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CSX CEO Harrison Falters in Public

“The company’s results for the third quarter reflect the resiliency of Precision Scheduled Railroading, even during times of transition,” declared E. Hunter Harrison, president of CSX Transportation when announcing its third quarter earnings on Oct. 17.

During the company’s quarterly announcement, he said, “With that transition largely behind us, we are now intensely focused on driving superior service for our customers and lasting value for our shareholders,” although his company had missed its self-declared earnings target by $30 million.

This seems optimistic to the point of being delusional it was because six days earlier his customers were telling the Surface Transportation Board that the railroad’s operations were still a mess and its customer service and communications with customers ranged from spotty to nonexistent.

The day-long “listening session” on Oct. 11 was held at STB headquarters in Washington, DC. Present were the board’s two remaining members (since Daniel Elliott left at the end of September), Acting Chairman Ann D. Begeman and Vice Chairman Deb Miller. Begeman stressed that the event was not an official hearing.

A parade of witnesses from all segments of the economy served by the railroad detailed how CSX under Harrison damaged their businesses – and the businesses of their customers – costing them
millions of dollars and undermining their positions in highly-competitive marketplaces – competition that CSX doesn’t need to worry about because of its near-monopoly in the markets it serves.

Harrison was the first speaker of the day and his physical appearance came as a shock. He will turn 73 on Nov. 7, and at the STB session he looked much older than his previously published photographs have depicted him.

He was dependent on an oxygen tank for undisclosed reasons and had trouble speaking, sometimes losing his train of thought, repeating himself and finding it difficult to answer some of the questions put to him by Miller and Begeman.

A week later during the company’s third quarter earnings conference call, some of his responses during the question-and-answer portion seemed disorganized and sometimes nearly incoherent.

At the STB session, Harrison apologized for service failures but placed most of the blame on bad luck, recent hurricanes in the region served by CSX, several derailments, and disgruntled employees who he suggested had deliberately sabotaged the implementation of drastic operational changes he imposed so quickly under the rubric of Precision Scheduled Railroading.

Both he and other CSX executives present asserted that starting in September service had turned the corner and was only steadily getting better.

Tale of Two Railroads

While some CSX customers said that service had improved slightly in some places, they noted most improvements were localized in a few places. Most agreed that even with a few improvements here and there, the railroad’s performance is nowhere near what it was in 2016, before Harrison took over.

The shippers who spoke at the STB session came from almost all industry segments, and their companies ranged in size from small regional lumber firms to global chemicals manufacturers.

They spoke of radical changes in scheduling and reductions in car deliveries happening without notice. Experienced CSX personnel they had previously dealt with were fired and not replaced, or succeeded by someone who knew nothing about their companies.

Not only were communications lacking, but in many cases there was no communication at all. In extreme situations the C-level executives at the customer companies had to call their counterparts high up in the CSX hierarchy to get anything done.

Others spoke of tracking cars that “ping ponged” around the country to be delivered days late. Shippers resorted to using costly trucking services to keep plants open, others moved freight to Norfolk Southern, but most are completely captive to CSX and had no transportation alternative.

American Chemistry Council President Cal Dooley asked the board to investigate the underlying causes of these service failures and the impacts of the railroad’s operational changes over the long term. It also should take steps to inject more competition into the rail environment, including streamlining procedures to allow reciprocal switching, he said.

Representing the Rail Customer Coalition, Herman Hacksteen, president of the Private Railcar Food and Beverage Association, deployed sarcasm by “thanking” Harrison for proving the coalition’s case for tighter rail regulation and the need for reciprocal switching in the United States.

“Harrison hasn’t made CSX more efficient, he has simply pushed costs onto customers,” he observed.

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