In recent months, we have provided you with updates on many aspects of supply chain disruptions that impact the automotive industry. The potential for a rail strike was one of those and we have monitored the situation closely. As we communicated previously, a rail strike was poised to trigger at 12:01 AM on Friday, September 16th. Fortunately, last night a tentative agreement was reached between the railroads and the unions. The agreement will be sent to union membership for a vote, during which, there will be no strike.
In the past week, Wheels Donlen has been in continual communication with the major automotive manufacturers who in turn were in constant contact with the railroads and the White House. During that time, manufacturers were preparing to minimize any potential impairment from a strike, but had not stopped shipping vehicles via rail. Both the manufacturers and the railroads had prepared operational contingencies, which will not need to be implemented.
How Did We Get Here?
The current union contracts for the five class one railroads representing 60,000 employees, expired in 2019. Since June of 2020, the unions and the railroads and have been in mediation. On July 18th of this year, in order to forestall a strike, the president established a Presidential Emergency Board (PEB) to resolve the dispute.
Ordering a PEB automatically triggers a 60 day “cooling off” period. That time was set to lapse at the end of the day Thursday, September 15th. Congress had the ability to either enforce the recommendations of the PEB, or extend the time period for negotiations. Of course, a negotiated agreement is always the best outcome. The impact to our industry would have been substantial. Up to 75% of OEM vehicles are at some point touched by rail transport.
As of Wednesday, September 14th, eight of the ten unions had conditionally agreed to the terms of the negotiations, with the two largest unions still not approving the offer. Unfortunately, the two remaining large unions represented nearly 50% of the workers, and to avert a strike, all of the unions had to be in agreement. The sticking issues were not about wages; they were over quality of working conditions which were a little more challenging to resolve. In a 20-hour session with the Secretary of Labor, the concerned parties have reached a tentative agreement which must now be ratified by the union members. The union has agreed to no strike during the ratification period.
Wheels Donlen has been closely watching this situation along with maintaining close communication with OEM management for several weeks. We are pleased that this strike has been averted and there will be no further impact to our recovering supply chain. As always, we are here to support you.