Michigan businesses brace again for possible U.S. rail strike

• Rail unions did not reach full approval of a proposed contract after the last of 12 concluded voting over the weekend
• The vote was close and the union wants to head back to the bargaining table before a strike is possible in early December
• Michigan counts on rail to move 20 percent of its freight, representing billions of dollars

Nov. 29: Michigan business hopeful as Congress poised to end rail strike threat

Michigan businesses for the second time this year are unsettled over renewed potential for a national rail strike that could slow billions of dollars in cargo shipments at the start of the holiday season.

A disruption could impact supply chains for autos, chemicals needed for manufacturing and water treatment, fuel, food and stores, while also leaving rail commuters stranded.

“A nationwide rail strike during the peak holiday season will be devastating for American businesses, consumers and the U.S. economy,” National Retail Federation president and CEO Matthew Shay said Monday. 

Related:

• U.S. railroad shutdown would leave 20 percent of Michigan freight stranded
• Urgency fades for Michigan businesses as national freight rail strike averted

A labor strike had been averted in September after the White House brokered a tentative deal for the 12 unions working on the nation’s railways to keep trains moving. 

However, recent votes by the two largest unions on whether to accept the deal were close, with one— the SMART Transportation Division — narrowly defeating the proposal when voting closed at 11:59 p.m. Sunday. That leaves four of the 12 unions without contract agreements. 

Union officials called the outcome “disheartening” on Monday, and said they’re heading back to the bargaining table.

If no agreement is reached toward a contract during the cooling off period, a strike could start December 9. A smaller union representing engineers is eligible to strike December 5, but said it pushed its target date back to align with the International Association of Sheet Metal, Air, Rail and Transportation Workers.

“There is a distinct possibility that Congress may pass legislation to resolve this dispute,” wrote Jeremy Ferguson, president of the SMART Transportation Division on Monday. Another option, he said, is that Congress could impose an agreement before December 9.

While a work stoppage would affect passenger rail, the uncertainty is once again worrying Michigan businesses and utilities that count on rail service to move 90 million tons of cargo, representing about 20 percent of the state’s freight.

If a strike looks imminent, many cargo restrictions will be initiated days ahead of a deadline, John Dulmes, executive director of the Michigan Chemistry Council, told Bridge Michigan on Monday. The effects would ripple across the state, he added, since chemicals are at the beginning of many types of production, from food to semiconductors.

“The flow of critical chemical products by rail would come to a halt resulting in potential negative impacts to crop protection & food production, electricity generation, and even automobile, semiconductor & steel production,” Dulmes wrote in a letter to U.S. Sen. Debbie Stabenow, D-Michigan, urging federal involvement to reach a “mutually agreeable” solution between workers and the railways.

Dulmes pointed to a new economic analysis released by the American Chemistry Council that estimates a one-month rail strike would have a “profound”  impact on approximately $2.8 billion in chemical cargo that is moved weekly across the country.

A month-long strike would result in an overall hit to the economy of $160 billion, or one percentage point of GDP, while producer prices would increase 4 percent.  At the same time, the U.S. economy would lose 700,000 jobs across multiple industries, the report said. 

Some of the largest U.S. chemical businesses that will be affected are Michigan-based Dow, along with 3M, Dupont, Exxon Mobil, Chevron, BP and Eli Lilly, Dulmes said. 

Union members have been working without a contract since 2019, and since the pandemic have said they’ve been understaffed, forced to work overtime and faced repercussions when taking time off. 

The Association of American Railroads said on Monday the proposed contract would make “freight railroad employees among the nation’s most highly compensated workers.”

The AAR, an association representing rail owners, noted that most of the unions supported the negotiated agreement that called for a 4.1 percent wage increase effective immediately and a 24 percent wage increase by 2024. The agreement also ensures premium health care with employee contributions capped at 15 percent, and it addresses scheduling concerns that peaked in the past two years, the association said.

The next step, the AAR said, should come from Congress “to act and institute the terms supported by the majority of the unions, guaranteeing certainty for rail customers and the broader economy.”

State business advocates, including the Michigan Farm Bureau, are asking members to contact their representatives in Congress to push for a resolution.

In the meantime, many Michigan companies are scrambling to explore rail alternatives, Dulmes said, but few exist as transportation hiccups continue in the nation’s supply chain as the pandemic recedes. Neither trucking capacity nor storage availability is widely available.

“They're kind of limited in some of the options because the trucking capacity either just isn't there,” Dulmes said of the state’s businesses using chemicals transported by rail. “They also don't have enough storage on hand. They need to both get product in as well as send products out.”

This second threat of a strike in just a few months raises questions about rail reliability, Dulmes said, since so much of the economy counts on it. Rail costs have fluctuated over the past two years, but normally the shipping mode is more efficient with less impact on the environment than trucking, he added.

“The railroads really need to figure it out and get their act together,” Dulmes said, “or it’s just going to decline as an option for many shippers.”