Urgency fades for Michigan businesses as national freight rail strike averted

• Concerns that contract negotiations between freight rail unions and owners would fail and cause a national shutdown were alleviated
• The parties reached tentative agreement overnight Wednesday
• A shutdown would have affected at least 20 percent of Michigan goods that depend on rail transportation  

Michigan businesses are among those relieved to learn the nation’s freight trains will keep running since urgent contract negotiations resulted in a tentative agreement.

President Joe Biden and White House officials joined negotiators overnight Wednesday to reach an agreement with the two unions that were still without a contract.

The compromise “means that our economy can avert the significant damage any shutdown would have brought,” Biden said Thursday about the tentative deal. 

Related:

• U.S. railroad shutdown would leave 20 percent of Michigan freight stranded
• Michigan Economic Dashboard

A strike “would have been a big deal” in Michigan, said Jon Cool, president of the Michigan Railroads Association. 

Products leaving the state that depend on rail include autos, iron ore and food products. And Michigan’s agriculture industry counts on rail even more during the fall harvest season.

Negotiations began when the contracts for about 115,000 freight rail workers expired in 2020. But talks reached a critical impasse over the past week just as the federally ordered “cooling off period” was set to expire after midnight on Friday morning.

Next: About 60,000 rail workers — including conductors, engineers and signalmen — will vote on a 24-percent wage increase through 2024 and five annual $1,000 lump sum payments, according to the National Carriers’ Conference Committee.

The unions, which said workers have been facing mandatory overtime and on-call periods due to worker shortages, also reached an agreement on quality-of-life issues.

“For the first time, our unions were able to obtain negotiated contract language exempting time off for certain medical events from carrier attendance policies,” the unions said in a joint statement Thursday morning.

Costly impact averted

Trains carry about 90 million tons of cargo annually in Michigan, representing 20 percent of all freight being shipped into and out of the state. Passenger lines also use freight rail, prompting concerns that a strike would halt Amtrak and smaller carriers’ service.

The American Railroad Association, which represents rail owners, estimated the economic impact of the strike would have been $2 billion per day.

That estimate was high, said Patrick Anderson, CEO of Anderson Economic Group of East Lansing, especially in the early days of a potential strike.

On Thursday, Anderson released the results of a study estimating the first day of a strike would cost about $60 million across the U.S. — representing $30.9 million for lost freight, $3.8 million for long-term passenger rail disruption and $25 million in lost railroad industry wages.

“In the first few days of a strike or labor disruption, both consumers and producers adjust their schedules and make use of stockpiles and opportunities to substitute one item (or one production run) for another,” Anderson said.

By the second and third days, the total could have reached $91 million, he said, mostly due to increased spoilage of food and agricultural goods, with increases multiplying after that.

Anderson’s analysis highlighted three industries where losses would be concentrated. Agriculture and automotive have been dealing with supply constraints since the start of the pandemic. Energy also topped the list, notably because states like Michigan depend on coal to generate electricity.

The state’s chemical industry, which employs 80,000, including manufacturers and distributors, would also suffer. 

John Dulmes, executive director of the Michigan Chemistry Council, praised the tentative agreement.

“Freight rail is indispensable to our industry and a prolonged shutdown would’ve been disastrous for supply chains, public health and our basic way of life,” he said.

Dulmes also pointed to other recent transportation issues — such as shipping slowdowns at U.S. ports and the trucking blockade that closed the Ambassador Bridge between Detroit and Windsor, Ontario —  as signals “of the fragility of our supply chains and the need to ensure more reliable and resilient infrastructure.”

Information on the timing for the contract vote was not available Thursday.