CSX announces top executive E. Hunter Harrison is on medical leave

Class I railroad carrier CSX reported late yesterday that the company’s Chief Executive Officer and President E. Hunter Harrison is on medical leave, due to complications from a recent illness, and it added that COO James M. Foote has been named as acting CEO in the interim.

Harrison, who joined CSX in March, has been in the freight railroad sector for more than 50 years, and came to CSX from CP and prior to that led CN. He is widely known for his focus on “precision scheduled railroading,” which requires cargo to be ready when rail cars arrive for loading or risk being left behind, a practice that served both CP and CN well under his leadership, with both companies seeing multiple positive results in the form of lower operating ratios, improved service, record amounts of reinvestment into networks, as well as creating significant shareholder value.

But over the course of 2017 since Harrison took the helm at CSX, things have not been quite as smooth in terms of the PSR implementation.

There were various issues stemming from CSX’s PSR implementation that were clogging the tracks, so to speak, in various ways in the form of things like informal complaints from both CSX customers and railroad industry stakeholders in regards to various service issues, including: transit times increasing significantly and/or becoming unpredictable; loaded and empty railcars sitting for days at yards; switching operations becoming inconsistent and unreliable; car routings becoming circuitous and inefficient; CSX customer service being unable to provide meaningful assistance; and slowing train speed and increasing dwell time along with numbers of cars online.

These issues were cited in a late July letter to Harrison from STB leadership, including STB Acting Chairman Ann Begeman, former STB Vice Chairman Daniel Elliott, and Board Member Deb Miller.

CSX reported on October 5 that that some of its key service metrics are now showing positive gains as it works to implement its PSR efforts. On the company’s third quarter earnings call Harrison drove home how these issues are on well on their way to being a thing of the past, which should be viewed as encouraging by railroad shipper customers.

“I think that we went through obviously some slippage service-wise in the third quarter, which we're not proud of,” Harrison said on the call. “I've been in this business a long time, and this company is back to where it was; it's back to where it was, and it's better, and it's climbing, and I see those issues, generally speaking, behind us, which I'm very proud of that. It reflects to some degree the resiliency of this organization, to go through what this organization has been through, and to be able to come out of an eight-nine-week, a little setback.”

Harrison was quick to defend his long-established and highly successful PSR model, too, explaining that these service issues did not represent the model being a failure as it is an operating plan that's been in existence for more than 20 years with an excellent track record.

“I think, as we reflect, it was more of an execution issue,” he said. “We didn't execute at a lot of levels, and we learned that. And as a result, we had to make some, what I would describe as painful changes, that's never pleasant to do, but we had to do that.”

Acting CEO Foote, a 40-year railroad veteran, has worked under Harrison for 11 years at CN and joined CSX earlier this year.

“I am always amazed at Hunter’s vision and by his ability to transform railroads through the implementation of [PSR],” he said on today’s call. “Simply put, the plan works, and, most importantly, Hunter knows how to position people to effectively work the plan.”

Foote said that the framework at CSX is in place to effectively execute the PSR operating plan, adding there is no reason to diminish expectations concerning the pace and magnitude of future progress. And he cited two phases to the execution of PSR.

The first phase is the implementation of a new operating plan across the company’s network, including the replacement of the company’s traditional operating plan, which, Foote said, requires significant changes in the way the company operates from top to bottom. A cornerstone of this is instilling a new railroading culture, he said, that focuses on improving customer service, driving asset utilization, and controlling costs.

The second phase, he said, is the daily execution of the railroad’s operating plan.

“Strict adherence to the plan, which drives performance, is clearly underway across the network,” he said. “Our performance metrics show the rate of change for train velocity and car dwell have significantly improved over the last year, with train velocity up nearly 18 miles per hour for 19% improvement and car dwell dropped 9.8 hours for a 13% improvement. We are also seeing improvements in every other part of the company. There is still much more work to be done, but, again, everyone is focused. When we need to make adjustments, we will make them quickly and communicate them effectively to our teams and our customers.”