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Tag: CSX Corp

  • Earnings will drive the stock market in the week ahead. That’s a good thing

    Earnings will drive the stock market in the week ahead. That’s a good thing

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    A view of the New York Stock Exchange building in the Financial District in New York City on Aug. 5, 2024.

    Charly Triballeau | Afp | Getty Images

    The good times are still rolling on Wall Street. An intensifying earnings season will put that momentum to the test.

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  • Microsoft, CrowdStrike IT outage hits global supply chain, with air freight facing days or weeks to recover

    Microsoft, CrowdStrike IT outage hits global supply chain, with air freight facing days or weeks to recover

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    A FedEx cargo plane.

    Leslie Josephs | CNBC

    The CrowdStrike software bug that crashed Microsoft operating systems and caused the largest IT outage in history caused disruptions at U.S. and global ports, with highly complex air freight systems suffering the heaviest hit, according to logistics experts, as global airlines grounded flights.

    “Planes and cargo are not where they are supposed to be and it will take days or even weeks to fully resolve,” Niall van de Wouw, chief air freight officer at supply chain consulting firm Xeneta, said in a statement shared with CNBC. “This is a reminder of how vulnerable our ocean and air supply chains are to IT failure.” 

    Thousands of flights were grounded or delayed at the world’s largest air freight hubs in Europe, Asia and North America.

    The new issue for the global supply chain comes amid a rise in global demand, with shipments up 13% year-over-year in June. Air freight supply has increased, but only by 3% year-on-year, already causing higher costs for shippers due to the limited capacity, according to Xeneta. “Shippers already had concerns about air freight capacity due to huge increases in demand in 2024, driven largely by the extraordinary growth in e-commerce goods being exported from China to Europe and the U.S.,” van de Wouw said. “Available capacity in the market is already limited so airlines are going to struggle to move cargo tomorrow that should have been moved today.

    Pete Buttigieg, U.S. Secretary of Transportation, told CNBC on Friday morning that what the government is watching for over the course of the day, as the issue has been identified, is “the kind of ripple or cascade effects as they get everything back in their networks back to normal.”

    “These systems, these flights, they run so tightly, so back to back that even after a root cause has been addressed you can still feel those impacts throughout the day,” Buttigieg said.

    He said the FAA’s operational systems, like air traffic control or most systems within the U.S. Department of Transportation, as well as major urban transit systems, such as New York City’s MTA, were operating though there could be “spot” issues throughout the day. But “as far as the airlines themselves we are going to definitely be expecting more there,” he said.

    FedEx said in a statement that it has activated contingency plans, but added that “potential delays are possible for package deliveries” expected Friday.

    UPS said in a statement that computer systems in the U.S. and Europe were affected, but its airline continues to operate effectively, and drivers are on the roads delivering for customers. “We are continuing to work to resolve all issues as quickly as possible; there may be some service delays,” UPS stated.

    Ports, freight rails, report some issues, but normal operations

    Most rails and ports were faring better after some early morning disruptions.

    Only one major U.S. freight railroad reported issues related to the IT outage, with Union Pacific confirming in an email to CNBC that it had varying levels of impact across its network.

    “Our backup protocols enable us to communicate with our teams and dispatchers. We are doing everything possible to keep freight moving, but there have been some processing delays in customer shipments as we address targeted areas impacted on our network. We will continue to keep our stakeholders updated as we address the outage over the next 24 hours,” Union Pacific said in the emailed statement.

    Other major freight operators, including CSX, Norfolk Southern and BNSF, a subsidiary of Berkshire Hathaway said their operations are not currently affected.

    Buttigieg said that at the ports, small issues can turn into a big issue, noting that even with ships and cranes operational, gates were affected, which meant the trucks couldn’t come in or out, which led to delays at certain ports, but they are “up and running and open for business today,” he added.

    The Port of Houston, the fifth-largest port in the U.S., said it experienced “major system outages” overnight, but said that all of its systems are now up and running with “minimal delay to operations.”

    The Port of Los Angeles, the nation’s largest port, confirmed to CNBC that one of its terminals, APM Terminals, was down temporarily, but came back up in the early morning. In an email to clients, APM, a subsidiary of Maersk, notified trucking clients that the port was “able to recover rather quickly,” and it restarted operations around 2 a.m. Any drivers not able to complete their pickups were told to contact the company’s import group so they could secure a new appointment to have a demurrage waiver for those containers.

    Mario Cordero, executive director of the Port of Long Beach, said there were minimal impacts to some of its terminals, but systems are up or in the process of being restored.

    The Port of New York and New Jersey reported a delay in the opening of two terminals, but within a few hours, the terminals were back up and running.

    “The Port Authority has been working closely with impacted terminal operators since the overnight hours, assisting in their recovery while also communicating updates through a multitude of channels to the port’s vast community of stakeholders,” said Bethann Rooney, port director at the Port Authority of New York and New Jersey. She said the port was able to initiate “a quick and efficient response to get cargo moving again.”

    All marine terminals were open by 8 a.m. The Port Authority agency was not impacted by the outage.

    Not all ports use systems that incorporate CrowdStrike software, with the Port of Savannah and the Port of Virginia both reporting “normal operations.”

    Emily Stausbøll, Xeneta senior shipping analyst, told CNBC that the IT outage has the potential to cause significant disruption at ports if ships are prevented from offloading and loading containers, and that can cascade through the supply chain.

    “There are also knock-on impacts across inland supply chains if truck and rail services are unable to pick up and drop off cargo at the port,” Stausbøll said.

    She noted that In May, Charleston Port on the U.S. East Coast shut for two days due to a software failure, which resulted in a port congestion increase of 200%. “Port congestion has been a major problem during 2024. While it is now easing, there is no slack in the system and any disruption will push the needle back into the red,” she said.

    Maritime intelligence company Kpler told CNBC early indications showed the global IT outage affecting operations at global ports including Poland’s Gdansk, and Dover, Felixstowe and Liverpool in the U.K.

    Rotterdam, the largest port in Europe, informed customers on its website of possible disruptions, but In an email to CNBC, a port spokesman said critical port operations of the Harbour Master Division and nautical service providers remain operational. “However, some companies in the port, including a container terminal, are experiencing issues due to the disruption and have adjusted their processes. They are working on a solution.”

    Matt Wright, senior freight analyst at Kpler, said the outage could lead to some delays at the affected ports, but with Microsoft and Crowdstrike reporting a fix being implemented, resumption of normal operations later today would mean it is unlikely to cause any significant backlog.

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  • Stocks making the biggest moves after hours: SolarEdge, Knight-Swift Transportation and more

    Stocks making the biggest moves after hours: SolarEdge, Knight-Swift Transportation and more

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  • Canadian West Coast port workers vote yes to ratify a tentative deal. Railroad congestion continues

    Canadian West Coast port workers vote yes to ratify a tentative deal. Railroad congestion continues

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    Shipping containers are loaded onto rail cars at the Global Container Terminals Vanterm container terminal on Vancouver Harbour in Vancouver, British Columbia, Canada.

    Bloomberg | Bloomberg | Getty Images

    Members of the International Longshore and Warehouse Union (ILWU) of Canada voted to ratify the second tentative agreement with West Coast port ownership, meaning an end to the uncertainty and trade congestion that has gripped the supply chain for weeks since dock workers first decided to strike.

    Rob Ashton, president of the ILWU, said 74.66% of members voted in favor of accepting the terms of the tentative agreement.

    The ILWU Canada and the British Columbia Maritime Employers Association (BCMEA) announced a revised second tentative deal last Sunday, with the agreement brokered by the Canada Industrial Relations Board, after union members rejected an original deal proposal. The country’s industrial relations board directed the union to vote no later than Friday.

    The new deal includes increases in wages, benefits, and training, according to an overnight statement by the BCMEA. No additional specifics were given.

    The original deal proposal which was rejected increased the compounded wage over four years by 19.2%, according to disclosures from the BCMEA, as well as a signing bonus of $1.48 an hour per employee, which tallied to approximately $3,000 per full-time worker. There was also an 18.5% increase in the retirement payout.

    The union argued that worker salaries were unsustainable against rising inflation, but the BCMEA countered that over the past 13 years, longshore wages have risen by 40%, ahead of inflation at 30%. The union said that the use of contract labor for maintenance work was another sticking point in the deal.

    The BCMEA said the ratification would provide “certainty and stability for the future of Canada’s West Coast ports.”

    “The BCMEA recognizes and regrets the profound repercussions this labor disruption has had on the national economy, workers, businesses and ultimately, all Canadians that depend on an efficient and reliable supply chain. All supply chain stakeholders must collaborate now to ensure we do not see disruptions like this ever again.”

    But, after a week of traveling and meeting shipping clients, Paul Brashier, vice president of drayage at ITS Logistics, told CNBC the reliability and reputation of the Canadian ports have created lasting damage.

    “We are happy that the ILWU has finally come to terms and agreed to a new contract,” said Brashier. “Unfortunately, this lack of government intervention and direction has forced cargo owners and shippers in our network to make the decision and permanently move their imports back to the U.S. port of entry on the West Coast.”

    Over the course of the 14-day strike, ocean carriers either pulled up anchor to divert the Canadian ports to stay on schedule and unload at U.S. ports. Some U.S. shippers reconsigned the destination of their containers to the U.S during that time. Other ocean carriers eventually went back to the Canadian ports and waited to unload both Canadian and U.S. freight.

    Canadian Labor Minister Seamus O’Regan tweeted acknowledgment of the supply chain damage the strikes caused and is now calling on federal officials to review how the disruption of this magnitude unfolded so it can be avoided in the future.

    Supply chain delays will last months

    It will take at least two months for the railroads to clear out the pileup of containers as a result of the 14 days of striking by dock workers. At the height of the strike, $12 billion in freight was stranded on the water. Some of that trade was diverted on vessels that called on ports on the U.S. West Coast.

    The Railway Association of Canada originally estimated that it would take three to five days, for every day the strike lasted, for networks and supply chains to recover. When the first strike ended on its 13th day, delays for rail containers were estimated at 39 to 66 days. After an additional day of work stoppage in the on-again, off-again strike, the congestion tally moved up to a range of 42 to 70 days.

    “Delays appear to be bearing out toward the mid-to-upper end of that range,” a Railway Association of Canada spokesperson recently told CNBC via email.

    Changes to vessel routes impact the profitability of railroads, including Canadian Pacific Kansas City and Canadian National Railway, since fewer containers can be unloaded at U.S. ports. This decrease in containers also impacts trucking companies. On the flip side, the extra containers coming into U.S. ports will add to the profitability of U.S. trucking companies and railroads BNSF, a subsidiary of Berkshire Hathaway, and Union Pacific. Over the long term, if Canadian trade is rerouted to the East Coast as a result of West Coast labor strife, that would also benefit Norfolk Southern and CSX.

    In the first two weeks of the strike, the flow of railroad trade from Canada to the U.S. was cut by 82%. Train trade has slowly recovered, with a 6.2% decrease being tabulated for the week ending July 29.

    The supply chain issues have already hit the bottom lines of railroad companies. Canadian Pacific Kansas City railroad’s chief marketing officer John Brooks told analysts on the company’s conference call last week the labor unrest will negatively impact the railroad’s revenue by $80 million. Brooks said the company is working to claw back those losses over the third and fourth quarters.

    Canadian National Railway announced it was running additional trains to help expedite the clearing out of the container congestion.

    The timing of this strike occurred during the peak shipping season, when back-to-school and holiday items are arriving for retailers.

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  • Rockland County, New York, officials say sparks from CSX train apparently cause brush fires | CNN

    Rockland County, New York, officials say sparks from CSX train apparently cause brush fires | CNN

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    CNN
     — 

    A CSX train apparently caused sparks as it traveled through its Rockland County, New York, route, creating “dozens of brush fires,” according to the Rockland County Sheriff’s Office.

    In a Facebook post, the sheriff’s office said, “A CSX train traveling through the Town of Clarkstown, Stony Point, Haverstraw, Village of Haverstraw, Village of West Haverstraw appears to have caused sparks to fly all along the route through these municipalities, creating dozens of brush fires which the Volunteer Fire Departments and Town Police Departments are responding to.”

    CSX said in a following statement, “At approximately 1:57 p.m. ET today, CSX was contacted by Haverstraw Town Police requesting that train traffic be stopped due to brush fires near Gurnee Avenue in Haverstraw, NY. CSX inspected the train that was in the area and no issues were reported. We will continue to work in close coordination with first responders and hold train traffic out of the area to allow for a safe response. CSX is cooperating with Rockland County officials, who are investigating.”

    Beth Cefalu, a spokesperson for the Rockland County Executive’s Office, said preliminary indications suggest that “a train was kicking up sparks and started fires.”

    The train has been stopped as firefighters put out the fires, Cefalu said.

    Three firefighters suffered heat exhaustion battling the fires Friday afternoon, Cefalu told CNN. She added that she did not have information on what the train was carrying.

    CNN has reached out to Rockland officials and CSX to inquire about the cause of the fire and whether the train was the impetus.

    The sheriff’s office advised the public to avoid route 9W through the municipalities.

    The town supervisor for Clarkstown, George Hoehmann, said as of approximately 3:30 p.m. most of the fire had burned out, but pockets were being treated and brush equipment was being brought in to hit hot spots. “This will be a long-term engagement but thankfully it appears contained,” he posted on Facebook.

    By Saturday, multiple fires had “significantly died down overnight,” officials said in a news release, “and no water drops will be necessary.”

    Hoehman said in the post that some homes had PVC fence melt from the heat, and one home had a pod storage unit destroyed and its home siding melted.

    There have been no structure fires, Hoehmann said.

    New York State Sen. Bill Weber called for a meeting with CSX.

    “This fire is the third incident in recent memory, which is unacceptable,” Weber said in a tweet.

    “We are happy to meet with Senator Weber to address any concerns he has,” the company said in a statement to CNN.

    CNN was unable to corroborate Weber’s assertion this was the third incident in recent memory.

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  • Inflation’s inventory gluts are here to stay and will hit the bottom line in weaker economy: CNBC Supply Chain Survey

    Inflation’s inventory gluts are here to stay and will hit the bottom line in weaker economy: CNBC Supply Chain Survey

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    CHRIS J RATCLIFFE | AFP | Getty Images

    Bloated warehouse inventories are an expensive pressure eating away at the bottom line of many companies, and for many, the excess supply and associated costs of storage won’t abate this year, according to a new CNBC Supply Chain Survey.

    Just over one-third (36%) said they expect inventories to return to normal in the second half of this year, with an equal percentage expecting the gluts to last into 2024 — 21% saying a return to normal can occur in the first half of the year, and another 15% expecting normal activity by the first half of 2024. But uncertainty about inventory management is significant, with almost one-quarter (23%) of supply chain managers saying they are not sure when gluts will be worked off.

    “We don’t expect significant decreases in inventory levels within our network in 2023,” said Paul Harris, vice president of operations for WarehouseQuote. “Several of our manufacturing clients are experiencing dead/bloated inventory challenges due to over-ordering in the container grid-lock from prior quarters. A majority have elected to keep the inventory on hand and are opposed to liquidating.

    A total of 90 logistics managers representing the American Apparel and Footwear Association, ITS Logistics, WarehouseQuote, and the Council of Supply Chain Management Professionals, or CSCMP, participated in the survey between March 3-21 to provide information on their current inventories and the biggest inflationary pressures they are facing, and often passing on to the consumer.

    What’s sitting in warehouses, and what companies are doing about it

    Logistics experts tell CNBC that 20% of their excess inventory sitting in warehouses is not seasonable in product nature. Slightly more than half of survey participants said they would keep the items in warehouses. But a little over one-quarter (27%) said they are selling on the secondary market because inventories impact a company’s bottom line through elevated storage prices.

    Harris told CNBC many clients with perishable goods are selling them on secondary markets to avoid destroying products. “However, if a secondary market is not an option, they are forced to destroy the product,” he said. “If it’s a consumable, they are donating the goods to take tax deductions.”

    Investors are worried about the earnings and margin trends and expect Wall Street to revise estimates lower. The supply chain pressures will be among the factors that weigh on quarterly numbers.

    “Inventory carrying costs continue to rise, driven by inflationary pressures and late shipments,” said Mark Baxa, CEO of CSCMP. “This means that with every day that passes, three things are happening … growing sales risk, margin pressure, and D&O [deteriorated and/or obsolete].”

    Almost half surveyed said the biggest inflationary pressures they are paying are warehouse costs, followed by the “other” category, which includes rent and labor.

    ITS Logistics told CNBC that many clients across industries have been using ocean containers, rail containers and 53-foot trailers for storage because distribution centers were full.

    “These charges will start materializing in Q2 or Q3 financial results,” said Paul Brashier, vice president of drayage and intermodal at ITS Logistics.

    The survey found 50% of respondents saying the average length of time they are using ocean containers for storage is over four months.

    “We are seeing similar trends in our data and ecosystem,” Brashier said.

    More inflation costs going to the consumer

    Traditionally, warehousing costs and the associated labor costs are passed on to the consumer, increasing or sustaining the price of a product. Nearly half (44%) of survey respondents said they are passing on at least half of their increased costs, if not more, to consumers.

    “It’s clear that supply chain challenges and all their associated costs continue to stir inflationary pressures,” said Stephen Lamar, president and CEO of the American Apparel and Footwear Association. “Given ongoing inventory concerns and the fragile nature of our logistics system, there are other pressures and uncertainty.”

    His group is calling for West Coast port labor negotiations to be quickly finalized and for the government to “aggressively remove other cost pressures,” a reference to Section 301 tariffs on Chinese imports, which he said continue to make supply chains more expensive.

    Manufacturing orders and the economic outlook

    Recent data on manufacturing has shown a deterioration in the economy, with the ISM Manufacturing index in contraction level based on March data released this week. The U.S. services sector slipped closer to contraction in March, according to the ISM Services Index, with sharp declines in new orders, exports and price.

    Looking at the health of manufacturing orders for the next three months, 40% of logistics managers surveyed said they are not cutting orders, while a little under one-fifth (18%) said they are cutting orders by 30%.

    Inventory levels and consumer consumption are two factors influencing manufacturing orders.

    These orders help gauge China GDP as it reopens from its strict Covid protocols, since the country relies on manufacturing and trade for its economic growth.

    FreightWaves SONAR intelligence shows a slight uptick in ocean freight orders and recovery from the massive drop ahead of Lunar New Year, but the longer trend line remains a decrease in ocean bookings.

    The inventory glut is affecting trucking logistics in multiple ways. Not only are trucks moving fewer containers from the ports, they are also moving less from the warehouses to the retail stores. Data from Motive, which tracks trucking visits to North American distribution facilities for the top five retailers by volume, shows a drop in truck visits from warehouses.

    “The decline in visits to retail warehouses indicates weakness in consumer demand, but surprisingly may also be a sign of recovery in the supply chain,” said Shoaib Makani, founder and CEO of Motive. “With lead times to replenish inventory reduced from 2021 and 2022 highs, retailers are burning off existing inventories with the confidence that they will be able to replenish quickly.”

    Even with orders increasing, the inventory headwinds are a source of concern for logistics experts.

    “This survey confirms that we remain in an era of serious supply chain cost-to-serve challenges,” Baxa said. “Warehousing costs are contributing to these challenges that shippers are facing today and on the road ahead.”

    FreightWaves and ITS Logistics are CNBC Supply Chain Heat Map data providers.

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  • CSX freight train derails after striking rockslide in West Virginia, injuring 3 and spilling diesel into river | CNN

    CSX freight train derails after striking rockslide in West Virginia, injuring 3 and spilling diesel into river | CNN

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    CNN
     — 

    A CSX freight train derailed Wednesday morning after striking a rockslide in a remote area of West Virginia, injuring three crew members and spilling diesel fuel into a nearby river, according to a company press release.

    The three crew members were in the locomotive, which caught fire after the derailment, and are being treated for non-life threatening injuries, CSX said. Two were airlifted and the third was taken to the hospital in an ambulance, a Summers County Office of Emergency Management dispatcher told CNN.

    Diesel fuel and oil spilled into the New River, and containment measures will be deployed, CSX said. The company also noted that the coal train was empty and was not transporting hazardous materials. CSX spokesperson Sheriee Bowman told CNN that 22 empty rail cars derailed.

    “The incident posed no danger to the public,” the CSX release said.

    The Federal Rail Administration says it’s actively monitoring the derailment and said that the fire has been extinguished. The administration said the derailment occurred on an Amtrak route, so residual delays may be expected.

    At least one locomotive and one fuel tank went into the New River, the West Virginia Emergency Management Division said. The division said the derailment occurred in a remote area south of Sandstone inside the New River Gorge National Park and Preserve, which in 2021 became America’s 63rd national park.

    The derailment comes about a month after a Norfolk Southern freight train carrying hazardous materials derailed and caught fire near East Palestine, Ohio, releasing potentially dangerous chemicals into the air and water. The incident has spurred bipartisan political efforts to prevent future incidents.

    CSX owns 12 feet from the middle of the train track to either side and is responsible for cleanup, the division said, adding praise for the early efforts of the company and first responders.

    “I’d like to commend the response agencies and CSX for their quick and efficient response,” said Summers County Emergency Manager Steve Lipscomb. “All the agencies worked as a team to provide prompt medical aid and transportation to the injured.”

    No roads are closed and there have been no evacuations of nearby homes, the division said.

    Chief Deputy Tim Adkins of the Summers County Sheriff’s Department said they received a call around 5 a.m. Wednesday about the derailment at a “pretty remote stretch of railway.” There was “extensive damage” to the train but no damage to outside property and no roads were blocked, he said.

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  • Despite toxic disaster, railroads still want single-person crews | CNN Business

    Despite toxic disaster, railroads still want single-person crews | CNN Business

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    New York
    CNN
     — 

    The nation’s major freight railroads have long desired to have only one crew member, a lone engineer, in the cab of their locomotives. And that desire hasn’t changed despite the derailment of a Norfolk Southern train on February 3 that released toxic chemicals into the air, water and soil of East Palestine, Ohio, that is still being cleaned up.

    But that accident very well may have ended the railroad’s chances of getting that one-person crew goal.

    The rail safety legislation, introduced in Congress Wednesday with bipartisan support, would include a prohibition on single-person crews. There is no such existing law or federal regulation requiring both an engineer and a conductor to be on a train. Instead, it is only labor deals with the Brotherhood of Locomotive Engineers and the transportation division of the Sheet Metal, Air, Rail, Transportation union (SMART-TD), which represents the conductors, that require at least one member of each union in the locomotive’s cab.

    The Association of American Railroads confirmed that its position in favor of one-person crews has not changed. It believes it will be more efficient, and just as safe, to have engineers responding to problems with trains by driving along tracks in trucks rather than riding in the cab of the locomotive.

    “The position on crew size has not changed. Railroads have been clear that they support fact-driven policies that address the cause of this accident and enhance safety,” said an AAR statement. “As we continue to review this bill, it is clear it includes many of the same wish list items AAR and others have clearly said would not prevent a similar accident in the future, such as the… arbitrary crew size rule. Railroads look forward to working with all stakeholders to meaningfully advance real solutions.”

    Union Pacific said the opposition to a two-person crew mandate does not mean the railroads don’t care about safety.

    “No data shows a two-person crew confined to a cab is safer, and train crew size should continue to be determined through collective bargaining,” a statement from UP. “Proposed legislation limits our ability to compete in a business landscape where technology is rapidly changing the transportation industry.”

    CSX also said it believes the decision on crew size should be decided in collective bargaining, not through legislation, but said it is not currently pursuing a change in crew size. Negotiations between the railroads and unions is not due to start again until 2024, and the railroads historically have negotiated deals that apply across the industry. The other two major freight railroads – Norfolk Southern and Burlington Northern Santa Fe – did not responded to questions about the legislation. But the AAR is the trade group that lobbies on their behalf.

    The AAR’s statement did not address the question as to whether that rule is now more likely to pass. But Jeremy Ferguson, president of SMART-TD, said this accident has completely changed the chances of getting the two-person crew requirement written into US law.

    “Absolutely,” he said when asked in an interview with CNN Business if he thinks the provision will now pass. “When an incident like this happens, it brings all the issues to light, how unsafe the rail industry truly is. I didn’t think we had any chance before this. The railroads and AAR do a very good job of lobbying in DC. So generally it’s difficult to get people to vote for something like this rule. But sometimes it takes a disaster to drive home the point. Any time you turn the TV on, there’s still an issue. It’s not going away.”

    The senators, both Democrat and Republican, sponsoring the rail safety bill say they’re hopeful there is now bipartisan support to change the law.

    “Rail lobbyists have fought for years to protect their profits at the expense of communities like East Palestine,” said Sen. Sherrod Brown, the Ohio Democrat. “These commonsense bipartisan safety measures will finally hold big railroad companies accountable, make our railroads and the towns along them safer, and prevent future tragedies, so no community has to suffer like East Palestine again.”

    “Through this legislation, Congress has a real opportunity to ensure that what happened in East Palestine will never happen again,” said Sen. J.D. Vance, the Ohio Republican who is a co-sponsor. “We owe every American the peace of mind that their community is protected from a catastrophe of this kind.”

    If the law is changed due to the East Palestine derailment, it won’t be the first disaster that changed rules and laws governing trains. In 2013, a runaway Canadian freight train carrying tanker cars of oil crashed in Lac-Mégantic, Quebec, causing a massive fire that killed 47 people and destroyed 40 buildings in the town. Canada responded by changing its law to require two person crews on trains carrying hazardous materials.

    But calls to change the law in the United States because of that accident fell on deaf ears.

    The fact that there were three employees on the train that derailed in East Palestine — an engineer, a conductor and a trainee — did not prevent this accident from happening.

    The National Transportation Safety Board’s initial finding on the disaster was that a fire originally started when a rail car carrying plastic pellets was heated by a hot axle.

    After the fire started, the train passed three trackside detectors meant to determine if there is a problem causing overheating. But the first two did not signal a problem, even as the fire raised the temperature more than 100 degrees. The detectors are designed not to alert the crew until there is a 200-degree rise in the temperature detected. Finally the third detector registered a rise in temperature of more than 250 degrees, triggering an alarm in the locomotive’s cab.

    The NTSB said the engineer responded immediately to the alarm by applying the brakes in an attempt to stop the train, but the wheel bearing on the car that was on fire failed before he could bring the train to a halt, causing the derailment.

    Ferguson said that while the crew could not prevent this derailment from happening, there are an uncounted number of times that they detect a problem and prevent a derailment. He said not having the conductor on the train would miss many of those problems and cause many more derailments.

    “When a detector goes off, you stop the train and the conductor can walk back and check if there is an overheating axle and make an immediate decision,” Ferguson said. An engineer is not allowed to get out of the locomotive, even if it’s stopped. Only the conductor can check to see if what the problems is that triggered an alarm.

    But if the conductor is driving around in a truck, rather than riding in the cab of the locomotive, it could be an hour or more before the conductor gets there, and the axle might have cooled down. At that point, the conductor might have to send the train back on its way, according to Ferguson, even though the original problem tripping the heat detector — a faulty axle or bearing — is still a problem that could quickly cause a derailment.

    “So having a guy wandering around in the truck may cause a derailment,” said Ferguson.

    Beyond the problems of this kind, having a second person in the cab can just offer greater attention to detail during long train rides.

    “You’ve got two sets of ears and two set of eyes. It always helps,” Ferguson said.

    And it also helps in case of a medical emergency. In January, a CSX engineer suffered a heart attack while bringing a freight train into Savannah, Georgia, according to the engineers’ union. The conductor was able to recognize he was in distress, give him an aspirin and to call ahead to have an ambulance waiting for him in the rail yard.

    The engineer needed emergency bypass surgery, but survived the heart attack.

    “This happens more often than people realize,” Ferguson said. “It’s not necessarily always a heart attack. But having two people up there always pays dividend for the crew members themselves.”

    CSX confirmed the incident with one of its engineer having a heart attack occurred in January.

    “We commend the heroic actions of all CSX employees who render aid during any medical emergency,” said CSX’s statement.

    The fact that the current labor contracts require two crew members is little comfort to the engineers and conductors unions.

    They point out that under the Railway Labor Act, they can have a contract that is opposed by some or all of the rail unions imposed upon them by Congress, as happened this past December. While this current contract did keep the provision for two-person crews in place, that’s not necessarily going to be the case in all future contracts, even if the unions continue to make the issue a priority.

    Congress generally enacts what is recommended by a panel appointed by the president to propose a deal that hopefully both labor and management can accept. But it might have one or two provisions which are deal breakers for the unions, such as allowing single-person crews.

    “Given the wrong president, we could lose this in a hurry,” said Ferguson.

    The Federal Railroad Administration is also considering a rule that would require two-person crews. But Ferguson said getting the requirement written into law would be better than a simple regulation. An FRA regulation could be easier to change in a new administration than it would be to get a change in the law.

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  • Union Pacific CEO to leave after push from activist shareholder | CNN Business

    Union Pacific CEO to leave after push from activist shareholder | CNN Business

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    New York
    CNN
     — 

    Union Pacific shares jumped 10% in premarket trading Monday after the railroad company announced CEO Lance Fritz will leave the company by year-end, following a call by an activist hedge fund for his ouster.

    Union Pacific just reported a record profit for the second straight year. But the hedge fund, Soroban Capital Partners, put out a statement saying that Fritz had lost the confidence of “shareholders, employees, customers, and regulators.”

    “UNP’s total shareholder return has been the worst in the industry,” said Soroban’s letter to the board. “Among all S&P 500 companies, UNP is rated by employees as the worst place to work and has the lowest employee CEO approval rating (ranked 500th out of 500 in both),” said the letter. And it said that the Surface Transportation Board, one of the regulators of freight railroads, ranked Union Pacific as providing the worst service among the major railroads.

    Soroban only owns about 1% of Union Pacific’s shares.

    “It is my honor and privilege to serve this great company. I am proud of our team and all we have built together,” said Fritz in a statement. “Union Pacific has been my home for 22 years and I am confident that now is the right time for Union Pacific’s next leader to take the helm.”

    Union Pacific said its process of looking for a new CEO had been ongoing for a year and that it decided to make a public statement in light of Soroban’s public call for a change.

    “The Board is grateful to Lance for his unwavering leadership, dedication and oversight in driving our company forward over the last eight years as CEO. Lance created an environment that has allowed Union Pacific to make a measurable impact with our customers, communities and employees alike,” said Michael McCarthy, lead independent director of the Board. “He has capably led our company during a time of significant challenge and change.”

    But, overall, the level of service and on-time performance in the freight railroad industry has been declining for years, as the railroads attempted to trim costs and staffing.

    Despite the industry’s record profits, stocks in major freight railroads have lagged other sectors. Shares of Union Pacific

    (UNP)
    are down about 20% over the last 12 month through Friday’s close, even with a rebound in share price so far in 2023. That’s worse than the drop in share price at other major railroads like Norfolk Southern

    (NSC)
    and CSX

    (CSX)
    .

    As far as employee relations, Union Pacific was seen as a leader among freight railroads in contentious labor negotiations last year that would have resulted in an economy-crippling strike had Congress not stepped in and imposed an unpopular contract. The contract granted employees an immediate 14% raise, including back pay, but denied them the paid sick days they had sought.

    Union Pacific and other railroads argued during the negotiations that it couldn’t afford to meet union demands for paid sick days, even though the unions estimated it would cost the entire industry $321 million a year at a time when the railroads are each making billions of dollars in profits.

    Union Pacific last year earned a net income of $7 billion, up about $500 million, or 7%, from the previous record profit it posted for 2021. Total employee compensation for the year came to $4.6 billion, far less than the $6.3 billion that Union Pacific spent repurchasing shares of stock in the period.

    Last week, Union Pacific reached an agreement with two of its smaller unions granting their members up to four sick days a year, as well as greater flexibility to use three personal days as sick days without prior notice and approval.

    “We will continue to work with other unions to address paid sick time solutions,” according to the company’s statement on sick pay last week. The move came after another major railroad, CSX, reached deals granting sick days with six of its unions. UP did act before a third railroad, Norfolk Southern, reached a deal with one of its unions on sick days in the wake of a major train derailment in East Palestine, Ohio, which released toxic materials into the area.

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  • Norfolk Southern is paying $6.5 million to derailment victims. Meanwhile, it’s shelling out $7.5 billion for shareholders | CNN Business

    Norfolk Southern is paying $6.5 million to derailment victims. Meanwhile, it’s shelling out $7.5 billion for shareholders | CNN Business

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    New York
    CNN
     — 

    Norfolk Southern CEO Alan Shaw pledged Tuesday the freight railroad will spend $6.5 million to help those affected by the release of toxic chemicals from its derailment nearly three weeks ago in East Palestine, Ohio. But in a plan released earlier this year, the company said it’s planning to spend more than a thousand times that amount — $7.5 billion — to repurchase its own shares in order to benefit its shareholders.

    The company spent $3.4 billion on share repurchases last year, and $3.1 billion in 2021, bringing its recent share repurchases to $6.5 billion. That towers over what it said is its financial commitment to East Palestine, which it said exceeds $6.4 million in direct aid to families and government agencies, in addition to what will be required in cleanup costs.

    There is no estimate as to the total cost to Norfolk Southern from the derailment, including the cost of cleanup that the Environmental Protection Agency says will be the railroad’s responsibility.

    It’s not clear how much of the accident’s cost will fall on Norfolk Southern. The company revealed Wednesday during a conference call with investors that it has as much as $1.1 billion worth of liability insurance coverage that it can draw upon to compensate third parties for losses caused by the accident. It also has about $200 million worth of insurance coverage to cover damage to its own property, such as tracks or equipment.

    In March 2022, Norfolk Southern

    (NSC)
    announced a new $10 billion share repurchase plan. Its latest annual financial report, filed just hours before the derailment this month, shows that it still had $7.5 billion available to buy additional shares under that repurchase plan as of December 31.

    Norfolk Southern did not respond to questions Wednesday on whether it expects to change its share repurchase plans in the wake of the derailment.

    The company also returned an additional $1.2 billion to shareholders in the form of dividend payments in 2022, and $1 billion in 2021, bringing total payments to shareholders to $4.6 billion last year and $4.1 billion in 2021.

    The shareholders did much better than the company’s 19,000 employees. Total employee compensation in 2022 came to $2.6 billion, up from $2.4 billion in 2021.

    The amount that Norfolk Southern and other major freight railroads are spending on shareholders got a lot of attention in December, when they successfully fought a move in Congress to require them to give hourly workers at least seven sick days a year as part of a labor contract imposed on the industry by Congress in order to avoid an economically crippling rail strike. And it’s getting new attention in the wake of the derailment, along with questions about whether the environmental disaster could have been avoided if the railroad had spent more on staffing and safety.

    “Corporations do stock buybacks, they do big dividend checks, they lay off workers,” said Democratic Sen. Sherrod Brown of Ohio, on CNN’s State of the Union on Sunday. “They don’t invest in safety rules and safety regulations, and this kind of thing happens.”

    The accident is under investigation by the National Transportation Safety Board. While the cause has yet to be determined, it is known that freight railroads have fought tougher safety rules in the past.

    One rule the industry successfully fought would have required a more modern braking system on trains carrying significant amounts of hazardous materials. The Federal Railroad Administration, which proposed the rule under the Obama administration, estimated a more modern braking system would reduce by nearly 20% the number of rail cars in a derailment that puncture and release their contents.

    The FRA estimated those better brakes would cost the entire industry $493 million, spread over a period of 20 years. The Association of American Railroads, the trade industry group that represents most US freight railroads, estimated a much greater cost — about $3 billion, but again, spread over 20 years. That would mean around $150 million a year for an entire industry that is earning billions of dollars of annual profits.

    Still, it was able to block the rule from ever taking effect, based partly on the argument it was too costly for the potential benefit.

    “The railroads are quick to point out their lack of funds to provide adequate staffing, paid sick leave and improved safety, yet they have billions of dollars to spend on stock repurchases,” said Eddie Hall, national president of the Brotherhood of Locomotive Engineers, the industry’s second-largest union behind the one that represents conductors.

    Share repurchases are designed to help increase the value of the stock by reducing the number of shares outstanding.

    In theory, each remaining share becomes more valuable since it represents a greater percentage of the company’s overall ownership. The earnings per share, a key measure used by investors to judge a company’s profitability, can rise even if the total dollars earned by the company goes down, as the pool of shares available to the public shrinks further.

    But Norfolk Southern’s profits aren’t going down. They’re going up — by quite a bit. It posted record profits from railway operations of $4.45 billion in 2021, and broke that record in 2022 when it earned $4.8 billion on that basis.

    Other freight railroads are also reporting improving profits, and have joined Norfolk Southern in massive share repurchases.

    Union Pacific

    (UNP)
    purchased $6.3 billion worth of shares in 2022, and has plans to purchase an additional 84 million shares, worth more than $16 billion at its current value. CSX repurchased $4.7 billion worth of shares last year and has plans to buy an additional $3.3 billion going forward. Like Norfolk Southern, both UP and CSX spent more on share repurchases than they did on total employee compensation.

    Share repurchases are not limited to the rail industry. Chevron

    (CVX)
    recently announced plans to repurchase $75 billion worth of its stock with windfall record profits that came from high oil prices. Across corporate America, share repurchases reached almost $1 trillion for the first time last year, coming in at $936 billion according to S&P Dow Jones Indices, up from $882 billion in 2021.

    Share repurchases are forecast to top $1 trillion this year.

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  • Railroad workers hopeful Biden will act to give workers paid sick time | CNN Business

    Railroad workers hopeful Biden will act to give workers paid sick time | CNN Business

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    New York
    CNN
     — 

    Railroad workers could get the paid sick days that were at the heart of their threat to go on strike – if the Biden administration steps in with an executive order.

    Workers have been unsuccessful getting their demands for paid sick leave met through months of negotiations with the freight rail companies, or through congressional action.

    But on Friday, 70 Democrats in Congress signed a letter asking for President Joe Biden or some federal agency to issue an order giving rail workers the seven sick days a year they were seeking.

    The letter pointed out that both the House and Senate supported legislation to do so, with some nominal Republican support in both chambers along with nearly unanimous Democratic support. But the legislation failed because it didn’t get the 60 votes it needed in the Senate.

    The White House did not immediately respond to a request for comment on the letter from the unions’ congressional allies.

    But officials with the rail unions said they have been talking to the administration about some kind of executive action to get them the sick time they’ve been seeking, and that they are hopeful action could be forthcoming.

    “I mean, the Biden administration has been helpful,” said Greg Hynes, national legislative director for the transportation department of the Sheet Metal, Air, Rail Transportation Union, (SMART-TD), the largest rail union representing about 28,000 conductors. “Of course, they want to do this. Whether they can do it, we’re going to find out.”

    The congressional letter said executive action, either by Biden himself, the Labor Department or the Federal Railroad Administration, is needed because the lack of paid sick days poses a safety hazard to the general public by having rail workers try to do their jobs when sick.

    “If a rail worker comes down with COVID, the flu, or some other illness and calls in sick, that worker will not only receive no pay, but will be penalized and, in some cases, fired. We cannot allow that to continue,” said the letter.

    The main lobbying group for the nation’s railroads, the Association of American Railroads, said it believes the question of sick days should be addressed in negotiations with the unions.

    “Following the conclusion of the latest bargaining round, the industry looks forward to using the new agreements as a springboard for further discussions on the structure of our paid leave benefits, enhancing schedule predictability, and addressing overall work-life balance interests,” said the AAR.

    “Railroads remain committed to working with their employees to address these priorities holistically and strike the right balance, be it as an industry or on a railroad-by-railroad basis with each union,” the AAR added.

    The railroads insist that the workers can use personal or vacation days if they are too sick to report to work.

    “If you wake up sick, no one wants you out on the railroad, and management does not want workers coming to work if they are sick,” said Ian Jefferies, CEO of the AAR, in an interview with CNN last month.

    The unions said that members could use their bank of paid time off when sick more easily in the past, but deep staff cuts in recent years have left the railroads so understaffed it is rare that workers can get approval to be off in those instances when they wake up not feeling well. If they do so, not only do they risk losing pay, they also risk being disciplined. And the AAR’s own statement on sick pay availability said workers can call off sick without penalty as long as “they maintain reasonable overall availability.”

    The Biden administration asked Congress to vote to block a strike by the unions that could have started this past Friday, saying a work stoppage would be too great a blow to the nation’s economy.

    The unions argued they needed the right to strike in order to win things they were seeking at the bargaining table, like sick days.

    But despite being disappointed most of the unions’ leadership have been restrained in criticizing Biden for imposing unpopular contracts on their members that did not include sick days.

    Asked if the reason that most union leaders did not criticize Biden’s decision was because they are hopeful that he will be willing to issue an executive order to get them the disputed sick days, Hynes replied, “I think you’re answering your own question.”

    The rail unions are planning rallies around the country in support of rail workers. The lack of sick days will be a major issue at the rallies.

    Among the speakers at the Washington DC rally will be Sen. Bernie Sanders, the main author of the congressional letter. That letter points out that President Barack Obama issued such a rule on federal contractors in 2015, but that it did not cover the unionized rail workers.

    “Over 115,000 rail workers in this country are looking to you to guarantee them the dignity at work they deserve and to ensure that our rail system is safe for its workers and for millions of Americans who cross rail tracks every day,” said the congressional letter. “Through executive order, agency rulemaking, and any other applicable authority, we ask that you take quick and decisive action to guarantee these workers paid sick leave.”

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  • Senate passes bill to prevent rail strike, rejects measure providing paid sick leave

    Senate passes bill to prevent rail strike, rejects measure providing paid sick leave

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    The U.S. Senate on Thursday voted 80-15 in favor of a bill that would prevent a rail strike by imposing a deal on freight-rail workers, after rejecting a separate House-passed measure that would require rail companies to provide those workers with seven days of paid sick leave per year.

    The vote for the bill imposing a deal keeps Washington on track to block a strike, as the House of Representatives passed it Wednesday. President Joe Biden is expected to sign the legislation into law given that he called on Monday for Congress to act.

    Business groups have been warning that even a short-term strike would have a tremendous impact and cause economic pain.

    The deal that would be imposed on rail employees includes a 24% increase in wages from 2020 through 2024, but workers have remained concerned about a lack of paid sick time.

    In the vote on sick leave, there were 52 senators in favor, while 43 were opposed, and 60 votes for it were needed. A half dozen Republican senators were in favor, while Sen. Joe Manchin of West Virginia was the only Democrat in opposition.

    “While I am sympathetic to the concerns union members have raised, I do not believe it is the role of Congress to renegotiate a collective bargaining agreement that has already been negotiated,” Manchin said in a statement

    Earlier Thursday, the Senate also voted against an amendment from Republican senators that aimed to deliver a cooling-off period so talks between rail companies and their workers could continue.

    Railroad operators’ stocks finished with gains Tuesday as traders reacted to Washington’s moves to prevent a strike, but Norfolk Southern Corp.
    NSC,
    -0.05%
    ,
     CSX Corp. 
    CSX,
    -0.03%

    and Union Pacific Corp.
    UNP,
    -0.69%

    all lost ground Thursday as the broad market
    SPX,
    -0.09%

    DJIA,
    -0.56%

    closed mostly lower.

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  • ‘A rail shutdown would devastate our economy’: Biden urges Congress to head off potential strike

    ‘A rail shutdown would devastate our economy’: Biden urges Congress to head off potential strike

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    OMAHA, Neb. — President Joe Biden on Monday asked Congress to intervene and block a railroad strike before next month’s deadline in the stalled contract talks, following pressure by business groups on the stalled negotiations.

    “Let me be clear: a rail shutdown would devastate our economy,” Biden said in a statement. “Without freight rail, many U.S. industries would shut down.”

    Congress has the power to impose contract terms on the workers, but it’s not clear what lawmakers might include if they do. They could also force the negotiations to continue into the new year.

    Both the unions and railroads have been lobbying Congress while contract talks continue. Four rail unions that represent more than half of the 115,000 workers in the industry have rejected the deals that Biden helped broker before the original strike deadline in September and are back at the table trying to work out new agreements. Eight other unions have approved their five-year deals with the railroads and are in the process of getting back pay for their workers for the 24% raises that are retroactive to 2020.

    Biden said that as a “a proud pro-labor president” he was reluctant to override the views of people who voted against the agreement. “But in this case — where the economic impact of a shutdown would hurt millions of other working people and families — I believe Congress must use its powers to adopt this deal.”

    Biden’s remarks came after a coalition of more than 400 business groups sent a letter to congressional leaders Monday urging them to step into the stalled talks because of fears about the devastating potential impact of a strike that could force many businesses to shut down if they can’t get the rail deliveries they need. Commuter railroads and Amtrak would also be affected in a strike because many of them use tracks owned by the freight railroads.

    The business groups led by the U.S. Chamber of Commerce, National Association of Manufacturers and National Retail Federation said even a short-term strike would have a tremendous impact and the economic pain would start to be felt even before the Dec. 9 strike deadline. They said the railroads would stop hauling hazardous chemicals, fertilizers and perishable goods up to a week beforehand to keep those products from being stranded somewhere along the tracks.

    “A potential rail strike only adds to the headwinds facing the U.S. economy,” the businesses wrote. “A rail stoppage would immediately lead to supply shortages and higher prices. The cessation of Amtrak and commuter rail services would disrupt up to 7 million travelers a day. Many businesses would see their sales disrupted right in the middle of the critical holiday shopping season.”

    A similar group of businesses sent another letter to Biden last month urging him to play a more active role in resolving the contract dispute.

    On Monday, the Association of American Railroads trade group praised Biden’s action.

    “No one benefits from a rail work stoppage — not our customers, not rail employees and not the American economy,” said AAR President and CEO Ian Jefferies. “Now is the appropriate time for Congress to pass legislation to implement the agreements already ratified by eight of the twelve unions.”

    Congressional leaders and the White House have said they are monitoring the contract talks closely but haven’t indicated when they might act or what they will do. House Majority Leader Steny Hoyer, D-Md., said leaders are aware of the situation with the rail negotiations and will monitor the talks in the coming days.

    Rep. Brian Fitzpatrick, R-Pa., said on “Fox News Sunday” that congressional intervention is a last resort but that lawmakers will have to be ready to act.

    “Congress will not let this strike happen. That’s for sure,” said Fitzpatrick, who helps lead a bipartisan group of 58 lawmakers. “It would be devastating to our economy. So, we’ll get to a resolution one way or another.”

    “It certainly could end up in Congress’ lap, which is why we are headed to D.C. this week to meet with lawmakers on the Hill from both parties,” said Clark Ballew, a spokesman for the Brotherhood of Maintenance of Way Employes Division, which represents track maintenance workers. “We have instructed our members to contact their federal lawmakers in the House and Senate for several weeks now.”

    The unions have asked the railroads to consider adding paid sick time to what they already offered to address some of workers’ quality of life concerns. But so far, the railroads, which include Union Pacific
    UNP,
    -2.25%
    ,
    Berkshire Hathaway’s
    BRK.B,
    -1.31%

    BNSF, Norfolk Southern
    NSC,
    -1.49%
    ,
    CSX
    CSX,
    -1.00%

    and Canadian Pacific’s
    CP,
    -1.26%

    Kansas City Southern, have refused to consider that.

    The railroads want any deal to closely follow the recommendations a special board of arbitrators that Biden appointed made this summer that called for the 24% raises and $5,000 in bonuses but didn’t resolve workers’ concerns about demanding schedules that make it hard to take a day off and other working conditions.

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  • Boston Beer, Schlumberger rise; Snap, Twitter fall

    Boston Beer, Schlumberger rise; Snap, Twitter fall

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    Stocks that traded heavily or had substantial price changes Friday: Boston Beer, Schlumberger rise; Snap, Twitter fall

    NEW YORK — Stocks that traded heavily or had substantial price changes Friday:

    Snap Inc., down $3.03 to $7.76.

    The owner of Snapchat gave a lackluster forecast for the fourth quarter.

    Twitter Inc., down $2.55 to $49.89.

    Elon Musk could cut almost 75% of the social media company’s workforce, according to a report.

    CSX Corp., up 46 cents to $27.54.

    The railroad’s third-quarter earnings and revenue beat analysts’ forecasts.

    SVB Financial Group, down $72.43 to $230.03.

    The financial services firm gave investors a disappointing financial forecast.

    Boston Beer Co., up $66.12 to $402.28.

    The brewer of Samuel Adams beer beat Wall Street’s third-quarter revenue forecasts.

    Schlumberger NV, up $4.72 to $50.41.

    The world’s largest oilfield services company beat analysts’ third-quarter financial forecasts.

    American Express Co., down $2.38 to $140.04.

    The credit card giant said it is setting aside hundreds of millions of dollars to cover potential losses as the economy continues to deteriorate.

    Robert Half International Inc., down $6.83 to $73.01.

    The staffing firm’s third-quarter earnings and revenue fell short of analysts’ forecasts.

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