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Threat of Railroad Strike Spooks Retailers

CNBC.com
Thursday, 1 Dec 2011 | 6:20 PM ET

A national railroad strike could potentially take place next week and it has the nation's retailers worried about their holiday season.

A Union Pacific steam.
David Zalubowski
A Union Pacific steam.

"The Christmas shopping season could be severely affected as products destined for stores sit idle at ports or in traffic," a leading retail association said in an appeal to President Obama. It warned the economic effects of a strike would be broad and "linger into 2012."

Earlier this week, talks between the nation's railroads and three of their major unions broke down. While the union representing track maintenance workers was willing to accept an extension, the unions representing locomotive engineers and dispatchers were not.

"If an agreement is to be reached, it is now, not some time down the road," said Dennis R. Pierce, president of the Brotherhood of Locomotive Engineers and Trainman, in a statement issued after his union declined to extend the time for talks.

Agreement from all three unions was required to extend the talks. Without it, the railroads are free to institute a lockout or railroad workers to go on strike Dec. 6.

"During the busiest shipping and travel period of the year, a nationwide disruption of rail service would deal a crushing blow to our nation’s economy, potentially costing our country $2 billion a day,” A. Kenneth Gradia, the railroads’ bargaining representative said in a statement.

Efforts are already underway in Congress to step in and prevent a strike, Congressional newspaper The Hill reported. These resolutions would either impose a "cooling off" period for negotiations to possibly continue or impose the recommendations of a Presidential Emergency Board that stepped in earlier to resolve disputed points in the negotiations.

Railroads are the main source of transportation for bulk freight like coal and wheat. But they also have become a vital link in the transport of retail and manufactured goods, thanks to the advent of intermodalism, where goods are packed in large containers that are transferred between ships, trucks and trains.

"A national railroad shutdown would force retailers to shift the delivery of their goods to trucks, increasing costs, time of delivery and congestion on our nations already crowded roadways," the Retail Industry Leaders Association claimed in its letter to Obama, asking him to pressure Congress into imposing a settlement.

A national strike would affect over 90 percent of the freight moving in the country, according to the industry's trade group. Commuter lines running on freight lines would be affected, as would Amtrak trains running outside the Northeast Corridor (which is directly owned by the government carrier).

The last major rail strike was in 1992. Congress ended it after 2 days.