Unions say rails should forgo buybacks and spend on safety

Apr 21, 2023, 3:42 AM

FILE - The crew on a Union Pacific freight train works at a siding area on Jan. 24, 2020, south of ...

FILE - The crew on a Union Pacific freight train works at a siding area on Jan. 24, 2020, south of Tucson, Ariz. Rail unions want railroads to take some of the billions they’re using every year to buy back their stock and use it to improve safety in the wake of several high-profile derailments and hire more workers. (AP Photo/David Boe, File)

(AP Photo/David Boe, File)

OMAHA, Neb. (AP) — Rail unions want railroads to take some of the billions they’re using every year to buy back their stock and spend it to improve safety in the wake of several high-profile derailments and hire more workers.

The 12 unions that represent all of the more than 100,000 workers across the industry safety record worsened as they cut costs and eliminated nearly one-third of all rail jobs.

“I think it has become increasingly apparent that the priorities of the railroads are out of whack,” said Greg Regan, president of the Transportation Trades Division coalition that includes all the rail unions.

The regulators.

Unions say the recent derailments and the problems railroads have had keeping up with shipping demand highlight their concerns about how overwhelmed workers have become after extensive job cuts. They say inspections are being rushed with workers getting maybe a minute to check out each rail car and preventative maintenance may be neglected.

Railroads defend their safety record and insist that cost cuts haven’t made their operations riskier.

Safety data from the Federal Railroad Administration does show that the rate of accidents per every million miles freight trains travel increased to 16.695 from 15.572 over the past decade even though the total number of incidents declined as the railroads hauled less freight on fewer, longer trains. The rate of accidents inside railyards also worsened from 11.044 in 2013 to 15.517 last year.

Regulators say the accident rate hasn’t worsened enough to show the new operating model the industry adopted over the past six years is unsafe. And the Association of American Railroads trade group has said railroads have a strong safety record overall, and they remain the safest option to transport hazardous chemicals across land routes. The railroads also say the large amount they spend on capital investments — which averages to more than 18% of their revenue — reflects their commitment to maintaining safe networks.

“Any suggestion that railroads fail to invest appropriately, and that this in turn is related to a negative safety record, is categorically false,” AAR spokesman Ted Greener said.

Union Pacific CEO Lance Fritz defended his railroad’s spending.

“The first dollar we generate and spend goes to either the employees or our railroad,” Fritz said. “We have a great track record in terms of investment in the railroad and it’s actually in some of the best condition I’ve ever seen it and it’s ever been in. So I think we’ve got the amount of capital being deployed to safety and the spending on safety right.”

Business experts say there’s nothing inherently wrong with stock buybacks even though they have become a popular political target of Democrats who say the repurchases tend to widen inequality between wealthy investors, railroad executives and workers. The government imposed a 1% tax on buybacks at the start of the year and President Joe Biden has talked about quadrupling that.

Buybacks reward shareholders by reducing the number of shares and making the remaining ones more valuable. Many investors prefer them over dividends because of the tax advantages. Dividends are treated as ordinary income and taxed at up to 37%. If buybacks boost a stock’s value, investors who hold the shares long enough pay a lower capital-gains tax on the profit when they sell — no more than 20%.

And investors expect to be compensated for putting their money into a company, said Charles Elson, who founded a corporate governance center at the University of Delaware.

“You have to return capital to your investors or no one invests — particularly a capital intensive business like a railroad,” Elson said.

Buybacks aren’t without drawbacks. They do make stock options more valuable, enriching executives, and Elson said companies could wind up wasting money if they overpay for their stock.

But railroads aren’t likely to abandon buybacks. Billionaire investor Warren Buffett, whose Berkshire Hathaway conglomerate owns BNSF railroad, has said stock repurchases benefit all investors equally as long as companies buy the shares when they aren’t overpriced.

“When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive),” Buffett wrote in his shareholder letter.

The railroad anti-buyback campaign follows similar efforts by airline unions last year. The rail unions say even if railroads do continue to buy back shares, they should do it at a much lower level and invest more in safety and their employees.

Leo McCann, president of the American Train Dispatchers Association, said the railroads are putting investors first while cutting corners on things like training and refusing to listen to worker concerns about safety.

“There’s little or no investment in the workers. It’s all about how much money you can make for Wall Street,” McCann said.

The railroads’ spending decisions have also contributed to low morale among workers after last year’s bruising contract fight that feel very appreciated.

Dean Devita, president of the National Conference of Firemen & Oilers union, said it’s troubling that the railroads seem to make all their business decisions based on financial — not safety — concerns.

“You want to make money, that’s fine,” Devita said. “We want the railroads to be profitable. We want them to make money. But when you get to that point where now it’s greed — and that’s what Wall Street could do with these hedge funds — that kills. Greed will kill you.”

National News

FILE - President John F. Kennedy waves from his car in a motorcade approximately one minute before ...

Associated Press

Four US presidents were assassinated; others were targeted, as were presidential candidates

WASHINGTON (AP) — Before Saturday’s apparent attempted assassination of former President Donald Trump, there have been multiple instances of political violence targeting U.S. presidents, former presidents and major party presidential candidates. A look at some of the assassinations and attempted assassinations that have occurred since the nation’s founding in 1776: ABRAHAM LINCOLN, the 16th president […]

1 hour ago

U.S. Secret Service agents converge to cover Republican presidential candidate former President Don...

Associated Press

AP PHOTOS: Shooting at Trump rally in Pennsylvania

This collection of photos shows the aftermath of a shooting at former President Donald Trump’s rally in Butler, Pennsylvania, on Saturday. The former president, his ear covered in blood from what he said was a gunshot, was quickly pulled away by Secret Service agents and his campaign said he was “fine.” A local prosecutor said […]

1 hour ago

People sit in a local bar near the Fiserv Forum watching news ahead of the 2024 Republican National...

Associated Press

At a Trump rally, shocking images fill TV screens. Then reporters rush to find out what it means

The images filled television screens across a rattled country on a hot Saturday evening — former President Donald Trump reaching for his bloodied ear as he moved down to the floor of a stage at a Pennsylvania campaign rally and U.S. Secret Service agents rushing to surround him. While the video was instantly available and […]

2 hours ago

Associated Press

A few short minutes after Trump took the stage, shots rang out

BUTLER, Pa. (AP) — At 6:02 pm Saturday, to the strains of “God Bless the U.S.A.,” former President Donald Trump took the stage at fairgrounds in Butler, Pennsylvania, waving at the cheering crowd and settling into his regular rally speech under a scorching midsummer sun. A few short minutes later, Trump pointed to a projection […]

2 hours ago

Republican presidential candidate former President Donald Trump is covered by U.S. Secret Service a...

Associated Press

Shock and relief cross party lines as past and present leaders react to shooting at Trump rally

WASHINGTON (AP) — Republican and Democratic leaders, past and present, expressed shock Saturday night following the news that gunfire had broken out during a Donald Trump campaign rally in Pennsylvania — and relief that the former president had survived the attack. Notable officials, including former Presidents George W. Bush and Barack Obama, praised the fast […]

2 hours ago

President Joe Biden speaks, Saturday, July 13, 2024, in Rehoboth Beach, Del., addressing news that ...

Associated Press

Biden says ‘everybody must condemn’ attack on Trump, hopes to speak with ex-president soon

REHOBOTH BEACH, Del. (AP) — President Joe Biden said Saturday that “everybody must condemn” the suspected assassination attempt on former President Donald Trump, adding that he hoped to speak with his 2024 presidential rival soon. Addressing the nation about two hours after the shooting, Biden said he was relieved that Trump is reportedly “doing well.” […]

3 hours ago

Unions say rails should forgo buybacks and spend on safety