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August 22, 2017 6:15 PM, EDT
CSX CEO Harrison Fires Back at Critics
Hunter Harrison Scott Eells/Bloomberg News

CSX Corp. CEO E. Hunter Harrison issued a stark rebuke of complaints about poor service, sending a scathing letter to a coalition of rail shippers, lawmakers in the U.S. Senate and House of Representatives and regulators at the Surface Transportation Board.

Harrison, the 72-year-old railroad veteran, implemented a concept called precision railroading to turn around Canadian National Railway Co. and Canadian Pacific Railway Ltd., but his tenure since joining CSX in March has been rocky. Service problems began in May and continued through summer, according to weekly performance data submitted to the federal government.

Shippers and third-party logistics firms have said that some of their freight was up to four weeks late without explanation. The coalition added that CSX’s customer service has been “woefully inadequate.”

The Rail Customer Coalition, consisting of more than 40 railroad shippers, previously called on the Surface Transportation Board and lawmakers on Capitol Hill to investigate the problems. The coalition includes shippers in the petrochemical, steel, lumber, agricultural, and food and beverage industries.

“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,” the group wrote Aug. 14 to the Senate Committee on Commerce, Science, and Transportation and House Committee on Transportation and Infrastructure.

However, Harrison responded two days later that he was “greatly disappointed” in the “many unfounded and grossly exaggerated statements” that the coalition communicated to lawmakers and regulators. He took umbrage with the fact that the coalition “did not extend us the courtesy of discussing those concerns with [CSX]” and that the complaints are merely part of a “longstanding attack” on the issue of reciprocal switching, a hot-button regulatory issue that has pitted shippers versus railroad carriers for more than a year.

“Since coalitions do not have service issues, we do not intend to continue a discussion with you about the service we provide our customers. We are also aware that not all members of your coalition were informed of your letter [to Congress] in advance and some do not agree with your position,” Harrison wrote.

Harrison Letter by Timothy Gibbons on Scribd

Scott Jensen, a spokesman for the Rail Customer Coalition, told Transport Topics that there was a broad agreement among its members and that the coalition did talk with CSX before sending the Aug. 14 letter.

“Furthermore, these service issues have not gone away, which is evident by the fact that the Surface Transportation Board was compelled to send a second letter to CSX earlier expressing concerns with the ‘widespread degradation of rail service’ across its network,” Jensen wrote in a statement.

Stephens Inc. released a survey finding that 60% of shippers haven’t been provided with a timeline of when service levels will return to normal. The survey also found that shippers were willing to move as much as a third of their freight away from CSX until the situation improved.

“As it relates to who could pick up this market share, 48% said NSC [Norfolk Southern], 39% said a truck and 13% said other railroads/modes. In summary, it is clear that the near-term market share shifts could be meaningful,” wrote Brad Delco, an analyst with Stephens.

Since coalitions do not have service issues, we do not intend to continue a discussion with you about the service we provide our customers. We are also aware that not all members of your coalition were informed of your letter [to Congress] in advance and some do not agree with your position.

Hunter Harrison

On a scale of 1 to 10, shippers on average gave CSX a 6.6 for service before Hunter Harrison arrived earlier this year, but the number has now plummeted to 2.3. Norfolk Southern’s current service levels were rated a 6.9.

“This is an unmitigated disaster. Harrison has no regard for the customer. While his model does promote efficiencies, these come at the expense of customers,” one shipper told Stephens.

“Hunter Harrison has never been a customer-first RR [railroad] executive. The harm he has done our business is beyond compare,” another stated.

When asked whether Harrison’s implementation of precision railroading — the root cause of the delays — would eventually lead to better service in the long term, 51% said maybe, 42% said no and only 7% said yes.

CSX also announced Aug. 22 that it would change the way it calculates train velocity, terminal dwell times and cars online in an effort, the company stated, to more accurately reflect the operational performance.

“CSX is transitioning to Precision Scheduled Railroading, which focuses heavily on service to customers and asset utilization,” Harrison said. “These revised service metrics give us a more accurate understanding of how we are performing and where there are additional opportunities for improvement.”

The revised data show the average dwell time improved from 11.8 hours a year ago to 11.6 hours, but train car velocity dropped from 15.6 mph to 13.1 year-over-year for the week ending Aug. 18. The on-time origination percentage dropped to 67% from 86%, and on-time arrivals fell to 50% from 75% in mid-August 2016.