How did major railroads perform in 2010?

Reviewing their calendar-year and fourth-quarter profit statements, one wouldn’t know they were operating in the midst of a nationwide recession.

Profits soared, stock dividends were raised and operating ratios improved. (Operating ratio — a railroad’s operating expenses expressed as a percentage of operating revenue — is considered by economists to be the basic measure of carrier profitability.)

Wall Street analyst Ed Wolfe reports the level of freight car and intermodal loadings for the year registered “the best” year-over-year growth in more than 50 years.

Wolfe and other analysts also point to the railroads’ pricing strength — the ability to raise rates on shippers with limited effective alternatives to railroad transportation. Many long-term contracts for hauling coal are expiring, and substantial rate increases on that traffic already are reflected in new contracts.

Indeed, railroad CEOs are predicting another strongly profitable year in 2011, which was reflected in year-end railroad stock prices, which were flirting with record highs.

Following are profit reports from the major railroads:

 Canadian National:

  • Fourth-quarter profit increased 19 percent.
  • Calendar-year 2010 profit increased 13.5 percent.
  • Operating ratio improved four percentage points to 63.6.
  • The stock dividend was raised 20 percent.
  • The year-end stock price was up 38 percent. Analysts predict CN’s stock price will rise another 4 percent in 2011.

 Canadian Pacific:

  • Fourth-quarter profit increased 34 percent.
  • Calendar-year 2010 profit increased 39 percent.
  • Operating ratio improved four percentage points to 77.6.
  • The stock dividend was raised 9 percent.
  • The year-end stock price was up 45 percent. Analysts predict CP’s stock price will rise another 8 percent in 2011.

 CSX:

  • Fourth-quarter profit increased 46 percent.
  • Calendar-year 2010 profit increased 35 percent.
  • Operating ratio improved four percentage points to 71.1.
  • The stock dividend was raised 26 percent.
  • The year-end stock price was up 62 percent. Analysts predict CSX’s stock price will rise another 6 percent in 2011.

 Kansas City Southern:

  • Fourth-quarter profit increased 47 percent.
  • Calendar-year 2010 profit increased 82 percent.
  • Operating ratio improved 8.8 percentage points to 73.2.
  • The year-end stock price was up 74 percent. Analysts predict KCS’s stock price will rise another 7 percent in 2011.

 Norfolk Southern:

  • Fourth-quarter profit increased 31 percent.
  • Calendar-year 2010 profit increased 45 percent.
  • Operating ratio improved 5 percentage points to 71.9.
  • The stock dividend was raised 11 percent.
  • The year-end stock price was up 41 percent. Analysts predict NS’s stock price will rise another 8 percent in 2011.

 Union Pacific:

  • Fourth-quarter profit increased 31 percent.
  • Calendar-year 2010 profit increased 47 percent. UP Chairman Jim Young said 2010 was the “most profitable year in Union Pacific’s nearly 150-year history.”
  • Operating ratio improved 5.5 percentage points to 70.6.
  • The stock dividend was raised 40 percent.
  • The year-end stock price was up 60 percent. Analysts predict UP’s stock price will rise another 8 percent in 2011.

 BNSF:

As BNSF is now privately held, it no longer reports detailed financial data.

A UTU member will be collecting more than $95,000 in penalties assessed against BNSF by the Occupational Safety & Health Administration (OSHA) for the railroad’s violation of the Federal Rail Safety Act.

OSHA found BNSF guilty of intimidating and harassing an injured UTU member who reported his workplace injury to the Federal Railroad Administration. The monetary award covers back wages, compensatory damages, attorney’s fees and punitive damages.

This is the first major award by OSHA after UTU International President Mike Futhey requested UTU designated legal counsel ramp up efforts to assist members whose whistle-blower rights under the Federal Rail Safety Act have been violated.

BNSF employee Ronald Helm (Local 1532, Kansas City), targeted for discipline after being injured on the job, didn’t feel so helpless against his powerful employer after his local chairperson, Joe Lopez, attended a seminar on whistle-blower rights given by a designated legal counsel. Helm is a 33-year veteran of the former Santa Fe and BNSF.

With assistance from General Chairperson Jim Huston (BNSF, GO 009), and committee Secretary Rex Pence, a case was developed and presented to OSHA, which administers the law as it applies to whistleblower protection.

Helm had been assessed a 30-day record suspension with no time lost, given one-year probation, and assessed 40 points against his personal performance index after reporting his personal injury to the FRA. Had the injury not been FRA reportable, he would have been assessed only five points.

BNSF said the penalty against Helm was for using a pin lifter, instead of a hickory stick, to adjust mismatched couplers in BNSF’s Argentine, Kan., yard. Evidence showed BNSF had not made the hickory stick available until after Helm’s injury.

Moreover, according to OSHA, BNSF’s discipline was arbitrary because BNSF typically does not discipline workers for using different tools if work is performed in a timely manner.

“An employer does not have the right to retaliate against employees who report work-related injuries,” said OSHA. And BNSF’s points system serves to discourage the proper reporting of workplace injuries, said OSHA.

In addition to the monetary penalty, BNSF was ordered to inform each of its employees in its Kansas Division — and in writing — of their whistle-blower rights under the Federal Rail Safety Act of 2007.

“This case and the work of our designated legal counsel shows that the federal law protecting whistle-blowers has teeth and that it can and will be used to stop the intimidation and harassment faced by our members,” Futhey said.

“UTU members who think they have been retaliated against for reporting workplace injuries should discuss the matter with a UTU designated legal counsel, their general chairperson or state legislative director,” said Futhey.

Complaints must be filed with OSHA within 180 days of the alleged employer retaliation.

Click on the following link for a listing of UTU designated legal counsel:

https://smart-union.org/td/designated-legal-counsel//

Click on the following link for a detailed OSHA fact sheet:

www.osha.gov/Publications/OSHA-factsheet-whistleblower-railroad.pdf

First it was Union Pacific wanting to have its trains inspected in Mexico.

Now BNSF is making the same plea to the FRA — and as the UTU and other rail unions did in the case of UP — the FRA is being advised to, “just say no.”

Putting safety first cannot co-exist with farming out crucial safety inspections to the lowest bidder, the UTU and the other labor organizations told the FRA in the case of both UP (in October) and BNSF (in December).

To begin with, the Rail Safety Improvement Act of 2008 established standards to be met when railroads seek safety waivers, such as wanting trains inspected south of the border.

The UTU, the Brotherhood of Locomotive Engineers & Trainmen, the Brotherhood of Railroad Signalmen, the Brotherhood of Maintenance of Way Employes and the American Train Dispatchers Association contend that neither UP nor BNSF have demonstrated that the inspections in Mexico will meet minimum FRA standards.

In fact, neither UP nor BNSF has shown that the FRA will have the uninhibited authority to examine the Mexican facilities where the safety inspections would be made.

Furthermore, said the UTU and other labor organizations, moving the inspections south of the border would be in direct conflict with congressional policy — and eminent common sense — to preserve employment in the U.S. during this lengthy and stalled recession.

The labor organizations told the FRA that “it is common” for cars from Mexico to enter the U.S. “with handbrakes applied, retaining valves set, angle cocks closed and bad order cars located within the train.

“Not to be overlooked is the fact that these trains also frequently are transporting hazardous materials cars,” the UTU and other labor organizations told the FRA.

“Historically, the FRA has denied requests for waivers of air brake and mechanical safety inspections on trains entering the U.S. if the request involves movement of the trains past a point where the inspections can be performed,” said the labor organizations.

By Assistant President Arty Martin and
GS&T Kim Thompson

Among the most difficult challenges facing us in 2009 arrives in November, when we exchange Railway Labor Act Section 6 notices with the carriers — the list of each side’s demands for the next collective bargaining round.

Our national rail contract is open for renewal on Jan. 1, 2010, and this upcoming bargaining round will be among our toughest ever given the deteriorating state of the national economy, the advance of technology and Wall Street pressure on railroads to deliver increased profits.

While the national rail contract affects members on only BNSF, CSX, Kansas City Southern, Norfolk Southern and Union Pacific, these national contracts tend to be a trend setter for bargaining on other freight railroads and Amtrak, and are frequently referred to by commuter railroads.

A reasonable individual might have good reason to assume the upcoming bargaining round will be favorable to employees. After all, railroads are among today’s few solidly profitable industries in America, and Wall Street confirms they have unprecedented pricing power. Moreover, the carriers continue to improve productivity, and it is the workers — especially operating craft employees — who are most responsible.

Indeed, the railroads’ own figures, as published by the Association of American Railroads, show that revenue ton-miles per employee — the best benchmark for measuring productivity — has soared five-fold since 1980, from 2.1 million revenue ton-miles per employee to almost 11 million revenue ton-miles per employee today.

Accordingly, the railroads’ labor costs have declined by 43 percent — from 46.5 cents of every revenue dollar in 1980, to 26.4 cents of every revenue dollar today.

This is because the employee headcount has dropped from 532,000 in 1980 to 236,000 today — a 56 percent decline in workers, while productivity has soared. Among train and engine service employees, the head count fell from almost 136,000 in 1980 to fewer than 70,000 train and engine service employees today.

Unfortunately, none of this matters to the carriers at the bargaining table, because it is hot Wall Street dollars that set the tone of carrier Section 6 notices.

Perhaps you have noticed Wall Street investment funds have been buying up shares of the major railroads.

BNSF, for example, is 46 percent owned by Wall Street investment funds. At CSX, the figure is 35 percent; at Union Pacific, 34 percent; at Kansas City Southern, 33 percent; and at Norfolk Southern, 32 percent, according to Bloomberg News.

These investment funds, some of them based in foreign countries, have a narrow focus of increasing stock price and increasing dividend payouts — often without concern to an appropriate level of railroad maintenance, and certainly without concern for employees and their families.

For sure, investment funds are behind the anti-labor policies at Wal-Mart and policies that export good American jobs overseas.

What a labor union does is to fight back — and the UTU will be spending the months leading up to the exchange of Section 6 notices by building our case on behalf of our members.

Who Owns the Railroads

BNSF 
Berkshire Hathaway21.8%

Capital Research Global

5.6%

Barclays Global

3.3%

UBS Global

3.0%

Vanguard Group

2.8%

State Street Corp.

2.7%

Fidelity Mgt.

2.4%

Capital World Invest.

1.7%

JP Morgan Chase

1.2%

Barrow, Hanley

1.2%

Total

45.7%

  

 CSX

 

Citigroup

5.4%

Barclays Global

4.7%

Children’s Invest. Fund

4.5%

3G Capital

4.4%

Deutsche Bank

4.2%

State Street Corp.

3.6%

Vanguard Group

3.2%

Tiger Global

1.9%

Bank of N.Y.

1.6%

JP Morgan Chase1.3%

Total

34.8%

  

 KCS

 

Neuberger Berman

6.2%

Wellington Mgt.

5.7%

Marathon Asset Mgt.

4.1%

Barclays Global

3.6%

Vanguard Group

3.0%

Keeley Asset Mgt.

2.8%

Bank of America

2.4%

Prudential

1.9%

Munder Capital Mgt.

1.9%

AXA

1.8%

Total33.4%
  
Norfolk Southern 

Capital Research Global

5.0%

Marsico Capital Mgt.

4.8%

JP Morgan Chase

4.7%

Barclays Global

4.5%

State Street Corp.

3.2%

Vanguard Group

3.1%

 Fidelity Mgt.

 2.7%

Pioneer Investment

1.3%

Dimensional Fund

1.3%

Capital World Invest.

1.1%

Total

31.7%

  

Union Pacific

 

Marsico Capital Mgt.

6.6%

Children’s Invest. Fund

4.7%

Barclays Global

4.4%

Capital World Invest.

3.4%

State Street Corp.

3.2%

Vanguard Group

3.0%

AXA

2.9%

Fidelity Mgt.

2.5%

Bank of America

1.9%

Berkshire Hathaway

1.8%

Total

34.4%

Source: Bloomberg News

Brothers and Sisters:

We know our rail members employed by BNSF, CSX, KCS, NS and UP are anxious about the status of talks with the National Carriers’ Conference Committee (NCCC).

The talks resume Jan. 22 in Jacksonville, Fla.

It has been a year since the UTU and the NCCC held negotiations; and, in the interim, other organizations did reach a new agreement with the carriers.

Our talks stalled, in part, over the matter of entry-level pay tied to training (which was the subject of a side-letter in the previous round of negotiations).

The talks are under the control of the National Mediation Board, and this session in Jacksonville will be the first with President Futhey leading the negotiating team.

There are some changes in the negotiating team owing to retirements and election-related departures. Assistant President Martin has been added to the team, having been on the team that negotiated in two previous rounds.

We do not anticipate we will be returning to square one with the carriers, as there was progress in previous sessions even though a tentative agreement was not forged.

We can say this in advance of the Jan. 22 resumption of negotiations: The UTU negotiating team will encourage a new and progressive attitude by both sides.

As you know, successful negotiations cannot and do not occur in public, but every UTU member affected should be assured that the UTU negotiating team recognizes the issues near and dear to our members, and your negotiating team intends to forge a tentative agreement that can and will be ratified by the membership.

We will provide an update on progress as soon as we are able.

Meanwhile, we have made significant progress in updating International vice president assignments, with the majority of requests for assistance from general committees — some extending back to mid-October — having been made.

Also, assignments for UTU representation on various FRA safety-related committees, as well as National Transportation Safety Board incident and accident committees, are in the process of being updated.

During the past week in Cleveland, we met with the dedicated and loyal International headquarters staff and assured them that this administration is sensitive to their concerns as we embrace change. We emphasized that we are all members of working families, and that working families survive and prosper by standing together and working together.

Additionally, we are working with staff of the UTUIA to ensure that the insurance needs and concerns of active and retired UTUIA policy holders are serviced properly and in a timely manner.

Another area receiving our attention is the Discipline Income Protection Plan (DIPP). The carriers have been accelerating the imposition of discipline and dismissal of UTU members. While we have made some changes to ensure the continuation of the DIPP, the accelerated discipline and dismissal of employees by the carriers requires a complete review of the DIPP.

It is essential to emphasize that while other job benefit plans are looking for ways to AVOID paying claims, the UTU’s DIPP has remained steadfast in looking for ways to pay claims of participants. We intend to shore up this plan and continue to provide the peace of mind expected by members and their families who participate in the DIPP.

With regard to the SMART merger, recall it is on hold through a federal-court temporary restraining order. A status telephone conference call with the judge, involving all parties to the case, is scheduled for Feb. 1, and a court-hearing is scheduled for Feb. 8 and 9. We shall be reporting more on this issue as events warrant.

Finally, we have scheduled a meeting with all International officers, general chairpersons and state legislative directors in New Orleans for the end of January.

On Jan. 29, which is a meeting for International officers only, we shall fulfill a campaign promise to provide training and education in available computer software related to their jobs, as well as work-related resources available to them.

On Jan. 30, International officers, general chairpersons and state legislative directors will be provided a review of the union’s financial condition. Also, at the Jan. 30 meeting, there will be a discussion of various issues facing the International, its officers and membership.

General chairpersons and state legislative directors should attend the Jan. 30 meeting only.

In solidarity,

Mike Futhey, International President

President@utu.org

Arty Martin, Assistant President

AsstPres@utu.org

Kim Thompson, General Secretary & Treasurer

GST@utu.org