How NS became the intermodal champ

More than half of the units handled by Norfolk Southern in the first quarter of 2015—51 percent, to be exact—were trailers or containers. That's a first for the Class I railroads. For better or for worse, intermodal is the future of this giant eastern railroad. How it got to this from a standing start, almost, less than 30 years ago is a compelling tale. To quote myself from the cover story in the October 2005 issue of Trains Magazine: “Pre-Conrail [before mid 1999], Norfolk Southern was an arrogant but profitable railroad whose coal franchise could let it run on autopilot, if necessary. Post-Conrail, it is again an immensely profitable railroad, but now half again bigger and harder to operate. Today it’s minus the arrogance and committed to running trains by the clock. The growth engine is not coal, but containers and trailers. This did not come easy.”

How hard? Oh boy. To find out when I wrote this story, I tracked down Tom Finkbiner, a tough but brilliant intermodal pioneer who is credited with making Norfolk Southern a real player in that field. He came to NS in 1987 to start its intermodal department. Now let me quote myself again:

“It was like being the cat thrown into a dog kennel. ‘The first profit and loss statement I looked at,’ says Finkbiner, ‘showed we had intermodal revenue of $250 million and before overhead and taxes, we lost $57 million.’ Forty-six days into the job, this young assistant VP went to a management meeting to propose a $250 million investment in intermodal infrastructure. ‘After I got thoroughly beaten to a pulp by the finance and operating people, [Chairman] Arnold McKinnon stood up and asked if anyone had a better idea for growing the business. The room was silent. He said, “Okay, we’ll do it.” ’

“By 1991, intermodal was profitable for NS. ‘But honestly,’ he says, ‘things never got easier, because everything is relative and other commodities were earning 1.5 times cost when intermodal earned 1.2’ Then in 1999, he watched his intermodal business unit ‘just get flushed’ in the post-takeover confusion. At staff meetings each Monday morning, ‘I was probably one of the more vocal people about exactly how bad we were,’ Finkbiner says. ‘In August or September, I looked around and said to myself, this just isn’t constructive for me’ to keep complaining. Still, he felt terribly deflated. ‘The Conrail merger was supposed to be the culmination of 12 years of my work at NS, and I was watching it wash away.’ Finkbiner resigned that November.”

That was what it was like to be an intermodal pioneer. Credit the CEO’s who stuck by their intermodal people, as McKinnon did Finkbiner, for not giving up.

There has been a lot of debate on this blog whether, if intermodal is the future of Norfolk Southern, it has much of a future. I’ve kept my mouth shut, but I have an opinion, and it is this: If you can achieve big volumes today on core intermodal routes that is fairly priced, and control your costs while delivering consistent service (I didn’t say super fast), you’ll do fine. And does NS have a choice? No, it really doesn’t. Thank you, Tom Finkbiner, for being there a quarter century ago.—Fred W. Frailey