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CSX Faces Reality After Harrison’s Death

E. Hunter Harrison

The sudden death of CSX Transportation Chief Executive Officer E. Hunter Harrison on Dec. 16 came at a time when regulators were taking a closer look at shipper complaints about railroad’s continuing widespread service failures.

The 73-year-old Harrison died two days after he took medical leave because of an undisclosed ailment. Chief Operating Officer James M. Foote was named acting CEO on Dec. 14, and following Harrison’s death on Dec. 22 was given the title of President and CEO.

The 63-year-old Foote was hired in late October and earlier in his career had worked with Harrison for 11 years at Canadian National (AA, 11-15-17, P. 4).

In public statements Foote made after Harrison took leave he pledged unswerving loyalty to the late CEO’s “Precision Scheduled Railroading” (PSR) model. However, some have expressed hope that because of his background in sales and marketing Foote will prove to be more responsive to customer service and communications needs, which in many cases have been nonexistent.

Harrison had joined CSX in March after signing a four-year contract that promised him an estimated $300 million in compensation to make up for what he lost when he resigned from his previous post as CEO of Canadian Pacific. By July it had become obvious that he was not well, constantly tethered to an oxygen tank. During a July earnings call he made a point of referring to himself as “a short-timer.”

At an Oct. 11 public listening session held by the Surface Transportation Board to hear shipper complaints and an earnings call days later, his mind wandered and speech seemed difficult.

It is believed that his health spurred him to rush into his massive operational makeover of the railroad. Since at least July his haste also was marked by failure to communicate with shippers. To the end, he largely blamed employees, customers and bad luck for CSX’s problems.

Harrison also was under enormous pressure from shareholders who were sold on the notion that he was a miracle worker who would generate extraordinary results through sheer force of will.

He dubbed his magic formula Precision Scheduled Railroading (PSR), which according to him meant applying statistical analyses down to the level of each engine and car to maximize their productivity.

At CSX the reality of PSR was the firing of 4,000 workers, sidelining nearly 1,000 cars and engines, closing almost a dozen railyards and ceasing to communicate with customers.

PSR also has created three-mile long trains that to this day when stalled — which is frequently — serve as massive steel walls dividing communities, preventing children from getting to schools and first responders to emergencies.

Commenting on PSR at the Oct. 11 STB hearing, a shipper executive said it was nothing more than a way for CSX to push costs onto its customers.

Refusing to Take Blame

In his last six months, Harrison exhibited disdain for customers by blaming both them and recalcitrant employees who committed sabotage for the failure of PSR to deliver decent service levels.

That psychology was evident when CSX informed customers that in 2018 demurrage fees will rise from $105 to $150 a day for standard railcars, from $175 to $250 hazmat tank cars, and from $200 to $250 for refrigerated cars.

The situation had deteriorated to the point where the STB sent Harrison a letter on Dec. 14, the day he took medical leave, demanding detailed information about what he was doing to fix service failures and improve communications with shippers.

In November the Rail Customer Coalition wrote to the STB and congressional leaders saying the situation had improved a little since late summer.

“The board should know that many shippers are continuing to experience significant problems. This includes major service changes with little notice, missed switches and poor communication on delivery status,” RCC said.

“With CSX closing additional yards since the [Oct. 11] listening session, rail customers remain very concerned about the resiliency of the rail network to meet customer demand now and into the future.”

Harrison started his railroad career when he was a 20-year-old college student in 1964 as a carman-oiler and then a train operator for the St. Louis-San Francisco Railway. After Burlington Northern purchased Frisco in 1980 he worked for BN, becoming vice president before he left in 1989 to become COO, and later CEO, of Illinois Central.

When IC was bought by CN in 1998, he was named COO and later CEO of CN before retiring in 2009. He became head of CP in 2012, and was enmeshed in an unsuccessful takeover attempt of Norfolk Southern. He left in March 2017 to join CSX.

Harrison is survived by wife Jeannie, daughter Cayce and son-in-law Quentin Judge, and a granddaughter, who also is named Hunter.

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