US unions call on railroads to halt buybacks, ditch lean operating model

By Amna Karimi

(Reuters) – U.S. labor unions called on railroad operators to halt all stock buybacks until they improve safety and abandon their lean operating model, which regulators and shippers say has led to deterioration in the quality of service.

The unions have blamed Precision Scheduled Railroading (PSR), a concept that encourages running longer trains on fixed schedule with lesser staffing, for worsening working conditions for employees, while shoring up profit for railroads.

Railroads, however, say PSR helps provide predictable and consistent service to customers.

U.S. railroads, crucial in connecting large swathes of the country, have come under fire after a Norfolk Southern (NYSE:) train carrying hazardous materials derailed in East Palestine, Ohio in February, resulting in the release of over 1 million gallons of harmful pollutants.

Last month, Senate Majority Leader Chuck Schumer urged a federal investigation into safety practices of all seven major freight railroads – Norfolk Southern, BNSF Railway, CSX (NASDAQ:), Union Pacific (NYSE:), Canadian National, Canadian Pacific (NYSE:) and Kansas City Southern (NYSE:).

Schumer said over the past five years, freight rail companies have had “over 26,500 accidents and incidents and 2,768 deaths, all while cutting roughly 20% of their workforce”.

A spokesperson for the Association of American Railroads (AAR (NYSE:)) on Friday defended the industry’s safety record.

“Any suggestion that railroads fail to invest appropriately, and that this, in turn, is related to a negative safety record, is categorically false,” the AAR said on Friday.

The AAR added that railroads’ capital spending as a percentage of revenue was 18.4% from 2012-2021, six times that of an average U.S. manufacturer.

The 14 rail unions, which represent more than 100,000 freight rail workers, said on Friday the six publicly traded railroads spent over $165 billion in buying back stock since 2015, a number that is at least $46 billion more than what they have invested in safety.