Railway strike would have major consequences for the US economy

OMAHA, Neb. (AP) — U.S. consumers and nearly every industry will be affected as freight trains grind to a halt next month.

One of the largest railroad unions rejected its deal on Monday, joining three other unions that failed to approve contracts over concerns about demanding schedules and the lack of paid sick leave. That raises the risk of a strike, which could start as early as December 5.

It wouldn’t be long before the effects of a railroad strike would seep through the economy. Many companies only have a few days’ worth of raw materials and space for finished products. Makers of food, fuel, cars and chemicals would all feel the pressure, as would their customers.

Not to mention the commuters who would be stranded because many passenger railroads use tracks owned by the freight railroads.

So much is at stake for the economy that Congress is expected to step in and impose contract terms on railroad workers. The last time the US railroads went on strike was in 1992. That strike lasted for two days before Congress intervened. Protracted rail closures haven’t happened in a century, in part because a 1926 law regulating rail negotiations made it much more difficult for workers to strike.

Here are some of the expected consequences of a railway strike:


Railroads carry about 40% of the country’s freight each year. The railroads estimated that a rail strike would cost the economy $2 billion a day in a report released earlier this fall. Another recent report, prepared by a chemical industry trade group, predicted that if a strike continues for a month, some 700,000 jobs would be lost if manufacturers dependent on railroads shut down, the prices of almost everything would rise even more and the economy could be pushed. in a recession.

And while some companies would try to shift shipments to trucks, not nearly enough of them are available. The Association of American Railroads trade group estimated that an additional 467,000 trucks per day would be needed to handle everything the railroads deliver.


Chemical manufacturers and refiners will be some of the first businesses affected, as railways will stop shipping dangerous chemicals about a week before the strike deadline to ensure no road tankers filled with hazardous liquids become stranded.

Jeff Sloan of the American Chemistry Council trade group said chemical plants are on the verge of closing by the time a railroad strike actually begins as a result.

That means the chlorine that water treatment plants rely on to purify water, of which they may only have about a week’s supply, would become hard to come by. It would be hard for manufacturers to make anything out of plastic without the chemicals that are part of the formula. Consumers will also pay more for gasoline if refineries close because they can’t get the ingredients they need to make fuel or because railroads aren’t available to transport by-products like sulfur.

Chemical plants also produce carbon dioxide as a by-product, so the supply of carbon dioxide that beverage makers use to carbonate sodas and beer would also be limited, even though the gas typically moves through pipelines.


About half of all commuter rail systems rely at least in part on tracks owned by freight railroads, and nearly all of Amtrak’s long-distance trains run over the freight network.

In September, Amtrak canceled all of its long-distance trains days before the strike deadline to ensure passengers would not be stranded in remote parts of the country while still en route to their destination.

And major commuter rail services in Chicago, Minneapolis, Maryland and Washington state all then warned that some of their operations would be suspended in the event of a railroad strike.


It would take about a week for customers to notice shortages of things like cereal, peanut butter and beer at the grocery store, said Tom Madrecki, vice president of supply chain for the Consumer Brands Association.

About 30% of all packaged food in the US is shipped by rail, he said. That percentage is much higher for denser, heavier items like cans of soup.

For some products, such as grains, cooking oils, and beer, the entire business is built around rail deliveries of raw ingredients such as grain, barley, and peanuts, along with shipments of finished products.

Those companies typically only have two to four days’ worth of raw ingredients on hand because it’s expensive to store them, Madrecki said, and grocers also have a limited supply of produce on hand.

Madrecki said major food companies are reluctant to discuss the threat of a rail strike because concerns about product shortages could lead to panic buying.


Any disruption to train service could threaten the health of chickens and pigs, which rely on trains to deliver their feed, and could contribute to higher meat prices.

“Our members depend on approximately 27 million bushels of corn and 11 million bushels of soybean meal each week to feed their chickens. Much of it is transported by rail,” said Tom Super, a spokesman for the National Chicken Council, a trade association for the broiler chicken industry.

The National Grain and Feed Association said a railroad strike will now hit pig and chicken producers in the southern U.S. hardest as their local supplies of corn and soybeans from this year’s crop are likely to be exhausted and they must truck feed , dramatically increasing costs.

“They only have so much storage space. They can’t go too long without the trail before they have to close the feed mills and get into trouble,” said Max Fisher, chief economist of the NGFA.


Jess Dankert, the vice president of supply chain at the Retail Industry Leaders Association, said retailers’ inventory is largely in stock for the holiday season. But the industry is developing contingency plans.

“We don’t see, you know, canceling Christmas and stories like that,” Dankert said. “But I think we’re going to see the general disruption of really anything moving by rail.”

David Garfield, a managing director of the consulting firm AlixPartners, said a rail strike could still affect holiday items shipped to stores later in December, and it would certainly hamper supplies of next season’s goods.

Retailers are also concerned about online orders. Shippers such as FedEx and UPS use rail cars with about 2,000 packages in each car.


Drivers are already paying record prices and often waiting months for new vehicles due to production problems in the automotive industry due to the shortage of computer chips in recent years.

That would only get worse if there was a rail strike, as about 75% of all new vehicles start their journey from factories to dealers on the rails. Trains deliver about 2,000 carloads a day filled with vehicles.

And automakers may struggle to keep their plants running during a strike because some larger parts and raw materials are shipped by rail.


Associated Press writers David Pitt in Des Moines, Iowa, and Dee-Ann Durbin in Detroit contributed to this report.

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