CSX……The Saga Continues

Sounds like the beginning of the death rattle. 

Tony

Up on "The D & H Bridge Line"

AS CSX withers away, the regionals will pick up the pieces and grow. the  Circle of Life.  Sad but true.

Glancing through the lines listed in the Bill Stephens article; I'd say the whole darn railroad is non-core to the folks in JAX.

Curt

One thing I don't understand... if the lower-density routes aren't profitable for CSX, how would they be profitable for regionals?  Non-union wages?  Relaxed environmental or safety regulations?  How can a regional do it for less??

I think Hunter should have done this first.  IC shed lines before he came to power there, making his vision of railroading easier to put into place.

This is the life cycle of empire being played out.  Just as nations acquire more land mass than they can manage or defend economically, railroads have been allowed and encouraged to merge until either they awaken, streamline or die.  EHH brought back timetable freight operations and thereby changed the course of the industry.  He brought customer back to the rails and transformed CN, CP and possibly CSX.  His detractors were those with vested interest in sinecures and the ill informed.

How can short lines and regionals achieve what trunk lines cannot?  Non-union employees, the use of part-timers plus smaller less expensive power and other machinery, stationed strategically, are advantages but increased service availability that trunk lines cannot provide attracts and keeps new and returning customers.  It comes down the the "eggs in the basket" principle - someone with thousands of eggs cares less for each while someone with only a few handles each with extreme care.

It is important to note that there are no (ZERO) breaks given by government regulations or regulators;  short lines and regionals are under the same regulations and regulators as the trunk lines.  As a retired short liner, I can vouch for the fact that regulators much prefer to camp out at smaller lines because they can log hours comfortably while the big railroads often do as they please.  Compare how many big wrecks and huge chemical spills occur on short lines and regionals versus the trunk lines?

Last, please consider how many miles of track NS has spun off to short lines and regionals in the almost twenty years since the CR breakup/takeover by NS and CSX.  No one pronounced a death rattle as miles of lines, deemed essential to NS management pre-merger, fell to others by the thousands.  Just as streamlining helped NS, the same strategy stands to help CSX and, ultimately, the industry.

CSX is looking at getting rid of Cinci to Atlanta? Is that part of the Iron Triangle?

Well, if smaller roads are subject to the same environmental regs as Class 1's, how is it possible that some (like the Delaware-Lackawanna near Scranton) are still running Alcos from the 1960s, while Class 1's are retiring their Dash-8s because they're non-compliant?  Not arguing here, just trying to understand the economics of it.  BTW, the problems go back to '99.  my perception is that CSX wasn't in a position challenge NS in a bidding war for Conrail.  Both sides probably paid too much, but CSX was less able to afford it, and fundamentally never recovered.  IMO, the STB should have called a truce before the price became so high that there were ultimately no winners (except Conrail's major stockholders.)

The Pere Marquette lines in Michigan were merged into the C&O in 1947. That is a bit of a distant time period reference. 

Andrew

To me, I do not think the Chessie System and Seaboard System merger into CSX really did not go completely down.

Legally, yes.  But not to the route level.  One always heard of the "Chessie Mafia".  And this is one merger where the two parts, pre CR, each cover a particular part of the NE and Deep South.  So I wonder if a merger culture was established.

But I think the price for dividing CR to both NS and CSX was too high.  Things might be different if that did not happen.

For Tax purposes, have a presence in JAX.  But maybe move operational side of the railroad to the heart of the system.  

Having an office in a low tax state is nothing new.  Many have one in Delaware for that reason.

Ted Sowirka posted:

BTW, the problems go back to '99.  my perception is that CSX wasn't in a position challenge NS in a bidding war for Conrail.  Both sides probably paid too much, but CSX was less able to afford it, and fundamentally never recovered.  IMO, the STB should have called a truce before the price became so high that there were ultimately no winners (except Conrail's major stockholders.)

Seems that is the way things happen today, plus the execs with Golden Parachutes.

Dominic Mazoch posted:

To me, I do not think the Chessie System and Seaboard System merger into CSX really did not go completely down.

Legally, yes.  But not to the route level.  One always heard of the "Chessie Mafia".  And this is one merger where the two parts, pre CR, each cover a particular part of the NE and Deep South.  So I wonder if a merger culture was established.

But I think the price for dividing CR to both NS and CSX was too high.  Things might be different if that did not happen.

Like United and Continental merging? It may show Chicago as the HQ, employees will probably tell you after the merger you'd have thought it was Continental Airlines out of Houston with their execs and software running it.

BobbyD posted:

Ted Sowirka posted:

BTW, the problems go back to '99.  my perception is that CSX wasn't in a position challenge NS in a bidding war for Conrail.  Both sides probably paid too much, but CSX was less able to afford it, and fundamentally never recovered.  IMO, the STB should have called a truce before the price became so high that there were ultimately no winners (except Conrail's major stockholders.)

Seems that is the way things happen today, plus the execs with Golden Parachutes.

 

Dominic Mazoch posted:

To me, I do not think the Chessie System and Seaboard System merger into CSX really did not go completely down.

Legally, yes.  But not to the route level.  One always heard of the "Chessie Mafia".  And this is one merger where the two parts, pre CR, each cover a particular part of the NE and Deep South.  So I wonder if a merger culture was established.

But I think the price for dividing CR to both NS and CSX was too high.  Things might be different if that did not happen.

Like United and Continental merging? It may show Chicago as the HQ, employees will probably tell you after the merger you'd have thought it was Continental Airlines out of Houston with their execs and software running it.

Yes, UA is a good example.  

He brought customer back to the rails and transformed CN, CP and possibly CSX.

Rapid:

I'll agree with just about your entire post except for the above comment.

As a customer of CN, CP and CSX during Hunter's tenure on each; in every case the railroad lost business while Hunter was in charge.  What Hunter did do well was present his successors with a low cost railroad.  

On CN at least; the new people went out and sold their pants off and brought new traffic back to the railroad.  I'm seeing signs of similar activity at CP and its way too early to make any prediction how Jim Foote will perform at CSX.

Curt

Ted Sowirka posted:

Well, if smaller roads are subject to the same environmental regs as Class 1's, how is it possible that some (like the Delaware-Lackawanna near Scranton) are still running Alcos from the 1960s, while Class 1's are retiring their Dash-8s because they're non-compliant?  Not arguing here, just trying to understand the economics of it.  BTW, the problems go back to '99.  my perception is that CSX wasn't in a position challenge NS in a bidding war for Conrail.  Both sides probably paid too much, but CSX was less able to afford it, and fundamentally never recovered.  IMO, the STB should have called a truce before the price became so high that there were ultimately no winners (except Conrail's major stockholders.)

Its called "grandfathering".  If you read the summary, linked below, you'll find that the regulations apply only to locomotives built after 1973.  The last ALCos, Newburgh & South Shore Railroad's 1016 and 1017, rolled out of the shop in January 1969.  Both locomotives are still on active rosters.

https://www.transportpolicy.ne...comotives-emissions/

Both NS and CSX paid far too much for CR but CR should never have existed.  The bankrupt northeastern railroads should have been sold on the courthouse steps by the sheriff in the time-honored manner.  Not only was federal intervention unnecessary, it allowed the criminals at Penn Central to get away with the train robbery of the century - the looting of the pending interline settlement money and a taxpayer funded purchase and bailout.  How many misbegotten multi-billion dollar bailouts have followed using PC/CR as a precedent?  Its a classic example of "enabling".

juniata guy posted:

He brought customer back to the rails and transformed CN, CP and possibly CSX.

Rapid:

I'll agree with just about your entire post except for the above comment.

As a customer of CN, CP and CSX during Hunter's tenure on each; in every case the railroad lost business while Hunter was in charge.  What Hunter did do well was present his successors with a low cost railroad.  

On CN at least; the new people went out and sold their pants off and brought new traffic back to the railroad.  I'm seeing signs of similar activity at CP and its way too early to make any prediction how Jim Foote will perform at CSX.

Curt

I should have specified "PROFITABLE customers".  The practices of undercutting competitors for unprofitable business was the undoing of many a railroad, especially the Midwestern granger roads (CNW-MILW-CRIP et al).  A friend of mine was the cost accounting department at CNW and found that virtually all of their grain business was grossly unprofitable.  They had relied on the concept "sell below cost and make it up in volume" and it failed them.  Branch lines fell like autumn leaves and grain handling transferred from local elevators to centralized silos and shipment from carload to trainload.

A review of net income during and after EHH's reign at CN reveals a leap from .725B in 2003 to 1.632B in 2009, an increase of 125%.  CN net income for 2016 was 2.749B, an increase of 279% over 2003.   

At CP, net income went from .484B in 2012 to 1.207B in 2016, an increase of 149%.  CP net income for 2017 was 1.856B, an increase of 283% over 2012.

In both cases, there were dramatic turn-arounds,  CN has experienced long term improvements in operations and business practices, however, it is too early to proclaim long term victory for CP after only one full year on its own.  Both roads were loaded with cancer and EHH was the surgeon who returned them to health.  Would that we had EHH to wade in with gown and scalpel to do the same for CSX.  Perhaps Mr. Foote will be able to follow through and build on EHH's foundation.  Let's hope.

(net income figures supplied by YCharts)