The history of railroad transport has been one of continuous enhancement of capacity through technological innovation. Yet, maintaining the capacity to guarantee good service when there is not the demand to meet that capacity, can be costly. With increasing competition among rail companies, and trucking options waiting to tear their share away, some rail companies have been forced to tighten their belts.
CSX Corporation is among those who have been forced to take some cost-cutting measures.
The company’s new CEO, Hunter Harrison (formerly the CEO of Canadian Pacific Railways), adopted these measures right after taking his position. His agenda included:
- Cutting down 900 locomotives (possibly another 100 in upcoming days), drastically lowering the capacity of CSX.
- Letting 2,300 employees go (possibly another 700 in upcoming days), crippling customer support at a time when it is dramatically needed.
- Closing down 12 hump yards: One of the most-effective classification yards, where containers are sorted according to their weight and any specific needs, like temperature or weather conditions, which they can or cannot face. Closing 12 of these effective facilities for specification has already created delays of up to 5-7 extra days, as less effective sorting procedures make the matching process painfully slow.
Harrison, confident in his agenda, and trusting the 3% growth over the first two quarters (as well as the expected 7% growth by the end of the year, compared to statistics of previous years), is not worried about the competition from NS (Norfolk Southern) and inland trucking. Nevertheless, the general picture doesn’t seem that bright.
Almost 80% of CSX’s customers are dissatisfied with the service they received, and almost 40% of those customers have already diverted their cargos to NS, while another 67% preferred the trucking option in their shipments. As for the growth of NS within the first two quarters, in comparison to CSX’s 3% growth, NS experienced an 8% growth rate compared to last year’s first two quarters.
Although the current situation might not look so optimistic for the railroads, placing all the blame on the rail companies wouldn’t be fair.
Inland trucking is putting up some fierce competition, especially given the lower fuel cost. Though recent developments have seen fuel efficiency in railroads increase by 85%, compared to previous years, the competition from trucking is still fierce, and the latest disruptions in railroads have given truckers the upper hand.