Posts Tagged ‘CSX service issues’

STB Gets Earful in CSX Hearing

October 13, 2017

The CEO apologized and the shippers hurled charges about poor service. After a month-long delay triggered by a hurricane, the U.S. Surface Transportation Board held a “listening” session on Wednesday pertaining to service issues that CSX has been having this year.

There wasn’t much new presented. Many shippers have written to the STB about their problems with CSX over the past several weeks and those letters have been posted on the STB website.

CSX has been providing weekly reports to the Board that describe how it is doing in recovering from those service problems. Those, too, have been posted on the STB website.

In addressing the STB this week, CSX CEO E. Hunter Harrison said the precision scheduled railroading operating model that he brought to the railroad when he joined it last March still needs some fine tuning.

But as far as Harrison is concerned, it is how CSX operates now.

“I want to apologize to our valued shippers. Whatever problems we’ve had, we’ve had internally,” he said during the hearing. “We’ve made mistakes, but this is not a failure of precision scheduled railroading. We’re moving in the right direction.

Harrison, who also brought the operating model to the Illinois Central, Canadian National and Canadian Pacific when he headed those railroad, was the opening speaker at the hearing.

Then representatives from various shippers and organizations representing shippers took their turn at the microphone.

Some of them are satisfied with CSX services, other said it appears to be slowly improving while yet others said they had they had seen no changes, or that service has gotten worse.

Count William Scott, vice president of Cullum’s Lumber Products of Allendale, South Carolina, as among the latter.

“CSX seems to have a total disregard for customer service and business relations,” he said. “They seem to do what they want, when they want, regardless of the impact on your business.”

Among the problems that Scott identified are keeping enough rolling stock on hand to manage customer orders.

Scott said that on some days Cullum has no cars. Then on Friday, CSX will deliver a dozen cars so that it collect the demurrage over the weekend, which is a fee a shipper pays for holding onto equipment beyond an allotted amount of time.

A typical amount of “free” time for freight cars is 24 or 48 hours after delivery, including weekends and holidays.

Some witnesses at this week’s hearing said CSX has been moving cars in and out of yards unnecessarily.

Still others said the poor to lackluster service has forced them to increase inventories of raw materials and pay higher rates for trucking products to customers.

One potato chip plant had to resort to shipping cooking oil by truck while a fast-food company had to ship french fries by truck to get them to its restaurants in a timely manner.

Some power generation plants have seen coal show up days after it was expected and grain elevators have had to hold onto inventory because they lacked cars in which to load it.

Brad Hildebrand, a vice president at Cargill, told the STB that the number of CSX switching crews has been cut and those that remain on the job are required to do more than they can handle.

“Mr. Harrison has publicly stated that we the shippers must bear some pain and suffering for the changes that are being rolled out,” Hildebrand said.

“Where in business today would a company put their customers through this pain to implement a supposedly new and improved operating model?”

Hilldebrand said that in his eyes precision scheduled railroading has meant shippers having to accept less service and adjust their operations to accommodate how CSX has structured its railroad.  “In a nutshell, [it] means having to do less with less,” he said.

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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.”

CSX Says it Continues to Make Progress

October 12, 2017

In its latest report to the U.S. Surface Transportation Board, CSX said that “network performance has recovered and is continuing to improve.”

CSX said dwell time is now lower than 2016 as well as the averages for the first and second quarters of this year.

“Velocity performance is at its best level since June, with both velocity and transit on a similar trend to April 2017’s strong progression. Terminal dwell has declined to 10.7 hours, also a 4 percent improvement from [the prior] week,” CSX said.

It said that the average velocity was 15.7 mph, up 4 percent from the prior week. Crew and power resource levels remain matched to demand and the Right Car Right Train program is stable.

The report said the railroad’s hump yards are performing reliably and efficiently and as a result  customer problem logs have returned to normal levels as performance has improved.

CSX also said that interchange volumes and performance are steady. Western terminals have recovered; secondary congestion has recovered as well. Empty car fulfillment is stable; demand is down modestly following a month-end surge. Local pull and place performance is stable.

CSX Reports Continued Service Improvements

October 6, 2017

CSX told the U.S. Surface Transportation Board this week that transit times for merchandise carloads have returned to a normal range.

In its weekly report, the railroad said that trains are moving faster and freight cars are spending less time in yards than was the case a year ago.

The report cited terminal dwell that is now lower than the full-year average for 2016 while saying that average train speed has climbed slowly for six weeks and also is exceeding the 2016 average.

CSX said that customer backlogs are down more than 50 percent when compared to last summer and now represent less than 1 percent of daily originations and less than 0.2 percent of active cars online.

However, the report also noted that at 67 percent on-time arrivals are about the same as they were in 2016.

That’s important because the precision scheduled railroading model being implemented at CSX emphasizes block-swapping.

Blocks of cars that miss their connection could be delayed up to 24 hours.

In seeking to put a positive spin on the report, CSX said that its “significant operating improvements during [the] third quarter” will put it on “a solid foundation for fall peak” customer demands.

Shippers Still Critical of CSX Service

October 5, 2017

A survey by Cowen & Company of CSX shipper found that 97 percent rated the railroad’s service as fair or poor.

The survey was conducted Sept. 26-28 at the North East Association of Rail Shippers conference in Pittsburgh.

However, shippers said that the service has improved since substantial service issues occurred last summer although 20 percent said service is poor and only growing worse.

In the meantime, the U.S. Surface Transportation Board will get an earful about CSX service when it holds a public hearing on Oct. 11.

More than two dozen companies and organizations have told the board they plan to participate in the listening session about CSX service issues.

CSX said it will send a team of senior-level managers from the executive, operating, and sales departments to the hearing where they are expected to provide an update on the railroad’s recovery efforts.

The problems were particularly severe during July and August as CSX implemented a precision scheduled railroading operating model.

Among those who plan to speak during the hearing are representatives of trade groups representing automakers, chemical manufacturers, lumber producers, and agricultural shippers.

Also expected to speak are representatives of Amtrak and passenger rail advocacy groups.

The hearing will begin at 9:30 a.m. in the STB’s hearing room at its headquarters in Washington.

CSX Says Metrics Continue to Improve

September 21, 2017

Hurricane Irma may have caused some local problems for CSX, but the railroad told the U.S. Surface Transportation Board this week that the storm did not set it back in recovering from the service issues that have plagued the carrier since summer.

CSX executives said that terminal dwell improved for the seventh straight week, and average train velocity improved for the fourth week. In both cases, the metrics were adjusted to take into account the effects of Irma in Florida, Georgia, and Alabama.
“Hurricane Irma did not interfere with broad recovery momentum,” CSX said in its presentation to the STB.

In advance of the hurricane, CSX evacuated 1,500 freight cars from Florida.

It held thousands of cars and nearly 200 trains as the storm lashed the Southeast. Service began to be restored within 24 hours of the storm moving out.

Workers removed 8,000 fallen trees from tracks and used more than 700 generators to provide power to signals and grade-crossings.

In its presentation to the STB, CSX said the average train speed of 15 mph was the highest it’s been in nine weeks, while average terminal dwell of 11.2 hours was the lowest it’s been in 14 weeks.

The 66-percent on-time arrival rate was the highest in nine weeks and equal to last year’s figure.

CSX said that it expects to complete repairs of hurricane damaged infrastructure this week as well as work off hurricane-related traffic backlogs.

STB Sets New Date for CSX Hearing

September 21, 2017

A U.S. Surface Transportation Board hearing into CSX service issues has been set for Oct. 11.

The hearing, which the STB has termed a listening session, had been scheduled for Sept. 12, but was canceled due to the approach of Hurricane Irma.

Those interested in participating in the hearing have until Sept. 29 to notify the board.

The hearing will be held at 9:30 a.m. in the board’s hearing room in Washington.

During the hearing, CSX managers will provide updated information about the railroad’s service recovery efforts.

However, much of the hearing is expected to feature shippers airing their grievances and views about how CSX service issues have affected their operations.

Among other problems, CSX has had issues with average train speed, terminal dwell time and on-time performance.

CSX contends that these metrics have improved during the late summer weeks, but many shippers counter that service remains subpar.

CSX Managers Tout Service Improvements

September 7, 2017

CSX executives told a railway conference this week that the carrier is emerging from its operations meltdown and making progress in implementing its precision scheduled railroading operating model.

CEO E. Hunter Harrison acknowledged in a statement issued ahead of the 10th Annual Global Transportation conference sponsored by Cowen and Company in Boston that the railroad’s service problems were in part due to a “too much, too soon” rush to implement the operating model.

But Harrison said CSX management now sees progress in overcoming those problems.

“The railroad is now returning to a normal operating rhythm, and our performance metrics are improving,” Harrison said. “Fluidity in our terminals largely has been restored and we are appropriately resourced to continue making progress. Car dwell has improved from week to week for the past five weeks, and system-wide velocity is increasing.

“I’m confident that many of the challenges we and our customers have recently faced are behind us.”

Chief Financial Officer Frank Lonegro said CSX “continues to expect free cash flow before dividends (excluding restructuring charges) of around $1.5 billion and record efficiency gains for 2017.”

However, the service issues that occurred in July and August have prompted CSX to change its 2017 full-year guidance from an operating ratio in the mid-60s to an operating ratio around the high end of the mid-60s and earnings per share growth from around 25 percent to a range of 20-25 percent.

Despite the improvements, CSX’s on-time performance was 50 percent last week, well behind last year’s 66 percent mark and the record 88 percent recorded in May this year.

“The CSX of the Hunter Harrison era is still under construction,” Frank Lonegro said at the conference. “While I say ‘please pardon our dust,’ I also tell you that the fundamental building blocks are in place to enable us to provide two very important things. The first is consistently high levels of service for our customers and the second is a radically improved financial trajectory for our owners.”

Lonegro said the railroad’s focus now is on reliably executing and refining the new operating plan.

He said CSX still expects to have between two and four hump yards and that by flat-switching two-thirds of its traffic, the railroad can cut the costs of processing cars, bolster yard productivity, trim hump-related capital expenses, and reduce transit time by a day.

Average train length has increased 7 percent since July 1 and fuel consumption has fallen by 6 percent. More than 300 crew starts per week have been cut and employment is down 2,700. CSX has also eliminated about 1,000 outside contractors.

The nine operating divisions of CSX have been reduced to five regions.

Although it has yet to undertake a line-by-line analysis, CSX is willing to consider bids to buy its lighter-density routes. “Everything’s for sale at the right price,” Lonegro said.

CSX Delays Hearing on CSX Service Issues

September 7, 2017

With Hurricane Irma taking aim at Florida, the U.S. Surface Transportation Board has canceled a hearing on CSX service issues.

The hearing, which the STB has termed a “public listening session” was to have been held on Sept. 12, but will be post-poned because Irma is expected to make landfall in Florida in the early morning hours of Sept. 11.

“The Board understands that CSX and many rail shippers are currently focused on hurricane preparedness efforts in areas that could be affected by the storm,” the STB said. “The Board does not want to divert attention or resources from those necessary activities, nor does the Board believe that it would be appropriate to require CSX’s senior management team to be in Washington, and away from its Jacksonville headquarters.”

In a statement the STB said the hearing will be rescheduled as soon as practicable.

CSX Claims Shorter Dwell Times in STB Report

August 30, 2017

In its latest report to the Surface Transportation Board CSX said it has made progress in reducing dwell time in terminals even as on-time performance has continued to decline.

The letter from CEO E. Hunter Harrison noted that the resumption of hump operations at Avon Yard near Indianapolis has enabled the railroad’s western terminals to become more fluid.

Secondary congestion that had overflowed from Avon and other yards has been contained. CSX said that its terminal dwell time declined to an average of 11.8 hours in the week ending Aug. 25, down from a peak of 13.2 hours five weeks ago.

In its six western terminals, CSX said dwell time averaged 13.7 hours last week, down from a peak of 22.1 hours five weeks ago.

CSX said its on-time originations fell to 64 percent, down from 70 percent a week ago and 87 percent in the last week of June. On-time arrivals followed suit, declining to 51 percent from 55 percent last week.

Average train speed was 13.2 mph, measured using a new standard that CSX recently adopted. That’s 15 percent slower than the average speed in the last week of June and below historic averages for this time of year.

However, some shippers are saying that CSX service remains erratic.

“We have not seen evidence that overall service is improving,” said Scott Jensen, a spokesman for the American Chemistry Council.

In its latest report to the STB, CSX said it has undertaken a number of steps, including sending during the past three weeks commercial personnel to “challenged” field locations to improve communications with customers, particularly those who have complained about CSX’s service.

Harrison said the reactivation of the hump at Avon Yard leaves the railroad with five hump yards, adding that the goal is to find the right balance of hump and flat switching yards to optimize efficiency.

“We are intensely focused on maintaining a balanced train network, reducing freight transit time by minimizing crew handlings, and scheduling each car and train in a manner that delivers optimal results for our customers,” Harrison wrote in the CSX report.

Earlier this year, CSX ended hump operations at yards in Atlanta; Hamlet, North Carolina; Stanley (Toledo), Ohio; Cumberland, Maryland; Birmingham, Alabama; Nashville, Tennessee; and Louisville, Kentucky.