Norfolk Southern closely watching changes at CSX Transportation

CEO says NS will cut costs while sticking to its customer-focused growth plan
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NSmugJamesSquires
NS CEO James Squires
Norfolk Southern
BOSTON — Norfolk Southern is closely watching developments at rival CSX Transportation under E. Hunter Harrison but remains focused on its own plan to cut costs, raise prices, and grow volumes.

“We’re extremely focused on industry developments right now and watching what’s going on carefully, all the while focused on executing our plan,” NS CEO Jim Squires said at a transportation conference on May 18.

Squires made the remarks just hours after CSX announced major operational improvements in the 10 weeks Harrison has been its CEO. CSX officials said 87.6 percent of its trains now arrive on time, up from just 57.8 percent in Harrison’s first week. Other metrics, such as terminal dwell and average train speed, also improved.

But there’s a difference between network performance and customer service, Squires points out.

Network performance measures — like train speeds and terminal dwell — are important from the railroad’s perspective, Squires says.

“But our real focus these days is on customer-facing metrics,” he says, noting the railroad is working with shippers to define joint service metrics.

These include getting containers off intermodal trains when promised and providing shipment consistency for merchandise shippers.

“What we’re trying to do with our customers is measure performance in the entire supply chain,” Squires says. “That’s different than merely measuring terminal-to-terminal train performance.”

As CSX implements precision scheduled railroading under Harrison, Norfolk Southern will steal good operational ideas whenever and wherever it makes sense.

“Operations best practices are operations best practices, and we all operate out in the open,” Squires says. “I’ve been very clear with our operations team that if they see the other guy doing something smart, then don’t let your pride get in the way of the right thing for the customer. And by smart, I mean better use of the assets and good for the customer and the business long term. If those two things are present, then we’re all over it.”

CSX has converted four of its 12 hump yards to flat-switching facilities since Harrison’s arrival and is likely to close four or five more in the coming months. Ultimately CSX will wind up with around three hump yards total.

Will NS follow suit?

NS has 10 hump yards on its network and has closed three in the past two years.

“And others are under review. That may make sense, it may not,” Squires says. The outcome will depend on the needs of the network and the railroad’s customers, he says.

CSX says it will reduce its operating ratio to the mid 60-percent range this year and that Harrison sees no reason it can’t eventually drop below 60.

NS aims to reduce its operating ratio below 65 percent by 2020 under a five-year plan Squires introduced last year. The NS board has encouraged acceleration of that plan by offering management incentives to hit operating ratio and earnings per share targets by 2018.

“We’re pushing as hard as we can,” Squires says.

NEWSWIRETrains News Wire

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