Leading trucking interests say potential rail strike would ‘create havoc’ in supply chains

The trucking industry, which is the largest single customer of the U.S. freight railroad system, is warning that a strike set for Friday by the U.S.-based Class I freight railroads would be an economic calamity that the nation cannot afford.

The U.S. Chamber of Commerce estimates a shutdown of the nation’s rail service would have enormous impacts on the economy, costing more than $2 billion per day.

Plus, top trucking executives say they do not have close to enough capacity to handle shippers’ contingency plans to handle freight idled by a strike. The Association of American Railroads (AAR) agrees, estimating that it would take 467,000 long-haul trucks daily to haul what the railroads do.

“There simply aren’t enough trucks or truck drivers to handle that volume,” the AAR said in a recent report. Coal, chemicals and grain are major bulk shippers for the rails, although auto parts and automobiles also rely heavily on rail shipments.

Right now, everybody is scrambling to obtain adequate capacity in case of a strike.

“As of yesterday, we only had one call looking for extra capacity. Now just this morning, we’ve had a little more than 10,” Greg Orr, executive vice president of truckload for CFI, a unit of Heartland Express, the nation’s eighth-largest TL carrier. “So there’s a little more activity today.”

Orr said his company, like many in the $332 billion truckload market, was willing to entertain some potential new customers. But he said there simply is not enough excess capacity to handle all the freight a national freight rail shutdown would produce.

“Based on what we’re seeing, there are pockets where we have (sufficient) availability,” Orr said. “I’m telling our team to tell shippers, ‘Give us flexibility. I may not have capacity today, but I might have it Saturday.’”

Orr said that while delivering on time is usually a top priority for trucking, in cases of a rail strike, customers need to be flexible.

“It’s more about getting freight moving and providing options,” Orr said. “I think things will get more heightened over the next couple days.”

As for adequately providing enough capacity in case of a national rail strike, Orr said, “There’s not enough capacity out there. It only takes one day before there’s a ripple effect in the trucking industry.”

Orr said he had a “gut feeling” the federal government would step in and impose another cooling off period, the first of which is set to expire Friday.

“It’s a big deal if you go two or three days without rail service,” Orr said. “There’s not enough capacity out there to support this for any extent of time. It only takes about a day and a half (of no deliveries) for shortages to creep into the supply chains.”

The American Trucking Associations (ATA) is calling on Congress to help resolve ongoing labor negotiations in the freight rail industry should the parties fail to reach a mutual agreement when the current cooling off period expires on Friday.

The trucking industry is freight rail’s largest customer. In a letter sent to Capitol Hill, ATA is warning of dire consequences for the U.S. supply chain if a strike were to go into effect. 

“Idling all 7,000 long distance daily freight trains in the U.S. 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,” ATA President and CEO Chris Spear said in the letter. “As such, any rail service disruption will create havoc in the supply chain and fuel inflationary pressures across the board.”

Meanwhile, U.S. Chamber of Commerce President and CEO Suzanne P. Clark said any shutdown of the nation’s six largest freight railroads would be “an economic disaster” at a time when the national supply chain is struggling to get back to normal.

“A national rail strike would be an economic disaster—freezing the flow of goods, emptying shelves, shuttering workplaces and raising prices for families and businesses alike, but that is exactly what is likely to happen in less than four days,” Clark said.

To avoid a strike and the catastrophic economic impacts that would follow, Clark said one of three things needs to happen:

• the remaining unions who have not agreed to a deal need to join the ones who have;
• an agreement to extend the current ‘cooling off’ period must be reached; an
• Congress must intervene, as it has in prior situations

“If action is not taken, the nation’s rail service will come to a halt, the negative impacts of which cannot be understated,” Clark added. 

U.S. consumers would be heavily impacted as well.

The Chamber estimates every day there are approximately 205 rail cars full of meat and poultry moving across this country to ensure store shelves are stocked. There are around 6,300 railcars of food and farm products, and a single loaded railcar contains enough wheat for 260,000 loaves of bread.

There also could be a significant reduction in the supply of chlorine for the purpose of water treatment, which could further result in community rationing of clean water.

More than 2,000 carloads carry 75% of all newly finished automobiles. Automakers rely on rail service to transport inventory, and an interruption in rail service would quickly disrupt auto production, experts said.

ATA urged Congress to help implement a contract patterned on the recommendations outlined by the Presidential Emergency Board and cautioned against merely extending the negotiation timeline further. That would push a potential strike deeper into the holiday season when the supply chain is already under added pressure, ATA noted.

“Merely delaying a possible strike through congressional action will simply exacerbate the concerns of consumers and industry,” Spear said. “A possible strike or lockout in October or November is arguably worse than one next week—although any disruption will cost the nation billions of dollars of lost productivity,” Spear added.