News & Reviews News Wire Service problems related to crew shortage have cost CSX traffic

Service problems related to crew shortage have cost CSX traffic

By Bill Stephens | June 3, 2022

CEO Jim Foote defends Precision Scheduled Railroading, says broad labor trends are behind hiring difficulties

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Yellow and blue diesel powers freight train past brick station
Southbound CSX Transportation train Q439 rolls through the Alexandria, Va., station with solid waste containers behind the power. (George W. Hamlin)

NEW YORK – CSX Transportation has lost traffic and failed to capitalize on strong freight demand due to service problems related to its ongoing train crew shortage, CEO Jim Foote says.

“How much business are we missing? Lots. This is not minimal. This is not on the fringes. We’re not doing the job we should be doing,” Foote told an investor conference on Thursday.

There’s strong freight demand, Foote says, but the railroad can’t meet it because it needs 300 more conductors to return to full staffing levels of around 7,000 active train and engine employees.

CSX’s carloadings are down 2.1% so far this year, while intermodal traffic is down 0.6%, according to its latest Association of American Railroads carload report. Overall, U.S. rail traffic is down 3.5% through the end of May.

Mann gesturing while speaking at podium
CSX CEO Jim Foote makes a point during a speech to the North American Rail Shippers conference last month. (Trains: David Lassen)
Despite customer complaints about the railroad’s service, Foote says shippers are still telling CSX that they want to ship more by rail. “We are not meeting the demand today,” he says.

“When we don’t meet the demand of our customers … they try to find an alternative, which is normally truck,” Foote says.

Foote dismissed suggestions that CSX’s low-cost Precision Scheduled Railroading operating model has contributed to its service problems.

“I’ve never seen anyone who I know who knows anything about railroads tell me that this is not the right business model,” Foote says, noting that any business should try to be as efficient as possible.

Union Pacific, Norfolk Southern, and Kansas City Southern adopted PSR operating models in 2018, a few months after CSX began reporting record financial results due to its shift to PSR that began in 2017.

“If the railroads had not done what they had done over the last couple years, the railroad industry right now would be a basket case,” Foote says. “It would be an absolute basket case.”

Foote notes that CSX posted its best performance metrics ever in 2019. “We were off the charts,” he says of on-time performance and network figures such as average train speed and terminal dwell.

Then the pandemic hit in 2020 and traffic declined sharply, particularly after North American auto assembly plants shut down for several weeks. Amid a highly uncertain economic outlook, CSX furloughed train crews.

“We laid people off and all of the sudden the business came flying back at us,” Foote says of the robust economic recovery.

Furloughed crews chose not to come back to the railroad at the same rate as they typically had, which Foote says was the result of the Great Resignation that accompanied the pandemic and affected all businesses. Meanwhile, CSX’s crew attrition rate rose to 10% from the normal 7%. And the railroad struggled to hire conductors in the tight job market, Foote says.

The railroad has hired 1,000 conductors over the past year but did not make any net gains to train and engine crew levels due to the accelerated attrition, Foote says.

Rail labor leaders have blamed operational changes and working conditions for the exodus of crew members, many of whom had 10 to 20 years of experience.

CSX is in a better position than other Class I railroads because it began to step up its hiring nearly 18 months ago, Foote says.

“Hopefully it’s a matter of months now that we start to see some improvement,” Foote says, noting that CSX’s hiring pipeline and conductor training programs are full.

Once service levels bounce back, Foote says “there’s no reason in the world why we can’t grow this business.”

Foote spoke with analyst David Vernon at Bernstein’s 38th Annual Strategic Decisions Conference.

17 thoughts on “Service problems related to crew shortage have cost CSX traffic

  1. I find it most amusing that railroads covet the LONG trains which should mean more track space is available . But, they give those long trains just enough horse power to make the run at slow speeds. Then try to run hotshots through them. And, then they wonder why they get complaints when they don’t deliver cars on time. But, they say,” look how profitable we are with our O.R.”

    What I remember from the creator of PSR is tearing out every other passing track and running trains way to long to fit what was left and telling customers they don’t know what they are complaining about. If I had been a customer at those hearings I would have torn into him lawyer cross exam style.

    Listening to what engineers say about seeing clear double track but can’t run over 35- 40 MPH just makes you shake your head. Carriers want to keep fuel usage down instead of pleasing customers. Hey ! Charge what you need to charge to provide on time delivery. And, do it damn it.

    On to shortage of labor. All carriers are going to have to change the way they treat their labor. You can not blame people tired of being laid off (no money) every year. It wrecks personal finances, marriages, you name it. It’s tough enough to be gone half or more of the time without the other crap to put up with. Sure Wall St will raise hell but, it is time to back them off and management needs revamped executive compensation that puts value on customer service, not stock options.

  2. Readers may wish to reference a recent NY Times article about the “Jack Welch Effect” documenting how he changed GE from a company that bragged about its employees and paid its taxes to one that closed plants manufacturing products in order to pivot toward financial services and the like. While there were glaring exceptions like medical devices, locomotives, and others, the transformation primarily upped management compensation and share price. Now GE is in the process of dismantling itself.

    1. Yup. GE could have owned the world. Its medical imaging gear (partially through merger/ acquisition, btw) dominates an infinitely growing market. Which explains why its stock is worthless. BTW does anyone even know why GE moved its HQ to Boston at a time when it was barely hanging on to solvency?

      Another poorly run outfit is Ford Motor Company. It’s two companies, the pretend FoMoCo the Ford family thinks it owns, and the real company run by a series of overpaid jackasses. Always the first company to embrace the latest trends in corporate management (all of which fail) but flounders at its side business which is building cars. It’s much-hyped signature launch, the Bronco, stops dead in the middle of the highway because of cheap parts, while the company spends bottomless hundreds of millions of dollars on the Michigan Central Station — all to get third rate tech and office space it doesn’t even have a need for.

    2. The general shift of innovation and R&D to the grad schools and universities is because Wall Street enjoys access to very cheap engineering and ideation talent. The universities enjoy this racket because it keeps the grant money flowing. This and the shift to offshore manufacturing leaves only 1 real domestic expense that *has* to be maintained. That is compensation in the C Suite.

      And while people say China is stealing our IP, actually they are simply taking home what these US company grants paid for when they finished their PhD’s. Its really the outsourcing of R&D.

      GM, Ford, Stellantis do very little engineering now. They have outsourced all of it to their suppliers and simply are a union assembly coordinator and marketing entity.

      We blame others for this “emptying of the talent bin” but it was really driven by, who guessed it, us! The overall shift to 401k/403b’s are making American’s more demanding of their shareholdings and investments. Who in turn push the mutual funds and pension fund managers to put more pressure on the publicly held companies for “more shareholder value”. That means seeking more margins and removing costs.

      What people can’t seem to find, is what is enough? In the railroad example, how much blood do you drain in the name of PSR before everyone says its enough? A ratio that provides a balance between efficient and safe operations and the equitable sharing of profit?

      We see what happens when it swings too far one way, now its time to find the right ‘normal’.

  3. Companies generally have to increase wages, provide a better working environment, and/or provide competitive benefits in order to hire in a tight labor market…

  4. “Precision scheduling” – but to who’s schedule, the customer’s or the railroad? “Making your resources sweat.” We “sweat” to build strength, the capacity to do more with what we have. There’s nothing wrong with that, but at some point more capability can only be bought. PSR has been perverted in the name of quick profits.

  5. CSX will stay in the same cycle until they change their operating plan. Starting at the top Foote needs to take the blame and the reins and stop blaming every other aspect of the company. Well before the pandemic and PSR CSX already had a reputation for hiring then letting employees go shortly there after. Times have changed and no one wants to put up with inane hours or layoff this week and please come back later when we need you just to repeat the process over and over.

    1. MARK — Ther was a time when the labor force included men (and a small number of women) who would work under those conditions. That cohort of potential employees is now retired or dead. With today’s work force that pool is bone dry. Men and women now in the work force want to be respected as professionals.

  6. The emperor has no clothes!

    PSR is a loser’s strategy. It is designed to manage decline. It has no room for growth or capacity to weather a traffic interruption. It destroyed marginal traffic that still contributed to the bottom line in an effort to lower the almighty OR. They removed track switches dooming customers to an impossible financial hurdle to resume service. What sane person would pay to re-install the track switch that previously existed for the level of “service” the railroads currently give?

  7. CSX CEO blames crew shortages for railroad’s service breakdowns. Proper blame should be placed at the feet of the same CEO and fellow executives who designed this just in time manpower procurement system. Lay the workers off this week … beg them to come back to work the next week. The railroad industry needs men and women of vision… look it up if you don’t know what the word means.

    William Douglass

  8. Oh my..only part of the story is being told. A famous quote by Mr. Harrison ” make your resources sweat.” What does that mean to you? Doing more with less…less crews, less engines, less yards etc.etc. Everything is less..Business wise, demands were placed on local businesses to meet the railroads desires. Some businesses did, some went to trucking, some closed their doors. No one mentions how much business was lost on the start up of PSR or how much trackage was sold or leased out to the shortlines. Yard closures, one example here…Atlanta’s Tiford yard took in a lot of traffic, closed, where does the majority of it goes now, Rice yard in Waycross. We could go on and on…PSR has cut CSX short..cant really recover from what has been done…

  9. Foote lives in a different dimension. A dimension others living in reality call The Twilight Zone.

  10. In a sense, Foote has a point. As a concept PSR is good. As implemented, poor. Nothing said railroads had to make their trains super long or lay off employees, but they did, and are paying the price for it. Precision scheduling is good, minimizing slack in workers, equipment, and serviced communities squeezes out inefficiencies but leaves no room for the emergencies that are always happening and the possibility for growth.

  11. I worry about CEO’s whose claim to fame is strictly financial expertise and zero line experience. I’m around foot’s age. When I graduated college in the late 70’s, none of my fellow graduates had a burning desire to join a railroad. No railroad came to our job placement meetings to present their opportunities. Joining a RR back then was the last option! And, few were hiring then! I had an informational interview with Western Maryland’s CEO and later a meeting with Conrail; but nothing opened up and I felt I had a strong resume’. I’d like to see Foot and others work in the field and see what they say! I think PS R by Harrison was poorly planned and executed.

  12. Foote saying PSR is not part of the problem is akin to Biden saying his crash course on eliminating gas and diesel are not the reason for high fuel prices.

    The hubris! If Foote’s bonus was based upon service and customer satisfaction, CSX would not be in this predicament. Railroading is a tough business for line employees. To deep-six employees in the quest for Zero OR, then deep-sixing employees who refused to take a questionable shot, clearly shows he is in denial. That, or he has no real clue as to what is going on in the field. Or, he is being fed a steady diet of bovine by-product. You choose!

    Accelerated attrition. Perhaps the current crews getting ulcers taking 15,000 foot freights over 19th century infrastructure built for 40-foot boxcars and 3,000 foot freights have had enough. Perhaps crews working non-stop on their rest with no time off have had enough. Perhaps the laid-off shop mechanics took jobs with a trucking company and have no desire to go back to the railroad.

    “Hopefully, it’s a matter of months now….” If the economy tanks again, will there be a need for new crews? Let’s hope so.

  13. Is it not nice that the ceo who gets his bonuses no matter what defends PSR it cost them thousands of railroaders and now not too many people want to go to work for them.Go back to trying to take traffic from trucks instead of just complaining and then maybe you will have some success.

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