[PLUG-TALK] The Corner Newsletter: The beleaguered railroad industry investigation (fwd)

[Rich Shepard]

---------- Forwarded message ---------- 
Wow! I had no idea the railroad industry was plundered for short-term
profit. Perhaps freight cars could be attached to the end of Amtrak trains.

No wonder food prices have increased.

Rich

---------- Forwarded message ----------

Mississippi Drought Will Strand Railroad Industry In Crisis Even if Strike
Is Averted

by Luke Goldstein

This week, Congress  passed a resolution ratifying a tentative labor
agreement with rail worker unions to avert a looming railroad strike that
could cripple the economy. But even if we dodge that threat, railroads are
at the center of another crisis. This next potential emergency starts with
the ongoing drought on the Mississippi River but it doesn't end there.

Little to no rainfall in the Midwest has led to historically low water
levels on the country's most commercially active water passage for domestic
transport and global exports. Around $100 billion in cargo, which includes
fuel, coal, grain, industrial chemicals, building materials, and over 90
percent of agriculture exports, is shipped by river every year.

But now shallow water restricts the number of barges that can pass through
narrow strips of the river. Several barges have gotten stuck on the floor of
the riverbed and caused long traffic jams. For the few shippers who can
still find barges to take their product, rates have skyrocketed nearly 300
percent compared with the same time last year.

Naturally, many shippers  are looking to railroads to save the day. But it
turns out that railroad deregulation and consolidation make that option a
non-starter for most. Under relentless pressure from Wall Street to maximize
short-term profits, railroads have stripped out so much capacity and laid
off so many workers that they cannot begin to pick up the slack even as they
impose monopoly prices on what little extra traffic they can handle.

"We have farmers needing to export goods and they have no one to turn to
because the rail lines say they're at capacity," said Todd Tranausky, the
Vice President of Freight Transportation Research, which monitors the rail
industry.

According to FTR's analysis, part of the problem is that the rail lines laid
off workers right before the pandemic and have struggled to rehire new staff
since the supply chain crunch hit.

The other problem is Wall Street’s mania for ripping out track. For example,
one of America’s most storied railroads, the Illinois Central, used to
operate a high-capacity, high-speed, two-track mainline paralleling the
Mississippi River between Chicago and New Orleans. But in the 1990s,
investors installed a new CEO, E. Hunter Harrison, who ripped out the second
track and closed key yards With that, the Illinois Central lost much of its
capacity to serve as a viable alternative to barge or truck traffic. But
Harrison boosted profits by cutting expenses faster than revenues, making
him a Wall Street darling.

Cheered on by powerful hedge funds, Harrison subsequently brought the same
kind of radical downsizing to three other major railroads, introducing an
industry trend that became known by the perversely Orwellian term “precision
scheduled railroading.” As OMI policy director Phillip Longman details in
his feature in the Washington Monthly, the result is a highly profitable
industry with ever diminishing capacity to meet America’s transportation
needs even as energy shortages and climate disruptions make railroads more
critical than ever.

Now as the drought crisis unfurls, two other large rail carriers — the
Canadian Pacific operates tracks paralleling the Mississippi south of
Minneapolis/St Paul, and the Kansas City Southern which controls key routes
to the Gulf of Mexico and beyond — are filing to merge. This will bring
still more concentration and monopoly pricing to the industry, and quite
possibly, the shedding of more rail infrastructure. Regulators should block
the deal as the first step towards restructuring our national rail system to
better serve the public interest.