Potential rail strike could have 'significant detrimental effects,' supply chain expert says

As freight railroads and their unions continue to feel pressure from the White House, businesses and other stakeholders to reach an agreement before a potential strike, economic experts say the possible work stoppage will wreak havoc on businesses and consumers.

Two labor unions representing 57,000 engineers and conductors, who make up roughly half of all rail workers, are seeking a better time-off policy and contend that rail companies are trying to force a deal without meeting their requests. The National Carriers’ Conference Committee, which represents the nation’s freight railroads in national collective bargaining, said the rail companies offered a fair contract that includes a significant wage increase.

ABC News Live spoke with Abe Eshkenazi, the CEO of the Association for Supply Chain Management, or ASCM, about the potential ramifications of a strike on all aspects of the economy.

ABC NEWS LIVE: How vital are our railroad tracks to our supply chain?

ABE ESHKENAZI: Well, you're talking about the most vital activities within logistics and transportation. By any measure, 30 to 40% of our goods are moved by rail. So we're talking about a significant amount of movement of goods and services from raw materials to finished goods. In almost every aspect, the supply chain relies on the rails from the ports to our consumers, and the warehouses. This is a vital link in our logistics and warehousing system.

ABC NEWS LIVE: President Biden was briefed on the situation this morning. What do the railroad workers want in this case and can this strike be averted?

ESHKENAZI: I think the hope from every perspective is that we are able to reach an agreement. I think there has been some discussion about some legislative action, if it is not if we don't see an agreement. I think the impact that it's having [is] on the workers. There are significant issues that they have not only in terms of their hours of work, [and] away from all of their work conditions. There obviously are a number of issues that need to be addressed, but the criticality of the logistics and the rail system can't be underestimated if we do have a work stoppage or any disruption.

ABC NEWS LIVE: Secretary of Labor Marty Walsh cut his Europe trip short to try and stave off this strike. What's the worst-case scenario for our supply chain if this does go forward?

ESHKENAZI: Well, you're talking significant detrimental effects. We're already facing a number of shortages. We've got congestion at the ports. You've got trucking issues. We have warehouse capacity issues. Our demand and our supply are not balanced right now. So having a rail disruption is going to impact everything from the raw materials to the manufacturing and obviously to the consumer and the availability of goods down the stream here. This is a global supply chain. Any disruption, as we've seen in the past, is going to have a collateral effect. Whether we're talking about weather-related issues or the conflict in Ukraine. We're seeing collateral impact from these disruptions on almost every aspect of the supply chain. We're seeing it in inflationary cost as well as labor issues, trying to find workers as well.

ABC NEWS LIVE: Amtrak has already canceled some long distance routes and companies have moved to suspend hazardous shipments in case they get stranded mid-route. Is our supply chain going to take a hit now regardless of whether or not there's actually a strike?

ESHKENAZI: Well, we're already seeing companies take some action and mitigate risk. There is a challenge that supply chain professionals need to address. And that's a force coming, disruption from the rails so that, unfortunately, there are very few alternatives to the rail volume and the costs that are associated with it. So there really aren't a whole lot of alternative transportation modes that we can rely on. That disruption on the rails is going to have a dramatic effect on almost every aspect of our economy.

ABC NEWS LIVE: And I understand that Congress has the ability to step in if a strike does happen. Do you think that the government ultimately will have to get involved?

ESHKENAZI: I don't see how it doesn't happen for a variety of reasons. No. 1, our economy depends on efficient rail and logistics. Secondly, we're coming into the November elections. I don't think that anybody in the legislature wants to address a rail stoppage or a work stoppage right now if we can avert it. Obviously, we're already dealing with a lot of impact from the pandemic and a lot of the disruptions in our supply chain, whether from [the] China shutdown or weather-related issues. I'm not sure that we're prepared for a significant disruption in our rail systems. Supply chain professionals need and work with accurate data and reliable systems. Removing this mode or modality of transportation would have significant and detrimental effects to almost every aspect of our supply chain.