One union rejects deal days ahead of rail strike deadline

Members of one union rejected a tentative deal with the largest U.S. freight railroads Wednesday, while two ratified agreements and three others remained at the bargaining table just days ahead of a strike deadline, threatening to intensify snarls in the nation's supply chain that have contributed to rising prices.

About 4,900 members of the International Association of Machinists and Aerospace Workers District 19 voted to reject the tentative agreement negotiated by IAM leadership with the railroads, the union said Wednesday.

But the IAM agreed to delay any strike by its members until Sept. 29 to allow more time for negotiations and to allow other unions to vote.

Government officials and a variety of businesses are bracing for the possibility of a nationwide rail strike that would paralyze shipments of everything from crude and clothing to cars, a potential calamity for businesses that have struggled for more than two years due to COVID-19 related supply chain breakdowns.

Railroads are trying to reach an agreement with all their other unions to avert a strike before Friday’s deadline. The unions aren't allowed to strike before Friday under the federal law that governs railroad contract talks.

There are 12 unions — one with two separate divisions — representing 115,000 workers that must agree to the tentative deals and then have members vote on whether to approve them.

All the tentative deals are based closely on the recommendations of a Presidential Emergency Board Joe Biden appointed this summer that called for 24 percent raises and $5,000 in bonuses in a five-year deal that’s retroactive to 2020.

Those recommendations also includes one additional paid leave day a year and higher health insurance costs.

Can trucks take up the slack?

Michael Gannon, chief operating officer at CRST in Cedar Rapids, said the trucking and logistics company already has seen a 50 percent increase in customer demand to move additional freight over the road amid growing concern about the potential for a rail strike.

“We obviously can’t take that much tonnage,” Gannon said.

“We just don’t have the capacity, and that’s the problem through the supply chain. The industry doesn’t have 50 percent slack capacity.”

He said the company is doing its best to work with existing customers by brokering with other carriers and offering financial incentives to drivers to stay out on the road longer to add capacity and pick up additional loads.

Gannon noted one major supplier turned to the company with a request to move more than 150 truckloads a day, “and saying, ‘Cover whatever you can.’

“If they’re an existing customer, we can probably cover five to 10” additional truckloads a day, he said. “Our ability to just shift and start covering 185 (truckloads) a day isn’t possible.”

CRST has begun taking shipments that some customers have diverted from rail as railroads stop taking shipments in advance of a possible worker strike, Gannon said.

“We’re trying to cover for certain customers 10 percent to 15 percent of that,” he said. “That’s possible with our third-party network, working with our fixed fleet. But beyond that, it’s going to be a challenge to cover much more.”

Gannon noted roughly 40 percent of the nation’s long-distance trade moves by rails and the idling of 7,000 trains daily would trigger retail product shortages and widespread manufacturing shutdowns.

Halting that many long-distance daily freight trains in the United States would require more than 460,000 additional long-haul trucks every day, which is not possible based on equipment availability and an existing shortage of 80,000 drivers nationwide, Gannon said.

He cited a letter the American Trucking Associations sent to leaders on Capitol Hill urging Congress to impose contract recommendations from the White House’s Presidential Emergency Board.

The ATA, in its letter to congressional leaders, cautioned against merely extending the negotiation timeline further, which it said would push a potential strike deeper into the holiday season when the supply chain is already under added pressure.

The trucking industry is freight rail’s largest customer, with the ATA warning “any rail service disruption will create havoc in the supply chain and fuel inflationary pressures across the board.”

“With a supply chain that’s already fragile, if businesses are already having supply-chain issues this just exacerbates it,” Gannon said, adding a looming rail strike has the potential to be as or more disruptive to the country’s supply chain than the COVID-19 pandemic.

“After the first week to two weeks (of the pandemic), we did not see any meaningful drop in capacity,” Gannon said. “In fact, if anything, drivers rose to the challenge and became more available.

“This has the potential to take a lot of capacity out of the supply chain, and COVID — at least from the transportation side — I don’t think did that.”

Bridget Christenson, global media relations director for Cargill, which has facilities in Cedar Rapids and elsewhere in Iowa, in an email said the company is “proactively managing our rail pipelines, while exploring alternative modes or commercially reasonable alternatives to minimize the possible impact to our operations.”

A spokesperson for Archer-Daniels-Midland, commonly known as ADM, said the multinational food processing and commodities trading corporation that also has operations in Cedar Rapids and in Iowa, did not have information to share about possible impacts from a rail strike.

A spokesperson for General Mills also declined to comment for this story.

U.S. Sen. Chuck Grassley, R-Iowa, warned Wednesday that inflation would “soar even higher if Biden doesn’t quickly resolve the potential railroad strike.”

“And will result in severe supply-chain disruptions and affect fertilizer and grain (shipments),” Grassley told reporters. “And this is going to be happening right in the middle of harvest.”

Grassley said in a tweet on Tuesday said Biden needs to step in and tell those holding out to keep negotiating or take the deal, and “If he can’t, Congress must.”

Ron Woeste, general manager of the Linn Co-Op Oil Co., said the elevator doesn’t ship grain by rail, relying on trucking instead, and receives fertilizer by barge.

“Here in Eastern Iowa, it all pretty much comes on truck,” Woeste said.