Greetings
The PEB report, as expected, split the baby and in this political/economic/jobs/service environment it surely could have been worse for the rails and their owners.
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The Presidential Emergency Board recommendations on the (US) national bargaining between the railways and their unions was released today, a day late, and, although they devils is as ever in the details (see below) the headline is that the wages increase of 22% (retroactive to 1/1/20) splits the difference between the rails’ 16% proposal and the unions collective 28% (plus $5K in “service
recognition bonuses”), with little changes in benefits and work rules and with scheduling recommended to arbitration. The bottom line, so far anyway, is that the rails can live with this (I was told it was at “the upper end of accruals” for planned wage increases – in other words, within their expectations). The AAR
issued a statement saying that the PEB report does “provide a useful basis to reach a resolution” and that the industry was “prepared to propose agreements based on the PEB’s recommendations”….
What’s next? We have most likely seen what the contract will yield, and the rest is just for show. So now theres another 30-Day Cooling Off period, and then we get to brass tacks. A union rejection (for the ball’s in their court now) could lead to a (very, very brief) strike, but as I have written before (and tweeted yesterday) that is highly unlikely and in any event not an investable event. Some thoughts:
- Believe me when I write about the devil and details – in terms of work rules one needs to have direct operating experience to interpret the changes, which in any event seem modest. As an example, see page 110/124: “The National Conference of Firemen and Oilers (“NCFO”) proposes an increase in the base wage rate of $1.58 per hour effective January 1, 2020, to adjust the pay relationship between NCFO-represented employees and shop Mechanics to account for changes in job responsibilities resulting from assignments under the incidental work rule”. Hard for me to change my earnings models based on that….for the full report: PEB 250 – Report and Recommendations (trains.com)
- On crew consist (size) the PEB recommended that rails withdraw their (national) proposal on conductors-on-the-ground and negotiate that locally. This was a pre-ordained defeat in the rails’ struggle to take advantage of technology, including the government-mandated PTC system, while AV technology and research is subsidized by federal and state governments.
o In any event, the FRA, the industry safety regulator playing the role of the Joker, has already mandated two-man crews, which, for now anyway, supersedes these or any negotiations
o BNSF tried local negotiations on consist and after initial (and local) success, was shut down by national actors
- The PEB ventured deep into the philosophical aspects of capital and labor, in discussions about the nature of caoital and risk (valid), compensation and company profitability (the crux of the theoretical debate – do labor rates relate to the market for labor and skills or to the success of the company, or to what degree do they inter-twine?). The PEB stated that the carriers argued that employees don’t share downside risk, which is patently false (see furloughs), but this, of all industries, is a capital intensive one….
- What will retro-active payments and bonuses do to attrition of the current labor pool? Swill their be a bubble of folks taking the money and running for the hills? Will this rather hefty wage increase allow for better recruiting? tay tuned….
The bottom line is that in this environment this is likely the final result and while perhaps a modest defeat as seen from the beginning of the process in 2019 is a hard-fought tie as seen in 2022. Real issues of productivity and technology remain unresolved with a negative bias, unfortunately. On the sunnier side, perhaps after resolution we can see reduced friction leading to less attrition/better labor relations moving forward.
Anthony B. Hatch
abh consulting
http://www.abhatchconsulting.com
1230 Park Avenue suite 4A NYC, NY 10128
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