification, likely but not assured - is local rail-to-union negotiations on individual opportunities for quality of life improvement and productivity through technology opportunities, although the consist (crew size) opportunity, already threatened by the STB, looks like it may have gotten further delays….If you are a Guidepoint member I will be doing a webcast tomorrow at 10 am.
AND: If strike avoidance was (to me) predictable then CSX announcing a new CEO from outside the industry effective almost immediately was a shock. CSX succession was one of the biggest open questions in railroading, but I thought Jim Foote, speaker at RailTrends, had a few years left. To be fairrr, I had hoped so – but incoming (late of Ford, including a spell in Logistics) Joe Hinrichs comes with a good reputation and certainly is saying the right things in his first interview with Trains: The Trains Interview: A Q&A with new CSX Transportation CEO Joseph Hinrichs - Trains.
- This isn’t the first time the complicated, not to say insular rail industry has reached outside for management and fresh ideas (BN, UP) but often the pattern is to bring into a, not the top role at first. Rails have worked well and should perhaps even do more of a “Mr. Inside/Mr. Outside” approach – that’s an old Army football reference and not meant to be gender specific. In any event, this is a gamble but if the CSX team pulls together likely a good odds one….
- As for Jim Foote, I know I will miss him and I think most of the rail stakeholders will (perhaps not the regulators so much, who learned that Jim fights well in the corners). I met Jim in 1989 in the Powder River in his capacity as IR of the CNW (look it up, kids). He is slated to leave CSX as CEO in only 11 days (plus 6 months of consulting) – and to speak at RailTrends on November 15 (www.railtrends.com ). And, he doesn’t know it, but was the odds-on favorite to win our annual award for 2023.
More thoughts on the labor situation:
- It’s still all pending ratification, but the T&E leadership is betting their leadership careers on it and their fight-to-almost-the-end tactics did yield enough “sweeteners” to declare victory.
- “What was the dispute between railroads and their unions about?” So asked the NYT as well as many, many others – there was no dispute between rails and their unions! There is friction, yes – even heightened friction (over attendance, quality of life, etc) brought about by shortages, Covid, and maybe even PSR. But this was, to be simple, a regularly scheduled contract “renewal” (the latter in quotes because, technically, the contracts are in perpetuity, and get modified). The bargaining over contracts, elongated by the Railway Labor process, allowed frictions to become public and be debated and become part of the bargaining process, but this wasn’t a dispute resolution event.
- It’s funny to see Wall Street, often accused of being too short-term oriented, mostly look past the strike (as I often said, it’s the outcome that mattered, not so much the process) meanwhile the business and popular press, the trade associations, the Congress, etc all focused on the events that could have started at midnight (and lasted only to daybreak?).
- It’s also funny to see the politicians jump in to take credit for the strike being “averted”, from the White House to the GOP Senate, which in fact was actually quite obstructionist, using the pending “economic chaos” to try to paint the WH into a corner – in effect, risking a worse outcome for political gain. In any event, the Railway Labor Act defined the terms, and the timing, which began way back in the past Administration– including the naming of a Presidential Emergency Board, and once the PEB acted, it was just a matter of time – and in the case of DC, of photo ops.
- The preventative slowdown/ramp-up was mitigated by the early “aversion” (rather than midnight tonight), but there will be some impact on rail ops/fluidity. And worse might be a possible bump up in attrition after receiving back pay. But hopefully, this tension relief and the attendance points/sick leave changes combined with future changes will bring attrition back down to at least historical levels.
- My quote isn’t terribly insightful, but the WSJ summary of much ado about very little is fine: U.S. Railroad Strike Averted as Tentative Deal Is Reached, Biden Says - WSJ
Meanwhile, back to business, the IANA Intermodal EXPO exuded long-term confidence (even as the record 1800+ attendees were caught up in “strike fever”). There was a general belief in railroads regaining service levels amidst new crew arrivals and a flood of new equipment. The only question was timing – would rail intermodal regain equilibrium only in time for a slowdown? Thoughts and reflections:
- Given increased western fluidity and eastern congestion, the emerging consensus is that some of the 2mm TEUs that flowed from mostly SoCal to eastern ports would reverse over the next year.
- Maersk and others investing in inland operations – a reversal of their policy to stick to the ports, or better, a return to their roots of managing intact containers to final destinations – is possibly a product of the huge amounts of pandemic boom cash burning a hole in their pockets and a realization that said the boom was ending, and fast.
- Many commentators noted that the most recent truck driver crisis is over
- ….and that as box turn times go back to normal, combined with upcoming orders, that equipment shortages, in ships, boxes and especially chassis was not only ending but turning from shortage to surplus, fast….
- BNSF (and closer-than-ever partner) JB Hunt are adding significant terminal and box capacity, with more announcements to come shortly….
Anthony B. Hatch
abh consulting
http://www.abhatchconsulting.com
anthonybhatch@gmail.com
twitter @ABHatch18