Norfolk Southern: PSR will help close operating-ratio gap with CSX

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NEW YORK — Norfolk Southern is approaching Precision Scheduled Railroading differently than CSX Transportation, with a much slower timetable and no appetite for disruptive change.

But NS sees no reason why it can’t close productivity and operating ratio gaps with its more efficient eastern rival, Chief Financial Officer Cynthia Earhart says.

“The biggest difference for us is we’re really trying to communicate very closely with our customers so that they understand what the changes are going to be and give them time to plan,” Earhart told an investor conference on Wednesday.

NS is currently laying the groundwork for a new operating plan that will incorporate elements of the late E. Hunter Harrison’s Precision Scheduled Railroading operating model.

The railroad is using a process called “clean sheeting” to redesign local service at its local serving yards and terminals. The goal is to improve service and terminal fluidity while making better use of locomotives, cars, and crews, Earhart says.

Once clean sheeting is complete next year, NS will turn its focus to a new systemwide service plan for its road trains. Changes will be rolled out gradually to minimize the potential for service problems.

“It’s a lot of change,” Earhart says. “There’s going to be a lot of change to the way that we run the railroad and there will be a lot of change for our customers.”

Harrison rapidly made sweeping operational changes at CN, CP, and CSX, which led to months of service problems, shipper complaints, and increased scrutiny from federal regulators.

The Surface Transportation Board is holding weekly conference calls with Union Pacific executives, who on Oct. 1 began implementing a new operating plan based on the principles of Precision Scheduled Railroading.

Federal regulators have not yet made a similar request to NS, which has said it will provide additional details on its operating plan and financial targets during an investor day scheduled for February.

Under Harrison and his successor, CEO Jim Foote, CSX’s operating ratio has improved by more than 10 points and stood at a record 58.7 percent in the third quarter.

Norfolk Southern’s operating ratio was a record in the third quarter, as well, but was 65.4 percent, or 6.7 points higher than CSX’s.

NS on Wednesday named Michael Farrell, who has experience with Precision Scheduled Railroading at both Canadian National and Canadian Pacific, as senior vice president of transportation.

As a consultant, Farrell has led the NS clean sheeting effort over the past year.

Prior to joining Norfolk Southern, Farrell served as general manager operations and mechanical of the Prairie and U.S. West divisions of Canadian Pacific, as well as general manager for the U.S. network operations center in Minneapolis. Previously, he served as general superintendent-Chicago Terminal of Canadian National and general superintendent terminals for CN.

Earhart spoke at the Stephens Fall Investment Conference in New York.
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