A Federal Case II; 24; The Railroads - Can They Survive?

This is a federal case. From Washington D.C. the National Educational radio network brings you an examination of current issues facing our nation and its capital city. Here is NPR and correspondent John Schon. How long can you drive a car without enough money for new tires a lube job or even gasoline. Not very long right. Well in 1969 one third of the nation's railroads operated at a loss and the 1970 results when all Iand are expected to be even poorer. And so these lines just didn't have the money for proper equipment investments necessary overhauls and sometimes even payrolls. Last spring we witnessed the spectacle of the nation's largest line Penn Central admitting it just couldn't make it and filing for reorganization under the bankruptcy act. And it wasn't the first railroad to go that route and probably won't be the last. So the railroads are indeed sick. So sick in fact that last December 10th they stayed home from work in bed

suffering from a union complaint a strike and it didn't affect only the railroads. Eight hundred coal miners were turned away from work. Chicago experienced one of its worst traffic jams in public transportation history. Auto company shortened shifts and began layoffs and preparing for a complete shutdown within five days. The post office wouldn't accept anything but first class mail if the destination was more than 300 miles away. Major utilities planned drastic cutbacks in power to homes and industry. Labor Secretary James Hobson detailed the magnitude of the problem. We would expect that the gross national product would be adversely affected. Better than 5 percent a year over the year by a one week strike by a four week strike better than 22 percent. The number of people out of work on the railroads alone would be three quarters of a million and that number in other industries would go day by day as the

economic intermixing enter a system ground to a halt because of the absence of railroad facilities. So it is quite a specter to contemplate why. Well of course the unions wanted more money than the companies were willing to grant. But beyond this lay some basic problems. Now as in any dispute not everyone agrees even on what the problems are. WJ Ceridian assistant secretary of labor is the government's top mediator for the rail crisis. People suffer when there is a strike so no one really wants a strike. And the railroad unions have historically pretty much worked out their differences of opinion. Now as of today there are more than 15 major unions in the railroad. There are more than 85 class 1 railroads as more than 140 railroads in these negotiations. So you see it gets very

complicated. Management have many different sort of views and so does the unions have difference of views. The unions are broken up roughly into two categories operating unions and non operating unions and they have different problems and also the rules that have grown up over the years. Many many rules which become very complex and complicated mean different things to different unions and different carriers. A rule may be working quite well with one carrier and another carrier is willing to pay money to get rid of that rule. So when you bargain rules on a national level it's very very complicated. Further the railroad employee used to be one of the highest paid employee and in recent years things have been passion him by. He's no longer the highest paid employee. And also he has seen the railroads going down and down he's seen his fellow worker be laid off. And. Also the railroads on the other side has seen their profits decline.

Mr Ross Ray's point about work rules strikes at the heart of the rail labor situation. Work rules basically are the rules under which the union members will work what they're expected to do is their part of the job. What they're not expected to do they provide for separation of powers then and in the rail industry for union members riding the trains they provide for crew changing in many cases when the trains cross certain geographic or jurisdictional boundaries. The unions maintain a conservative attitude toward these rules agreeing to changes rarely if ever the industry on the other hand has been beating its head up against the wall for years trying to budge labor on this point. John P hilts is the chief industry negotiator as chairman of the National Railway Labor conference. The railroad unions cannot help but recognise. That our relaxation of these rules will improve service for the road would better enable them to serve their customers at the same time. And this is something that is not generally understood about. The railroads have

agreed to protect. Employees who might be adversely affected by the relaxation of rules. To the fullest extent of the earnings so that they they don't lose any earnings and over a period in which could be as long as five years and readings are guaranteed to them. So it's just difficult to understand why the unions will. Stop. Short of. Giving any relaxation of these work. It will eventually result in. Some reduction of employment. And. The only reason of course it can come of the mind on hand and as much as the individual employees are protected is that the unions don't want to lose the membership that this reduction of employment would involve the unions of course don't see it that way.

And they're only willing to sacrifice what they consider their interest for the sake of their employers. Back to Mr Russell right. I guess we'd have to define sacrifice. I don't think it's going to have to take sacrifice as far as wages and working conditions. I think it is going to have to take change though and many employees may view this as a sacrifice. I think in the long run it will mean more jobs if we can get in increase production and get a more efficient railroad. Then I think in the turn the road can better supply their customers and the people who ship by rail roads and therefore will get more business and in turn the employees will have greater job security. Now is how we can educate the people to accept this and get them to ratify agreements and make changes and these changes I think can mean more jobs because we know that the road so essential to the economy of this nation there are so many things that you cant ship my trucks that must go by rail and many many plants and industries depend solely upon rail shipments

to move their goods both raw materials and the thinnish products out. So I think in the long run its not sacrifice its change. And there must be change not only in the attitudes of the management of the carriers but the attitudes of the union leadership and the. Union members themselves that we must update ourselves to have not only better working conditions but a more efficient railroad. But all this discussion is academic when the trains actually stop running because of a strike with some people the right to strike has become almost a moral issue and the rail industry for its part sees nothing sacred about it. They would prefer binding arbitration. The government is caught in the middle. Mr Russell Rees says it's not a comfortable position. This administration has since we've been in office has said all along that people should reach an agreement themselves and if they can't reach one they should have the rights that's given to them by law which in most cases is a right to strike. And technically the road unions have the right to

strike also. But as you mention in the national interest we have to protect that and the railroads being what they are for the movement of goods freight military supplies Coles and other things we have to have some way to to keep most of them up. The shipments moving. And therefore we have no alternative but to go to Congress as it is the courts have decided that can't be selective strikes. And yet the union says we have a right to strike. So we have nowhere to go but to Congress to to get relief. And a few times in the past decade Congress has been forced to make it the law of the land is to keep the trains running. The lawmakers don't like this. The industry doesn't like it nor do the unions. Sen. Jacob Javits of New York is the ranking Republican on the Senate Labor and Public Welfare Committee. I believe it will keep coming back to Congress unless we pass permanent

legislation to deal with this kind of national emergency strike. And I have submitted such legislation and the president has submitted legislation and transportation which would affect only railroads and airlines etc.. I have submitted for everything where there's a national emergency giving the president the broad range of remedies from the findings of a board as to what's a fair settlement to partial operation. I'll remember days which which may be a necessary cooling off periods etc to be invoked. I believe that in the final analysis operation must be possible. Nothing should stop. Operation which is essential to the public health and safety. And the United States has to have that power. Otherwise you don't have a government. Now in my judgment if we do pass such a law we may well avoid the nationalization of the railroads to which

the roads could be brought up by a complete breakdown in the collective bargaining process in the absence of any law such as I've described. Nationalization isn't a word that falls lightly from American considering the free enterprise and capitalistic traditions in the US but the unions are so opposed to President Nixon's proposal for settling transportation labor disputes that they are backing nationalization as an alternative. What they would prefer actually would be an amendment in the law to permit partial strikes and partial operation. Senator Javits says that could work. I believe that partial operation is. Practical provided you wish to pay the cost. And I think the cost is the big question now on the issue of cost. I believe that when the United States takes over the facilities and uses them it must maintain them to the extent that it does use them. They should not be an element of profit to the owners any more than the president now says he wants to play. Pay unemployment compensation if they go out on strike. Now the president's thinking about

selective operations some roads will operate some will not. I don't think that will work because I don't think that deals with the National Health and safety issues. So that I believe that partial operation though expensive has got to be the answer because I don't like nationalization I want the American people. And the only way to avoid is giving the government the ultimate power to take these facilities and use them to the extent the public health and safety requires and that's what I think ought to be done. But the industry says it's impossible. Mr health was emphatic about it. Part of the operation just simply does not. Apply to the current industry. And. And then this train which. Handles or has rendered to it let's say 100000 cars of new freight every day would just be nice. It would just be simply impossible to identify. Out of those hundred thousand cars which cars were essential food for Chicago or which car

or out of a ship would be. Going into steel for defense material you know which car of coal from a coal mine would be going to a power plant. And the complications which would evolve from partial operation and trying to distinguish this essential material from the non-essential material. It is absolutely terrifying to even contemplate. In addition to that of course to operate a 10 car train takes as much of a crew complement and takes as much per. Labor and station forces and so forth as does it take to operate 100 car trains and almost takes as much to operate one train as it does to operate 10 or 15 or 20 trains. So the cost of operation would be astronomical for the amount of tonnage to be handled under a selective situation time.

The industry would prefer to keep the Railway Labor Act born in 1926 updating it in health his words to. Restore some semblance of balance between management and labor in the bargaining area. Today with the economic assistance that strikers and I get they are able to withstand the pressures of a strike much. Better than the industry in general and this is especially true in the railroad industry. The record industry is very financially weakened mystery of the present time. So neither side accept the other's alternatives. What about the third possibility nationalization industry for obvious reasons opposes it but the unions say this is a proposal that could become attractive Carlye and heads the transportation departments Federal Railway Administration. I asked him about the union

position. I can't agree as a matter of fact I couldn't disagree more heartily and nationalization is prevailing in practically every foreign country of the world for railroads throughout the world. In some of those countries as many people who travel abroad know the passenger service is quite good. In practically every one of those countries that passenger service is performed at substantial deficit's paid for by the taxpayers the freight service on the other hand in those countries comes nowhere near meeting the standards and the performance that is provided in this country. A recent comparison was made by the Southern Railway indicating the number of employees and the services rendered by the nationalized railroad of Great Britain compared with the Southern Railway this country those railroads are similar in many respects

and yet there are massive differences in the numbers of employees that are required to perform those services in England as compared with on the Southern Railway. And there are massive differences in the numbers of the fish and seas and efficiency ratios and factors which measure the two on their freight services. I think the industrial capacity and capability of this country depends largely on the remote system we have run efficiently as I think it is and can be but under a system of private enterprise and private ownership. So there is a substantial body of opposition to touring Uncle Sam into Casey Jones as suggested by the unions and that still leaves us with no be all end all solution. But beyond that land owns us. But even without labor problems the railroad wouldn't be home free. I don't see that this can be solved in such a way that it will

settle all of the problems of the railroad industry. One of the immediate problems of the industry is finding a way to attract capital into the he industry now for investments in new equipment and new track and roadway which is so badly needed. Irrespective of any settlement of the labor matters. And this means the lines need more help. I'm convinced in my own mind that it is time for the government to. Adopt a more balanced program of support for competing modes of transportation for example a locality or a city your municipality running to find federal aid for a highway construction program or for any Airways or airport construction program or even a waterways programs assuming there is water available. As a source

of federal funds upon which to draw. This is not the case in the rail system. I am not saying that there should be a vast number of dollars provided in an outright subsidy to a private industry but I think some way must be found of balancing the scales to place the matter in the proper perspective for competitive balance to be reached. I think this necessarily entails some form of financial assistance to the railroad industry at this time in our history mainly because it is clear. That the nation must continue the kinds of developmental programs and support programs that it has in each other areas of Transportation and the only way to achieve this balance as I see it is through some form of financial assistance through loan guarantees for example

to the Reverent industry. But no one likes to open the public Treasury to bail out bad management with the possible exception of the bad managers. Some railroads have had funds available to improve their service and invest in capital equipment. But instead the money was poured into outside business opportunities. I think some of the financial operations which have been disclosed as a result of the disaster which occurred on the Penn Central have been very very sad. They have shown a tremendous lack of judgment. Business and Professional On the other hand I think one must be careful not to conclude on the basis of this that it is unwise necessarily for a railroad to diversify diversification as a concept and as a business practice has been the salvation of a number of industries in this country where they have

had to seek out ways of finding additional sources of revenue. Making a return on their investment done properly I don't believe there's anything wrong with diversification as such. On the other hand we have seen some very very blatant and serious examples of misapplication of funds as Federal Railway administrator Coraline must keep a highly polished crystal ball. We asked him to look through it at the much maligned Penn Central to come up with a prediction. Well my crystal ball probably is Misty and Smokey is anyone else's. My hope for the Penn Central is that with the kind of management it now heads and I know it now has under its new president Bill Moore. Given a little running time given a little capital with which to stay alive while some changes can be made it is essentially a profitable

railroad. I believe that it can be turned around from me losing operation as a railroad to a profitable operation as a railroad. It's going to take some capital to keep them going for an interim period to give them time to make the changes which are essential to be made. I would say that during the course of the next 18 months this is a very critical period. During which there will have to be some additional infusions of capital. That sounds like a warning. But where would this money come from. I would guess that the source of this capital will probably have to be in the form of some kind of financial assistance either emergency financial assistance of the kind which is presently

existing and being used by the Penn Central or perhaps through some longer term kind of assistance which permits defense central to get on its feet. For example the railroad has been in a declining situation for several years. Its locomotive and cars are in relatively poor shape. These kinds of things are essential to the necessary improvements in service which will make shippers want to use Penn Central and will make that daily revenue sheet look much better as a continuing basis. Unfortunately the same comment can be made about a number of railroads this is just the Ben Central went first. Does this mean then that we're going to see more bankrupt lines with a demand for more emergency federal assistance. Much depends on the turn in business.

I believe that a good 1071 business wise will. Then a good weather year and a few breaks here and there will prevent this from happening with respect to any more railroads. I feel it's absolutely essential that to cure the deep seated underlying problems of the railroads that some long term solutions other than temporary marginal financial assistance and things of these kinds must be found. One of the first specific proposals Lyons makes is a substantial amount of deregulation particularly in the area of rate making. That's the interstate commerce Commission's function. There I talked with ICC chairman George Stafford in the rate structure yes I've been hearing some conversation and suggestions. That. Seem to indicate.

Relatively minor changes and rate making insofar as railroads are concerned all the way up to complete deregulation. Well you understand that under the law. They lose some other protections. From other laws. If this. Deregulation comes about and so this I would assume means that. We. Should explore some way. That they will not lose their and oppressed immunity. And yet. Make it possible for them to. Fluctuate their weight making ability is up or down anywhere from 5 to perhaps 20 percent from what the present level as. I'm not sure that I know just how that can be done and still maintain their immunity.

But. I've already told railroads that if they have any new ideas that they want to try. Try them on us. Other areas of needed improvements to its chairman Stafford and Mr. Lyon both point railroad routing and the network of excess trackage taxes. Stafford notes the possibility of the federal government buying the track right of way and leasing it back to the carriers to lift the burden of property taxes from the equipment. Perhaps a national car fleet controlled and directed by a computer network to get optimum usage of what's available. One of the greatest Yorks the railroads Where is being lifted from the passenger service. Congress has created the national railroad passenger corporation or rail packs rail packs will run the passenger carrying upgrading service hopefully and contracting the jobs back to the lines. Here we do have government getting into the railroad business.

But Mr. Lyon is quick to point out I think is a step away from nationalization and I think it's very important to recognize that something had to be done about river and passenger trains because the deficit was a great burden upon the carriers. It was costing them around 200 million dollars a year in avoidable costs. There's been some discussion about him actually have much it did cost of railroad industry but there's general agreement that it's somewhere in the neighborhood of 200 million dollars a year on the basis of the label kus. And there are so many rather odd problems of which this is only one which can lead it to nationalization that we have to start solving them one by one and by solving this one first. Relieving the railroad's of this responsibility providing the people of this country with first rate passenger service at the same time which is very very important.

We will have taken a step in my judgement away from nationalization the next question then is how can government do the job better than the industry has for many years and at the same time today railroads are required to provide many services by rail which have no chance of making any profit or contributing anything toward a profitable operation and the structure of the National basic network that Secretary Philby has prescribed for this rail pass corporation to operate. The majority of the losing routes have not been required to be served and this new collaboration will not have that burden. In addition to that the the federal government is putting 40 million dollars in a capital GRANT AVAILABLE FOR equipment and either purposes making 100 million dollars available for equipment loans and

will have the flexibility of improving services system wide throughout the nation. Whereas before there and at the present time there are twenty two separate railroads which must make interchanges and must on a separate system basis make decisions an interchange and connect and work out schedule separately etc. with all of the problems associated with that ramp tax preparation will be able to do this in a much more efficient manner. So the railroads must survive one way or another and those in government are convinced the job can be done without a Washington takeover. John Q public will have to help out how much we don't know. It will take some fresh thinking into changing attitudes among the industry unions and government officials and a lot of determination for the national educational radio network this is John all but shot in Washington.

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