CSX CEO talks safety, performance, right-sizing

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August 6, 2019 (Courtesy The Jacksonville Business Journal)

Second-quarter earnings for CSX Corp. (Nasdaq: CSX) showed continued improvement on operating ratio, the industry-wide measure of operating efficiency. The measure stood at 57.4 percent for the quarter, a U.S. record and 1.2 percentage point improvement from last year’s record-breaker.

Nonetheless, the price of CSX stock fell about 10 percent through Wednesday afternoon, a day after CSX downgraded its financial projections for the rest of the year.

The quarter offered mixed results for the Jacksonville-based railroad. CSX achieved faster train velocities, lower dwell times and major improvements in safety performance, but volumes slipped — especially in intermodal — and on-time arrivals fell to a lackluster 53 percent.

CEO Jim Foote discussed the quarter’s results with the Business Journal Wednesday. This interview has been lightly edited for brevity and clarity.

Customers testified during May’s regulatory hearing that increasing demurrage fees were causing an increase in the number of customers opting for truck over rail. Have you seen any exodus at CSX?

No. I think if you look across the entire transportation group – whether that be rail, whether that be trucking, whether that be intermodal, you name it – I think that the volumes are down across the board. I would say that what we’re experiencing is not a modal shift. It’s an overall, general shock in the transportation sector.

CSX recorded a major improvement in safety this quarter. What do you attribute that to?

Real hard work and focus… We have had a very strong focus, and we brought in a new head of safety; we hired a really well-regarded consultant to help us set up our program. We’re constantly focused on this. For two quarters in a row now, we are leading the industry as the safest in terms of employee injuries, and the other area where there is a big effort is our train accidents. While we’re not the leader there yet, we’re very, very close, and we’ve made substantial improvements in that area.

CSX had a dip in on-time arrivals. What do you attribute that to?

There’s two ways to measure it, … on-time originations and on-time arrivals. On-time originations are near 100 percent on time. On-time arrivals continues to improve, even though it’s clearly not where it should be.

That number can move around on a short-term basis. If we had a derailment, guess what? For a week or so, the railroad goes a little out of sync, and on-time arrivals will be off.

But what we really like to look at more and more is trip plan compliance. Our trip plan compliance is what measures how we’re performing for the customer, and that number is continually increasing… . That’s measuring the box – an intermodal box or boxcar or whatever it might be – from when we pick it up and move it across the railroad to his customer.

In that trip plan compliance in intermodal, 90 percent of the time we deliver to the hour of when we say it’s going to be delivered … . On the merchandise side of the business, that number is up in the 70 percent range. When we first started measuring that from a comparison standpoint, that number would have been in the high 30 percent range.

In both originations and arrivals and in trip plan compliance, every time we get the railroad running pretty good, we try to shorten that transit time and make our service even better, which makes it harder for us to achieve numbers. Often times, when we see a short period of time where the metrics will show a negative trend, it’s because we’ve reconfigured and re-engineered the schedules and made them even tighter.

You said in yesterday’s earnings call that driving efficiencies and cost savings would be a major focus for the rest of the year. What kind of right-sizing should we expect to see this quarter?

I think we’re going to continue along the same lines of what we’ve been doing throughout this year. There’s no major plans to close any significant shops or do anything major. It’s mostly more and more focus on how we do business each and every day and making small changes across the network. Those small changes have a compounding effect, which makes us run better, and therefore, we get the efficiencies.

 

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