Posts Tagged ‘precision scheduled railroading’

CSX Continues to Cull Motive Power Fleet

October 19, 2018

The implementation of the precision scheduled railroading model at CSX last year brought many changes to the carrier, including fewer trains and an aggressive cost-cutting campaign that has resulted in lopping off 2,000 employees and selling some routes.

In particular, management has claimed that the new operating model has enabled it to haul more freight with fewer locomotives and freight cars.

Much of this has been achieved by operating fewer and longer trains. This also resulted in fewer crew starts.

Managers also contend that the trains are operated faster, saying average train speed increased by 28 percent during the third quarter in comparison to the same quarter of 2017.

CSX CEO James Foote said the railroad needs 30 fewer locomotives for every 1-mph gain in average train velocity. The average velocity was 17.9 mph for the third quarter this year, versus 14 mph a year ago.

It should be noted that during the third quarter of 2017 CSX was still recovering from congestion prompted by the rapid launch of precision scheduled railroading under then CEO E. Hunter Harrison.

CSX Chief Financial Officer Frank Lonegro touted those gains again during the third quarter earnings call by saying that the railroad during the quarter handled a traffic increase with a locomotive fleet that is 12 percent smaller than it was when the model was implemented in spring 2017.

Lonegro said revenue ton-miles were up 7 percent and overall volume grew 4 percent compared to the third quarter of 2017.

Over the past year CSX has stored or retired more than 300 locomotives.

Lonegreo said the smaller motive power fleet enabled CSX to cut the number of maintenance workers in locomotive shops by 11 percent.

“We now have over 800 locomotives in storage, in addition to the hundreds of engines we’ve sold, scrapped, or returned since the beginning of last year,” Lonegro said.

CSX managers say the locomotives that are in the active fleet are newer and more reliable.

The carrier’s active motive power fleet numbered 2,821 units at the end of the third quarter compared with 3,381 locomotives at the end of 2017.

It had an average of 3,763 locomotives in service in the first quarter of 2017 before Harrison implemented precision scheduled railroading.

By the end of 2020, CSX management expects to cull its motive power fleet to 2,400 units.

“We’ll continue to take out locomotives, we’ll continue to take out railcars, we’ll continue to free up capacity across the railroad and in the terminals because we will drive more and more efficiency and fluidity in the network,” Foote said.

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CP’s Creel Predicts Class 1 Mergers Coming

October 9, 2018

With half of North America’s Class 1 railroads now operating some form of the precision scheduled railroading operating model it may be easier for railroad mergers to take place.

Canadian Pacific CEO Keith Creel made that assertion at the railroad’s Oct. 4 investor day event.

Precision scheduled railroading has been implemented by the late E. Harrison Hunter at CP, Canadian National and CSX.

Union Pacific recently announced that it will practice the model as well.

“Yes, eventually it’s going to happen,” Creel said about the prospect of Class 1 mergers. “It’s not a matter of if — it’s when.

Creel said it would be easier to combine two railroads that practice precision scheduled railroading and thus overcome a potential hurdle in the review process by the U.S. Surface Transportation Board.

An increase in rail freight traffic is expected to drive the North American rail mergers.

Precision scheduled railroading can only do so much to alleviate the congestion, particularly in the Chicago region, that Creel expects to happen.

He said population growth and highway congestion will increase the demand for moving freight by rail.

“You can’t double traffic in Chicago and solve that problem with just PSR. It just doesn’t happen,” Creel said.

He said the solution to increased demand and finite capacity will be to remove operational complexities and eliminate interchanges by combining Class I railroads.

“Eventually it’s going to have to happen,” Creel said. “I don’t know if it’s three years, five years, 10 years.”

Ex-CSX President Looks Back on His Time There

October 2, 2018

Long before E. Hunter Harrison became CEO at CSX, the railroad’s management team was already studying the precision scheduled railroading model and had adopted some of its principles.

That was the message that Clarence Gooden, the CSX Transportation president who retired after Harrison became CSX CEO, told the North East Association of Rail Shippers last week.

Gooden said CSX adopted such practices as laying off employees, mothballing locomotives, closing some small yards, and shuttering 11 of its smaller car and locomotive repair shops.

CSX under former CEO Michael Ward also began running longer trains in an effort to reduce train starts and improve crew and locomotive utilization, and increased its use of distributed power.

Although CSX closed a couple of the 14 humps it operated at the time , Gooden said the carrier should have closed four or five more humps.

The moves during the Ward administration were in response to the Great Recession of 2008 and a sharp drop in coal traffic.

Coal provided a 53 percent profit margin and when it declined, it was a major blow to the CSX balance sheet.

Losing coal traffic cost CSX $1.5 in revenue as the domestic utility coal market collapsed over a five-year period.

Gooden expects CSX to take another hit in lost coal revenue starting in 2023 when a wave of retirements of coal-fired power plants is expected to begin.

He predicted that CSX and NS alike will spin off or close many of their coal-dependent routes.

Although intermodal traffic might pick up some of the slack left by falling coal traffic, Gooden said intermodal traffic is not nearly as profitable as coal.

The Eastern railroads might have to live with higher operating ratios due to declining coal traffic and an increase in intermodal business.

Gooden spoke favorably of the changes that Harrison introduced during his less than a year at the helm of CSX before his death.

But he also defended the accomplishments of the railroad during the Ward years.

From 2004 to 2017, CSX’s stock price went from $5.13 to $36.88.

Other achievements that Gooden cited included making the hiring of veterans a priority, launching an ad campaign promoting the efficiency of rail transportation, having the distinction of being the safest Class I railroad.

At the same time Gooden said CSX should have adopted technology much faster. He said automating yard operations and taking advantage of the operational benefits of positive train control will be a focal point for reducing costs.

Gooden also believes that CSX should have developed closer ties with short line and regional railroads because of their importance in feeding traffic.

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.

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.

Foote Named Permanent CSX CEO

December 23, 2017

James M. Foote had the word “acting” removed from his title on Friday after the CSX board of directors unanimously voted to name him the company’s permanent president and chief executive officer.

James Foote

Foote had been named acting CEO on Dec. 14 after E. Hunter Harrison was placed on medical leave. Harrison died two days later.

In a news release, CSX said that Foote will also join the board of directors.

“Jim has decades of railroading experience and the board is confident of his ability to lead the company,” says CSX Chairman Edward J. Kelly III in a statement. “He has already had a markedly positive impact. The board looks forward to working with him.”

Foote said in the same statement that his intends to continue to implement Harrison’s model of precision scheduled railroading, saying that its implementation is well underway, with the most critical components of the implementation completed and beginning to generate measurable operating improvement.

“We look forward to providing an update on our strategic progress and to showcase our deeply talented management team at our upcoming investor day in March,” Foote said.

Before joining CSX last October, Foote was president and CEO of Bright Rail Energy, a technology company formed in 2012 to design, develop, and sell products that allow railroads to switch locomotives to natural gas power.

He previously served as executive vice president of sales and marketing at Canadian National, which he had joined in 1995 as vice president of investor relations to assist the company’s privatization.

Foote began his railroad career in 1972 as a laborer in the mechanical department with the Soo Line Railroad in Superior, Wisconsin.

For nine years, he worked in operating positions with the Soo Line and the Chicago & North Western fulltime while earning his undergraduate and law degrees.

STB Wants More CSX Service Information

December 16, 2017

The U.S. Surface Transportation Board is taking a renewed interest in CSX operations.

The STB wrote to the railroad on Thursday to ask its managers for a meeting with board members and requested that they provide a detailed update on the ongoing implementation of its precision scheduled railroading model.

In the letter, the STB asked for information concerning the current state of the CSX network and key performance measures in light of continued reports regarding service issues.

In its reports to the STB, CSX has contended that operational improvements have been accelerating, with average train speed up 19 percent and terminal dwell time down 13 percent when compared with the average for 2016.

In the past two weeks, on-time performance has improved and now stands above last year’s levels, but has not yet topped the 81-percent level recorded in the second quarter.

But that hasn’t been enough to satisfy some shippers.

“The board continues to hear concerns related to CSX service challenges or inadequate service, particularly about unsatisfactory ‘last mile’ performance and lack of communication regarding changes to service before they occur,” commissioners Ann Begeman and Deb Miller wrote to CEO E. Hunter Harrison.

The STB sought to encourage CSX to continue to participate in the Chicago Transportation Coordination Office, which helps smooth railroad traffic through the nation’s busiest rail gateway.

That was apparently in response to Harrison saying in October that he was considering pulling out of the CTCO, which the Class I railroads and terminal lines use to monitor such things as yard car inventories, maintenance-of-way planning, weather alerts and service priorities.

“While we recognize that several key performance measures have shown noticeable improvement in recent weeks, other metrics, such as car order fulfillment and local service performance, have lagged when compared to 2016 and first quarter 2017,” they wrote.

The STB also wants CSX to explain its lack of progress in improving car-order fulfillment, including why it can’t match or exceed local service performance from 2016.

Also on the STB’s list is a request for information on the progress the railroad has made on developing trip plans for individual carloads, as well as efforts to improve communication with shippers.

Harrison on Medical Leave From CSX

December 15, 2017

CSX announced Thursday night that CEO E. Hunter Harrison has taken a medical leave of absence and Chief Operating Officer James Foote is serving as acting CEO.

E. Hunter Harrison

The announcement said Harrison is dealing with complications from a recent illness.

A conference call was to be held on Friday morning to discuss the situation.

Harrison has been thought to have health issues for some time. It was reported earlier this year that he sometimes uses supplemental oxygen and that due to an undisclosed illness he has curtailed his traveling.

Concerns about Harrison’s health had been an issue early this year after hedge fund Mantle Ridge acquired a block of CSX stock and pushed for the company to make him CEO.

The CSX board of directors had demanded that Harrison’s medical records be examined by independent physicians, but he declined and the demand was later dropped.

Foote worked with Harrison years ago at Canadian National and was brought to CSX this past October with the idea of eventually succeeding Harrison as CEO of CSX.

“Hunter is a good friend and has been a colleague of mine for many years. He is an icon in the industry and we pray for his speedy recovery,” Foote said in a statement. “I have been following the CSX story very closely since January, but did not realize just how much progress Hunter and CSX’s able team have made replicating the transformation we effected at Canadian National some years ago.”

Harrison agreed to a four-year contract when he agreed to become CEO of CSX.

In his statement, Foote said that the precision scheduled railroading operating model is well in place at CSX and “the company has amassed the critical talent – through education of the internal team and supplementation with a complement of strong PSR operating veterans and a strongly supportive Board – sufficient to follow through and execute on the PSR operating plan.”

CSX Executive in Presentation Lauds Precision Scheduled Railroading, Explains How it is Benefiting Shippers

December 5, 2017

A CSX executive gave a rosy assessment of the benefits of the precision scheduled railroading model during a speech at the RailTrends 2017 conference last week.

Michael Rutherford, CSX vice president of industrial products, said carload customers are benefiting from faster and more dependable service.

Although the closing of hump operations at eight CSX yards has received much publicity, Rutherford said a less visible change has been the practice of blocking cars closer to their origination and pushing them further across the network before they are flat-switched or classified in a hump yard.

“That’s how you get the speed and reliability,” he said. “Hump yards make sense where they make sense. They just don’t make sense everywhere.”

Rutherford said running cars through hump yards was adding two or more days to their transit time and cars were sometimes humped more that once.

Since implementing the precision scheduled railroading model, Rutherford said, CSX has reduced the average merchandise transit time from just under seven days to just under six days by early November.

Rutherford cited an example of faster transit times between Buffalo and Syracuse, two New York cities located 150 miles apart.

Previously, freight traveling from Buffalo to Syracuse went through Syracuse to Selkirk Yard near Albany to be classified. It was then sent back west to Syracuse.

“We used to have to boomerang the car over Selkirk,” Rutherford says. “As a result, the actual route miles were three times the actual distance from Buffalo to Syracuse.”

Today an eastbound train picks up a block of Syracuse cars in Buffalo and drops them off in Syracuse, which Rutherford said is a faster, more reliable service that costs less.

Although many CSX shippers prefer to see their cars move in unit trains because they view that as more reliable than regular merchandise service, Rutherford said that where possible CSX is shifting unit train business into the merchandise network as a way to streamline service.

Rutherford said the downside to unit trains is the extra time expended in building and unloading them, which adds expense by requiring the use of more freight cars.

Metal shipped for a customer in a unit train would require 10 days to load, move from origin to destination, and unload, Rutherford said. But smaller blocks of carloads moving in daily merchandise service has reduced the moves to two days and the shipper is able to use 10 to 15 percent fewer cars to handle the same traffic

Those now surplus cars are being re-assigned to other shippers to carry other freight.

Rutherford acknowledged that CSX is seeking to change the behavior of its shippers by encouraging them to order only the number of cars they need and to unload their shipments more quickly.

When shippers order extra cars, those cause congestion. Precision scheduled railroading seeks to keep rolling stock moving along.

“The change has been transformative,” he said, citing performance measures of reduced terminal dwell time and faster average train speed.

However, Trains magazine observed that Rutherford did not say that CSX’s on-time performance remains lodged at its 2016 level with about a third of its trains arriving late.

Now did he acknowledge that some shippers still believe service is subpar or deteriorating.

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.”