Posts Tagged ‘E Hunter Harrison’

Book to be Out Soon About Harrison

August 15, 2018

As the CEO of four Class 1 railroads Ewing Hunter Harrison was a larger than life figure known to friends and foes alike simply by his middle name.

Harrison

Harrison has been deceased for less than a year and the first book about him is set hit the shelves on Sept. 18.

Howard Green has written Railroader: The Unfiltered Genius and Controversy of Four-Time CEO Hunter Harrison, which is being published by Page Two Books of Vancouver, British Columbia.

Green, who worked for the Business News Network of Canada, interviewed Harrison while he was the head of Canadian National and later Canadian Pacific.

“He’s just a fascinating story,” Green said of Harrison. “I’ve never met anyone like him.”

The 289-page book is based on interviews with 75 people who worked with Harrison, competed against him, or were part of his family.

Work on the book began two years ago and Green said he spent 170 hours talking with Harrison. He also attended the last “Hunter Camp” training seminar days before Harrison died last December at age 73.

A review of the book posted on the Trains magazine website said Green’s book portrays a colorful and complex self-made man who reshaped every railroad his headed but triggered controversy in the process.

“Everywhere he went there was thunder and lightning,” Green says.

The book focuses on the entirety of Harrison’s life, starting with his upbringing in Memphis and how he worked his way up from laborer to CEO of the Illinois Central and later CN, CP and CSX.

As a youth Harrison was rebellious and seen by many as a bully. The son of a Memphis police officer, Harrison for a brief time hung out with an older Elvis Presley.

The Trains review described the book as primarily oriented toward personalities, boardroom politics, and corporate strategy. “It’s clear that Harrison became increasingly focused on investors as he moved from CN to CP and, ultimately, CSX,” Trains correspondent Bill Stephens wrote.

During his career, Harrison was a workaholic who developed a reputation as a demanding boss who felt little remorse for all the employees who lost their jobs at the railroads that he oversaw.

Green said that Harrison’s American citizenship worked against him during his time at CN and CP because he wasn’t part of the small, clubby Canadian business scene and wouldn’t have tried to fit in anyway.

He made no effort to learn French, one of Canada’s two official languages, other than the phrase “Bonjour, y’all.”

Harrison had few close friends and Green quotes Harrison’s sister, Mary, as saying that her brother had “no life,” that it was “nothing for him [at a family gathering] to spend hours pacing on a conference call  . . .  There’s no day off. There’s no vacation. There’s no downtime.”

Yet when he died 700 people attended a tribute to his life. During his career, Harrison also developed a devoted following of railroad executives, some of whom spoke at their mentor’s memorial service.

Harrison was cremated and his ashes scattered about the Memphis railroad yard where his career began.

Green reveals that Harrison might have taken the helm of CSX in the early 2000s had a strategy by CN to obtain an ownership stake in the Florida-based Class 1 railroad worked out. At the time, Harrison was CN’s chief operating officer.

Although Harrison never held a grudge against CN after it declined in 2009 to extend his CEO contract, he did have hard feelings about Norfolk Southern, which Harrison and CP unsuccessfully sought to acquire in 2015-2016.

After becoming CEO of CSX, Green said Harrison reportedly said he wanted to “kick NS in the nuts” by capturing 10 to 15 percent of its traffic.

Green also reveals that Harrison’s health problems prompted an intense debate with CSX management ranks as to when and what to disclose about it.

By the time Harrison agreed to be part of an effort to oust CSX CEO Michael Ward, he had become a very wealthy man, saying that during his time at IC, CN and CP he was paid $500 million.

Harrison had three horse farms and three homes furnished with all of the lavish fixtures and trappings you might expect someone of such immense wealth to have.

Yet his real home was out on whatever railroad he happened to run at the time.

Railway Age columnist Frank Wilner in reviewing Green’s book likened Harrison to a railfan except rather than making photographs of trains EHH was barking orders to subordinates.

Harrison’s antipathy toward railroad labor is well known and been well documented. Many of the employees of his railroads loathed him in return.

But shippers also easily found themselves the targets of Harrison’s tirades. It may be that a railroad would not be a railroad without shippers, but Harrison viewed shipper demands as impeding his goal at the railroad of making money and lots of it for stockholders.

To that end, Harrison was less of a railroader than he was a rapacious capitalist who happened to work in the railroad industry.

Green described Harrison as “an unsentimental efficiency wizard who’d risen to the top by lopping expenses, maximizing the use of assets, and creating enormous value for shareholders [by] making the trains run on time. Investors came first. For him, the game was capitalism, pure and simple.”

Green concludes by saying that Harrison transformed four publicly traded companies, which the author found to be a rare fete.

But as accomplished as Harrison was, he didn’t live long enough to realize what may have been his most craved goal, the establishment of a true transcontinental railroad.

In concluding his review of Green’s book, Wilner observes, “Surely, [Harrison] possessed the ego, perhaps fueled by sharing initials with one of history’s most notable railroad barons—Edward H. Harriman. That Excalibur of railroading remains for another visionary.”

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CSX to Reopen Another Hump

July 2, 2018

Maybe hump yards are more important than some high-ranking railroads initially thought.

CSX plans to resume within the next few weeks hump operations at its Radnor Yard in Nashville, Tennessee.

It had been converted a year ago to flat switching as part of system-wide operational changes made by the late E. Hunter Harrison, who was then CSX’s CEO.

But CSX found flat switching in the ex-Louisville & Nashville facility to be cumbersome so it is reversing course.

CSX also had shut down its hump at Avon Yard in Indianapolis last August, but reopened it less than a month later after the western end of its system became congested.

Harrison was not a fan of hump yards and changed eight of the CSX’s hump operations to flat switching. At one time, CSX officials said they expected to have a few as one or two hump yards still in operation.

In a statement, a CSX spokesman indicated that congestion was behind the move to resume humping yards at Radnor yard, saying that “given the footprint complexities of flat switching at Radnor Yard in Nashville, we will improve network fluidity, optimize train starts, dramatically reduce out-of-route train miles and switching costs by reopening the hump,”

Before its hump closed, Radnor Yard was CSX’s third busiest hump, trailing only Waycross, Georgia, and Selkirk, New York.

Radnor was classifying an average of 1,477 cars a day, which was within the range that Harrison said was an insufficient volume to justify the operating and capital expenses of a hump yard.

Although CSX declined to reveal how many cars a day Radnor classifies on average now, it remains in the company’s top 10 terminals in volume.

CSX officials said that when the Radnor hump reopens will depend on completing maintenance of retarders and other infrastructure.

The CSX spokesman said that once Radnor’s hump resumes operation, CSX will eye downgrading operations at other yards and infrastructure.

Norfolk Southern also found itself having to backtrack on ending hump operations at its Debutts Yard in Chattanooga, Tennessee, after facing congestion issues due to rising traffic volume on the southern region of its network.

CSX Shareholders to Mull Executive Pay

May 10, 2018

When CSX holds its annual meeting on May 18 executive compensation will be on the agenda.

However, the issue is not the pay of current CEO James M. Foote or his management team but rather that of the late E. Hunter Harrison.

Harrison, who died late last year, was awarded a compensation package that a shareholder advisory firm wants CSX shareholders to renounce during the annual meeting.

Institutional Shareholder Services said CSX should have imposed a clawback on the $84 million reimbursement agreement with Harrison and hedge fund Mantle Ridge, which was instrumental in luring Harrison away from Canadian Pacific and overseeing his selection in spring 2017 to replace then CEO Michael Ward.

ISS contends that a clawback provision would have enabled CSX to recover a portion of the payment it made to Mantle Ridge after Harrison died.

Those payments were designed to compensate Mantle Ridge for money it paid Harrison for giving up some of his CP compensation by resigning as CEO before his term ended in order to join CSX.

The shareholder advisory firm also said Harrison’s pay should have been completely based on performance and that the operating operating income target for the management incentive plan should have been higher.

It was instead set below the operating income level CSX reported in 2016.

CSX shareholders approved by a wide margin Harrison’s compensation package last June.

Management of CSX is opposed to the ISS proposals and has urged shareholders to consider that CSX stock value has increased 53 percent over the past year.

It also noted that Harrison’s stock options of $115 million were forfeited upon his death and had been evenly divided between performance vesting and time vesting over four years, which CSX said “was not atypical for equity incentives.”

CSX also said it operating income incentive target had been based on the railroad’s outlook in January 2017 and also hinged on hitting certain strategic goals.

Once Harrison arrived at CSX, its board of directors replaced those goals with what it termed an “aggressive” 66.2-percent operating ratio target.

This includes incentives for 2018 and long-term incentives for executives through 2020 that CSX said are “challenging targets to support our pursuit of exceptional returns for our shareholders.”

The ISS resolution on Harrison’s compensation package is non-binding and CSX management has pointed out that a year ago ISS favored the compensation package.

During his short time with CSX before his death, Harrison earned a base salary of $1.8 million last year, plus non-equity incentive plan compensation of $3.4 million, and $600,339 in non-qualified deferred compensation. He also received the one-time reimbursement payment of $29 million.

Shippers Perspective on CSX Service Woes

March 13, 2018

We often refer to a railroad’s customers as shippers as though they are a monolithic group.

They are in the sense that all of them pay a railroad to transport something, whether it be coal, trailers, containers, automobiles, scrap metal, chemicals or grain, to name a few.

But the interests of shippers of new automobile are not necessarily the same as those who ship coal.

Nor are all shippers equally suited to get CSX or any other railroad to pay attention to their gripes and complaints.

Some shippers are big enough to get a CSX executive to return their phone calls, but others might wait days, weeks or months to hear from the railroad if they hear anything at all.

The most vulnerable shippers are those who consider themselves captive to a railroad.

What constitutes a captive shipper is a subject of debate. A railroad might argue that all shippers have alternatives and it is a matter of their willingness to use them.

Shippers would say that some of those alternatives are impractical and/or too expensive.

CSX’s top management recently made the case at a meeting of investors that it has made great strides toward providing not just better, but excellent service for its shippers.

The late E. Hunter Harrison used every opportunity he could to say that precision scheduled railroading would result in better service for shippers.

I recently ran across an op ed column on the website of Railway Age written by Ann Warner, a spokesperson for the Freight Rail Customer Alliance, which represents more than 3,500 manufacturing, chemical and agriculture companies, electric utilities and alternative fuel companies.

As Warner sees it, CSX is more interested in pleasing shareholders than its shippers.

As evidence she cited the company’s $5 billion stock buyback program, noting that this is more than double what CSX spends on capital investments every year.

While agreeing that CSX needs to make a decent return on the investment made by its shareholders, Warner said that shippers and rail labor interests find themselves having something in common.

“CSX’s problems have become so big that what is bad for CSX’s customers and the country generally has also become bad for CSX’s employees. And CSX is just a more extreme version of what is happening at other railroads as they, too, pursue the holy grail of operating ratio reductions,” Warner wrote.

In reading Warner’s column I was reminded of how Harrison used to dismiss complaints from shipper organizations as little more than a front for long-standing arguments to re-regulate the railroad industry. There appears to be some truth in that.

Warner made it clear that many shippers believe the current regulatory scheme isn’t working for them.

In particular, she noted that federal law requires that rates for rail-dependent shippers must be reasonable.

When a shipper believes its rates are not reasonable it can complain to the Surface Transportation Board. Yet Warner finds the STB’s stand-alone cost test to be impractical.

“SAC cases are long and expensive, and their record of success is spotty at best. Large chemical companies like DuPont have devoted years and millions of dollars to bring SAC cases, only to have little or nothing to show for their efforts. Electric utilities have achieved a more mixed record. However, most shippers cannot even think of bringing a SAC case because of the expense.”

Other rate abuse remedies exist, but Warner said they are not viable.

Warner also was critical of the STB’s response to the CSX service problems of last year.

“In response to shipper complaints about CSX, the Board required some reporting, convened a public listening session, scheduled weekly status calls (which are not made public), and relied on its Office of Public Assistance, which under the circumstances has done a good job where it can,” she wrote.

“More telling is what the Board has not done: There have been no penalties or other sanctions, no order to show cause, and no directive to avoid personnel cuts or other operational changes.”

It is worth reading Warner’s column if for no other reason than because it provides a shipper’s perspective on the railroad industry. You can find it at: https://www.railwayage.com/news/csx-actions-add-shipper-woes/

Warner didn’t say much about what her employer wants done. She said rail-dependent shippers welcome the opportunity to work with rail labor “to help get the nation’s railroads, particularly CSX, back on the right track.”

What that would entail she didn’t say. It is one thing to identify a problem, but quite another to implement the solution.

Comments from shippers must be read with the same degree of skepticism that comments made by railroad executives also must be read. Both are trying to get the world to accept how they project themselves and neither is necessarily what they say that they are.

Shippers and railroads are alike in those both seek to maximize their own financial gain, sometimes at the expense of someone with whom they do business.

The interests of shippers and railroads will inevitably conflict and each will do whatever it can to influence those who have the authority to address those conflicts.

Truth be told, some members of Warner’s organization probably have their own customers who complain about the service they receive.

Caught in the middle are regulators and policy makers who would rather not get caught in the back and forth that exists in commerce.

And yet that is what they are appointed to do. Perhaps if no one is satisfied with the regulatory framework and how it operates then maybe they are doing something right by not favoring one party too much.

Reading Between the Lines of How CSX Management Projects Itself to the World

March 7, 2018

CSX executives revealed last week at long last their vision for their company. They were supposed to have done it last fall, but three top-ranking vice presidents left during a management shakeup. Then CEO E. Hunter Harrison died.

But things have now stabilized. CEO James M. Foote and his management team put forth the most optimistic and rosy scenarios that they dared to spin.

Hovering over those presentations in New York City, though was Harrison.

A year ago Harrison and the hedge fund Mantle Ridge were closing in on their takeover of CSX, a feat they pulled off with a relatively small amount of money and in a short amount of time.

Harrison had great plans for the hidebound CSX. He brought the precision scheduled railroading model that he had implemented on the Illinois Central and then at Canadian National and Canadian Pacific.

Foote and his team went to great lengths to show that Harrison’s vision is their vision, too. Harrison received the reverence normally reserved for a company founder or elder statesman of much longer tenure.

Harrison had a lot of work to do. Independent railroad industry analyst Tony Hatch and Trains magazine columnist Fred Frailey have described CSX as long hindered by adherence to the practices of its  predecessor railroads, meaning it was  averse to change and rather bureaucratic.

Frailey said ormer CEO John Snow as uninspiring and his successor, Michael Ward, sought to move CSX forward but was bewildered as to how to get it out of its rut.

No wonder the CSX board of directors gave Harrison a chance even if, to quote his successor Foote, Harrison engaged in “carpet bombing” the railroad with fast-paced changes that led to widespread service failures that drew the ire of shippers and the attention of the U.S. Surface Transportation Board.

But all of that is behind CSX now, or so management wanted those attending or watching the presentations in New York to believe.

Some have bought it. Writing in Progressive Railroading, Hatch quoted an  investor as saying this was the best CSX meeting he had seen in a decade of watching the railroad.

The current management team laid out  goal of a 60 percent operating ratio by 2020, described a new intermodal business strategy, and pointed to the huge buckets of money it will fill from sales of unneeded real estate and rail lines.

Having a plan and making it work are not always, though, the same thing. Truth is every railroad company talks about growing traffic and all of them are facing challenges finding it.

Hatch said that if CSX is to increase its carload and intermodal business it will have to provide consistent and improving service.

Frailey didn’t comment directly on the New York conference, instead referring readers to articles written by the magazine’s writer covering the story, Bill Stephens.

Those articles, Frailey correctly observed, did well in showing how CSX seeks to project itself to the world.

Yet Frailey said some industry observers with whom he regularly corresponds have been debating the endgame that CSX management is seeking and it isn’t necessarily to grow traffic and become North America’s best railroad.

Those observers think CSX plans to eventually liquidate the company.

Frailey said the case for liquidation goes as follows: “The railroad borrows money to buy back an astounding $5 billion of stock, making every dollar of profit worth more to shareholders who stick around because the same amount of earnings is spread among many fewer shares . . . Freight rates are being jacked up to cover fully allocated costs, a direction I’m told only Union Pacific has gone up to now—milk the cow until it collapses, the saying goes. Its carload business has been steadily eroding since the turn of the century.”

The veteran journalist who has written about railroads since the 1960s said  he understands that CSX has reduced its marketing staff to a hard core operation.

That hardly sounds like a railroad that will be able to aggressively go to find new business. Perhaps CSX expects that by offering a superior product that shippers will come to it begging to do business.

The word “liquidate” that some of Frailey’s contacts used to describe CSX’s endgame is unfortunate because it conjures up selling assets and going away.

Perhaps a better description might have been to break up the railroad much as Illinois Central Gulf slimmed down in the 1970s and 1980s until it emerged as largely a Chicago-New Orleans core with a few arteries connecting to it.

Yes, some rail lines were abandoned, but most wound up in the hands of short line and regional railroads.

It was that railroad on which Harrison first implemented his precision scheduled railroading model.

Frailey isn’t sure what to make of what CSX is doing, but doesn’t believe Foote isn’t prepared to do the job thrust upon him following Harrison’s death.

Foote was in the right place at the right time and for now CSX and its shareholders will let him sit at the throttle and take the EHH train a little further down the line. But it is Harrison’s train orders that Foote is following and not those Foote wrote himself.

Shareholders can be a fickle lot. Just this week Canadian National, a railroad described in most circles as highly successful, pushed out CEO Luc Jobin after the company hit a rough patch.

What I see happening at CSX is that management is trying to walk a fine line between pleasing investors and shippers and keeping at bay a few interested bystanders who have the ability to make life easy or miserable for a company.

Cost cutting and asset sales will only take a company so far in that endeavor. Of course growing traffic makes everyone happy, but is CSX prepared to spend the time and money needed to make that happen. It is so much easier to sell property and lightly used rail routes.

In theory, a company exists to serve its customers because without them you don’t have a company. But theory also says that a company exists to make money for its shareholders.

The two objectives are not necessarily in opposition. Arguably, you can’t make money for shareholders unless you provide a product or service that someone is willing to buy.

But you can’t improve your product or seek to sell more of it without spending money on that, too.

Management has always existed to reconcile those sometimes opposing forces.

The history of the railroad industry is filled with tales of financiers milking companies and leaving them behind. There is reason to believe that CSX is tilting toward enabling the financiers to make a financial killing before moving on to something else.

To quote a line from the John Mellencamp song Peaceful World, “These are just words and words are OK. It’s what you do and not what you say, if you’re not part of the future then get out of the way.”

We will know in time what the future of CSX is but take with some healthy skepticism how CSX projects that to the world.

FRA Concerned About Safety at CSX

February 13, 2018

A Trains magazine special report on safety and CSX found that train accident and personal injury rates increased by 12 percent and 13 percent last year.

It cited unknown sources as saying that the Federal Railroad Administration is becoming increasingly concerned with safety trends at CSX.

The report said the FRA fears the rapid pace of change at CSX within the past year has increased the risk of injury.

Those changes have included having three CEOs, changes in the ranks of front-line operating personnel, changes in operating rules, and the increased pressure to deliver on promises made to shareholders and shippers regarding improved financial and operational performance.

Among the rule changes that Trains said have drawn the attention of the FRA are increasing the restricted speed allowed in yards from 15 mph to 20 mph and allowing crews to get on and off moving equipment.

CSX has abolished road foremen of engine positions and given their duties to trainmasters.

Citing unnamed sources, the magazine report said this has reduced the effectiveness of the supervision of engineers and conductors.

The FRA is also concerned about whether CSX locomotive engineers have been trained properly to handle long trains, but CSX has resisted those concerns.

In 2013, the CSX train accident rate was the lowest among Class 1 railroads. But it increased by 73 percent between 2013 through 2017, while the employee personal injury frequency rate increased 38 percent during the same period.

In the first 11 months of 2017, CSX had the highest train accident rate among the big six Class 1 railroads.

CSX, though, sees things differently. In statement, it said that its FRA reportable personal injury frequency index of 1.19 for 2017 was 13 percent unfavorable versus the prior year as man-hours fell by 9 percent while overall injuries were up slightly

“While the FRA train accident frequency rate increased year-over-year, overall FRA train accidents remained flat and train miles decreased 12 percent year-over-year,” the carrier said in a statement.

CSX also said it remains committed to ongoing safety improvement with a focus on reducing injury severity and avoiding catastrophic events. It said it engages in continuous improvements in safety through training, innovation, and paying for technology that can help prevent accidents caused by human error.

The statement also said CSX works with the FRA to discuss any concerns or questions that regulators raise.

Trains said that most CSX accidents occur in yards, which the magazine said is true of all railroads, and involve trains moving at low speed. The accidents seldom result in significant injuries.

Yet the magazine’s sources said the FRA has received complaints from CSX employees saying they don’t have enough time to properly inspect trains.

Although CSX CEO E. Hunter Harrison culled the company’s workforce, his predecessor, Michael Ward, laid off nearly 1,000 management employees in February 2017.

Some industry observers told Trains that the rapid pace of change at CSX in the past year may have affected safety.

“How do you maintain a safety culture when you are making some really radical changes to the operation in a short amount of time,” said Allan Rutter, a former FRA administrator who now is division head of freight and investment analysis at the Texas A&M Transportation Institute in Dallas.

Former FRA administrator and Amtrak CEO, Joseph Boardman told Trains that it’s dangerous for any railroad to undergo as much change as CSX has in such a short period of time.

“Safety culture is a very difficult thing,” Boardman said. “You have to be consistent, you have to keep moving forward.”

Steven Ditmeyer, a former FRA official, said the increased accident rates are significant, saying that it appears likely that CSX workers didn’t follow rules and procedures to ensure that a switch was properly lined before the Amtrak’s Silver Star crashed into a parked CSX auto rack train.

“I view it as a legacy of Hunter Harrison,” he said.

Nonetheless, when Harrison was CEO at Canadian Pacific it had an industry-best train accident rate, while personal injuries rose slightly, by 6 percent. That was, however, still at the low end of the Class I systems.

Ditmeyer said that at CSX “Harrison was trying to do a much more rapid change on a much more complex network.”

Ex-CSX VP Lands Job at Union Pacific

January 29, 2018

A former CSX high-ranking executive who was forced out of her job as vice president and chief operations officer had handed a VP job with Union Pacific.

Sanborn

Cindy Sanborn, the first woman to hold a senior operating executive role at a Class I railroad,  was among three CSX executives who left the carrier last November during a management shakeup instituted by then-CEO E. Hunter Harrison.

Sanborn will become regional vice president transportation-western region at UP on Feb. 16.

She will replace the retiring Richard Castagna and lead rail operations in Washington, Idaho, Oregon, California, Nevada, Utah, Arizona and New Mexico from a base in Roseville, California.

Sanborn had held various management positions during her 30 years at CSX.

CSX to Require CEOs to Get Annual Exam

January 24, 2018

The board of directors of CSX has decided that henceforth all of its CEOs will have an annual visit with a doctor.

The board will adopt the policy change in the wake of the death of former CEO E. Hunter Harrison last month.

The health of the 72-year-old Harrison had been an issue when he was hired as CEO last spring.

Harrison was known to have health issues and the CSX board at the time insisted that his medical records be reviewed by an independent physician. But Harrison balked, saying that his doctor had cleared him to assume the CEO position.

The CSX board dropped its demand and Harrison took over the C suite at CSX in March.

Harrison died on Dec. 16 two days after taking a medical leave for unspecified health problems.

Railway Age magazine has reported that Harrison suffered from emphysema and it had been widely reported that he used supplemental oxygen.

Federal securities laws do not require companies to disclose executive health problems, but some firms provide that information because it might affect an investor’s decisions to buy or sell stock.

It is not uncommon for companies to be cagey about why their CEOs take medical leave.

United Continental Holdings, the parent company of United Airlines, for example disclosed that its CEO Oscar Munoz had been hospitalized but did not initially reveal in October 2015 that he had suffered a heart attack.

Munoz, who once headed CSX, underwent a transplant and returned to work the following year.

Thomas Flannery, managing partner at the executive search firm Boyden, described the matter of forcing an executive to share his or her medical history with a board of directors as a slippery slope because of privacy concerns. It could have a bigger downside than upside.

He said he encourages executives and their boards to be open about health problems and whether they affect the executive’s ability to fulfill his or her duties.

The CSX board plans to change its policy next month during a meeting, thus avoiding a vote on a resolution that was set to be introduced at the company’s annual meeting.

The policy will require the CEO to get a comprehensive physical performed by a medical provider chosen by the board, according to a letter submitted to the Securities and Exchange Commission that was reviewed by The Wall Street Journal.

A CSX spokesman would not comment on the matter.

The shareholder vote had been proposed by John Fishwick, a Virginia attorney who owns 1,000 shares of CSX stock.

No Turning Back, Foote Says

January 18, 2018

New CSX CEO James M. Foote wanted to make one thing clear. On his watch there will be no turning back from the commitment made to precision scheduled railroading that the late E. Hunter Harrison brought to the carrier last year.

James Foote

During a conference call on Wednesday to discuss the railroad’s fourth quarter financial results, Foote praised Harrison and said CSX would not be where it is today without him.

“I am committed to seeing his vision through and making CSX the best railroad in North America,” Foote said.

Speaking during the same conference call the newly-appointed CSX vice president of operations, Edmond Harris, said the carrier will continue what Harrison started, including operating fewer trains, putting more locomotives into storage, moving the same tonnage with fewer freight cars, and having a more fluid network.

“The table has been set,” Harris said, saying CSX will take advantage of technology and boost the use of distributed motive power.

Foote said he made changes to the sales and marketing structure to simplify the organization by reducing the leadership group to three business units and aligning certain functions into other departments.

He said he also implemented changes in the operating department at the staff and field levels in order to achieve more efficient operation and achieve service improvements.

Foote noted that one of his first moves as CEO was to order the hump to be razed at Tilford Yard in Atlanta.

The yard, which remains open as a flat switching facility, was one of eight hump yards that were converted last year.

As for what the future holds for CSX operations, Harris said that he favors run-through interchange trains and would like to see CSX bypass the Belt Railway of Chicago by running merchandise trains directly to BNSF and Union Pacific.

He will also seek partnerships with short lines railroads and other Class I carriers to create shorter, more efficient routes.

CSX will study creating directional running for longer trains and will continue to build longer trains pulled by fewer locomotives per train.

Foote said CSX will make it a priority to improve its on-time performance, which was just 56 percent in the fourth quarter of 2017.

Calling that unsatisfactory, Foote said CSX plans to create schedule plans for every carload as a way to improve on-time deliveries.

Foote acknowledged that the rapid changes that Harrison ordered at CSX before his death last Dec. 16, disrupted operations, resulting in angry shippers and additional regulatory oversight.

The railroad also lost some traffic, but Foote predicted that most of it will return. “We are seeing some of those customers return already,” Foote said.

However, CSX doesn’t expect to recoup the 7 percent loss it suffered in domestic intermodal business after it closed its Northwest Ohio Intermodal Terminal and ditched the hub and spoke strategy toward building intermodal traffic.

CSX’s intermodal strategy will be built on increasing container traffic to East Coast ports and not on seeking to develop low-volume service lanes.

Capital spending will fall by 20 percent to $1.6 billion in 2018 on top of a 25 percent cut last year.

That prompted some analysts on the conference call to express concern about CSX’s ability to maintain its infrastructure.

In response, Chief Financial Officer Frank Lonegro said CSX will spend $1.4 billion this year on track maintenance, which he said is about the same as it spent in previous years.

Lonegro said most of the curtailed capital spending would have been for new locomotives and freight cars. But with 900 locomotives in storage, and 20,000 cars sidelined, he said it would be many years before CSX needs to buy more rolling stock.

Looking ahead to a March 1 investors conference, CSX executives said they did not want to provide many details about their expectations for this year and beyond other than they expect the operating ratio to improve due to operations improvements and efficiency gains.

However, they did say that CSX expects to reduce its payroll by 2,000 people this year and that it ended 2017 with 3,282 employees than it had on the last day of 2016. CSX now employs 24,000. CSX also reduced the number of consultants that it hired by 1,418.

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.