Market Matters Blog

Transportation Board to CSX: Get Your Service Back on Track

Mary Kennedy
By  Mary Kennedy , DTN Basis Analyst
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On July 27, the U.S. Surface Transportation Board wrote a letter to CSX Transportation, Inc. President and CEO Hunter Harrison stating their concern, fueled by shipper complaints, that service has "deteriorated" across the CSX network, affecting the entire North American rail network. (DTN photo by Mary Kennedy)

After receiving complaints from shippers about CSX Transportation, Inc. (CSX), the U.S. Surface Transportation Board (STB) wrote a letter July 27 to CSX President and CEO Hunter Harrison stating its concern about service problems that had resulted from "ongoing operating changes" underway at CSX.

The STB has received complaints from shippers saying loaded and empty cars have sat for days at yards and switching operations have become inconsistent and unreliable. Shippers said car routings had become inefficient and CSX customer service personnel were unable to provide "meaningful assistance."

A survey released in early August by Cowen and Company noted that at least 80% of shippers surveyed said they've had service problems with CSX since the company began using "precision scheduled railroading." The survey also noted that 67% have resorted to trucks to relieve the pressure of slow rail service and close to 40% of shippers switched some freight to Norfolk Southern where possible.

On Aug. 14, the STB requested that CSX submit weekly specific service performance data to the board's Rail Customer and Public Assistance office for "purposes of ongoing calls between CSX senior management and STB staff. The performance data will assist the Board in actively monitoring CSX's service levels and the effectiveness of its recovery efforts." The STB also noted that it remained concerned over "the widespread degradation of rail service."

Also on Aug. 14, the Rail Customer Coalition (RCC) sent a letter to members of the Senate Committee on Commerce, Science, and Transportation, notifying them that RCC members are "concerned that the severe deterioration of service will continue for the foreseeable future, and that changes imposed by CSX may fundamentally degrade the long-term resiliency of the national rail network.

"Rail customers have had to take extraordinary steps at great cost to meet the needs of their customers because CSX has repeatedly failed to pick up and deliver cars," added the RCC. "This has put rail-dependent business operations throughout the U.S. at risk of shutting down, caused severe bottlenecks in the delivery of key goods and services, and has put the health of our nation's economy in jeopardy."

Here is a link to the letter from the RCC to the committee: https://goo.gl/…

The American Shipper publication reported that Harrison sent a letter to the RCC in response to the Aug. 14 letter noting that that the coalition never contacted CSX to discuss the service concerns. According to the article, Harrison said that the statements made by the RCC were made to advance their "longstanding attack on the balanced approaches of the Staggers Act. Despite customer service problems, which CSX is addressing aggressively, the railroad is already seeing progress," added Harrison.

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The Staggers Rail Act of 1980 was a U.S. federal law that deregulated the American railroad industry to a significant extent and replaced the regulatory structure that had existed since the 1887 Interstate Commerce Act.

Many shippers would probably wholeheartedly disagree with Harrison's statement. Besides delayed agriculture shipments, other industries have also complained to the STB about CSX. One of those, Amtrak, told the STB that its on-time performance went from bad to worse in July because of the CSX service problems. S&P Global Platts reported that coal producers Murray Energy and Foresight Energy have urged the STB to institute a proceeding to address CSX's "brazen refusal to meet the demands for coal transportation."

On Aug. 16, the STB updated the Senate Committee on Commerce, Science, and Transportation and the House Committee on Transportation and Infrastructure on recent actions the board has taken in response to service problems on the CSX rail system.

"In addition to the ongoing weekly calls between CSX senior management and STB staff initiated late July, the Board advised the committees of the Acting Chairman's direct communication with CSX's President and CEO about service issues and the Board's request that CSX provide specific performance data, which will be made publicly available, so that the Board and stakeholders can better monitor CSX's recovery efforts," said the STB in a press release.

While CSX said it would provide the information requested by the STB, the STB said "it is not apparent to the Board or invested stakeholders that there have not been tangible service improvements."

In the second letter to Harrison, STB said it was asking for a "detailed schedule" for CSX's remaining implementation of its new operating plan, including key action items and milestones for the balance of 2017, by Aug. 24.

CSX also indicated to the STB that its internal metrics are showing that service in some areas is improving and that noticeable improvements should be more evident after Labor Day.

News reports said that Harrison also sent an email to CSX customers apologizing for the service disruptions, which he blamed on "resistance to the restructuring plan on the part of some employees. The pace of change at CSX has been extremely rapid, and while most people at the company have embraced the new plan, unfortunately, a few have pushed back and continue to do so," Harrison wrote.

The "restructuring" Harrison is referring to are the changes he has made since he became CEO in March 2017. The railroad has taken nearly 900 locomotives and 60,000 freight cars out of service and laid off 2,300 people this year. On top of that, Harrison is also planning to lay off 700 more positions by the end of the year.

On Aug. 24, the STB announced it will hold a public listening session beginning at 9:30 a.m., on Tuesday, Sept. 12, at its offices in Washington, D.C., to hear firsthand from CSX senior officials and affected shippers about CSX rail service and efforts to improve service.

In the meantime, the board said it will continue to address these "important service reliability issues in a transparent manner to ensure shippers, carriers, and all interested stakeholders are fully informed about the Board's work."

Here is a link to the STB correspondence to the Congressional oversight committees of the STB and CSX: https://www.stb.gov/….

Here is a link to the responses sent by Harrison to the STB on Aug. 21 and Aug. 24: https://www.stb.gov/….

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

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