The news about the proposed deal to avert a rail strike was big. That’s because the rail strike could have been bigger. Rail transportation accounts for about 28% of freight transportation in the United States, according to the Federal Railroad.

“Railways are a cost-effective and efficient way to transport almost any freight in the United States, benefiting producers and consumers,” the agency says. Each American needs to move approximately 54 tons of cargo annually. Goods used by people or components of goods used by people are largely shipped by rail.โ€

If you thought supply chain problems were bad before, they would have been worse if rail freight transport had been shut down.

The workers have not yet agreed to the new contract. Union leaders said in a Reuters report that if they accepted the announced deal, “workers whose salaries were frozen would win double increases and would be allowed to seek certain types of medical care without fear of retribution.” “The agreement also includes an immediate pay increase of 14.1%.”

But they still might not, especially with 12 different unions having to sign. “The leaders of the 12 associations involved in the talks must now sell the agreements to members who will vote to ratify or reject them over the next several weeks,” Reuters wrote. โ€œAnd if a small unionโ€™s rejection of the agreement on Wednesday and online complaints by many union members are evidence, this will not be an easy sale.โ€

Many guild members are very angry. Money is an issue, but “the real stumble in conversations seems to have revolved around attendance, sick time, and scheduling.”

I had never really realized how brutal working on the body rail was until I met someone who retired a few years ago from the industry due to their injuries. In difficult bodily jobs – and I’ve had my share of hard work (and injuries) in the past – there should be time to get the treatment needed. healing time.

But even these other factors come down to money and what companies intend to spend. More often than not, you will hear poor company crying. In some industries, companies operate on short margins. But in many people they do not. As in the railroad.

One trade publication, The American Journal of Transportation, published an article claiming that the railroad industry is the most profitable industry in the United States, with average margins of 50%. Half of the revenue goes to profits.

The data source was a website that called itself a "Small Business Consulting Platform". The publication in question mentioned "recent research now reveals profit margins" for several industries.

Probably. But for more training in this kind of analysis, go instead to Aswath Damodaran, a professor who teaches corporate finance and valuation at New York University's Stern School of Business. He periodically updates his ongoing analysis of company margins by industry. It offers a great look at who's really into the money. Its results show that the rail transportation sector has an average net margin โ€” โ€œprofitability, after all expenses and taxes, owed to company shareholdersโ€ โ€” at 28.9%.

For perspective, the median value for all industries is 7.9%. The rail industry's heights are the fifth highest of any industry, and have only been surpassed by money center banks (the really big banks), non-bank financial services, regional banks, and entertainment software.

There are different ways of looking at a company's earnings. Another important thing Damodaran tracks is โ€œpre-tax and pre-inventory compensation operating marginโ€. In other words, before the company pays taxes or scoops stock dividends to employees (mostly CEOs). It shows how much money a company spends before it pays executives and governments their dues. It is after payment for parts and products, wages of workers, offices, lawyers and accountants, travel, etc. This is a measure of who really pulls money beyond expenses.

From this perspective, tobacco ranks first with 44.7%. And the second highest? Railways increased by 42.4%.

Take the BNSF Railroad, owned by Berkshire Hathaway
and its CEO, Warren Buffett. Last year, it had $22.5 billion in revenue, according to data from S&P Global Market Intelligence. Earnings before taxes were $9.3 billion, or 41%.

or CSX
Corp. , which generated 2021 revenue of $12.5 billion and profit before tax of about $5 billion, or 40%.

These are money presses on steel wheels. This is why Warren Buffett is so interested in railroads.

It was once true that companies give a much larger portion of the profit increase to the workers, because these people made the profits possible. By the 1980s, that was past.

Executives, backed by the likes of the Chicago School of Economics and the likes of Ayn Rand, believed that they were the motivating force behind success, and that shareholders (and executives) should reap the massive benefits of increased profits.

It's time to step back and see who makes all these profits possible.