(Bloomberg News circulated the following story by Angela Greiling Keane on September 29.)
NEW YORK — Union Pacific Corp. and other U.S. railroads may be able to boost profits by trimming locomotive crews to one person from two under rail-safety legislation moving through Congress, a Morgan Stanley analyst said.
The measure, which Senate Majority Leader Harry Reid today called a top priority, would require technology that may allow railroads to get approval for one-person crews, said William Greene, the New York-based analyst, in a report yesterday.
“By our estimates, one-man crews could ultimately add
7-13 percent to earnings, far outweighing any near-term negatives from the bill,” he said in the report to clients.
The technology, called positive train control, would automatically apply brakes when engineers miss signals. Interest in the legislation was renewed by a Sept. 12 collision in Los Angeles between a commuter train and a Union Pacific freight train that killed 26 people. The bill, passed by the House on Sept. 24, doesn’t specifically address locomotive crew size, and rail labor unions have opposed one-person crews.
Federal Railroad Administrator Joseph Boardman told reporters on a Sept. 15 conference call that positive train control technology could have prevented the Los Angeles crash. The bill would require installing such systems on major rail lines and locomotives that travel on those tracks by 2015.
Work-Hour Limits
Other provisions in the legislation, including limits on the number of hours train operators are allowed to work, may reduce profit, Greene said, adding that rail productivity gains might offset any losses.
“As a rough guideline, we assume these changes may add an incremental 1 percent to the total growth rate in labor expense,” Greene said. “When we consider the rails’ continued push for labor productivity, potential changes in pension expense and incentive compensation, and the relatively large growth rates we are modeling for 2009, it’s quite possible investors won’t even notice the impact from the safety bill in the 2009 financials.”
The bill’s proposed limit of 276 work hours a month for train operators led the Brotherhood of Locomotive Engineers and Trainmen to stay neutral on the bill, union Vice President John Tolman said. The union lobbied for some of its safety provisions, including banning so-called camp cars to house employees and attention to rail workers’ radiation exposure when they haul nuclear waste, he said.
The 276-hour cap would affect some union members, Tolman said.
“We do also have some jobs that people work 2 days on, 3 days off and may come into the 276, but their quality of life is a lot better,” he said in an interview. “They know when they’re coming into work.”
The United Transportation Union, whose members include railroad conductors, who work alongside engineers in locomotives, supports the bill.