With U.S. railroad shutdown threatening, industry counts the cost

LOS ANGELES (Reuters) - A railroad strike or lockout could cost the U.S. economy $2 billion per day in output, threaten supplies of food and fuel, and stoke already red-hot inflation, according to an industry report released on Thursday.

President Joe Biden this summer appointed a presidential emergency board (PEB) to break a labor negotiation impasse between major U.S. railroads and the unions representing 115,000 of their workers.

Those groups have until just after midnight on Sept. 16 to reach a deal based on the board's recommendations. Failure to do so will open the door to labor or management-led work stoppages - as well as Congressional intervention.

The economic impact report issued by the Association of American Railroads (AAR (NYSE:AIR)) warned that pulling the brakes at Union Pacific (NYSE:UNP), Berkshire Hathaway (NYSE:BRKa)'s BNSF, CSX (NASDAQ:CSX) and other freight railroads could disrupt shipments of wheat and other grains during the critical harvest season, upend coal deliveries to power plants, exacerbate vehicle and auto part shortages, and strand e-commerce packages handled by United Parcel Service (NYSE:UPS) and other shippers.

Diverting shipments to over-the-road transportation would require an additional 467,000 long-haul trucks per day, exceeding availability, AAR said.

The AAR report landed a day after the National Mediation Board hosted a meeting with railroads, unions, and U.S. Labor Secretary Marty Walsh with the aim of averting work stoppages that could pile extra costs on consumers just weeks before midterm Congressional elections that could change the fortunes of Biden's Democratic party.

Unions and freight railroads have so far reached tentative agreements covering 21,000 workers represented by five of the 12 unions involved in the talks. Those employees could refuse to cross picket lines if the two sides don't forge deals to cover all of the workers.

“A nationwide rail work stoppage would result in an unnecessary $2 billion daily economic hit,” said AAR President and CEO Ian Jefferies. "Should negotiations fail and result in a work stoppage, Congress must act to implement the PEB recommendations."