Posts Tagged ‘CSX operations’

CSX Names Operations VP

January 9, 2018

A former Canadian National executive has been brought out of retirement to help CSX in its implementation of precision scheduled railroading.

Harris

Edmond L. Harris has been named executive vice president of operations and will oversee mechanical, engineering, transportation and network operations.

Harris, who will begin his position immediately, worked with the late E. Hunter Harrison and current CSX CEO James M. Foote at CN.

He also worked with Harrison at the Illinois Central Railroad where Harrison initially implemented the precision scheduled railroading model.

During his 40 years in the railroad industry, Harris rose to the post of executive vice president of operations at CN.

He later served as chief operations officer at Canadian Pacific and held a seat on the CP board of directors.

Harris also was as a senior adviser to Global Infrastructure Partners, an independent fund that invests in infrastructure assets worldwide; chairman of Omnitrax Rail Network; and board director for Universal Rail Services. He began his railroad career in operations at the IC.

Holding a Bachelor of Science degree in management from the University of Illinois-Chicago,  Harris served in the U.S. Marine Corps from 1969 to 1973.

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Many Questions, Few Answers From CSX

December 16, 2017

Now the questions begin and thus far there have been few answers, but much speculation.

E. Hunter Harrison

Acting CSX CEO James M. Foote spoke to investors, analysts and journalists early Friday morning, but said little about why his boss, E. Hunter Harrison, had to step away on what the railroad described as a medical leave of absence.

Nor would Foote say when Harrison would be back to work or even if he plans to maintain regular contact with him during the interim. “We just can’t talk about it, simple as that,” Foote said.

The news sent CSX stock prices plummeting on Friday. After hitting a high of $57.59 per share on Dec. 13, CSX stock opened on Friday at $51,90 per share, but rallied to close at $52.93.

Foote did say that Harrison became ill last week after one of his regular multi-day sessions known as Hunter Camps in which he lectures managers about the principles of precision scheduled railroading. That illness “led to medical complications,” Foote said.

It had been reported earlier this year that Harrison has a medical condition that forces him to use an oxygen tank and often work from his home in Wellington, Florida.

Railway Age has reported that Harrison has been suffering from emphysema.

When hedge fund Mantle Ridge was pressuring the CSX board of directors last spring to replace CEO Michael Ward with Harrison, the board wanted a panel of independent physicians to review Harrison’s medical records.

But Harrison balked at that and CSX dropped the demand.

From the viewpoint of investors, they want to know the degree to which CSX has a CEO succession plan in place and whether Harrison’s absence will adversely affect the efforts to build the new top-level management team.

Back in late October, Harrison oversaw a management shakeup that sent three high-ranking executives out the door.

Harrison said on Nov. 29 that he was “trying to stay back a little bit” to allow Foote and other executives some room to steer the company. At the time, Harrison said it was part of his succession plan.

Above all, investors and others are wondering how Harrison’s absence might affect CSX long term.

“Hunter Harrison is a unique talent and leader and if he is unable to return to the company it would raise real questions over CSX’s long-term margin potential,” Citi analyst Christian Wetherbee wrote in a note to investors.

Although Foote worked with Harrison for 11 year at Canadian National, he has never been the head of a railroad.

When Foote was brought in to be executive vice-president and chief operating officer, Harrison said it was because of his knowledge of precision scheduled railroading, the operating model that Harrison has implemented at three other railroads that he headed including the Illinois Central, CN and Canadian Pacific.

Foote has 40 years experience in the railroad industry, but much of it has been in sales and marketing. He has limited railroad operating experience.

Although Foote was given responsibility for operations as well as sales and marketing at CSX, he said earlier he was spending 70 percent of his time on the sales and marketing side.

Now he will need to divide his time more evenly between operations and sales.

“There’s only one genius in the room at all times that knows the railroad business like nobody else does. We all know that, we all appreciate his vision,” Foote said last month.

During the early Friday conference call, Foote sidestepped questions about whether the CSX board had been slow in warning that Harrison has health problems.

“The board acted properly and promptly based on the information that we had,” Foote said. “As I said, it was a short period of time ago when he was not only actively involved publicly with the financial community but actively involved holding these mentoring meetings with employees, which was really just only days ago.”

No CSX board members participated in the Friday conference call. Five of the current board members also are new at CSX, having been suggested by Mantle Ridge.

Foote said CSX has already done most of the “real heavy lifting” associated with implanting precision scheduled railroading, including closing or curtaining operations at numerous classification yards.

CSX has also imposed several cost cutting measures, laid off employees and experienced service disruptions that left some shippers disgruntled.

Service problems that peaked during the summer and continued into the fall, led the U.S. Surface Transportation Board to conduct a public hearing on CSX service in October.

“I believe that the battleship has turned, the precision scheduled railroading framework has been put into place, and the company has amassed the critical talent – through education of the internal team and supplementation with a complement of strong PSR operating veterans and a strongly supportive board – sufficient to follow through and execute on the PSR operating plan,” Foote said on Friday morning.

He said the management team in place has implemented a foundation consistent with Harrison’s vision.

“I do not see any reason to diminish our expectations concerning the pace and magnitude of our future progress,” Foote said.

Some analysts have expressed doubt about whether Harrison intended for Foote to become his successor. They believe that Harrison meant for Foote to be the No. 2 executive at CSX.

Whatever reservations that the CSX board had about hiring a CEO they knew had health issues were swept away when CSX stock value skyrocketed even after reports surfaced that he might take over the railroad.

CSX stock was trading for $35.89 per share back on Jan. 3. It zoomed to $44.33 per share on Jan. 19 after word got out that Harrison would leave CP early and set his sights on become CEO at CSX.

The stock has had its periodic ups and down since then, but has consistently traded between $45 and $55 per share for most of the year.

By comparison, since 2013, CSX stock has traded from a low of around $20 a share to a high of $37.56 in November 2014.

Cowen and Co. Managing Director Jason Seidl told Railway Age on Friday that in the wake of Harrison’s medical leave uncertainty will remain surrounding CSX for several months.

“ . . . we think there will be a prolonged period of heightened uncertainty around the stock. The company’s near- and long-term outlooks are unclear, in our view. We are unsure if Harrison will return to run the company.”

Seidl described Foote as a capable leader, [but] “we do not view this as a long-term solution for the company and expect the [CSX] board to start looking inside and outside the organization for a long-term successor to Harrison.

“Perhaps the biggest question that remains to be answered is what Mantle Ridge, the Paul Hilal-led hedge fund that installed Harrison as CEO, is going to do, now that Harrison is, for all intents and purposes, out of commission, possibly permanently,” Seidle said.

CSX has plans to conduct an investors conference in March that had originally been scheduled to be held last October.

Analysts will be looking toward that conference for information about CSX’s longer-term operating plans.

In the meantime, Seidl expects CSX to announce another round of employee layoffs in early 2018. He also expects the railroad to begin announcing divestitures about the same time.

Seidl pointed out to Railway Age that Harrison has swept aside most of the key CSX managers who had run the company before his arrival last March.

“Who is the replacement senior management team at CSX now, after Harrison let so many senior people go? Are there people who will know how to run things when the winter hits?” he said.

Baird Equity Research analyst Benjamin Hartford in a report issued Thursday said that Harrison’s influence at CSX “is immense,” and his absence likely will be a concern to stockholders.

“We expect that the announcement of his leave pressures the stock,” he wrote. “Harrison’s health has been an ongoing concern among investors since his hiring. His implementation of his PSR model has been the fundamental catalyst to CSX this year.”

In speaking early Friday morning, Foote acknowledged that CSX still has much work to do in implementing precision scheduled railroading.

He said the carrier continues to seek ways to turn cars and locomotives faster, tweak train and network performance, and improve service as a way to grow the business.

Trains magazine on Friday quoted John Larkin, an analyst with Stifel Equity Research, as saying that although the operational changes at CSX are largely complete, the corporate culture is not yet where Harrison expects it to be.

“Jim Foote should be able to continue on the redirected trajectory and finish up the cultural transition,” Larkin said. “His expertise is marketing, which is Hunter’s weakness. So maybe this transition is functionally appropriate, albeit on a bit of a more rushed schedule than originally planned.”

Anthony Hatch of ABH Consulting told Trains that CSX probably has gone far enough in implementing the precision scheduled railroading model.

However, Hatch said CSX lacks “a true, experienced” chief operating officer.

He noted that Canadian National thrived after Harrison left there in 2009 and Canadian Pacific, which Harrison left in January, has been doing well. Perhaps the same will hold true for CSX.

CSX Extolls Benefits of Precision Scheduled Railroading Even as the Benefits of it Have Not Helped All Shippers

July 20, 2017

Even as CSX CEO E. Hunter Harrison was extolling the virtues of his precision scheduled railroading model in an earnings call with investors and analysts, the railroad’s management was acknowledging that it was having some service issues.

Harrison said there would be some inevitable pain and suffering before operations are running smoothly.

“I thought we had a hell of a quarter,” Harrison said in the wake of the railroad’s announcement earlier this week that during the second quarter of this year profits rose, the operating ratio improved, and traffic and revenue were on the rise.

CSX Chief Marketing Officer Fredrik Eliasson said that such important service metrics as terminal dwell time, average train speed, and on-time performance were better during the second quarter.

Eliasson conceded that service improvements have not been felt everywhere on the railroad. “There are certain places where we are not there yet,” he said while declining to provide customer satisfaction metrics.

A report published on the Trains magazine website said that not all shippers have felt those benefits.

“A large number of our members have said they are experiencing serious problems with their service from CSX,” Scott Jensen, a spokesman for the American Chemistry Council, told the magazine. “Some have even reported that it has caused their customers to temporarily shut down operations.”

Trains reported that the scope of the service problems appear to be growing and quoted an unnamed chemical shipper as saying that transit times have increased by 48 hours in several key lanes.

Jay Roman, president of Escalation Consultants, a Maryland-based firm that helps merchandise and bulk shippers negotiate contracts with railroads, told Trains that what the CSX metrics show is not what he has been hearing from shippers.

“There seems to be a disconnect between the data and what shippers are running into,” he said, noting that some shippers have experienced a reduction in local service and report having problems with car supply.

A survey of rail shippers conducted by Cowen & Company this month found that 24 percent of them ranked CSX service as “poor.”

Nonetheless, another unidentified shipper told Trains that there has been significant transit time improvement  and that his company’s car cycle times dropped by eight days over the span of a month.

“We are asking our customers to hang with us,” Ellison said. He said that he talks with shippers every day to assure them that conditions will improve.

CSX managers contend that no shippers have taken their business to Norfolk Southern or put it on the highway due to service issues.

“This service disruption has been way overplayed,” Harrison said. He said approximately 500 customers account for 90 percent of CSX’s traffic and two could make a case that they have experienced a “major disruption.”

In one of those cases, Harrison said service slid back to previous levels, which he attributed to a labor slowdown that he described as “pushback by some of the troops.”

CSX has stored nearly 900 locomotives and expects to put another 100 units in mothballs. The active car fleet has been reduced by 60,000 as CSX seeks to move the same level of tonnage on fewer trains.

Train length has averaged 6,500 feet and most trains now operate daily rather than five or six days a week as had been the case before Harrison arrived.

Chief Financial Officer Frank Lonegro said train length will continue to grow as CSX continues to move unit train traffic into its merchandise train network.

During the second quarter, terminal dwell time improved 2 percent to 24.4 hours, although dwell time is up significantly at some terminals since CSX ceased humping operations at seven yards.

CSX management is studying why dwell time has increased to 40 or 50 hours at some yards.

Train velocity improved 3 percent, to 21.7 mph and and fuel efficiency improved 5 percent as the railroad stored older, less-efficient locomotives.

In response to a question, Harrison said CSX will shift from a cost-cutting mode to a growth strategy if it continues to control its costs.

“A lot of this will happen in the post-Harrison era. If we do our job today in laying the foundation, there will be a lot of opportunity for growth,” he said.

Harrison described what CSX is doing as balancing cost and service. The railroad will need to bring in more revenue and not just cut costs.

The CSX head also said that just because the railroad is closing hump operations doesn’t mean it plans to sell the land they use.

“We’re not having a garage sale here,” Harrison said. If traffic continue to grow, that yard capacity may be needed again.

As for the short-term future, CSX management expressed a favorable third-quarter outlook for two-thirds of its traffic, including export coal, intermodal, agriculture and food, metals and equipment, and minerals.

CSX managers have a neutral outlook for fertilizers and forest products, which account for 8 percent of the railroad’s traffic.

The outlook is seen as unfavorable for 26 percent of traffic, including automotive, chemicals, and domestic coal.

CSX plans to discuss its long-term strategy and outlook during an investor conference scheduled for Oct. 29 and 30 in Palm Beach, Florida.

CSX Converts Cumberland Hump to Flat Switching

May 22, 2017

As expected, CSX last week converted its hump yard in Cumberland, Maryland, to flat switching.

It is the fifth such yard to have its hump closed since E. Hunter Harrison became CEO in March and implemented his precision scheduled railroading operating philosophy.

Among other things, that approach looks with disfavor upon hump yards in the belief that they add cost and transit time to freight movements.

Other hump yards that have been converted to flat switching are located in Toledo, Ohio; Louisville, Kentucky.; Hamlet, North Carolina; and Atlanta.

A memo sent to CSX employees last week indicated that the hump at Selkirk, New York, will also be closed in favor of flat switching.

The remaining CSX hump yards are in Waycross, Georgia; Birmingham, Alabama; Nashville, Tennessee; Cincinnati; Avon, Indiana (Indianapolis); and Willard, Ohio.

CSX managers have indicated that those yards are being evaluated and that the railroad expects it could have between two to four hump yards left in its system once that review is completed later this year.

Trains magazine reported that when CSX closes a hump, it does the flat switching on the receiving and departure tracks. The classification bowl tracks stand empty.

The railroad said track and switches from the classification bowls will in time be used elsewhere.

Harrison Gives Preview of What’s in Store at CSX

April 21, 2017

CSX CEO E. Hunter Harrison gave a preview on Thursday about what is in store at the railroad in the coming months and years.

Speaking during a conference call with Wall Street investors, Harrison called the CSX network a bowl of spaghetti when compared to the linear-oriented systems he oversaw at Canadian Pacific, Canadian National and Illinois Central.

E. Hunter Harrison

Although he thinks that CSX does well in moving intermodal trains, Harrison believes merchandise freight needs to move faster.

The average speed of CSX merchandise freight is now 18 mph between terminals, but Harrison believes it could be boosted to 27 to 28 mph.

One way to boost transit times is by skipping terminals. Ultimately, Harrison wants to see CSX provide merchandise service that is on a par with trucks.

CSX Chief Operating Officer Cindy Sanborn said CSX has made two significant operating changes since Harrison arrived.

Some traffic that had been moving in unit trains has been merged into merchandise trains and four of the railroad’s 12 hump yards have been converted to flat switching.

Sanborn said the changes will allow CSX to provide seven-day-a-week service, bring balance to the system, increase train length, cut terminal dwell time and reduce the time that freight spends in transit.

CSX is expected to continue closing humps although Sanborn said she doesn’t know by how many because management is studying each yard individually.

Harrison described hump yards as a relic of an era when a much higher percentage of rail freight traffic was merchandise service.

In a related matter, Harrison said CSX will consolidate yards in areas where multiple yards now exist and sell the land used by yards that are closed.

There was speculation earlier that CSX would sell some secondary lines, but Harrison said he doesn’t expect any major line sales in 2017 because management is focusing on improving operations of the current network.

Other steps CSX plans to make, Harrison said, include having fewer train sets devoted to unit coal train service, but having faster cyling of cars between mines and customers.

CSX is not looking to drop some of its less-profitable merchandise traffic as Canadian Pacific did while Harrison was that railroad’s CEO.

“No, we’re not looking at demarketing,” he said. “We’re looking at marketing.”

As predicted, Harrison will trim the CSX work force. The railroad now has a hiring freeze in place and expects to lose 9 percent of its work force through attrition.

He added, though, that management does not have a target for work force cuts.

Another labor-related change may see CSX pull out of national negotiations with labor unions and instead bargain directly with the unions.

Harrison would like to see train and engine crews paid by the hour in return for the company offering job guarantees. Ultimately, Harrison said he wants to lower T&E costs by 30 to 35 percent.

One area in which Harrison does not expect change is the number of crew members on each train. “I’m not a one-man crew advocate,” he said. “ . . . to take a 20,000 ton train on line of road, with one person, I don’t think it’s good business,”

Sounding like a union officer, Harrison said there are safety issues with one-person crews and he sees the value of having extra set of eyes and ears in the cab.

If one crew member had to deal with such things as a broken air hose or a knuckle failure, that could result in delays.

Harrison said one-person crews might make sense in some situation, citing switching at mines.

CSX Closing Stanley Yard Hump in Toledo

March 29, 2017

CSX plans to close the hump at Stanley Yard in Toledo, rearrange the schedules of trains originating there and convert the facility to flat switching.

The changes were to begin this week and be phased in over a period o f weeks.

A CSX spokeswoman told Trains magazine that the move will result in the elimination of 34 jobs. The yard will still have 40 workers once the restructuring is completed.

The laid off employees will be train service and maintenance employees, the Toledo Blade reported. CSX employs 360 workers in the Toledo area.

It will be the second time that CSX has reduced operations at Stanley.

It closed in spring 2004 but within days the railroad had resumed flat switching there and it reopened the hump that July due to freight congestion in neighboring rail yards.

Stanley Yard is a former Toledo & Ohio Central (later part of the New York Central) yard and one of two hump yards on CSX in Toledo.

Walbridge Yard, a former Chesapeake & Ohio facility, but its hump is no longer used.

Instead, Walbridge is used to sort auto rack cars and store unit trains of coal, grain and other bulk commodities that do not require en route sorting.

Stanley is the second CSX hump yard to be closed since E. Hunter Harrison became CEO on March 6.

The railroad also plans to cease hump operations at Tilford Yard in Atlanta.

CSX will have two hump yards left in Ohio at Willard and Queensgate Yard in Cincinnati.

CSX is framing the closing of the Tilford and Stanley hump yards as a cost cutting move that will make the railroad more efficient.

Among the trains that originate at Stanley are Q319 to Indianapolis; Q322 to Flint, Michigan; Q392 to Detroit; Q394 to Cumberland, Maryland (via Willard);  Q507 to Cincinnati; Q509 to Chicago; and Q511 to Louisville, Kentucky

It is not yet clear if these trains will now be handled at Willard or continue to be classified in Stanley by flat switching.

The Blade reported that another recent CSX practice, operating symbol trains every 28 hours, ended shortly after Harrison became head of CSX. The every 28 hours starts resulted in trains operating six days a week rather than seven.

The practice had been implemented more than a year ago. At the time, CSX had also combined the operation of some symbol freights.

Harrison is known for his operating philosophy of precision scheduled railroading, which seeks to reduce if not eliminate the number of times that a train is reclassified en route.