Rail Execs Push Back on Shipper, Union Charges

As could be expected, executives of Norfolk Southern and CSX took issue in a hearing this week conducted by the U.S Surface Transportation Board with how some shippers, labor unions and other critics have described the causes of service issues both carriers acknowledge having.

However, there was agreement from various quarters that a shortage of operating personnel is a major factor behind the service issues.

But beyond that there was a wide range of opinion as to what can be done or even should be done to ease service issues.

NS Chief Operating Officer Cindy Sanborn said improving service quality is the railroad’s top priority while Chief Marketing Officer Ed Elkins said restoring service is critical to the company plans to gain volume by converting freight from highway to rail.

Annie Adams, NS executive vice president and chief transformation officer, said the company furloughed workers when traffic fell sharply at the beginning of the COVID-19 pandemic.

But she said higher than normal attrition of furloughed employees not returning to work combined with difficulty hiring new workers in a tight labor market have led to crew shortages.

Sanborn argued that crew shortages were the sole culprit of NS’s service problems and denied that they were rooted in the adoption of the precision scheduled railroading model as some shippers and workers have claimed.

 “To varying degrees they are asking you to turn back the clock and return to operating models of the past – operating models that are more resource intensive and less efficient. I think that would be a grave mistake,” she said. “Our competitors in the trucking industry aren’t moving backward. They’re not even standing still. They wake up every day thinking of new ways to leverage technology to implement operational innovations that would improve the customer experience and improve efficiency. And railroads must also think this way.”

CSX executives also made similar comments.

Jamie Boychuck, CSX’s executive vice president of operations, said his company has emphasized hiring new workers and seeking to retain those it already has.

He acknowledged CSX had a difficult time implementing PSR in 2017 but two years later its operations had improved to become the best in company history despite having 2,000 fewer conductors and locomotive engineers.

“Clearly our performance wasn’t driven by how many resources we had, but rather how effectively we leveraged those resources,” he said.

Boychuck said CSX now has more operating workers than it did before the pandemic and has a large number of new conductors undergoing training.

Seeking to provide an independent perspective was Rick Paterson, an analyst at Loop Capital Markets who once worked in the railroad industry.

He agreed that lack of operating personnel is the root cause of the service issues while saying that crew shortages also lead to motive power shortages that slow the network, which results in more power and freight cars needed to handle the same amount of volume.

Patterson argued that performance data shows railroads practicing PSR tend to bounce back more quickly from service disruptions.

He was critical, though, of railroads for not having an adequate “cushion” of employees to draw upon when service is disrupted by weather or other causes.

This he blamed on the influence of Wall Street investors who have long insisted that railroad continuously reduce their operating ratio, which is the percentage of revenue devoted to expenses.

Consequently, Patterson said this has put railroads into a position where if the operating ratio rises then one or more activists investors will come in and demand change.

Patterson said the lack of adequate staffing makes railroading a fragile enterprise subject to a roller coaster effect whereby service reaches a good level only to fall back to a poor level every few years.

There also seemed to be widespread agreement that resolving the service issues won’t be easy because there are no quick fixes.

“If we had a silver bullet we would have brought it to you,” said Chris Jahn, CEO of the American Chemistry Council, which represents chemical manufacturers.

U.S. Secretary of Transportation Pete Buttigieg said there wasn’t much the board could do in the face of crew shortages. “These are complex issues. There’s no single step available to deliver ideal freight rail service overnight,” he said.

More about the Tuesday hearing, which ran for 10 hours, can be found at https://www.trains.com/trn/news-reviews/news-wire/stb-seeks-ways-to-quickly-ease-railroad-service-problems/

Tags: CSX, Norfolk Southern, railroad freight service issues, U.S. Surface Transportation Board