CSX CEO Harrison apologizes; automakers complain about rail delays

CSX’s service disruptions have created logistical headaches for companies ranging from chemical and agricultural to automotive and steel producers. Photo credit: Bloomberg

UPDATED: 10/11/17 1:36 pm ET – adds automaker testimony

WASHINGTON — CSX Corp.’s CEO apologized to customers for months of service disruptions at the No. 3 U.S. railroad but passionately defended his operating strategy, at a hearing on Wednesday called by the top U.S. rail regulator.

Seated before two regulators at the U.S. Surface Transportation Board in Washington, CSX CEO Hunter Harrison defended his vision for streamlining efficiency, which he calls “precision scheduled railroading.”

The STB announced the public hearing in August after customers complained of service issues, including longer transit times, unreliable switching operations, inefficient car routings and poor communications with CSX customer service.

Automotive impact

Among automakers, General Motors has suffered from shipment delays. CSX recently halted all automobile shipments to or through its yard in Lordstown, Ohio, where new vehicles are unloaded from trains and trucked to dealerships, to give workers time to clear a backlog of rail cars and relieve congestion, according to a CSX email seen by Reuters. GM’s Lordstown plant builds the Chevy Cruze sedan. 

An assortment of trade groups including automotive, grain, and paper lobbyists speaking on Wednesday called on Congress to make it easier for shippers to file complaints and to allow other operators to use CSX track during service disruptions. 

“Due to the frequent and rapid changes to CSX operating plan, rail customers have witnessed a reduction of resources, the closing of yards and switch operations, and changes to train schedules with little or zero notice,” David Schwietert, an executive vice president at the Alliance of Automobile Manufacturers, testified.

“Numerous shipments have experienced three to four times their scheduled transit time due to sudden yard closures. Hundreds of time-sensitive shipments have been delayed without advance notice and customers have had to wait several days before new routing is communicated.”

One member automaker, for example, was forced to make 500 premium truck shipments to support production at its facilities due to CSX missed connections, terminal reorganizations in Nashville and Memphis, and other operational failures. Another automaker had to shut a body and paint shop various times throughout the summer due to component shipment delays, resulting in several hours of costly overtime to restore the system, he said.

The trade association urged the STB to continue shining the light on CSX’s service problems and use any authorities at its disposal to alleviate the situation.

Critical turnarounds

Harrison, appointed to the job amid investor fanfare in March, said his strategy was critical to his turnarounds of two Canadian railroads — Canadian Pacific Railway and Canadian National Railway Co.

Since he took over, Harrison has rapidly closed CSX rail yards, lengthened trains, mothballed locomotives, and slashed overtime pay and hundreds of jobs. He changed the way rail cars are sorted in yards and replaced “unit” trains carrying a single commodity like coal or grain to carry diverse freight.

“If I don’t accomplish anything else today, I want to apologize to our valued shippers,” Harrison said on Wednesday. “Whatever problems we’ve had, we’ve had internally, we’ve made some mistakes, this is not a failure of precision scheduled railroading.”

Harrison spoke before Cargill Inc., Dow Chemical Co. and seven other major rail customers were due to testify about their experiences with CSX’s network.

CSX’s service disruptions have created logistical headaches for companies ranging from chemical and agricultural to automotive and steel producers whose supply chains, plants and distribution channels rely on CSX’s rail network across the eastern United States.

The STB’s “listening session” was the first public forum for customers to air grievances and give Harrison the chance to defend his strategy. The agency has been reviewing CSX’s performance weekly and talking to senior management for months.

At least three companies have withdrawn requests to testify as service has improved. Other companies due to testify on Wednesday included The Chemours Co., Kellogg Co. and Murray Energy Corp., the largest private U.S. coal mining company.

Eric Kulisch of Automotive News contributed to this report.

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