Posts Tagged ‘precision scheduled railroading’

Foote Defends PSR in Spirited Speech

July 20, 2022

CSX CEO James Foote gave a spirited defense of the precision scheduled railroading operating model during a speech to a shipper’s association, but acknowledged his company needs to do a lot of things differently.

As reported by Trains magazine on its website, Foote told attendees of the Midwest Association of Rail Shippers that blaming the railroad industry’s recent service issues on PSR is nonsense.

In hindsight, Foote said CSX made mistakes during the COVID-19 pandemic, including laying off workers when business plummeted.

“If I had the decision to make over again . . . we would have never laid off an employee,” Foote said. “Never. But there was no vision of the future, there was no idea what we expected to encounter.”

Foote said at the time he and other railroad executives expected the business downturn to play out as had other business downturns with the same cycle of layoffs and recalls.

CSX laid off about 1,000 operating workers but when it attempted to recall them, many didn’t return.

The CSX train and engine workforce was about 7,000 at the end of 2019, dipped to about 6,000 during the pandemic and rose to 6,800 after recalls went out.

Although CSX hired another 2,000 T&E workers, its workforce has fallen to 6,600 T&E employees because about half of the new hires have quit within the first six months of employment.

Foote said that happened because they began realizing they would have to work on weekends and holidays or miss the birthdays of their children.

He said the industry needs to find ways to make railroad work more attractive.

“We need to provide employees with greater flexibility,” he said. “Is it a different kind of bid arrangement, where they can go work on this kind of job one day, and this kind of job another day — yard jobs, where they can have a regular assignment and work regular days off, and then the people that want to make more money can bid the road jobs.”

Foote also took issue with the criticism that Class 1 railroads are acting at the behest of powerful investors.

“Everybody says, ‘oh, my God, he’s beholden to Wall Street,’ ” Foote said. “Do you have any idea how much money CSX has lost because of our failure to move freight? Enormous amounts of money. This doesn’t benefit me. This doesn’t benefit the shareholder. This doesn’t benefit anybody.”

He described the criticism of PSR as an excuse to “blame the railroad management for something they intentionally did. It’s insanity.”

More of Foote’s comments can be read at https://www.trains.com/trn/news-reviews/news-wire/csxs-foote-blaming-psr-for-rail-problems-is-nonsense/

NS Launches New Operating Plan

June 28, 2022

Norfolk Southern launched on Monday a new operating plan that is largely focused on improving intermodal service although it will be applied to all types of freight shipments.

The plan, known as Thoroughbred Operating Plan|Service Productivity Growth was described as an evolution of its previous operating plan known as Thoroughbred Operating Plans 21.

TOP|SPG continues to build upon the elements of the precision scheduled railroading model with its emphasis on efficiency but also adding and more point-to-point intermodal service.

For example, NS will consolidate all intermodal traffic moving between Chicago and Harrisburg, Pennsylvania, at one terminal in Chicago, 47th Street.

Under the previous operating plan, NS operated one train daily between 47th Street in Chicago and Rutherford Yard in Harrisburg and one train daily between 63rd Street in Chicago and Rutherford.

In the new operating plan Chicago-Harrisburg intermodal operations will be consolidated at 47th Street and expanded to four daily trains between there and Harrisburg. The intermodal trains serving the 63rd Street terminal will be eliminated.

NS officials said they are seeking to increase the number of miles per day that cars travel by reducing how often those cars are handled en route and how much time they spend sitting in yards.

The running time will be adjusted for more than half of all road trains. Schedules will be changed for 90 percent of all scheduled trains.

There will be changes to 39 percent of yard blocks. The officials said the new operating plan seeks to reduce network directional imbalance, and simplify operations of routes and terminals.

The carrier indicated it will increase the number of daily intermodal trains it operates systemwide from 79 to 85.

NS CEO Alan Shaw cautioned that implementation of the plan won’t occur overnight.

In a video created to announce the new operating plan, Shaw said the goals of the plan are reducing the complexity of the NS network by reducing train meets and how often cars need to be worked while en route.

In a social media post, NS said the new operating plan “isn’t a radical change in how we work with our customers, but a shift in how we execute our operations to move their shipments more directly and consistently.”

NS said there will be no operating changes for most customers and for those who are affected It has been working with them to ensure they are prepared for coming changes.

Above all, NS indicated, the new operating plan seeks to provide greater consistency in the service provided to shippers.

Union Rips PSR in Letter to STB

April 6, 2022

The adoption of the precision scheduled railroading operating model is the culprit behind service issues that Class 1 railroads are having, a railroad labor union has told the U.S. Surface Transportation Board.

The SMART Transportation Division wrote in the April 1 letter that the nation’s freight railroad network is “at a breaking point” and “cannot sustain any more reductions.” The union, which represents 40,000 railroad workers, wants the STB to intervene.

The letter said crew shortages that Class 1 railroads have blamed for service issues are self-inflicted hindrances that railroads brought on by their adoption of PSR.

The concerns raised by the union are similar to those raised earlier this spring by a trade association that represents grain shippers.

Railroads reduced their worker ranks during the worst of the COVID-19 pandemic when freight traffic plunged.

But after traffic began rebounding, some furloughed workers chose not to return to their railroad jobs. The Class 1 carriers have characterized this as being higher than usual compared with previous times when furloughed workers were recalled.

The union letter said about 33 percent of the country’s railroad workforce was laid off when PSR was initially implemented and thousands of locomotives were placed in storage.

One hallmark of how PSR has been implemented in the United States by Class 1 railroads is operating fewer, but longer, trains.

Class 1 railroads have been actively seeking to hire new conductors in areas with acute crew shortages but have bumped up against a tight labor market.

The union letter cited other operational changes that have adversely affected freight service.

It said that in an effort to save fuel crews have been restricted from operating trains at maximum authorized speeds.

“ . . . they are directed to limit the locomotive’s throttle position, acceleration, and overall train speed to no more than forty  mph. This not only impedes system fluidity, but it greatly hamstrings a railroad’s ability to service customers.”

As the union sees it, Class 1 railroads are now in a position of not having enough crew members or locomotives “to operate the necessary number of trains required to provide a level of service that equals the current level of demand.”

The union’s letter also took aim at railroad attendance policies that the union said require train crews to work 29 out of 30 days per month.

 “Not only has morale dropped to an all-time low, but employees are also leaving the industry in unprecedented numbers,” the union wrote.

NS Revising its Operating Plan

January 28, 2022

Norfolk Southern has given its operating plan a new name.

During a fourth quarter earnings call with investors this week, company officials said the new plan, known as TOP SPG, involves a reworking of the railroad’s merchandise operating plan.

TOP, which denotes Thoroughbred Operating Plan, is the NS version of precision scheduled railroading, which the company implemented in summer 2019.

SPG stands for service, productivity and growth, which Chief Operating Officer Cindy Sanborn described as the three facets of the plan.

The operating plan covers all types of trains and freight. The plan calls for long trains and a more balanced train plan that NS President Alan Shaw said seeks to improve efficiency and service.

The new operating plan will be implemented this spring as NS places into service a new wave of conductors who are going through training.

Sanborn acknowledged that during the fourth quarter service quality was not where the company wanted it to be, which she attributed in part to crew shortages in some regions of the NS network when the number of operating personnel fell by 8 percent.

NS has sought to compensate for this by boosting its locomotive fleet by 5 percent by putting back into service idled units. It also has been operating fewer but longer trains.

During the fourth quarter average train speed declined 17 percent compared with the same period in 2020. Terminal dwell increased 24 percent.

Sanborn said both metrics have improved this month but NS remains hindered by crew shortages stemming from COVID-19 infections and quarantines.

NS plans to continue to convert locomotives from DC to AC traction operation. Sanborn said the motive power fleet is now 60 percent AC traction and two-thirds of it is capable of being used as distributed power.

During the fourth quarter NS completed one siding project and plans eight additional siding projects in the Southeast where many routes are single track.

Adding siding capacity is key to being able to operate longer trains.

Canadian PSR Success Stories Unlikely to be Replicated by U.S. Class 1 Railroads

June 16, 2021

U.S. railroads that have adopted the precision scheduled railroading operating model like to describe it as a two-step process.

The first step involves ruthless cost cutting as freight schedules and operations are revised to move more freight in fewer and longer trains.

Some shops and yards are closed or reduced in their scope of operation, and layoffs are widespread as the carriers seek to do more with less.

The second chapter is a so-called pivot to growth. Class 1 railroads CEOs like to tell investor conferences that the savings from slimming down and becoming more efficient and reliable operators will enable railroads to chase after volume growth.

But what if the second chapter of the story is actually a myth?

Railroads have an answer for that. They’ll point to the experience of Canadian National and Canadian Pacific, both of which implemented PSR and once it was in place began enjoying double digit traffic growth.

Between 2010 and 2019 Canadian rail traffic rose 47 percent while U.S. rail traffic fell 2 percent.

Yet an analysis published on the website of Trains magazine suggested that what happened in Canada is less likely to occur in the United States.

What drove growth in Canada were factors unique to that country with much of it being driven by international intermodal, petrochemicals and fuel, and agriculture.

Canadian international intermodal traffic grew at the expense of U.S. West Coast ports and a 40 percent rise in containers landing at Canadian ports that were forwarded to the U.S. Midwest.

CN and CP also are hoping that Eastern Canada ports can divert traffic away from U.S. East Coast ports.

The Canadian carriers have other advantages including how farmers in Canada are more dependent on rail than is the case with U.S. farmers.

While Canadian agriculture shipments rose 16 percent over the past decade, U.S. agricultural rail volume fell 22 percent. In the United States, railroads haul less than 50 percent of grain ton-miles.

Coal offers another contrast. Most Canadian coal is metallurgical coal and exports of it to Asia drove a 10 percent increase in coal volume over the past decade.

In the United States, most coal is thermal coal used by power plants, many of which have been shifting to lower cost natural gas. U.S. railroad coal volume in the past decade fell 44 percent.

The Trains analysis noted CN and CP also have some other built-in advantages, including networks that are largely east to west across the country and rely far less than U.S. railroads do on interchange traffic.

The Canadian economy is more reliant on rail transportation because the country has longer distances between urban centers and a highway system that is less developed than that of the U.S. Therefore competition from trucking companies is less intense.

The analysis said CN and CP deserve credit for taking advantage of their opportunities and being creative in generating, for example, traffic to fill containers from U.S. destinations that would otherwise return empty to Asia.

They’ve done this by offering good service and competitive rates to keep this traffic from returning to U.S. ports, the analysis said.

It remains to be seen, the analysis concluded, how successful U.S. carriers will become in growing traffic as they claim to be doing.

But the key point, the analysis said, is that the type of success stories by U.S. Class 1 carriers that CN and CP have enjoyed are not guaranteed because of significant differences in the environments in which the carriers operate.

Oberman Fears Wall Street Pressure Harming Class 1 Railroads

May 28, 2021

A top federal regulator express concern this week during a webcast that Wall Street investors are pressuring railroads, which has thus led to a deterioration of freight service.

U.S. Surface Transportation Board Chairman Martin Oberman also raised questions about the need for major railroad mergers.

“Our mandate as an agency . . . is to ensure and protect a strong national rail network. That’s why we exist. And everything we do should be aimed at that outcome,” Oberman told investors.

He said the pressure from Wall Street includes pushing for ever-lower operating ratios and aggressive share buyback programs.

“There’s been a huge decrease in the level of the workforce over the last few years, I think something like 25 percent,” he said.

“I am concerned it has left the Class I’s with too little cushion to respond to a major crisis like the pandemic or the [polar] vortex, which is more likely to keep coming around. So we are keeping a close watch on the situation.”

In the past decade, the North American Class 1 railroads have adopted the precision scheduled operating model.

Typically, aggressive cost cutting, including reducing the size of the labor force and the number of trains being operated, has followed in the wake of PSR adoption.

The railroad have sought to reduce their operating ratios in a bid to boost profitability.

From February 2017, the month before CSX adopted PSR, through December 2020, U.S. Class I rail employment fell 21 percent overall.

“We’re seeing, I believe, some impact from that on the service side,” Oberman said citing missed switches and crew shortages.

“A lot of this stems from furloughs and quarantines from COVID, but I think it’s also related to the fact that the whole workforce has been greatly reduced over the last few years, I think largely in response to pressures from Wall Street. And I am beginning to get concerned that this could start impacting capital expenditures as well.”

As for stock buybacks, Oberman said in some cases those have been funded with borrowed money.

Stock buybacks are efforts by railroads to boost earnings per share and stock prices.

“Those forces are of concern to me in terms of what they mean for the long-term health of the freight industry and whether we’re going to have an industry staffed enough to fully serve and with enough incentive . . . to keep spending money on greatly needed capital improvements,” Oberman said.

“It’s not our job to come in and micromanage and tell them how to run their companies, but it is our job to keep an eye on the ball so things don’t get too far out of whack,” he said.

Independent rail analyst Anthony B. Hatch told Trains magazine that for all of the talk about railroads cutting capital expenditures, the industry spends far more of their revenue on capital expenditures than most other industries.

He said financial strength is what enables railroads to keep their physical plants in good condition.

The STB chairman also questioned the rationale for railroad mergers as well as the substantial premiums Canadian Pacific and Canadian National were willing to pay to acquire Kansas City Southern.

As for railroad mergers, Oberman expressed skepticism that consolidation will lead to railroads being able to siphon more freight business away from trucking companies.

“I am all for promoting much more competition in the freight world, particularly among railroads and particularly with railroads getting more freight off the highways and onto the rails,” Oberman said, adding that what is needed is more rail competition, not less.

“The thing that’s impressed me most since I’ve come to the board is the lack of competition for most shippers in most parts of the country,” Oberman said.

Many of these shippers are captive simply because they are located on a single rail line with no opportunity for service from a distant second railroad.

House Committee Seeks Probe of PSR

May 17, 2021

The House Committee on Transportation and Infrastructure is seeking an investigation of the practice of precision scheduled railroading.

It has asked the U.S. Government Accountability Office to conduct the probe with a focus on how the practice has affected shippers, Amtrak, commuter railroads, employees and others.

A letter from committee chairman Peter DeFazio (D-Oregon) and Donald Payne Jr. (D-New Jersey), chairman of the Subcommittee on Railroads, Pipelines, and Hazardous Materials, asked Comptroller General Gene Dodaro to, “at a minimum,” investigate 10 aspects of the impact of PSR.

“These include the safety and service impacts of longer trains, and of reduced workforces; elimination or downsizing of yards and maintenance facilities; changes in dispatching practices; on-time performance of passenger trains; quality, availability and reliability of service to shippers; and increases in demurrage or other charges.”

The letter noted that longer trains, unhappy shippers, and a workforce pushed to do more with less is not a model to emulate “unless you’re on Wall Street.”

“But we can’t let hedge fund managers write the rules of railroading,” DeFazio said in a statement.

NS Focusing on Longer Trains

January 28, 2021

You can expect to see even longer trains on Norfolk Southern in the coming months.

NS Chief Operating Officer Cindy Sanborn said this week during an investor’s call to discuss 2020 fourth quarter financial results that NS is seeking to lengthen its trains.

The objective is to reduce its operating ratio, which NS said lags other Class 1 railroads.

The operating ratio reflects the percentage of revenue that is used to cover expenses.

Over the past two years NS has sought to cut operating costs by shifting to the precision scheduled railroading operating model.

It has ceased humping cars at six classification yards and sought to reduce its fuel, labor and locomotive-related costs.

Sanborn said NS is seeing more business but at the same time reducing resources and improving productivity.

“Our push for efficiency led to record train weight and record train length in the [fourth] quarter,” she said.

“These larger trains, combined with our strategy of better matching train size and locomotive horsepower, drove us to record fuel efficiency and enabled us to get the job done with a smaller workforce and a record low count of locomotives.”

NS is now moving freight with 16 percent fewer locomotives and 15 percent fewer crews.

The length and weight of its trains has grown by 10 percent.

That resulted in an 8 percent cut in operating expenses during the fourth quarter.

“Traffic coming back is both our challenge and an opportunity,” Sanborn said. “We can and will add resources to meet customer needs, but first we must explore every option to fully utilize our existing crews and locomotives.”

That will mean that ncreased traffic will be accommodated on existing trains.

It doing this, NS plans to re calibrate operations by re-balancing traffic among existing trains. Extra section trains will operate only when necessary.

Sanborn said doing this will involve seeking to optimally match train size with the pulling power of locomotives while minimizing the number of crew starts.

This is expected to result in an increase in mixing different types of traffic in the same train. It will be done by blocking traffic for the most distant points on the NS network.

“We will continue to look at yards and see how we can speed up cars,” Sanborn said. “The real mission around terminal capability and terminal footprint is around keeping cars moving, or not pushing cars into terminals, moving cars faster. So I think there’s still quite a bit of room there.”

NS expects its workforce size to hold steady or only decline slightly this year.

However, it will recall and retrain furloughed employees for work in other crafts rather than hire new employees.

NS did suffer some increase in terminal dwell times and lower trains speeds as volume picked up around the late 2020 holiday season.

Service also took a hit at time due to high numbers of workers having to quarantine due to the pandemic.

During the fourth quarter, cars spent 16 percent more time in yards while average train speeds fell 5 percent.

“We’ve gotten a lot better. We’re not at 2020 levels, but we are much, much better,” Sanborn said.

NS Revenue, Profits Fell in 3rd Quarter

October 29, 2020

As expected Norfolk Southern reported this week that its revenue and profits sank during the third quarter due to traffic declines that the railroad tied to the COVID-19 pandemic.

Operating income fell 6 percent to $939 million while revenue dropped 12 percent to $2.5 billion.

Adjusted  earnings per share rose 1 percent to $2.51.

During the period NS posted an adjusted operating ratio of 62.5 percent.

During the quarter NS reduced expenses by 15 percent while its traffic volume fell by 7 percent.

Intermodal volume grew 1 percent during the quarter, but merchandise traffic and coal combined fell 11 percent.

Domestic intermodal was up 9 percent while international intermodal volume fell 11 percent.

Coal volume alone fell by 32 percent, which represented most of the volume declines said NS Chief Marketing Officer Alan Shaw.

NS CEO James Squires said the railroad plans to pick up the pace of precision scheduled railroading changes, including closing hump operations in Macon, Georgia, and revising its southern service plans.

“As we continue rolling out PSR, our team sees additional opportunity for efficiency and growth that will close the [operating ratio] gap with the rest of the industry,” Squires said during an investor’s conference call.

The carrier said it is aiming to reach an operating ratio of 60 percent in 2021.

Chief Operating Officer Cindy Sanborn said the change NS is making to its operating plans are more than tweaking.

She said there will be longer trains that will move faster. Train length was up 12 percent this quarter compared to 6,600 feet a year ago.

Increases in intermodal and merchandise traffic have been added to existing trains.

Crew starts in August and September did not increase even though traffic volume rose.

The NS workforce in the third quarter was 18 percent below what it was a year ago.

Shaw predicted a rebound in consumer-related traffic, including intermodal and automotive, but expects anything connected to energy to recover more slowly.

He said there is no hope for coal traffic to improve so long as natural gas prices remain low and utility stockpiles stay 45 percent higher than they were at this time last year.

Sanborn said NS still has the ability to increase train length because only 9 percent of merchandise trains at at the maximum of the horsepower of their locomotive consists.

Just 10 percent of NS intermodal trains are longer than 10,000 feet.

NS in September closed its hump at Enola Yard near Harrisburg, Pennsylvania.

The closing of the hump in Macon next week will mark the sixth hump that NS has idled since 2019.

 “A lot of these hump conversions that you’ve seen  . . . actually improves car speed,” Sanborn said. “And at a system level what we want to do is avoid touches all together if at all possible. If we can speed the cars up, that’s good for us in terms of asset intensity and it’s also good for our customers. It provides them a more timely service product.”

As part of its redesign of southern operations, NS also plans to close several local yards around Atlanta.

As other railroads practicing PSR have done, NS is pre-blocking more traffic at origin and focusing on block-swapping en route.

NS will still have jump yards in Elkhart, Indiana; Conway (Pittsburgh), Pennsylvania; Birmingham, Alabama; and Chattanooga, Tennessee.

Conference Speakers Optimistic That Intermodal Traffic Growth Will Continue

October 2, 2020

Colorful containers on a late day eastbound intermodal train on  CSX in Clinton, Ohio.

Speakers at the recently concluded North East Association of Rail Shippers virtual fall conference expressed cautious optimism that recent growth in intermodal volume can help railroads recover from traffic losses prompted by the COVID-19 pandemic.

Jason Seidl, managing director of Cowan and Company said the consensus among railroad executives who spoke during the conference is that current trends could continue for the remainder of 2020 and into next year.

Railroads are bullish on intermodal for the time being due to continued tightness in the trucking industry that has sent some shipment onto the rails.

Kansas City Southern CEO Pat Ottensmeyer said the USMCA treaty, which replaced NAFTA,  “allows North America to emerge as an even more powerful force in global manufacturing and trade.”

However, Ottensmeyer said the United States “must do a better job” coordinating policy with Mexico and Canada in order to maximize the benefits of the treaty.

Tom Tisa, who heads business development for CSX, noted that railroads posted intermodal traffic records in August because retailers were restocking depleted inventories and preparing for the holiday sales season.

However, Tisa expressed some uncertainty that the intermodal surge is sustainable although he is optimistic that it will continue.

Speakers at the conferences noted a contrast between how Canadian Class 1 railroads are managing their precision scheduled railroading operating model with how it is being done by U.S.-based carriers.

Analysts said this probably is because Canadian National and Canadian Pacific have been using PSR for a longer period of time whereas the U.S. carriers are still in early stages of

PSR, particularly those focused on chopping costs and paring assets.

Whereas U.S. railroads are still looking to sell low-density lines, Canadian carriers are seeking to add routes, including some lines they once spun off.