Hunter Harrison\s Legasy and CSX\s Future

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Hunter Harrison\s Legasy and CSX\s Future
Posted by daveklepper on Monday, February 19, 2018 1:58 AM

This posting is suggested by both the recent tragedy and also the current tight situation in the trucking industry.

1.  I suggested when HH first arrived at CSX that he would be a great success if he concentrated primarily on obtaining new business.  Instead, he conecntrated on cost-cutting and disabling the hub-and-spoke organization of business and the subsitution of his pecision railroading organization, which mean dilberately walking away from certain customers and their business.  Was he right?

2.  If the hub-and-spoke sysem and all intermodal lanes had remained, would CSX have a great oppotunity, now, with the tight truck situation, to insure profitability on all the intermodal lanes it had, and obtain new business, with resulting profits and returns to investors beyond what is possible with the reduced sysem CSX is becoming?

3.  Should the present management reconsider and reverse, or partly reverse, this change in operating philosophy?

4.  Could elimination of the 3-Point-Protection be interpreted as putting profits before safety?  Should this decision be reversed, or has it been reversed?

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Posted by tree68 on Monday, February 19, 2018 12:04 PM

It'd be hard to determine whether walking away from any given business was a good idea without looking at that specific business.  Then comes the question, what parameters do you use to make that judgement?  I would opine that your parameters might be different than EHH's, whose underlying philosophy seemed to be getting money to the bottom line where it would best benefit his investors.

One would think that transportation analysts looking at the big picture would have seen the trucking issue looming.  EHH's folks either ignored that, or didn't care, focussing on getting the money to the bottom line where it would best benefit his investors.

One could hope that CSX management would go back to making money the old fashioned way, instead of focussing on getting the money to the bottom line where it would best benefit the investors...

Getting rid of "three step" made no sense, and I'm willing to bet that it still occurs today, even if the words aren't heard over the air.  The literal seconds it takes to do it, and the occasional cost of a replacement for the generator field switch can't hurt the bottom line in any meaningful way.

I wonder if it was just a way to signal to the troops on the ground that a new sheriff was in town.

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Posted by samfp1943 on Monday, February 19, 2018 3:09 PM

(Larry)tree68 wrote the following post[in  part]:

"...It'd be hard to determine whether walking away from any given business was a good idea without looking at that specific business.  Then comes the question, what parameters do you use to make that judgement?  I would opine that your parameters might be different than EHH's, whose underlying philosophy seemed to be getting money to the bottom line where it would best benefit his investors..."

You seem to be right on the major differences, philosophically;  If you join an organization to make its' success, long Term; your goals, and motivations are surely, different than the "...get in, rob the bank, and escape with as much loot one can make off with, and move on quickly..." This later seems to be the approach taken by the group of allies EHH affiliated himself with, where CSX was concerned. The question remains, will CSX be strong enough to survive 'their bank being robbed', or will it become bits and pieces for someone else's [puzzle?]. 

Sam

 

 


 

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Posted by BaltACD on Tuesday, May 08, 2018 8:08 PM

         

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Posted by Euclid on Tuesday, May 08, 2018 8:29 PM

daveklepper

 

1.  I suggested when HH first arrived at CSX that he would be a great success if he concentrated primarily on obtaining new business.  Instead, he conecntrated on cost-cutting and disabling the hub-and-spoke organization of business and the subsitution of his pecision railroading organization, which mean dilberately walking away from certain customers and their business.  Was he right? 

 

 

Please provide some specific, detailed examples of Harrison deliberately walking away from certain customers and their business. 

 

 

 

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Posted by PJS1 on Tuesday, May 08, 2018 10:40 PM

Euclid
.......,which mean dilberately walking away from certain customers and their business.  Was he right? 

Please provide some specific, detailed examples of Harrison deliberately walking away from certain customers and their business. 

If a customer will not pay the fully allocated cost of the service, including a reasonable return to the investors, a prudent CEO walks away from that customer.

I worked for a Fortune 200 Corporation.  I spent several tours overseas with one or more of the company's subsidiaries.  One of them decided to go after market share and in the process lost sight of the bottom line. 

Going after market share without a focus on profitability is not a good strategy.  Neither is hanging onto customers that don't contribute to the overall profitability of the firm. 

Rio Grande Valley, CFI,CFII

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Posted by daveklepper on Wednesday, May 09, 2018 12:15 AM

The problem with this thinking as applied to the current situation, with trucking becoming steadily more expensive with respect to rail, is this:  The hub and spoke sytem is designed to promote good service toward profitability in an expanding market for lanes of commerce, point A to point B, that could not be profitable on their own.  It was the business stratergy that made US Air profitable at a time when other arilines were losing money.  I think in the long run it would have made CSX more profitable than the precision railroading, line-hall A to B for only lanes that are profitable now, statargy that CSX under Harrison adopted.  Yes profitability is greater now.  But I believe a lot of business is lost in the process that would have been profitable in the future.  Hub and spoke would not have been appropriate for IC, CN, znd CP, with their very simple routes structures, but was appropriate in my opinion for CSX and still be appropriate for NS.  I have no proof of this, and your opinion may be the correct one.

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Posted by daveklepper on Wednesday, May 09, 2018 4:26 AM

Euclid

 

 
daveklepper

 

1.  I suggested when HH first arrived at CSX that he would be a great success if he concentrated primarily on obtaining new business.  Instead, he conecntrated on cost-cutting and disabling the hub-and-spoke organization of business and the subsitution of his pecision railroading organization, which mean dilberately walking away from certain customers and their business.  Was he right? 

 

 

 

 

Please provide some specific, detailed examples of Harrison deliberately walking away from certain customers and their business. 

 

 

 

 

Euclid

Please do your own research on this, since my time at a wideband connection is limited.  Pull up all the news stories on the website about CSX, and you will see the closure of specific intermodal lanes as not being suffiiciently profitable, plus the end of the Hub and Spoke arrangement that was the reason for the building of the North Baltimore Intermodal Hub facility.

 

 
daveklepper

 

1.  I suggested when HH first arrived at CSX that he would be a great success if he concentrated primarily on obtaining new business.  Instead, he conecntrated on cost-cutting and disabling the hub-and-spoke organization of business and the subsitution of his pecision railroading organization, which mean dilberately walking away from certain customers and their business.  Was he right? 

 

 

 

 

Please provide some specific, detailed examples of Harrison deliberately walking away from certain customers and their business. 

 

 

 

 

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Posted by zugmann on Wednesday, May 09, 2018 10:14 AM

Euclid
Please provide some specific, detailed examples of Harrison deliberately walking away from certain customers and their business.

Hmmm.

The opinions expressed here represent my own and not those of my employer or any other railroad, company, or person.

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Posted by daveklepper on Thursday, May 10, 2018 9:53 AM

With just a few more minutes to spare, I can now answer Euclid's request.  CSX turning down business:

 

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CSX culls low-volume intermodal lanes
Posted by Chris30 on Thursday, October 19, 2017 9:59 PM

From the newswire: CSX culls low-volume intermodal lanes

Link:

http://trn.trains.com/news/news-wire/2017/10/18-csx-shreds-intermodal

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Posted by jsanchez on Thursday, May 10, 2018 10:45 AM

daveklepper

This posting is suggested by both the recent tragedy and also the current tight situation in the trucking industry.

1.  I suggested when HH first arrived at CSX that he would be a great success if he concentrated primarily on obtaining new business.  Instead, he conecntrated on cost-cutting and disabling the hub-and-spoke organization of business and the subsitution of his pecision railroading organization, which mean dilberately walking away from certain customers and their business.  Was he right?

2.  If the hub-and-spoke sysem and all intermodal lanes had remained, would CSX have a great oppotunity, now, with the tight truck situation, to insure profitability on all the intermodal lanes it had, and obtain new business, with resulting profits and returns to investors beyond what is possible with the reduced sysem CSX is becoming?

3.  Should the present management reconsider and reverse, or partly reverse, this change in operating philosophy?

4.  Could elimination of the 3-Point-Protection be interpreted as putting profits before safety?  Should this decision be reversed, or has it been reversed?

 

Most of the CSX crews are still doing 3 step, I work in some yards in Conrail Shared Assets along side CSX crews and we hear them "thank goodness" still practicing this. It is a simple common sense practice that has prevented many deaths and injuries. I have no respect for Hunter Harrison for trying to endanger his workers. He really made a mess of things in North New Jersey, the stupidest act was trying to get rid of crew vans and have trainmasters move crews around, needless to say all the trains were late and the trainmasters could not get their work done while stuck in traffic for hours. (many of them quit)Trying to close the Selkirk hump was a huge failure. For someone supposed to be such a great railroader he seemed very clueless on how things run, did not listen to people, and made an incredible mess of everything. Not to mention horrible morale from top management down.

  The timing on cutbacks was completely wrong, like Trump or not the economy really started to boom at the time of all the equipment, employee, and yard reductions. CSX should have been focusing on growth.(Union Pacific, BNSF, shortline industry, for example) The lack of investment in new engines, cars, and infrastucture is going to kill them in a few years. The cut backs in intermodal especially in the Midwest was incredibly short sided, the Hub and Spoke system could have been very lucrative long term especially with the economy growing again.

James Sanchez

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Posted by BaltACD on Thursday, May 10, 2018 10:53 AM

EHH was well past his sell by date when Mantle Ridge foisted him on CSX and his oxygen deprived demtia decimated CSX and has crippled it for decades to come - if it lasts that long.

         

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Posted by longhorn1969 on Thursday, May 10, 2018 11:41 AM
Yes, the traffic will come back. Truck companies are having a hard time getting drivers, and RRs are more efficient at moving bulk. NS will start charging a premium and companies want competition when negotiating. CSX has gotten its house in order and making incredible profit against revenues coming in. Just add volume to the system and CSX will increase profits more so. The problem is when NS (apparently railfan favorite) stockholders start a seeing a smaller CSX with a higher profit margin and will demand the same changes.
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Posted by jsanchez on Thursday, May 10, 2018 11:42 AM

BaltACD

EHH was well past his sell by date when Mantle Ridge foisted him on CSX and his oxygen deprived demtia decimated CSX and has crippled it for decades to come - if it lasts that long.

 

Unfortunately your probably right.

James Sanchez

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Posted by BaltACD on Thursday, May 10, 2018 11:43 AM

longhorn1969
Yes, the traffic will come back. Truck companies are having a hard time getting drivers, and RRs are more efficient at moving bulk. NS will start charging a premium and companies want competition when negotiating. CSX has gotten its house in order and making incredible profit against revenues coming in. Just add volume to the system and CSX will increase profits more so. The problem is when NS (apparently railfan favorite) stockholders start a seeing a smaller CSX with a higher profit margin and will demand the same changes.

CSX is in disarray - not order.

         

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Posted by daveklepper on Friday, May 11, 2018 8:52 AM

One of the most successful users of the hub and spoke system is FedEx's aircraft operations.   If you ship from Shreveport or Oklaoma City to LA, your package goes via Memphis.

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Posted by Euclid on Friday, May 11, 2018 9:09 AM

longhorn1969
Yes, the traffic will come back. Truck companies are having a hard time getting drivers, and RRs are more efficient at moving bulk. NS will start charging a premium and companies want competition when negotiating. CSX has gotten its house in order and making incredible profit against revenues coming in. Just add volume to the system and CSX will increase profits more so. The problem is when NS (apparently railfan favorite) stockholders start a seeing a smaller CSX with a higher profit margin and will demand the same changes.
 

Why is that a problem?

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Posted by daveklepper on Friday, May 11, 2018 10:33 AM

Idoubt that the NS stockholders will demand a management change.  I believe NS will have even greater profits because of far greater business.  The OP won't be as low, but with far greater business, the profits will still be greater.  NS will find a wa to make business that CSX has canclelled profitable for NS.

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Posted by charlie hebdo on Friday, May 11, 2018 10:54 AM

Euclid

 

 
longhorn1969
Yes, the traffic will come back. Truck companies are having a hard time getting drivers, and RRs are more efficient at moving bulk. NS will start charging a premium and companies want competition when negotiating. CSX has gotten its house in order and making incredible profit against revenues coming in. Just add volume to the system and CSX will increase profits more so. The problem is when NS (apparently railfan favorite) stockholders start a seeing a smaller CSX with a higher profit margin and will demand the same changes.
 

 

 

Why is that a problem?

 

This discusssion illustrates the age-old conflict between running a railroad as a private corporation seeking to maximize profits for shareholders vs running a railroad as a service seeking to maximize transportation efficiencies for customers, with profits being a secondary consideration or not a factor at all.  There is also the choice between short-term profits vs longer-term growth.

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Posted by Euclid on Friday, May 11, 2018 11:11 AM

charlie hebdo
 
Euclid

 

 
longhorn1969
Yes, the traffic will come back. Truck companies are having a hard time getting drivers, and RRs are more efficient at moving bulk. NS will start charging a premium and companies want competition when negotiating. CSX has gotten its house in order and making incredible profit against revenues coming in. Just add volume to the system and CSX will increase profits more so. The problem is when NS (apparently railfan favorite) stockholders start a seeing a smaller CSX with a higher profit margin and will demand the same changes.
 

 

 

Why is that a problem?

 

 

 

This discusssion illustrates the age-old conflict between running a railroad as a private corporation seeking to maximize profits for shareholders vs running a railroad as a service seeking to maximize transportation efficiencies for customers, with profits being a secondary consideration or not a factor at all.  There is also the choice between short-term profits vs longer-term growth.

 

Why should a private corporation maximize transportation efficiencies for customers regardless of whether it returned a profit to the corporation?

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Posted by charlie hebdo on Friday, May 11, 2018 11:20 AM

Euclid

 

 
charlie hebdo
 
Euclid

 

 
longhorn1969
Yes, the traffic will come back. Truck companies are having a hard time getting drivers, and RRs are more efficient at moving bulk. NS will start charging a premium and companies want competition when negotiating. CSX has gotten its house in order and making incredible profit against revenues coming in. Just add volume to the system and CSX will increase profits more so. The problem is when NS (apparently railfan favorite) stockholders start a seeing a smaller CSX with a higher profit margin and will demand the same changes.
 

 

 

Why is that a problem?

 

 

 

This discusssion illustrates the age-old conflict between running a railroad as a private corporation seeking to maximize profits for shareholders vs running a railroad as a service seeking to maximize transportation efficiencies for customers, with profits being a secondary consideration or not a factor at all.  There is also the choice between short-term profits vs longer-term growth.

 

 

 

Why should a private corporation maximize transportation efficiencies for customers regardless of whether it returned a profit to the corporation?

 

That is my point.

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Posted by cx500 on Friday, May 11, 2018 12:20 PM

I think one of the basic questions is whether the focus is on lowering the operating ratio, which provides greater profit MARGINS on selected business is the best way to greater profits.   In the short term it may well be.  For long term success it becomes prudent to keep the customer base as broad as possible.  Then if a selected business disappears for some reason the effect on profit is mitigated.

Compared with many companies, the railroad industry has greater fixed costs and expansion has longer lead times, in both fixed plant or skilled labor.  Any reductions for short term gain can result in the struggles such as those we have seen documented on the CN lines in western Canada, and elsewhere.  Delayed and stopped trains, recrews, lost customers (where they have alternatives) are all unnecessary costs reducing potential profits for the shareholders

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Posted by BaltACD on Friday, May 11, 2018 9:16 PM

         

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Posted by daveklepper on Saturday, May 12, 2018 12:56 PM

A good analagy for precision railroading, Hunter Harrison style, is a watch.  Great precision and performs its task beatifully.  What I think is a better model for a Ckass I railroad is a modern computer, which actually learns its user(s) preferences and adapts to them----  and also tells time.

 

I think NS has an opportunity to outstrip CSX with 

Better ability to go after new business and also absorb surges by capacity improvment.

Possibly less efficient use of physical resources, track, motive power, and cars, but better use of human resources, with more employess home for wekends and holidays and fewer local swotch crews working late nights, a good response to employee suggstions and flexibility to implement them, and a generally happier envirionment where every employee with contact with the public is also a salesman/saleswoman.  And customers also believing the railroiad is out to serve them, rather then they serving the railroad.

More responsiveto customers' needs in general, with the proper computer technology, ability to handle them efficiently.

Ability to see the good future in some not-quite profitable lanes of business today, that have the potential of becoming vrey profitable in the future.

I think NS can do this, but it is not HH Precision Railroading.  In the long run, investers will be happier with NS.

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Posted by Shadow the Cats owner on Sunday, May 13, 2018 7:07 AM

Trust me when the OTR industry gets the ELD crap figured out systemwide for everyone.  It took us some time also to adapt to it.  I looked at some drivers that were here prior to my carrier putting it into service and 2 years later.  The average miles in the year were actually 3K more under Elogs.  It just took some time for our drivers and dispatchers to get used to the limitations of the system.  However now that they know what the system allows look out.  We do not allow any changes to be made to the logs by anyone after they are entered and the computers do all the logging for us.  So it is the computer program we bought doing our logs for us.  

 

CSX however totally screwed the pooch last fall with UPS going to the Northeast.  UPS is still wanting blood over how much more they had to pay to haul the holiday rush with outside contractors since they could not count on CSX to get the freaking job done.  My boss however was happy along with several other small fleets in the area.  One guy my husband drove for 22 years ago bought 6 new trucks for his fleet with the cash he made hauling UPS to Boston this holiday season with just 4 trucks.  He was able to retire all his non California certified trucks.  

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Posted by tree68 on Tuesday, May 15, 2018 8:04 PM

cx500
I think one of the basic questions is whether the focus is on lowering the operating ratio, which provides greater profit MARGINS on selected business is the best way to greater profits. 

Who cares, as long as I get my money (and lots of it) now...  [/sarcasm]

Shadow
 The average miles in the year were actually 3K more under Elogs.

Is part of that due to shippers and receivers having to load/unload more quickly under the possibility of a penalty?

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Posted by BaltACD on Tuesday, May 15, 2018 9:55 PM

tree68
 
cx500
I think one of the basic questions is whether the focus is on lowering the operating ratio, which provides greater profit MARGINS on selected business is the best way to greater profits.  

Who cares, as long as I get my money (and lots of it) now...  [/sarcasm] 

Shadow
 The average miles in the year were actually 3K more under Elogs. 

Is part of that due to shippers and receivers having to load/unload more quickly under the possibility of a penalty?

My prefered time to start LONG distance drives starts with the 11 o'clock news.  In doing so on the Interstates - ALL the Rest Areas in both directions are chock full to overflowing with trucks undoubtedly running Rest Time on their eLogs until after daybreak.  During the day the 'normal' number of trucks are seen in Rest Areas with many of the drivers using the facilities and moving on.  At night I rarely see a driver using the facilities.

         

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Posted by Shadow the Cats owner on Wednesday, May 16, 2018 5:55 AM

How that happened is simple when the shippers and receivers are getting hammered with Detention time after 2 hours and we are billing them for it and if needed taking them to court to collect it they are getting the idea that hey move those trucks.  Even the grocery warehouses are getting it thru their heads that holding a truck for 6 hours is no longer acceptable.  

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