Norfolk Southern on Tuesday rolled out yet another service strategy that CEO Alan Shaw said is designed to enable long-term growth while enticing shippers to move freight by rail rather than by highway.
As reported by Trains magazine on its website, the Atlanta-based carrier will still employ the precision scheduled railroading operating model, but Shaw described it as a different form of it that will not focus not so much on reducing the operating ratio, which is the percentage of revenues that NS spends on operating expanses.
Instead, NS will seek balance among service, productivity, and growth.
“These are not competing priorities. They are complimentary,” Shaw said indicating that NS will not focus so much on reducing expenses and profit margin.
“We just can’t cut our way to sustainable growth,” Chief Financial Officer Mark George said during NS’s investor day program.
He said NS will strive to o provide consistent service even during tough economic times.
Shaw said NS management recognizes that the traditional approach of furloughing workers during economic downturns and cutting spending “did not work well.”
It led to a deterioration in service and lack of confidence by shippers.
Shaw acknowledged that NS has yet to reach its desired level of staffing and although its service has improved, it is not yet where shippers expect it to be.
In future traffic downturns, NS will avoid furloughing operating personnel so it can be better prepared for traffic rebounds.
“By serving more volume in the recovery, we generate more revenue, and by avoiding the disruption, we enable customers to trust us and build supply chains around us,” Shaw said.
A key to the new NS plan is running what Floyd Hudson, vice president of transportation, described as a disciplined operation, which he defined as running trains on time, switching cars within six hours, and putting the right car in the right block on the right train.
NS hopes this will enable it to attract business that now moves in trucks. If NS is able to pull off its new strategy its expects freight volume to grow between 2 percent and 4 percent annually while revenue increases by 5 percent a year.
Most of this volume growth is expecte4d to come from intermodal, which NS executives said could grow at twice the rate of the gross domestic product.
In a related development, NS has told the U.S. Surface Transportation Board that its has posted improvements in its service metrics in recent weeks, which it credited in part to improved staffing.
NS now expects to reach its pre-pandemic service levels service metric levels by May 2023. Its eastern counterpart CSX told regulators its goals remain unchanged because its network resiliency, staffing and hiring levels, and current service metric trends do not yet justify changes to its service recovery plans.
CSX said that since late October it has met or exceeded each of the key performance targets it set last May in its service recovery plan. The ranks of conductors and locomotive engineers are near normal levels.
The Jacksonville-based carrier said it has an active personnel force of 6,918. It’s goal is to reach 7,000 to 7,100 by the end of this year.
NS told the STB that since last May it has exceeded its hiring of new operating workers while also exceeding its target levels for system velocity and on-time performance.
However, terminal dwell time remains elevated and its local service metric fell short of its six-month goal.
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Rail Passenger Funding, Running Amtrak on Time, New NS President Didn’t Impress Some Workers
January 17, 2022Bit and pieces of insights into the workings of railroad world . . .
I recently received in my email inbox a message quoting Evan Stair of the Friends of the Southwest Chief group in which he suggested that the promise of new and expanded service contained in the Amtrak Connects US plan is largely a mirage.
Amtrak has estimated the plan will cost $75 billion to implement.
In his interview, Gardner characterized the federal government as the capital partner but the ongoing operating expenses are the responsibility of the states and Amtrak.
And Amtrak has made clear that it’s responsibility to pay operating expenses will only last at best for five years. After that states will be on the hook to pay operating expenses as is the case now with state-supported corridors on the West Coast, in the Midwest and along the East Coast.
“I frankly believe the Amtrak Connects US program will result in few, if any new routes,” Stair wrote. “States are unlikely to commit to long-term operational dollars without some federal operational matches.”
Stair is probably right about that but could have gone even farther. It may not be realistic to think that states that are not now and/or have never paid Amtrak for corridor service will do so in the future even with a short-term Amtrak funding match for operational expenses.
Yes, I’m talking about you, Ohio.
Speaking of Amtrak, Canadian Pacific CEO Keith Creel told a Midwest shippers conference in Chicago last week that he was “proud” of having reached an agreement with the passenger carrier to allow for the prospect of additional passenger service on routes operated by CP and it merger partner Kansas City Southern.
As reported by Trains magazine, Creel also talked about how CP has become one of Amtrak’s best host railroads in dispatching its trains on time. It wasn’t always that way.
“Five years ago, six years ago, we didn’t lead the industry in Amtrak service,” Creel said.
He went on to say that his 30 years as an operating officer taught him that it’s not easy for a freight railroad to coexist with passenger service.
“I understand the conflicts sometimes and the tradeoffs sometimes when you mix high speed passenger rail with what is, in comparative terms, low-speed freight rail,” Creel said. “I understand the track geometry challenges, I understand the speed challenges. But I also understand that if you prioritize right, and there’s tradeoffs, and balance in a partnership, you can succeed. And that’s the approach we’ve taken at CP.”
Creel’s comments suggest that having the right attitude is key to running passenger trains on time and if CP can do it so could the other Class 1 Amtrak host railroads.
Yet CP doesn’t host as many Amtrak trains as its Class 1 brethren and doesn’t host any long-distance trains over thousands of miles.
Perhaps the best that can be expected is that the host railroads could do better than they do, but dispatching is a balancing act and there will be times when a host railroad puts its own interests ahead of avoiding delaying Amtrak for what the host sees as a relatively short period of time.
Speaking at the same shipper’s conference, new Norfolk Southern President Alan Shaw told a story of how on his first day in his new post he decided to go out into the field and meet and greet NS operating employees in Toledo, which is the largest NS crew change point on the system.
“I wanted to thank [the employees] for their dedication to Norfolk Southern and our customers, and I wanted to get their input into how we fix service and how we continue to improve our productivity,” Shaw said.
As reported by Trains magazine on its website, Shaw said he approached some workers sitting outside the crew room.
He was wearing khakis, boots and a collared shirt and the workers thought he was an operations supervisor.
“So I walk up and introduce myself. They told me their names, and one of the guys said, ‘Well, what do you do?’ I said, ‘Well, I’m the president’. And he looks at me, and I’m like, ‘Not Joe Biden president, but president of Norfolk Southern.’ And the other dude pulls out his phone, and he’s like, ‘Oh, yeah, yeah, yeah, I see the announcement. Congratulations!
“So that made me feel good. And then the one guy looks at me and says, ‘What craft did you come from? . . . Were you mechanical, or engineering, or a conductor, or an engineer?’
“And I was like, ‘No, I started in finance.’ He was really not impressed with that. He goes, ‘Man, at some point, we’re going to have a craft employee running the railroad.’
“It is somewhat humbling when you go out there and talk to them, because they’ve got their own expectations.”
Shaw is right about that, but expectations are not reality. It’s possible that a future railroad president might have worked as a craft employee at an early point in his or her railroad career, but it is not realistic to think that C suite executives will be pulled from the ranks of operating or maintenance employees.
If you want to be a railroad president you need to have spent extensive time in such areas as finance, law or marketing and moved up the ranks in those departments.
Operating employees are not the only railroad stakeholders who have expectations and the expectations of some stakeholders carry more weight than those of others.
Shaw told another story about his first conversation with members of the railroad’s board of directors.
“Their primary message to me was, ‘Don’t mess up,’” Shaw said. “Now, it was a little more forceful than that. I’ll let you use your imagination what the real verb was that they used.”
I think we can easily figure that one out.
Tags:Alan Shaw, Amtrak, Amtrak funding, commentaries on transportation, Keith Creel, Norfolk Southern, On Transportation, posts on transportation, railroad executives, Toledo Ohio
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