CHICAGO — Martin J. Oberman isn’t ready to retire just yet. That much was clear from his impassioned talk at a recent Northwestern University Transportation Center gathering.
Sharing the bill with the group’s annual holiday luncheon keynote speaker, veteran transportation analyst Anthony B. Hatch, the Surface Transportation Board chairman announced his decision in November to not re-up for another term [see “STB chairman Oberman will not seek reappointment,” Trains News Wire, Nov. 16, 2023].
But he acknowledged to Trains News Wire after the event that he expects to step down “this spring,” adding, “I don’t have a date. I have a lot of things I have to finish and want to get done — can’t talk about what those are. Once they’re done, I’m ready to go.”
What Oberman did reveal were his views about management at the Class I railroads, Wall Street’s potential negative influence, and the railroads’ common carrier obligations.
On railroad workforce reduction woes: “Every shipper I visited told me, ‘Of course we didn’t lay anybody off [during the pandemic]. We knew the business was coming back; we’ve got a lot of value in our employees and we would lose all that.’ Only the railroads didn’t discover this until last year? It’s a 200-year-old industry.
“I constantly hear CEOs preaching to me that the government shouldn’t interfere and let the market decide. I agree: the market is telling you you’re not paying enough. Everyone has a price if you need more workers.”
On investment in capacity to support long-term growth: “I think five of the six Class Is have really turned around at the C-suite level in terms of their philosophy. But Union Pacific furloughed 94 mechanics two weeks after Jim Vena took over on Aug. 14 and 100 carmen a couple of weeks after that. In October, they furloughed over 1,300 maintenance-of-way workers and then cut administrative staff by 5%. This was in direct contrast to the other Class Is. The UP carries 28% of freight in this country; if they are unable to recover as the so-called industrial recession recedes, I have a concern for the economy.”
Oberman also is worried that the stockholder-driven corporate “legal structure” which allowed management to conduct massive layoffs “is still in place. Will [a hedge fund] say, ‘enough of this pivot to growth — enough spending money for the long term. We want short-term returns?’ I’m very concerned about UP.”
On the railroads’ common-carrier status: The STB chairman cited an early 20th Century ruling by Supreme Court Associate Justice Rufus W. Peckham, who said that as common carriers, railroads “primarily owe duties to the public of a higher nature even than earning large dividends to their stockholders. The business railroads do is of a public nature, closely affecting nearly all classes in the community.”
And so, Oberman said, “The courts have affirmed that railroads are held to a much higher standard than other businesses because of this common-carrier obligation. Right now this is the only tool the STB really has. Shippers have to live with the railroads day in and day out; they can reasonably and accurately fear retaliation — despite all the railroads’ denials — so they don’t bring a lot of cases.”
He noted two recent cases, including one where settlement talks are pending after the railroad first tried to have it dismissed [see “BNSF and Powder River Basin coal producer settle …,” News Wire, Nov 9, 2023]. “The Board has made clear that there is a common carrier obligation that is meaningful,” Oberman said.
He also revealed that habits he acquired while serving on the Chicago City Council from 1975 to 1987 die hard.
“When a shipper calls me up says they have a unit train that has been stuck in a yard somewhere for three days, I get on the phone with the railroad CEO and ask, ‘Can you move that train?’ I call the shipper back and tell him, ‘I think it is going to happen.’ It’s a natural reaction from an alderman who gets a call from a constituent about that pothole in front of his house that hasn’t been fixed for weeks. But it drives my staff crazy.”
Regarding hedge funds–their customers aren’t mostly billionaires but instead Public Employee Pension Funds (Think CALPERS), Insurance outfits, and college endowments (Harvard and TIAA-CREF). Pension and insurance funds need $$$ to pay pensions and health claims while colleges have building projects and BLM, DEI, etc. grants to do; I have suspicions that stock buybacks are HOW that money is gotten mostly. I have been trying to find out HOW stock buybacks are done because I suspect it is NOT in the retail market but rather in the shadowy nether-world of mysterious “Block Trades” that appear over the wires on the “Bloombergs”. Yet getting a straight answer out of anyone is frustrating. The eventual goal of Biden, Schumer, Jeffries & Co. is to institute a “Freight MBTA” for the entire country akin to the FEDERAIL that almost happened in 1976-9. a Freight MBTA for the Northeast. But the Freight MBTA’s proponents didn’t have the votes in a Senate Committee in August 1979 while the rest of the country worried about Jimmy Carter and Killer Rabbits (long story) as the rest of the country’s taxpayers realized they’d be footing the bill for cushy union jobs forever.
OK. Last summer I saw how CSX was running fewer longer, slower trains with mid-train helpers at Little Falls NY. How to drive away customers with less service; yes, trains doing only 50 are easier to chase than trains doing 70–but there are fewer. Plus no point to watching trucks on the Thruway near Rotterdam Jct. even if it is now possible to get into there (no more driving in; did that twice).
Which brings up a question of operations over major projects: how many of them didn’t pay? Each summer I see Binghamton to Albany on the D&H and the remains of “Track 4”—the D&H got only 33 years’ use out of that low-grade line (1920-53); would they have been better off NOT doing it?
Oberman has had his moments but most were complaining and doing little to solve the other issues he should have been worrying about, encouraging growth opportunities, especially among the short lines working with the class ones. The Savage Tooele Project (in Western Utah) being a prime example. as Bill Stephens pointed out, of forcing an existing railroad facility to be stopped and causing a shovel-ready economic distribution hub to lose willing customers and occupants because of a need for an unnecessary environmental impact statement, not even required by the local and State authories. And what was it that Stephens also said: In Oberman’s time, 59 ROW’s were allowed to be abandoned but only 9 were allowed to be built? That is not a very good record in doing something that was always available to be done rather than sitting on a throne and complaining about the Class Ones.
And by the way, while that constructive criticism of the Class Ones and their love affair with PSR and their Wall Street cadre was necessary and also took too long to get it risen above the level of the classified section of the newspapers, Oberman’s criticism of UP laying of maintenance of way employees and their mechanics was not presented fairly. Those layoff happen every late November and December and all of those men are called back in January as the new year rolls forward. Vena and his CMO explained this but of course that fell on “short-timer ears…” Before UP could be turned around, Lance Fritz and his cat herding brigade of accountants had to be gotten rid of. I for one, would like to know if Foster Farms is now getting the service they once had before Fritz and associates ran THE premier railroad franchise in the US into the ground. If nothing else, this continues to prove that Railroad people must run Railroads; not accountants or airline presidents or marketing gurus, etal; but RAILROAD PEOPLE.
By the way Charles, you can’t win with these democratic apologists. Their buddy’s ship is sinking faster than a concrete canoe. Things will be changing soon as everybody will vote for anybody that has an economic clue, which even the dems cannot deny unless they are just being contrarians for the fun of it. Their economic policy’s are not very funny though.
What would the end of the year be without the daily insult from Mr. Landey.
If it’s about the Biden administration, expect 366 of them next year.
Or for that matter, the federal government, Democrat or Republican.
Charles once again proving the old adage “Better to remain quiet and be thought a fool, than to speak out and remove all doubt”.
I am sure the Class 1’s will be glad to see him leave, but lets face it…..he got the STB involved because they started bowing to their new masters, the hedge funds. He is reminding them all that the courts have ruled that the public good has a higher priority than the hedge fund greed.
“Proactive hedge funds” who force themselves onto F500 boards to enable their profit return schemes should be restricted to some degree. It used to be that funds in general invest in companies that show excellent performance. On the flip side, they disinvest in those that aren’t. That is what drove the capital markets.
But now, these funds buy up stock, take over the boards, install a henchman and clean house and start share buybacks with the profits. This was considered healthy when it was only about turning a company around, but now funds are going completely Gekko on profitable companies to get yet more in their favor. Greed is good run amuck.
It makes you wonder how much Hedge Fund money is polluting Congress to get regulations to maintain this model even further.
Yes it is not a pretty picture. I hope the next chairman has the wisdom of Abe Lincoln and the iron fist of Teddy Roosevelt…
There is absolutely someone there who can fill his shoes. He is Mr. Robert Primus. He is already on the board, and was every bit as tenacious as Mr. Oberman during those meetings with the Class 1 Execs during the industry meltdown. I had the honor of meeting both of them this past June.
Really hate to see Oberman leave. He had gotten to the point of recognizing when railroads service had gotten so bad that something needed to be done. Then he took action even in the face of the big bad railroad. Remember the chicken and cattle feed UP ordered service and now he’s tied into the poor last mile switching. The big question is there anyone else who can fill his shoes?
A (very rare) distinguished credit to American government. Sorry to see him leave. Seems to be the only Biden Administration official with an IQ above the freezing point of water, as measured in degrees Celsius.
That puts the Biden administration one up on the insurrectionist-loving Trump administration where truth and the Constitution died.
Mr. McClure, what country do you live in? The constitution is alive and well, no thanks to Mr Biden and his cadre of clowns. who never saw a dollar that couldn’t be spent wastefully. Remember, it was Abraham Lincoln who said that no one can “spend their way out of debt.” Somebody on the demcratic side of the Senate (Chuck Schumer?) needs to figure that out quick…