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Exclusive - Persistent rail service disruptions dog CSX customers
September 21, 2017 / 11:49 PM / a month ago

Exclusive - Persistent rail service disruptions dog CSX customers

FILE PHOTO: A CSX coal train (R) moves past an idling CSX engine at the switchyard in Brunswick, Maryland October 16, 2012. REUTERS/Gary Cameron/File Photo

(Reuters) - CSX Corp (CSX.O) customers, including chemical, automotive and steel producers, are still battling delays and congestion despite the railroad’s assurances that it had moved past service disruptions, people familiar with the situation said.

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 seen by Reuters.

CSX Assistant Vice President Maryclare Kenney apologised to customers in the email dated Sept. 8.

Such freight “embargos,” more commonly associated with hurricanes and other disasters, can send companies scrambling to find alternate, usually higher-cost ways of getting products to market.

The Surface Transportation Board, the U.S. rail regulator, is due to host a hearing in Washington, D.C., over CSX’s service on Oct. 11.

CSX spokesman Rob Doolittle said on Thursday that operations should return to normal in the near future.

The company emailed manufacturers about the Lordstown embargo on Sept. 8, two days after CSX executives said the railroad had made strides in fixing service problems 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 after leading turnarounds of Canadian railroads, has vowed to cut costs and streamline efficiency through his “precision scheduled railroading” strategy. He has blamed delays on pushback from some employees.

General Motors Co (GM.N), which builds the Chevy Cruze nearby and uses the facility, said on Wednesday that cars rolling out of its assembly plant continued to ship, but it declined further comment.

Six CSX employees told Reuters this week that Harrison’s rapid-fire changes were responsible for persistent problems. They requested anonymity because they were not authorized to speak to the media.

Harrison closed rail yards, lengthened trains, mothballed locomotives, and cut 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 trains carrying diverse freight.

“We’re back on our feet and committed to fully implementing our new operating model,” Harrison said in a statement on Thursday. “We remain confident that Precision Scheduled Railroading will provide lasting benefits to our customers, our employees and our shareholders.”

Doolittle said rail cars were spending less time idle than during the worst summer periods, and train velocity was essentially the same last week as it had been a year ago. He said customers had seen improvements.

Manufacturer JCI Jones Chemicals Inc withdrew its Aug. 31 notice to testify before the Surface Transportation Board after Harrison called to apologise for “transitional service issues” and to describe steps to quickly fix problems.

‘FAILING CUSTOMERS’

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

“CSX’s service is failing its customers,” McDivitt told the transportation board in a Sept. 13 letter seen by Reuters.

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

The American Chemistry Council trade group, which includes 3M Co (MMM.N), said CSX’s problems continued to affect product shipments, including roof coating component titanium dioxide.

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

Sloan said Disruptions had been felt through Cincinnati, Nashville, and New Orleans.

CSX spokesman Doolittle said terminals on the company’s western corridor, including Nashville, were now fluid and showing improvement, adding, “Congestion in other areas has substantially recovered.”

CSX, based in Jacksonville, Florida, was also hit by the flooding, power outages and debris from Hurricane Irma.

The company said on Thursday that it had been able to re-establish rail service in most of the U.S. Southeast within hours, and throughout most of Florida within one week.

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 (STLD.O) has had delays in 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.

Reporting by Eric M. Johnson in Seattle; Editing by Lisa Von Ahn

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