CSX, Railroads Avoid Strike But Negotiations Extend into 2012

by Trefis Team
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CSX Corporation
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Even as the risk of rail workers strike is averted, a wage rate settlement between the union workers and rail freight carriers may be delayed until February next year. The Brotherhood of Maintenance of Way Employees (BMWE) union, which represents 19% of workers bargaining for wage increase, has reported that it will extend negotiations ‘at least’ through February next year, two months past the Presidential Emergency Board’s (PEB) 30-day settlement period that ends on December 6. [1] The union will try to push for extending travel expense coverage by companies during this period, even as it is ready to accept wage and health care norms recommended by PEB. BMWE has confirmed that it will not go on a strike, which could adversely affect operations of various railroads such as CSX Corporation (NYSE:CSX), Union Pacific Corporation (NYSE:UNP), and Norfolk Southern Corporation (NYSE:NSC).

See our full analysis of CSX’s stock here | UNP’s stock here

The freight carriers were able to reach a deal with a total of 10 workers’ unions, representing around 60% of the 132,000 workers negotiating wages. [2] Now, only three labor unions – BMWE, American Train Dispatchers Association and the Brotherhood of Locomotive Engineers and Trainmen – are left to come to a conclusion with the rail companies.

A strike by rail workers would have stalled the operations of railroads, costing the economy over a billion dollars. The speedy settlements by rail companies have helped preserve customer confidence, as shippers continued business with railroads, instead of shifting to trucks.

We have $34 as the price estimate for CSX, which is around 65% ahead of the current market price.

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Notes:
  1. Rail-Maintenance Union Sees Talks Beyond Dec. 6 Obama Panel Date, Bloomberg []
  2. Rail Strike Threat Eases as 10 Railroad Unions Agree to Obama Panel’s Plan, Bloomberg []
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