CSX’s Ward Says Computers, Bonuses Boosting Efficiency

CSX Corp. Chief Executive Officer Michael Ward said the second-largest publicly traded U.S. railroad is reducing fuel costs with on-board computers and using bonuses to align workers’ interests with the company’s.

CSX said yesterday that fourth-quarter profit rose 42 percent and that the company’s operating ratio, which measures the percentage of revenue consumed by expenses, will fall to the “high-60s” this year and 65 percent by 2015. CSX lowered the ratio 3.8 percentage points to 71.1 percent last year.

The railroad uses on-board computers that track fuel usage to hone the crews’ techniques, and remote controls help maneuver trains within rail yards, Ward said.

“If you improve a process a little bit, it might save $100,000 dollars, but enough of those adds up,” Ward said today in a telephone interview. “We’re getting $130 million to $140 million of productivity, and we anticipate we can do that again this year.”

Bonuses for engineers and conductors based on operating and performance goals are aligning worker pay with the company’s results, Ward said. About 75 percent of CSX’s union workers are on a bonus system similar to management’s and the remainder should be added this year, he said.

Fourth-quarter net income climbed to $430 million, or $1.14 a share, from $303 million, or 77 cents, a year earlier, Jacksonville, Florida-based CSX said yesterday in a statement. The average of 27 analysts’ estimates compiled by Bloomberg was profit of $1.09 a share. Fourth-quarter sales gained 21 percent to $2.82 billion, and full-year revenue increased 18 percent to $10.6 billion.

Shipping Volume

Rail volumes rose 13 percent, led by a 23 percent increase in auto shipments, CSX said. Excluding the extra week in the quarter, total volume rose 7 percent. The company has said it delivered about 30 percent of the light vehicles in North America in 2009.

CSX rose $2.33, or 3.4 percent, to $70.04 at 2:26 p.m. in New York Stock Exchange composite trading. The shares gained 33 percent last year.

Union Pacific Corp. is the largest publicly traded U.S. railroad by market capitalization. CSX trailed both Union Pacific and Warren Buffett’s Burlington Northern Santa Fe Corp. by 2009 revenue.

To contact the reporter on this story: Mark Clothier in Southfield, Michigan, at mclothier@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net.

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