Rail Strike Threat Eases as 10 Unions Adopt Obama Panel Plan

Unions for more than half of the workers bargaining with the largest U.S. freight railroads have reached agreements, reducing the threat of a walkout that might cost the economy $2 billion a day.

“A strike is unlikely,” said Christian Wetherbee, an analyst at Citigroup Global Markets Inc. in New York. “The more that you get to sign up for an agreement, the more likely that you end up with a resolution” by the deadline.

Four more unions have made deals, bringing the total to 10, the National Railway Labor Conference, which represents the railroads, said yesterday. The accords, which cover about 60 percent of the 132,000 employees in negotiations, implement recommendations of a panel appointed by President Barack Obama, the rail group said, without disclosing details.

If the rail operators and the remaining three unions don’t reach agreements during a 30-day “cooling off” period that ends Dec. 6, the workers are permitted to strike under the Railway Labor Act and the railroads can lock them out. More than 30 railroads, including Union Pacific Corp. and Warren Buffett’s Burlington Northern Santa Fe, are involved in the talks.

The Presidential Emergency Board’s proposals are aimed at preventing a walkout, which the Association of American Railroads said would cost the U.S. economy as much as $2 billion a day. Before the government review, the companies had ratified an agreement with the United Transportation Union and its yardmasters division, which represent almost 40,000 employees.

Congressional Role

Congress probably would legislate a contract similar to the presidential board’s recommendations if rail workers went on strike, Wetherbee said. Such legislation was passed in 1 1/2 days during the last rail walkout, he said.

“There’s more risk to them by going in front of Congress than to actually signing this deal,” Wetherbee said.

Obama’s board recommended an 18.6 percent pay increase over six years. That compares with the 19 percent raise over five years sought by unions and the carriers’ offer of 17 percent over six years.

The agreements announced yesterday involve the International Brotherhood of Boilermakers, Blacksmiths, Iron Ship Builders, Forgers and Helpers; the Sheet Metal Workers’ International Association; the National Conference of Firemen & Oilers; and the Brotherhood of Railroad Signalmen.

The three unions still in talks include the Brotherhood of Locomotive Engineers and Trainmen and the Brotherhood of Maintenance of Way Employes.

‘Two Big Ones’

“You have two big ones out there,” said Tony Hatch, an independent railroad analyst in New York. “Those are the ones that if they strike, will shut the railroads down.”

A strike might have a bigger effect than usual because consumers may have delayed holiday purchases, meaning railroads may carry more freight than normal in December, Hatch said.

In previous years, a strike at that time “would’ve been after the money is made,” he said. “Now the money is still going to be being made then.”

Hatch said any potential strike still isn’t a reason to buy or sell railroad shares.

Shippers haven’t shifted business to trucks amid concern that a strike would reduce ability to move goods by rail, said Wetherbee. He has a “buy” rating on Union Pacific, CSX Corp. and Norfolk Southern Corp., the three biggest publicly traded U.S. railroads. Wetherbee said the labor talks haven’t affected his outlook on the companies.

Union Pacific, based in Omaha, Nebraska, gained 1.1 percent to $102.04 at 4:15 p.m. in New York. Jacksonville, Florida-based CSX rose 0.9 percent to $21.64 and Norfolk Southern, based in Norfolk, Virginia, advanced 0.9 percent to $73.29.

“The deals get done and we don’t see a strike,” Wetherbee said. “We think that’s the highest likelihood.”

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