Labor is Key to Rail Future

March 25, 2009
Morgan Stanley Research analysts say risks of regulation for the US rail industry can be averted with labor's cooperation.

Anti-railroad rhetoric has grown in Washington, say William Greene and Adam Longson of Morgan Stanley Research as recent rate case decisions and the re-introduction of anti-trust legislation have created more doubts about the long-term rail pricing story. With labor in the debate, railroads could earn the support needed in Washington, but there is a cost for the railroads.

The United Transportation Union (UTU) issued a statement urging railroads, rail customers, and labor to meet "amicably and quickly" to resolve disputes over rail regulation, said the Morgan Stanley analysts. The union believes a mediated solution is necessary to end debates in Congress over rail regulation that could jeopardize the long-term future of rail transportation for all stakeholders.

The mood in the Democrat-dominated capitol is not so much anti-railroad as it is pro-labor, say the analysts. No major rail legislation has passed without labor support, they continue. That means labor will be critical to fending off harmful legislation. Issues like one-man crews are likely to go to labor as rail management takes a serious look at how to earn labor support. While the analysts expect railroads to outperform in a market rebound, they do caution that headlines alone could affect the investment climate. Issues like regulation and anti-trust could overshadow some positive results among top performing railroads.

In a press release, the United Transportation Union (UTU) urged railroads and their customers to “join with the UTU and others in rail labor to meet jointly to resolve, amicably and quickly, a long-simmering and too-often acrimonious quarrel over how railroads are regulated by Congress and the US Surface Transportation Board.”

"This dispute threatens the long-term viability of the railroad industry, its ability to increase capacity and improve customer service, its image as the environmentally superior transportation mode, and its immediate ability to attract and invest federal stimulus funds for further productivity enhancements that will benefit rail customers, the carriers and rail labor," said UTU International President Mike Futhey.

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