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.