Epic CSX Meltdown

I just read the article and what a bunch of BS. Basically "short term pains will give long term gains".   Yeah, as you lose business, fewer trains, less traffic, clear tracks  !!   Typical propaganda. Lost business is seldom easy to get back.

The article implies that Mr. Harrison's changes weren't either well thought out or executed or perhaps are not the right solution for CSX.  Sometimes one size does not fit all.

I would have thought that having done this at both Canadian railroads he would have the process well planned and executed.  For example, why shut 12 hump yards at once instead of shutting them one at a time?

 Hopefully CSX will get back on track soon.  

NH Joe

Penn-Central II?   

When HH was taking over and all the good news was bouncing around I read an article explaining how the two Canadian RRs were laid out differently than CSX and his grand ideas wouldn't necessarily work. Maybe the guy was right. And I can't believe the unions are behind this guy.

could we see another merger coming? and a cool paintscheme to go with it

BSSF Burlington seaboard Santa Fe orange blue yellow and black

I don't rely on anything I hear and only half of what I read about CSX...........

Penn-Pacific posted:

Penn-Central II?   

SP II

Darn

Ed

Maybe a Canadian company will help them out ?

Did HH consider the complexity of railroads in the east as opposed to out west or Canada. I've ridden the NE corridor from Boston to Washington enough to know how congested the rails are here. Taken Amtrack to Florida enough times to see the old CSX in action and can't imaging what its like now.

Funny thing is politicians talk about putting more freight on trains to reduce highway congestion, etc. Sounds like Mr. H needs to have a chat in front of a sub-committee on Capitol Hill.

I have taken a "Wait and see." attitude about this. Any time someone disrupts the status quo, there is always a period of adjustment before things get "right" again. This is especially true in the railroad industry.

Some have said that HH's approach won't work well on CSX because of the nature of the railroad. Where the Canadian lines were mostly one main line with a clearly defined line-of-road layout, CSX is a tangled web of railroads laid out in a massive triangle (New York - Chicago - Florida) with multiple routes within that triangle. Consequently the scheduled "line-of-road" approach may not work well at CSX.

It remains to be seen whether the HH plan will work on CSX. In the meantime, there can be no doubt that the railroad is in turmoil, and most of their customers are very unhappy.

Kinda like seeing when know-it all smart alecks catch their lunch, particularly ones who have damaged a fair number of peoples' lives. But as Rich noted, "wait and see".

There was a time when the money big shots, although greedy and ruthless, built up businesses and created jobs. Today the money big shots walk away with  obscene amounts of money with shattered companies and loss of jobs behind them. To me, these guys like HH and a bunch of others are racketeers, nothing less. I hope CSX survives, I feel sorry for the employees.

Mr. Harrison was made the CEO of CSX to drive down the railroads poor operating ratio. Digging on the internet, I found this rather plain language article about the operating ratios of US Class 1 railroads.

Operating ratio is a key metric of railroad performance. It is basically a measure of profitability and shows the percentage of revenue used to operate the railroad. A lower operating ratio is better, as more revenue is falling to the bottom line or available to reinvest in the business. Over time, if the operating ratio is decreasing, the railroad is increasing profits. Railroads with lower operating ratios have more cash to reinvest in the business or return to shareholders in the form of dividends and buy backs. They also earn more for each additional dollar in revenue.

Despite being such an important measure, the operating ratio is easy to calculate. The operating ratio is simply operating expenses divided by revenue. Both items can be found in the annual report under the Consolidated Statement of Income, Consolidated Income Statements, or similar. This is generally at the back of the report to discourage investors from actually reading it.

A few conclusions can be drawn from the above table. First, Canadian National (CNI) has the lowest operating ratio, which is a sign of effective management. Second, Norfolk Southern (NSC) shows the most improvement over the five year average, a decrease of 11.9 points. This implies management has been successful at controlling costs and increasing efficiency. Additionally, NSC has the second best operating ratio of the railroads compared. Union Pacific (UNP) has the highest operating ratio, a sign of poor management. Their operating ratio, while improving on a year over year basis, is also above the five year average. This means management is getting worse over time. While CSX currently has the second worst operating ratio, they have the second highest decrease over the five year average at 10.1 points. For the industry as a whole, operating ratios declined from 2005 to 2006 and were well below the 2001 - 2005 average.

That was interesting.  How do you take into account huge amounts of money spent to daylight tunnels for double stacks??  Apparently you can't be competitive without doing double stacks, system wide.  A lot of eastern railroad money has been spent on this undertaking.  Capital investment in infrastructure a necessity, eventually you have to look at a lot of very old bridges.  There are also articles about the decaying concrete ribbons of this country, another major investment, but that's government. IMO  Mike CT.

Mike a lot of that taxes paid for

One has to wonder if part of UP's issues is they still have to upgrade parts of the ex-SP.

Also UP was working this summer on the ex-MP line east of Dallas TX.

Mr. Harrison said CSX customers were "well-informed" of what the changes would look like, given his record at other railroads. "I don't think anyone got caught by surprise," he said. 

In other words: You should have expected this!  

CSX said it has been "sending some cars to less-congested, out-of-route terminals for sorting" to keep "customer deliveries moving as efficiently as possible through some congested terminals." 

So their competitors are expected to pick up the slack. 

Farmer_Bill posted:

CSX said it has been "sending some cars to less-congested, out-of-route terminals for sorting" to keep "customer deliveries moving as efficiently as possible through some congested terminals." 

So their competitors are expected to pick up the slack. 

This CSX mess illustrates once again one of the problems that arises as a result of allowing rampant mergers. Out of dozens and dozens of railroads that existed even relatively recently, there are now only 4 big ones left. One of them goes down, and there are no other railroads of any size around to pick up the slack. As one of the customers noted, it really can rise to the level of a national emergency when one of the few remaining railroads craters like this.

So you decided to save money at the expense of your employees and your customers. Seems like a foolish business propsistion to me. I wish CSX would've hired me to make this mess, I'd have done it for half what HH cost em.

Bobby, are your posted operating ratios off by a decade?   2016 rather than as-labeled 2006?   If not, can you provide us with more recent data?

I live in monroe nc along the sal rr.I have seen nothing but a big mess.Long trains with under powered while locomotives set in yards.Where do csx get these so called ceos.This proves not every plain is gonna work for every company.They need to get rid of this nitwit and get some who knows.What they are doing and how to treat their customers right.

Bobby Ogage posted:

 

Despite being such an important measure, the operating ratio is easy to calculate. The operating ratio is simply operating expenses divided by revenue. Both items can be found in the annual report under the Consolidated Statement of Income, Consolidated Income Statements, or similar. This is generally at the back of the report to discourage investors from actually reading it.

Do all railroads use the same numbers to calculate the operating ratio?  Revenue is probably straight forward.  I wonder, however, are things such as depreciation an operating or capital expense?  Is daylighting a tunnel to improve operations or rebuilding a bridge a capital or operating expense?  How about purchasing fuel futures?  A significant revenue drop caused by the closing of an online shipper or diverting traffic because of a storm can cause the operating ratio to increase even though expenses have dropped.  For example, if oil is shifted from rail to a pipeline, the expense of having the tank cars and locomotives to haul them continues even if the both the locomotives and tank cars are sitting on a siding waiting to be sold or scrapped.

Accounting in any company is complex and in my experience every company does it slightly differently  even in the same industry.  All companies have to follow generally accepted accounting practices (GAP) but these are open to interpretation.  Do Canadian companies follow the same accounting practices as US based companies?   Since operating ratios are used to measure management's performance, is it being skewed at some companies in order to present management in a better light?  Perhaps some of higher operating ratio numbers are closer to the truth than the lower numbers.

I don't know the answers to any of these questions but I think you would have to really dig deeply into the financial statements to make a real comparison between two railroads.

NH Joe

I read an article where the author analyzed the CSX recent  quarterly report and the creative writing and figuring that was in it. Most are "feel good"  propaganda pieces. Beware.