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Sep 21, 2017

CSX customers still plagued by service disruptions

CSX

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CSX Corp (CSX.O) customers, including chemical, automotive and steel producers, are still battling delays and congestion despite top executives' assurances that the railroad has moved past service woes that plagued its system during the summer, people familiar with the situation said.

Customers will be able to air grievances when the Surface Transportation Board, the top U.S. rail regulator, hosts a hearing over CSX's service in Washington on Oct. 11.

The No. 3 U.S. railroad has halted all automobile shipments to or through its yard in Lordstown, Ohio, where new vehicles are unloaded from trains and trucked to dealerships, to give workers time to clear a backlog of rail cars and relieve congestion, according to a CSX email that Reuters saw.

Such freight "embargos" which are more commonly associated with a disaster like a hurricane, can send companies scrambling to find alternate, usually higher-cost means to get their products to market.

CSX Assistant Vice President Maryclare Kenney apologized in the email. Spokesman Rob Doolittle said operations should return to normal in the near future.

The company emailed manufacturers about the Lordstown embargo on Sept. 8, two days after top executives said the railroad had made great strides in fixing service problems that gripped its system in July and August.



"The railroad is now returning to a normal operating rhythm, and our performance metrics are improving," Chief Executive Officer Hunter Harrison said on Sept. 6, when the company also cut its earnings forecast.

Harrison, who took over as CEO in March to great investor fanfare after leading turnarounds of Canadian railroads, has vowed to cut costs and streamline efficiency through his "precision scheduled railroading" strategy. He has blamed employee pushback to his methods for delays.

General Motors Co, which builds the Chevy Cruze nearby and uses the facility, said new cars rolling out of its assembly plant continued to ship, but it declined to comment further.

Six CSX employees told Reuters that Harrison's rapid-fire operations changes were to blame for persistent problems. Harrison, closed rail yards, lengthened trains, mothballed locomotives, and slashed overtime pay and hundreds of jobs, while changing the way rail cars are sorted in yards and replacing "unit" trains with one commodity like coal or grain with those carrying diverse freight.

Doolittle said rail cars were spending less time sitting idle than they were during the worst summer periods, and train velocity was essentially the same last week as it was a year ago.

Customers have seen improvements, Doolittle said. Manufacturer JCI Jones Chemicals Inc withdrew its Aug. 31 notice to testify before the Surface Transportation Board after Harrison called to apologize for "transitional service issues" and describe steps to quickly fix problems.

"FAILING ITS CUSTOMERS"

However, Phil McDivitt, chief executive officer of Houston-based plastics maker Ascend Performance Materials, said train transit times on multiple routes in place for years suddenly spiked in recent months by as much as 80 per cent. The railroad has failed to communicate transit changes and at one point lost track for several days of tank cars carrying hazardous materials, he added.

"CSX's service is failing its customers," McDivitt told the transportation board in a Sept. 13 letter that Reuters saw.

While Ascend has seen some improvements, a spokesman said, it has switched some freight to truckers and also ordered staff to bombard CSX customer service representatives with complaints as delays arise.

The American Chemistry Council trade group, which includes 3M Co and Occidental Chemical Corp, said CSX's problems continued to affect shipments of a range of products, including roof coating component titanium dioxide.

"Some areas have improved, but by and large, there are still serious service problems," said spokesman Jeff Sloan. "In some cases, they have either caused members to shut down operations, or have brought them to the brink of shutting down."

Disruptions have been felt through Cincinnati; Nashville, Tennessee; and New Orleans, Sloan said.

However, Doolittle said terminals on the company's western corridor, including Nashville, were now fluid and showing improvement. "Congestion in other areas has substantially recovered," he added.

CSX's service was also hit by the flooding, power outages and debris from Hurricane Irma, which starting last week halted freight transportation across the deep U.S. Southeast.

Companies in the Alliance of Automobile Manufacturers have complained within the last four weeks of shortages of empty rail cars, wayward shipments and massive delays, said group spokesman Wade Newton.

Steel Dynamics Inc has seen delays receiving scrap metal and shipping finished steel from Indiana, a CSX employee said. A Steel Dynamics representative declined to comment. Rail yards in Indiana and Ohio have been so clogged in recent days that cars are sitting in track sidings and workers commonly hit the legal limit of 12-hour shifts as they try to fix delays or fall prey to them, employees said.

At one point during the weekend of Sept. 9-10, one employee said, the Russell, Kentucky, yard had more than 2,000 cars sitting outside waiting to be processed.