Precision Scheduled Railroading: Short Term Gains at What Cost?

By Dennis R. Pierce, BLET National President

(BLET Editor's Note: The following message from BLET National President Dennis R. Pierce has been excerpted from the February/March 2019 issue of the Locomotive Engineers and Trainmen News.)

INDEPENDENCE, Ohio, April 8 - Much is being made in the railroad industry and other transportation media about the Precision Scheduled Railroading (PSR) wildfire sweeping from coast to coast. Proponents of PSR will tell you that it will prove to be the industry's savior. But it also begs the following question; just what does the industry need to be saved from?

d6c20464-6fbb-484d-81b6-d5f530c4baee.jpgAccording to transportation industry news provider Transport Topics, the combined operating income of the Class I railroads topped $16 billion for the first half of last year, based on company reports. The carriers are now well into their second decade of ever increasing profits, setting new records virtually every year.

So, why the stampede toward PSR? And what does PSR really mean for railroad workers, shippers and the nation as a whole? While everyone seems to have a slightly different definition of PSR, there are a couple of common threads in all the definitions.

What the PSR crowd is in unanimous agreement on is that the process will be driven by maximization of every single asset. That includes even the fixed-point shippers, as Norfolk Southern and Union Pacific eliminated more than 425 domestic and nearly 100 international origin-and-destination interline pairs in just the first six weeks of the year.

As a result, hundreds of locomotives and cars already have been mothballed, and that number will increase into the thousands in the next few years. Dozens of shops and yards have already been closed or are slated to be shuttered.

And where a line doesn't pass muster under the profit maximization test it will be sold off or leased to some short line. NS did just that last year with an entire operating division, and CSX has been trying to do with its main line along the Florida Panhandle since last fall.

While all this is unfolding, thousands of railroad workers already have been furloughed.

For BLET members, there are signs beyond yard closures, demotions and furloughs. Increasing numbers of Distributed Power locomotives are used to run trains of dangerous lengths in order to eliminate road jobs, vastly exceeding the train lengths that current communication technology can manage.

Of even more concern is that many railroads refuse to consider the introduction of actual scheduling for our work shifts in road freight service. There is no consistent "precision scheduled railroading" insofar as BLET members are concerned. Predictability for road freight crews on many railroads is all but non-existent, creating avoidable fatigue risks every day. And the carriers continue to complain about crew size even when a single crew of two is moving hundreds of truckloads hundreds of miles every day across America. All of this combined creates the potential for a much less safe workplace, all in the name of short term profits.

What is the purpose of all this asset maximization? At a conference held in Atlanta in February NS identified three key targets for investors.

One was that it plans to reduce its operating ratio, which measures operational costs as a percentage of revenue. The carrier's operating ratio was 65.4 percent in 2018. NS vows to slash that ratio by over 8 percent in just three years' time.

The second is that NS plans a dividend payout ratio of 33 percent. What this means is that one out of every three dollars in profits will be paid to shareholders as a dividend.

On top of that, the third key is that NS plans to continue share repurchases using free cash flow and borrowing capacity. In other words, much of the two dollars in profit that are not paid out in dividends will be used to buy back stock and, if there isn't enough money to do that, then the railroad will borrow money for buybacks.

These financial goals reveal PSR for what it really is ... a scheme to suck up as much of the railroad's revenues as possible and distribute it to investors, particularly to the hedge funds that own an ever-increasing stake in the industry.

PSR is nothing more than what has been called by many industry observers, and with good reason, vulture capitalism. Hedge fund investors swoop into a company and drive down operating costs in order to wring out every possible dime in profits, but don't share those profits with the workers who created them. They buy back stock to pump up the price, and when they run out of cash they borrow against the company's assets to buy back more stock and pump up the prices some more. At the same time, operational downsizing cuts are removing much more than "fat"; they cut into the muscle and bone of the operation and are much harder to repair when the hedge fund investors move on to greener pastures.

And what happens when this merry-go-round stops? Just ask the folks who used to work for Sears, or Kmart, or Toys 'R' Us, to name just a few of the more recent victims of vulture capitalism. Their companies were cannibalized in the name of making wealthy investors even wealthier.

To be sure, it is very unlikely that CSX or KCS or NS or UP will disappear from the economic map the way those companies did. But history instructs what happens when vulture capitalist schemes like PSR have squeezed all of a railroad's assets dry.

In 1968 the Pennsylvania and the New York Central railroads merged to become the Penn Central. When it became apparent that the two operations were not a good match, a system-wide cannibalization and liquidation of assets began so that stock prices could be maintained and dividend payments continued. Penn Central's shippers and workers were mere afterthoughts. Less than two and a half years after the merger, the Penn Central became the largest corporation in U.S. history - to that point - to declare bankruptcy ... and the carcass of the railroad was dumped on the nation's taxpayers to rebuild.

Significantly, Burlington Northern Santa Fe, which is the only privately-owned Class I railroad in the country, has said "Thanks, but no thanks" to PSR. Perhaps BNSF understands this history, or maybe it knows that short-term gain for a few ultra-wealthy investors at the cost of long-term pain for everyone else is not a plan for long term success.

 

Former Republican President Theodore Roosevelt said in 1913, four years after he left the White House, that "Of all forms of tyranny, the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of a plutocracy." Time will tell if PSR is what the railroad industry needed. Unfortunately, much harm could come to the nation's railroad infrastructure by the time that question is answered.

Locomotive Daily Inspection Checklist

Brothers and Sisters,

The implementation of PSR on Union Pacific has caused a reduction in the mechanical forces that have historically done the required daily inspections on our locomotives.  The daily inspections are more frequently being done by our Locomotive Engineers that have not been trained to do the inspections. 

Our General Committee has created a checklist for our Locomotive Engineers to use when they have been instructed to do the daily inspections.  This checklist was created using the Air Brake and Train Handling Rules currently in effect, always verify there have been no changes to these rules.   

We are currently in the process of distributing the checklist to your BLET Local Chairman.

You will still file a basic day penalty claim for doing the locomotive inspection where there are mechanical forces on duty. 

Ronnie Rhodes

Engineer Training Board TE23/TE24

 

For those who are being assigned to an Engineers Training Board TE23/TE24, you will be paid at the Guaranteed Extra Board Rate.

Memorandom

Violations of FRA Regulations

Brothers,

 

  In response to President Pierces letter concerning:

 

             If a crew is ordered to exceed their permissible Hours of Service, they should avoid putting themselves in a position where they could be subject to charges of insubordination. Rather, the date and time the order was received, and the identity of the Carrier official giving the order, should be documented. All suspected Hours of Service violations should be reported, in writing, to the member's Division Legislative Representative, who will forward the reports to the applicable State Legislative Board Chairman for handling with FRA. The SLBCs for the states identified in the Carrier's initial waiver request are copied hereon for their information.

•             The same process should be used in the following circumstances:

o             when ordered to operate beyond their territorial qualifications;

o             when working with a pilot who is operating beyond their territorial qualifications; and

o             whenever ordered to omit a required brake test, or ordered to perform an alternate, less detailed brake test.

 

All WORKING Engineers are encouraged to take these notes, if required under the circumstances listed above and forward them to one of the respective Legislative Representatives below.

 

Missouri – Mike McGill – Email – [email protected] Cell – 573-421-0246  

Illinois – Victor Crivilare – Email – [email protected]  Cell – 217-663-2292

 

If you are unable to get ahold of one of the above Legislative Reps, feel free to send the information to me for further handling.

 

Brian Young – Email – [email protected]

Message from your GC

Brothers,

The BLET National has been in touch with the FRA Administrator in Washington, D.C. about a waiver to the current Federal HOS law.  The UP is requesting the HOS go from 12 hours to 16 hours.  The National thinks at this point the waiver will be granted.  
 
We have been in unsuccessful negotiations with the UP over the flood issues.  They were wanting us to agree to a guarantee on the pools that in our opinion had too many conditions.  We believe that, especially with the possibility they receive this waiver, that our Members would not draw a dime of guarantee.  The incentives that they offered were tied to an unattainable attendance requirement of no lay off for 30 days. 
 
We will try to keep you guys updated as this develops.  
 
Fraternally,
 
Ronnie

Deadheading By Train

A situation that is happening more and more is Deadheading by train. If you are instructed to deadhead by train this is the claim language to use. Below that I have included the agreement language for you to review. 

 

I was instructed to deadhead (from location) to (end location) on (train id) at (DH time) at the time of this request there was no emergency or circumstance that would make vehicle transportation impossible.   

 

STL HUB Article IV Section B:

3. Transportation: When a crew is required to report for duty or is relieved from duty at a point other than the on and off duty points fixed for the service established hereunder, the Carrier shall authorize and provide suitable transportation for the crew.

NOTE: Suitable transportation includes Carrier owned or provided passenger carrying motor vehicles or taxi but excludes other forms of public transportation. 

STL HUB, Side Letter 4:

This has reference to our negotiations covering the Merger Implementing Agreement entered this date between the Union Pacific Railroad Company, Southern Pacific Lines and the Brotherhood of Locomotive Engineers. During these negotiations, the Organization expressed concern that engineers who expire on the Hours of Service Law would not be transported in a timely manner to the destination terminal.

This will confirm the advice given to you, i.e., that when an engineer ties up on the Hours of Service before reaching the objective terminal, the Carrier will make every reasonable effort to relieve subject engineer and transport him to the tie up point, expeditiously. The Carrier recognized the interests of the railroad and its engineers are best served when a train reaches the final terminal within the hours of service. In the event this does not occur, the Carrier is committed to relieving that engineer and providing transportation as soon as practical. It is understood that this commitment contemplates transportation in the form of passenger vehicle, and engineers shall not be transported to the tie-up point after Hours of Service tie-ups by means of train except in case of emergency or extraordinary circumstances which make providing a vehicle impossible.

Blueprint Sequence Claim

Basic Sequence 

A pool freight engineer arriving at the far terminal out of position will, upon arrival at the far terminal, be placed in the same relative position on the board as the engineer held at the home terminal. If the engineer cannot be returned to the proper position because the engineer has not received the necessary Hours of Service rest, the engineer will, upon arrival at the home terminal, be placed in the same relative position on the board as the engineer held at the home terminal at the start of the previous trip. Side Letter 26 St. Louis Hub Agreement

 

If called out of basic sequence claim 130 miles penalty account called out of proper sequence in the (Pool as example RE05).  I am assigned to turn (turn ID as example UP-01) which was called out of proper sequence on (date).  Describe event and include board standings, trans log of turns called on claim date and copy of basic sequence for the pool.  CMTS documents needed include Board Inquiry working and blue print, Job History and Snap Shot. 

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