Posts Tagged ‘Freight Rail Customer Alliance’

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.