Conrail's Attempts To Control Labor Costs and Improve Its Labor Productivity

In 1978, Conrail's labor expenses were higher than the rail industry's average. Conrail's labor costs must be reduced if it is to become financially self-sufficient. The railroad's labor costs have been high for a number of reasons including the poor condition of its yards, tracks, and equipment; the layout of the system and the type of traffic it carries, which requires a relatively large amount of switching; and a legacy of weak management from the bankrupt predecessor railroads. Conrail believes it can reach a goal of reduced labor expenses by improving its collective bargaining agreements, its management, and the physical condition of its facilities. Conrail has negotiated a new collective bargaining agreement to reduce the size of yard and road freight crews. The railroad has also begun programs to improve management and operations. In an effort to improve the industry's work rules, the Department of Transportation proposed legislation that would authorize loans to railroads to pay up to 100 percent of payments to employees who suffer financial loss due to changes in work rules or operating practices that are designed to improve system productivity. Conrail has been using Federal funds to pay for separation allowances for employees who give up their jobs as a result of their agreement to reduce the size of crews. GAO believes that while the use of the employee protective funds in this context does not violate the law, it was not the use intended by Congress.

Control of labor costs will be a key factor in determining how much additional federal funding Conrail will need. The programs begun by Conrail are a good start but will have to be pursued aggressively. Because of its large number of terminals, and other operating constraints, Conrail is subject to factors that hamper its productivity. Conrail can improve its productivity, but progress will depend on its success in negotiating changes to collective bargaining agreements, introducing better systems for managing its human resources, and continuing to make physical improvements to its facilities. A key part of Conrail's program to control its labor expenses is the successful implementation of the agreement it negotiated with the United Transportation Union to reduce the size of train crews. GAO does not believe that Conrail's use of funds authorized by the Regional Rail Reorganization Act to pay separation allowances to employees affected by this agreement was intended by Congress. Since Conrail plans to continue using these funds to pay separation allowances, Congress should determine whether it wants to authorize such use.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: No director on record Team: No team on record Phone: No phone on record