August 15, 1997 in Nation/World

Railroads Sidetracked By Ups Strike

Howard S. Abramson Bloomberg News

While the 11-day strike against United Parcel Service of America Inc. is hurting many industries, America’s railroads are carrying a significant portion of the economic pain.

The International Brotherhood of Teamsters strike is costing the railroads an average of $11.5 million a week normally paid by UPS, which last year spent $600 million for rail deliveries. UPS is “the largest private user of the rails” in the U.S., said UPS spokeswoman Susan Rosenberg.

The heavy reliance of UPS, the company known as “Big Brown” for its enormous fleet of delivery trucks, reflects the interconnected nature of the modern freight transportation system. The strike also focuses attention on the little-noticed process used to carry the 15 million ground-delivered packages across the U.S. daily.

UPS uses the railroads to transport truck trailers it fills with parcels destined for other parts of the U.S. at its network of distribution centers around the country. Company drivers bring the trailers from the centers to rail yards to be loaded onto specially designed rail cars.

When the trains arrive in their designated region, UPS drivers fetch the trailers and take them to the company’s local distribution centers. There the freight is reloaded into the familiar brown vans for final delivery to homes and businesses.

The rail industry turned to so-called intermodal service, where more than one mode of transportation is used, as a way of recapturing some of the business it lost to trucking companies in recent decades. The service began by converting unused rail flatcars to hold the truck bodies and freight containers used by ship lines.

The impact of the strike on the railroads has been dramatic and immediate. For the week ending Aug. 9, total railroad trailer traffic fell 3.2 percent from a year earlier; until last week, trailer traffic had grown 5.4 percent during 1997, according to statistics from the Association of American Railroads in Washington.

“The decline was just about across the board,” hitting most major railroads, said AAR spokeswoman Carol P. Steckbeck. She said UPS accounts for 9 percent of the railroad industry’s intermodal business.

Figures are expected to show that rail business from UPS is dropping to zero as the strike by the 190,000 Teamster members employed by UPS lengthens.

Deliveries using more than one mode of transportation represent the fastest-growing part of the rail industry and accounted for about 17 percent of the carriers’ total revenue of $32.7 billion in 1996.

In addition, “intermodal provides good margins” for the railroads, said Anthony B. Hatch, a transportation analyst at NatWest Securities Ltd. in New York.

This week’s figures are expected to be substantially lower. Rosenberg of UPS said “100 percent of our normal moves have now stopped” on the railroads now that the company has cleared out freight that remained in their system from before the strike.

“We have not been picking up new ground packages” for days, she said from the company’s headquarters in Atlanta. UPS says it is moving less than 10 percent of its usual daily deliveries of 12 million packages, and almost all of what is moving consists of packages sent via their premium air freight services.

The Northeast’s Conrail reported its trailer business was down 10.9 percent, to 10,483 trailers, while Union Pacific and CSX Corp. reported their business was well below normal for this year.

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