Posts Tagged ‘Canadian Pacific’

So What is Precision Scheduled Railroading and Why Does E. Hunter Harrison Believe it Will Work at CSX?

October 13, 2017

Since March, the term “precision scheduled railroading” has shown up in a lot of news stories about CSX.

But the model is anything but new. The term has received added attention this year because its chief promoter, E. Hunter Harrison, began imposing it shortly after he became the CEO of CSX last spring.

Harrison developed the model while serving as head of the Illinois Central Railroad. He later took it to Canadian National and then Canadian Pacific after he became the CEO of those roads.

Last year he proposed taking it to Norfolk Southern, but a rebellion by that railroads shippers, its board of directors and various government officials thwarted those plans and Harrison and his associates called off a proposed merger between CP and NS.

But less than a year later Harrison and the Mantle Ridge Hedge Fund successfully engineered a plan whereby Harrison became CEO of CSX.

The name of the model itself provides only a few clues to how it works. Like any philosophy, how it works in theory and how it works in practice are now always in synch and that appears to have been the case at CSX where service problems began within two months and accelerated during the summer.

Depending on who you believe, CSX is either ironing out the kinks or forcing its shippers to change how they do business.

PSR differs from the prototypical railroad practice of holding trains in a yard or on a siding until they’re full.

With PSR, deliveries are given priority from origin to destination as quickly as possible, and each asset is used and monitored constantly so customers can better plan their shipments.

As CSX Executive Vice President and Chief Operating Officer Cindy Sanborn explained it to Progressive Railroading magazine, PSR is designed to improve customer service, control costs, optimize asset utilization, enhance safety and aid workforce development.

Of course it is. What railroads doesn’t say it is doing those things.

Sanborn continued by explaining that PSR seeks to provide customers a more reliable, predictable and cost-effective shipping experience by creating train operating plans that seek to speed cars through the network.

Sanborn acknowledged that a charge made this week at a Surface Transportation Board hearing into CSX service issues that the railroad is forcing customers to change how they operate may be accurate.

“Our service may be configured differently, and the transition to the new system may mean that we’re asking some customers to make some changes, but ultimately we believe that the customer will be happier with that product,” she said.

The latter part of Sanborn’s comment mirrors what Harrison has been saying for weeks that, ultimately, customers will benefit from precision scheduled railroading.

It’s just that many CSX shippers aren’t seeing that yet and Harrison’s pronouncements are coming across as just so much public relations talk.

Trains magazine Fred Frailey columnist wrote last year when CP was trying to take over NS that Harrison has a core belief that freight cars should be moving, not sitting still.

He said Harrison learned this as a young railroad manager and if he saw cars that had been sitting around for awhile he would demand that they get out town on the next train.

When CSX began having its service issues this year, Frailey wrote another column about Harrison and what he is seeking to do at CSX.

Frailey thinks Harrison might have come to CSX with clear ideas about what needed to be done, how it needed to be and who should do it.

Among other things, he apparently believed that CSX had too many hump yards, too many trains and too many employees and contractors.

In short order, CSX made 1,300 train plan changes, cut 2,700 jobs and sent 1,000 contractor and consultant positions packing.

It has retired or stored 850 locomotives and eliminated more than 300 train crew starts per week. Twelve hump yards were converted to flat switching yards because a tenet of precision scheduled railroading is that that humping cars takes more time.

PSR holds that some car blocks can be switched more efficiently at intermediate stops between an origin and destination and in less time than it would take to classify each in a hump yard.

Frailey quoted an industry source who suggested that Harrison didn’t care if CSX loses customers. In the end, he is only interested in keeping those customers whose needs dovetail with the service that he wants to provide.

Most of those would be shippers needing transportation that provids CSX with high margins.

Shippers whose business is more competitive tends to be lower margin business and costs money to keep.

Harrison, like so many other corporate titans these days, is an adherent of the religion of cost cutting.

In that sense, he is not alone. All North American Class 1 railroads are talking about reducing expenses and driving down their operating margins.

The problem that CSX encountered after implementing Harrison’s vision was a clogged network.

Sanborn admitted to Progressive Railroading that the rapid changeover to precision scheduled railroading caused some shippers to experience “unintended effects.”

CSX owned up to it, Sanborn said, noting that in early August, Harrison emailed shippers a letter apologizing for the service disruptions.

“We have redoubled our efforts to resolve customer issues as quickly as we can and to improve communication with customers as we move forward,” she said.

Sanborn said that based on customer comments, CSX management is studying traffic flows across the network by closely analyzing connections between merchandise trains, yard jobs and locals.

Management is seeking to nudge local operating managers to be more proactive in communicating with shippers and solving their problems.

CSX is also considering providing customers more frequent service. Sanborn cited the example of possibly discontinuing unit-train service for a customer who in the past used one or two trains per week, or about 200 cars, and instead offering daily service that would provide about 30 cars  a day.

“For the customer, that [would] mean they need fewer cars and less track space for storing empty or full cars, and there’d be less inventory tied up in transit at any one time,” Sanborn said. “For CSX, it means we are able to handle fewer cars in our scheduled merchandise service, with better balance on the network. That’s a more efficient approach.”

There’s that “e” word again. Efficiency is something that Harrison has long valued.

At the time that Harrison arrived, CSX was in the midst of another operating plan change that the Michael Ward administration had begun executing in April 2016.

That plan was based on the premise that the railroad would emphasize a triangle of routes extending from Chicago to New York, New York to Florida, and Florida to Chicago.

All other routes were secondary and would not receive the same level of maintenance as the key routes.

Trains began getting longer and departed yards every 28 hours rather than every 24 hours. The effect was fewer and longer trains.

At the time, CSX said this realignment would bolster service, boost productivity and improve safety.

But Harrison and his management team tore up CSX of Tomorrow in favor of precision scheduled railroading.

CSX Executive Vice President and Chief Financial Officer Frank Lonegro said last month during an industry conference that the previous operating plan had resulted in inconsistent financial results.

“Measured by operating ratio, we hovered around 70 percent,” he said. “It wasn’t that long ago that we had an industry-leading OR. Since then, though, the industry has made great progress … but we did not make meaningful progress. On the service side, [we’ve had] a couple of good years followed by a couple of not-so-good years.”

Another flaw of the CSX of Tomorrow plan was that it would take too long to show results. When it was announced, management said it would take years to implement.

But Wall Street is seldom willing to wait that long. John Larkin, a Stifel Equity Research analyst who follows CSX, told Progressive Railroading that many on Wall Street expected an operating ratio in the 50s in a matter of months. “That is obviously not a realistic expectation,” Larkin said.

But it was out there and many on Wall Street tend to view Harrison as a financial savior.

Larkin is among them, saying that Harrison is “the most brilliant operator of our time.”

The news that Harrison wanted to take over CSX was enough to send the value of the company’s stock skyrocketing by double digits.

The service problems of this year may have soured some shippers but they have not dented Harrison’s reputation on the Street.

Larkin argues that many critics, observers and customers are selling Harrison short for the recent performance hiccups.

“He will get CSX service fixed and lower the operating ratio to the targeted levels, no matter what. He won’t accept anything else,” he said.

Independent rail industry analyst Tony Hatch, whose views are often cited by Trains and Progressive Railroading, concurs, citing improvements in CSX service metrics.

Harrison and other top CSX executives have maintained throughout the troubles that things will turn around, that the issues are temporary.

Sanborn said that once the transition period has ended and the operating plan is fully in place that shippers will enjoy a fast and more fluid network. CSX will reap lower costs and a reduced operating ratio.

“While we have made a lot of changes since we began our transition [to PSR], there is still work to be done to refine the operating plan and continue to improve company performance and service to customers,” Sanborn said.

CSX management plans to send stakeholders a long-range strategy overview that it plans to reveal at its investor conference Oct. 29-30 in West Palm Beach, Florida.

“In broad terms, we’ll talk about financial and operational objectives and the timeframes in which we hope to achieve them,” Sanborn said.

“We’re bullish on the future and sometimes you have to break some eggs to get there,” Lonegro said.

Much of the faith that CSX management and Wall Street have placed in precision scheduled railroading is rooted in the belief that it is a strategy proven to work.

By that they mean that it worked at IC, CN and CP, although some skeptics have noted that the networks of those railroads differed greatly from that of CSX.

In touting PSR, Sanborn said it has been proven over time to improve the performance of railroads. It will provide a more intuitive and flexible railroad, she said.

“Our decision-making is driven by [PSR] principles,” she said. “As our business evolves, we will use that framework to determine how to continue meeting our customers’ needs, and operating safely and efficiently, in response to whatever new conditions develop.”

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CP Move Into Ohio a Bid to Compete with CN

October 12, 2017

Canadian Pacific and Genesee & Wyoming announced that they would cooperate in opening an intermodal service lane into the Ohio Valley, using an existing terminal in Jeffersonville, Ohio.

But the two carriers did not say when the service will begin or whether it would be provided with a dedicated train.

Trains magazine reported on Wednesday that a CP spokesman had declined to provide additional details, saying only that more information would be available during next week’s quarterly earnings call. A G&W spokesman did not respond to a request for comment.

The new service is an effort to fill containers that would otherwise return empty.

Usually, containers arrive in North America from Asia filled with consumer goods, but return empty across the Pacific.

There has been a growing demand for farm exports to Asia and those empty containers present new markets for railroads, shippers and steamship lines.

From CP’s perspective, Trains said, it the new intermodal service presents an opportunity to battle back against rival Canadian National.

CP has been losing market share at the Port of Vancouver to CN, which handles about 70 percent of the containers that move by rail to and from that port.

CN had direct rail access of agreements with other railroads to reach into the U.S. interior to such points as Indianapolis and Memphis, Tennessee.

However, CP has the advantage of the shortest route from Vancouver to Chicago.

“This service will put CP into an area that CN can’t reach, so they will be able to offer a differentiated product,” said Larry Gross, an analyst with FTR Transportation Intelligence in an interview with Trains. “I think it makes a lot of sense for CP to be working this way. The region is under-served from the west because of the interchange issues in Chicago.”

The containers will be moved out of Ohio by the Indiana & Ohio, which serves a 90-acre terminal in Jeffersonville owned by Bluegrass Farms.

The containers will then be interchanged in Lima, Ohio, to the Chicago, Fort Wayne & Eastern Railroad, which reaches Chicago via a former Pennsylvania Railroad route.

Most of the traffic on the 281-mile CF&E is chemicals, farm products, fertilizers, paper and steel. The 469-mile I&O primarily handles ethanol, farm products, fertilizers, lumber, paper and steel.

CP and G&W officials noted in a news release earlier this week that the Jeffersonville terminal can be easily accessed from Columbus, Cincinnati, and Dayton.

Gross said the key to making the intermodal lane work will be providing a seamless interchange in Chicago.

“With the volume involved being to and from Asia, it won’t be tremendously service-sensitive but the service will need to be reliable,” he said. “Having the ready source of outbound volume is certainly a plus, so the pacing item will be the ability to attract inbound volume.”

Trains noted that the CP-G&W arrangement is similar to a 2013 deal that CN and the Indiana Rail Road reached to provide international intermodal service from Indianapolis to the British Columbia ports of Vancouver and Prince Rupert, British Columbia.

CP to Begin Ohio Intermodal Service Lane

October 11, 2017

The blue line is the Genesee & Wyoming line to be used by Canadian Pacific’s new intermodal service to Ohio.

Canadian Pacific and Genesee & Wyoming plan to launch an intermodal service that will reach into west central Ohio.

The G&W owned lines will handle the traffic between Chicago and Jeffersonville, Ohio.

In a news release, CP said the new intermodal lane will open the Ohio Valley to its intermodal customers and further extend its reach into North American heartland markets.

CP has reached an agreement with Bluegrass Farms to use its 90-acre intermodal facility in Jeffersonville, Ohio, on the I-71 corridor, to serve the Columbus, Cincinnati and Dayton markets.

The farm consortium will continue to own the facility and will operate it on behalf of CP. The site is served by the G&W-owned Indiana & Ohio.

The Bluegrass terminal will handle intermodal and bulk shipments, and transloading services of bulk agricultural products into containers.

CP said the site also features extensive container and trailer storage and room to expand.

Bluegrass Farms is a soybean producer owned by Japan’s Mitsui & Co. (USA).

CP said the new intermodal service will use its one-off live-lift operation at Portal, North Dakota, and its daily service between Vancouver and Chicago.

The railroad is expanding its Asian sales and marketing presence with key positions in China and Singapore.

Michigan Central Depot to Host Detroit Event

September 14, 2017

Michigan Central Station in Detroit will host the annual Detroit Homecoming this year, the first significant event to be held in the vacant depot since the middle 1980s.

The 104-year-old station in the Corktown neighborhood has been the subject of various renovation plans, the most recently being backed by the Moroun family of companies.

They have spent more than $8 million in the past two years making repairs that have included constructing a freight elevator in the shaft of the depot’s original smoke stack and installing 1,100 windows.

Matthew Moroun described the station development as a marathon, but insisted the race is well underway. His father, Matty, purchased the depot in 1995.

For years, the Morouns made few moves to restore the Detroit landmark, which once hosted passengers trains of the New York Central and tenants Canadian Pacific and Baltimore & Ohio, the latter using the terminal between 1946 and 1963.

After taking office in 2014, Detroit Mayor Mike Duggan sought to improve what he termed the “somewhat checkered” relationship the Morouns have had with past city administrations.

Matthew Moroun and the mayor have discussed a list of issues involving the depot.

Although that list has not been made public, one known item is a request to replace the building’s numerous broken windows.

The mayor had made it known that he was tired of a former train station with broken windows defining the image of Detroit in national news stories about the city.

“I said, ‘I want you to put windows in the train station. And if you do that, everything else will be just fine.’” Duggan said.

The Morouns installed the windows in 2015 at a cost of $4 million.

Since the the windows went in, Matthew Moroun said he’s had more interest from developers with “hundreds of great ideas” for a building that has sat vacant since 1988 when Amtrak ceased passenger service there.

Moroun estimates it would renovating the station will cost more than $100 million.

“We’re looking for the right idea that’s not only popular and motivating, but also economically viable,” Moroun said. “We’re getting closer all of the time.”

Among the ideas that Duggan has for the station is housing a corporate headquarters or building high-end lofts on the 18th floor, which has a 360-degree view of greater downtown Detroit and the waterfront.

“I’m not the one who has to make the numbers work,” Duggan said. “When the day comes, I’m going to do everything I can to help make the numbers work.”

Beaver in Berea

September 6, 2017

Back in February Canadian Pacific announced that it was bringing back its beaver herald although it wasn’t until July that the modified logo began appearing on  locomotives.

CP used the beaver herald, which features a beaver, a maple leaf, a shield, the company name and the date of the railroad’s incorporation, previously, but dropped it for a more contemporary look.

The beaver has a long tradition at CP, having first been used on a company herald in 1886.

Here in the states we might think of the maple leaf as symbolic of Canada, but the beaver is our northern neighbor’s official symbol of sovereignty.

Between 1886 and 1929, the beaver appeared on four renditions of the CP herald, which featured a shield as its dominant element. In three of those iterations, the beaver appeared atop the shield.

The beaver went on hiatus between 1929 and 1946 when the CP herald was, again, shaped like a shield but featured the slogan “World’s Greatest Travel System.”

In 1946, CP brought the beaver back and it sat atop the shield through three generations of heralds. In 1968, CP decided to give itself a more “progressive look” and adopted a triangle C logo.

Other heralds would follow including one that featured the Canadian and U.S. flags. That was an effort to show that CP was a North American railroad and not just a Canadian one.

To celebrate its independent status, which included resuming use of the name Canadian Pacific Railways, CP resurrected the beaver and shield in 1997 in a bid to give itself a retro look.

Some corporations can only sit still with their image for a few years, so the beaver was put out to marsh in 2007.

CP adopted a minimalist approach with only its name “Canadian Pacific” appearing in its herald. Things got even more concise in 2012 when the herald became simply the letters CP.

Now the beaver, the maple leaf and the shield are back. Unlike the most recent beaver herald, the current logo does not feature solid gold shading in the shield. Instead, the shield has horizontal stripes.

The latest version of the beaver herald is expected to become widespread as CP ramps up a program to repaint its locomotive fleet. The herald will also adorn rebuilt locomotives.

AC400CW No. 9817 wore the previous beaver herald. It is shown leading CSX train Q166 through Berea this past Sunday sporting the new herald.

The Q166 and its counterpart, Q165, are CP run-through trains that use CSX between Chicago and Buffalo, New York.

Just over two hours after the Q166 passed by, the Q165 came rolling through Berea. It is always a good outing when you catch both CP run-through trains on the same day.

And the cherry on the top of this treat was the eastbound “salad shooter” with its usual Union Pacific motive power, shown in the bottom photo.

CP Launches Detroit-Vancouver Train

August 15, 2017

Canadian Pacific said on Monday that it is launching a new service between Detroit and  Vancouver, British Columbia.

The train is expected to cut the transit time between the two points by as much as 48 hours and operate daily.

In a news release, CP said that it will use a new transload facility in Vancouver and a live-lift operation at Portal, North Dakota.

The latter began earlier this year. CP lifts single containers off trains for inspection by customs authorities rather that having entire intermodal rail cars — which can carry up to 15 containers — delayed.

CP said that process eliminates delays to containers not flagged for inspection, thus helping make it easier and faster for customers to do cross-border business.

The Detroit-Vancouver train will operate via Chicago.

Seeing Red

August 10, 2017

Train Q165 roars past the Lake Shore Railway Museum in North East, Pennsylvania.

On a couple of back-to-back outings I had the good luck of seeing Canadian Pacific motive power on four trains.

Two of them were Q165 and Q166, which are Chicago-Buffalo, New York, run through trains on CSX that have been operating for a few years now.

I used to somewhat regularly see one of those trains at Berea, but that hasn’t been the case for a while.

I’ve only seen both of them in the same day twice and each time I was in North East, Pennsylvania.

I also found CP motive power leading a pair of Norfolk Southern trains, the 216 and the 67X. One of those was moving and the other was tied down.

I didn’t mind seeing so much red and wouldn’t mind seeing it again now that CP has resumed putting its beaver tail logo on the flanks of some locomotives.

The light was less than ideal to get Q166, which was one of five consecutive eastbounds allowed to move as CSX was single-tracking the Erie West Subdivision between North East, Pennsylvania, and a point in New York York State.

A pair of CPs lead NS 216 through the vineyard country near Bort Road in North East, Pennsylvania.

The first of two views of NS train 67X tied down near Lewis Road in Olmsted Falls, Ohio.

 

Ya Think It Won’t Start Anyway?

August 4, 2017

The remains of a StL&H SD made a stop at work in its journey from LTEX to Pottstown, Pa. I thought the “Do not start” instruction on the non complying locomotive tag was a bit of a hoot.

Photographs by Roger Durfee

 

CSX Shareholders Favor Giving Harrison More $$$

June 6, 2017

As expected, most CSX shareholders have voted to give CEO E. Hunter Harrison the money that he wants.

E. Hunter Harrison

In an advisory vote, 93 percent of the shareholders favored giving Harrison and hedge fund Mantle Ridge $84 million to reimburse them for salary and benefits that Harrison forfeited by leaving early as the CEO of Canadian Pacific last January.

The vote was made public on Monday at the CSX annual meeting in Richmond, Virginia.

Harrison had threatened to resign if shareholders rejected the reimbursement request.

Many analysts had expected the shareholders to agree to giving Harrison the money because CSX stock has risen by 40 percent in value since it became known that Harrison was seeking to become the railroad’s head.

Harrison took over the CEO post last March. Paying Harrison and Mantle Ridge will cost about 12 cents per share.

CSX also said that 13 candidates for its board of directors have been elected, with each member receiving the backing of at least 96 percent of shareholders.

They include Harrison, Mantle Ridge founder Paul Hilal, Donna M. Alvarado, Sen. John B. Breaux, Pamela L. Carter, Steven T. Halverson, Edward J. Kelly III, John D. McPherson, David M. Moffett, Dennis H. Reilley, Linda H. Riefler, J. Steven Whisler, and John J. Zillmer.

CSX, CP May Launch Run-Through Trains

May 29, 2017

CSX and Canadian Pacific are reportedly discussing ways to eliminate traffic congestion in Chicago, including creating run-through trains.

 “We’ve had some discussions with CSX operationally as well as commercially,” CP CEO Keith Creel said last week at an investor conference.
Noting that the talks are in the early stages, Creel said that the goal is to reduce transit time and improve service reliability.

CP currently relies on Norfolk Southern to move CP trains between Chicago and Detroit because CP does not have its own route from the east.

Stack trains cannot use the Windsor Tunnel beneath the Detroit River and CP has used CSX in recent years to move double stacked container between Chicago and Buffalo.

This puts CP at  competitive disadvantage against its chief rival Canadian National, which reaches Chicago over the former Grand Trunk Western and when can get through Chicago on the Elgin, Joliet & Eastern, which CN acquired in 2009.

CSX and CP interchange about 400 cars per day in Chicago, making CSX CP’s largest interchange partner railroad there.

Creel told the investor conference that 100 of those cars could be sent deep into CSX territory as a run-through train to avoid handling in Chicago. CSX could build trains destined for points on CP.