Impact of Potential Railroad Strike

Episode Transcript

Speaker 1 (00:00):
A lot of experts say if this, if they brought
the rail traffic to a hauled up there, this could
devastate the economies of both Canada and the USA. And
I want to flesh that out a little bit with
Rob Kelly. Rob is a supply chain expert and he
is a senior partner at Headstorm. Rob.

Speaker 2 (00:18):
Good morning, Good morning, Thanks for having.

Speaker 1 (00:21):
Me, Bet, It's good to have you on here. The
last I heard this was I don't know, sometime yesterday
that there is an order basically for them to return
to work, what pending arbitration.

Speaker 2 (00:37):
Yes, that is correct, and actually the order to work
has not the stay has not been granted, so they
are headed back to work as of right now. The
teamsters have made a decision to obey it for now,
but they are mounting a legal challenge and so we'll

(00:58):
see where that goes here coming days.

Speaker 1 (01:01):
Yeah. And I read that nearly a third of the
freight handled by these two railroads across as the US
Canadian border. And we know that railroads bring an enormous
amount of raw materials to industries of all kinds. If
they did a stoppage up there, Rob, what would the
effect be on us?

Speaker 2 (01:19):
Well, you're exactly right. First of all, we are talking
about billions of dollars of goods the freight industry. These
two railways handle about a billion dollars of shipments every day,
and as you just said, a third of that is
in conjunction with the United States. So the impact for
the US would be in a number of different areas.

(01:44):
One is the chemical and food distribution business. There's a
lot of chemical goods that come back and forth between
the countries. Second is the auto industry. There are engines,
engine parts, and finished vvehicles that come back and forth. Surprisingly,

(02:05):
four out of every five cars that are manufactured in
Canada are imported into the United States. Timber and lumbers,
so if you think about residential housing construction, a lot
of the timber that we get comes from Canada. And then, last,
but not least, is agriculture, and that really goes in
two directions. We import a lot of our fertilizers, pest

(02:29):
control chemicals, things like that for our farmers from Canada,
and then of course we export a lot of our
harvested crops to Canada.

Speaker 1 (02:40):
We live in a just in time delivery world, and
as long as the trains are running and the trucks
are running, it works fairly well. Have we come close
to completely recovering from the supply chain disruptions caused by
the pandemic?

Speaker 2 (02:55):
Ooh, great question. I don't know if we've recovered from it.
Certainly learned from it. Safety stocks, safety inventories are higher
than they were prior to COVID because of the lessons
learned from that time frame. But I will tell you
something like this, like the Canadian rail strike, if the

(03:16):
workers were to strike and be off the job for
say longer than a week, like eight or nine days,
we would start to feel those effects just as much
as we did, you know, during the COVID period.

Speaker 1 (03:28):
And a trucking industry can't make up the difference, kin it.

Speaker 2 (03:31):
They cannot. Now, there's two reasons for that. One. Do
you just think about the volume. If you've seen, you know,
a train go through your neighborhood lately, you'll notice there's
you know, dozens and dozens of cars on one shipment.
And then secondly, the rail industry is uniquely qualified to
handle the protocols of hazardous materials, and so a lot

(03:53):
of like I mentioned earlier, you know a lot of
our chemicals and fertilizers come from Canada. Well, those are
consider hazardous materials and so the rail ways are uniquely
qualified to move those shipments.

Speaker 1 (04:06):
Yeah wow. So, so the situation as of now is
that the arbitration order is in effect, that is being challenged.
So for the moment, they're going back.

Speaker 2 (04:16):
To work, right, correct, Yeah, I think, you know, disasters
kind of avoided for now. I mean, obviously there were
reasons why they were going off the job, right, They
were trying to get better working conditions, reducing on the
job fatigue and of course better pay and so that
you know, that kind of stings, I guess for those workers,

(04:37):
but for the economies of the two countries, it is
a good thing for them to get back to work.

Speaker 1 (04:41):
Well, you know. The other consideration here, I think is
given how vital this all is. If if you read history,
you can read in them. I think it was in
the fifties or Harry Truman nationalized the railroads here. And
I think that if if a shutdown were to happen
and major ports or major services in the United States,

(05:03):
our government may say no, this, this can't happen here.
I don't think the Canadian government will do that if it.

Speaker 2 (05:09):
Comes to that, do you well, I mean, you know,
Prime Minister Trudeau jumped in pretty quickly. You know, they
they had been negotiating for about a year and the
government largely stayed out of it. But the day they
went you know, went off the job and closed all
those ports and truck yards and rail yards, he stepped
in immediately and ordered you know, his his minister McKinnon too,

(05:34):
you know, to order the the arbitration. So so they
stepped in pretty quickly once the deadline passed, and you know,
we would it's interesting to you know, think about or
speculate what the United States government would do in a
similar situation.

Speaker 1 (05:51):
It kind of depends on who the president is, Ronald Reagan. Hey, Rob,
thanks for the insight. Really appreciate your time.

Speaker 2 (05:59):
Yeah, my pleasure.

Speaker 1 (06:00):
Thanks for having We've got Rob Kelly, supply chain expert
here on kf a b's Morning News