Tag Archives: CSX Rail

CSX Upheaval Risks Throwing It Off Track

Bloomberg

Three top executives don’t leave a company when everything is going swimmingly.CSX Corp., the railroad that replaced its CEO with storied cost-cutter Hunter Harrison amid pressure from an activist investor, announced more management upheaval on Wednesday. The $47 billion company’s chief operating officer, chief marketing officer and general counsel are all stepping down. I find it hard to believe this reshuffle was planned far in advance because the changes forced CSX to delay an investor conference that had been scheduled for next week. The meeting now won’t happen until February, Harrison told Bloomberg News. I hope analysts’ and shareholders’ flights to Palm Beach, Florida, are refundable.
WATCHING AND WAITING

It’s not clear what prompted the executives to leave, but their exit strikes me as a loss for CSX — not least because two of the three departing executives are women whose jobs will now be filled by men. There’s something to be said for keeping a little institutional knowledge around, particularly in light of the cascade of customer complaints sparked by Harrison’s aggressive push to implement his strategy for making the railroad run more efficiently. The disruption from delayed shipments and service shortfalls was significant enough that the Surface Transportation Board held a hearing over the degradation in CSX’s customer experience earlier this month.
“Overplayed”
While CEO Harrison tried to pass off the issue of service disruption as “overplayed” in July, it was significant enough that CSX had to walk back its forecast for the year.

New CEOs bring in their own teams all the time, but public commentary would seem to point to these departing executives at least being willing to try things Harrison’s way. Outgoing chief operating officer Cindy Sanborn and chief marketing officer Fredrik Eliasson, for example, gave glowing remarks about Harrison’s strategy to Bloomberg News in June. Harrison signed only a four-year contract with CSX and the septuagenarian has been dogged by questions about his health. He has a short period to set CSX on a sustainable path to increasing profitability, and someone else will have to take over the controls whenever he retires.It now appears that person is going to be just-hired chief operating officer James Foote, one of Harrison’s lieutenants while he was at Canadian National Railway Co. I’m sure someone with Foote’s decades of experience is perfectly qualified, but he hasn’t spent a day working at CSX in at least the past decade and Harrison has already essentially crowned him the heir apparent. In an interview with Bloomberg News, he said Foote’s appointment is part of a long-term succession plan. Why him and not the “rock stars” Harrison has said he’s unearthed at CSX during his tenure?
When a High Score Isn’t Good
CSX’s operating ratio was the worst among the top North American railroads in 2016. It can obviously improve but how much is a matter of debate.

Harrison has laid some of the blame for CSX’s service setbacks on employees who were resistant to change and the low morale created by a plan to cut 1,000 management jobs that was announced before his official hiring. That’s always been a bit of a rich criticism considering he’s targeting 4,500 job cuts this year (including the above slashing) and has done away with some safety-based procedures such as nap breaks. I can’t imagine this latest slap-down of internal talent will do much to improve morale, either.Shareholders aren’t always concerned about employees’ feelings, but they do pay attention when flagging morale translates into service issues that erode profits. And this latest bit of upheaval at CSX raises questions about whether or not those setbacks have really faded into the past.

The CSX Railroad Must BE NIMBLE!

Coal likely won’t be a major traffic/revenue for CSX anymore. Coal revenue losses, which have been mounting since 2011, are expected to total $2 billion by year’s end.

So, the Class I needed to develop a strategy to radically change the structure and operation of the coal-dominant railroad for the long term. Enter the “CSX of Tomorrow.” Formally launched in late April and expected to take several years to implement, the strategy calls for realigning the network to de-emphasize coal traffic and optimize the volume-growth potential of the more promising intermodal sector and solid merchandise segment; deploying more high-tech equipment and information systems; pursuing service excellence; and developing a workforce of the future.

csxmap

The idea— and hope — behind the CSX of Tomorrow (CoT): help spur volume growth and increase profitability in the intermodal and merchandise franchises, and yet preserve the business value of coal as it becomes a smaller part of the company’s portfolio.

The Class I aims to develop a Team of Tomorrow (ToT), or a more diverse, versatile and highly skilled workforce. CSXers believe such a team can up the ante on working collaboratively, making decisions quickly, embracing new technologies and finding ways to boost productivity.