White House Moves To Avert Freight-Rail Strike

The White House stepped into an impasse between major freight railroads and labor unions, attempting to avert a potential strike as early as December.

The Obama administration appointed a "presidential emergency board" Thursday to resolve stalled contract talks that began in early 2010 and cover about 94,000 workers, or roughly two-thirds of the industry's unionized employees.

More than 30 railroads are involved, including the Class I railroads of Warren Buffett's Burlington Northern Santa Fe; Union Pacific Corp. (UNP); Kansas City Southern (KSU); Norfolk Southern Corp. (NSC); and CSX Corp. (CSX).

A strike is still viewed as unlikely, but the prospect of a disruption of freight shipments during the holiday season has raised the stakes. Industry officials say a strike would cost $2 billion a day.

"Freight rail is vital to our economy and our future," President Barack Obama said in a statement. "It's in our national interest to make sure our freight rail system runs smoothly, since a disruption could affect businesses across the country and cause unnecessary damage to our already-fragile economy."

The five-member board will hear arguments from each side and then recommend contract terms within 30 days. The parties will then have 30 days to review the recommendations and work out a deal, or a strike could occur.

Railroads and the industry's largest union, the United Transportation Union, representing about 40,000 employees, reached a tentative deal this summer that the industry wants to serve as a model for contracts with the other unions.

The remaining unions rejected an offer that would have increased wages by 17% over six years, said the National Carriers' Conference Committee, representing railroads in the talks.

"These robust increases are exceptional, especially in an economy that has seen real hourly earnings decrease 1.5% over the last year," A. Kenneth Gradia, the committee's chairman, said in a statement. "They're particularly generous given that railroad employees are already among the highest compensated workers in the United States."

Union representatives couldn't immediately be reached for comment.

The Transportation Communications International Union said in June that the railroads' proposal would include insufficient wage increases and unfairly shift health-care costs to employees.

"We believe that 17% in wage increases over six years is not a fair settlement in light of the carriers' record profitability, nor do we accept the need for the radical restructuring of our health plan," Robert A. Scardelletti, the union's national president, said in a statement at the time.

The last freight-rail strike occurred over two days in 1992, a spokeswoman for the rail committee said.

-By Josh Mitchell, Dow Jones Newswires; 202-862-6637; [e-mail]