The Undisputed Master of Making Trains Run on TimeBy
Hunter Harrison is moving CSX trains faster and on time
Crash course for managers has shares up 42 percent this year
Railroads have been around for more than two centuries. So it would seem to the casual observer that, at this point, there should be little mystery about how to efficiently run the trains.
And yet, at age 72, Hunter Harrison is proving once again that he’s better at it than anyone else in America. Three months into his tenure at CSX Corp., trains are running 10 percent faster and the percentage of on-time arrivals has risen to 79 percent from 58 percent before he came on board. Investors have taken note: the company’s shares have jumped 42 percent since January when Harrison left the top job at Canadian Pacific Railway Ltd. and said he was seeking the leadership of CSX amid a management shakeup.
“The objective is moving cars faster,” said CSX Chief Operating Officer Cindy Sanborn, a thirty-year veteran at the railroad who marvels at the “amazing" pace of change since Harrison took charge. “You look at our service and performance measures and you can see it.”
Outspoken, folksy and brash with a deep southern drawl, Harrison has won a legion of followers in the industry over the years. When Harrison was chief executive officer of Canadian National Railway Co. a decade ago, he wrote a book on running a profitable railroad. That book, which recently sold for $600 on Amazon, is still required reading for anyone getting into the business today.
Harrison officially became CSX’s CEO in March after a four-year stint at Canadian Pacific. Lured there by activist investor Bill Ackman, Canadian Pacific’s profits improved sharply and the stock soared 161 percent under Harrison’s control. CSX, prodded by its shareholders, hired him two months after he quit Canadian Pacific and approved picking up the $84 million payout that he left on the table.
As much a natural-born teacher as he is a businessman, Harrison recently has been tutoring CSX’s top management with an intensive course in Precision Scheduled Railroading, his system for making trains operate more efficiently that over the course of his career has led to lifting the three railroads he previously ran to the most profitable in the industry.
Sanborn has been attending Harrison lectures, one of which lasted 11 hours, furiously filling yellow legal pads and taking the pop quizzes that Harrison springs on his students.
“He’s a passionate professor,” said Sanborn. “He’s changed the industry in many, many ways and it’s kind of neat to have a front-row seat.”
CSX still has a long way to go. The railroad, for instance, is just getting started on Harrison’s plan to balance the number of trains traveling north with the trains traveling south, which improves locomotive efficiency and keeps crews from having to be shuttled back in company vans while on the clock. CSX also is working to schedule more pickups over seven days.
Still, CSX has moved quickly to streamline under Harrison. Most notable has been the closing of six of 12 “hump yards,” so named for the small hill up which rail cars are pushed, unhitched by an operator and rolled down the other side onto one of forty different tracks. The cars are assigned automatically to specific tracks to build new trains that each head out in different directions.
A hump yard is the most efficient way to switch freight cars. So closing down these “assembly lines,” as Sanborn calls them, seems counterintuitive. The alternative to a hump yard is pushing around cars with a locomotive to build trains, known as flat switching. It doesn’t work as well with a high volume of cars.
Harrison’s innovation, though, is arranging freight cars with a common destination into blocks of at least 20 much earlier in the process. By doing so, Sanborn discovered that as many as 800 of the 1,000 cars arriving daily to major hubs could bypass the yard altogether. The remaining 200 cars -- mostly aligned in blocks -- can be flat switched on nine departure tracks without entering the hump yard.
That approach, though, can be disruptive to customers. That’s why some may jump to rival Norfolk Southern Corp., said Rick Paterson, an analyst with Loop Capital Markets. After Harrison took over at Canadian Pacific in 2012, the railroad lost market share to Canadian National. Canadian Pacific lost 5.7 percentage point of share in intermodal, which is freight loaded in containers, and 3.7 percentage points for autos, Paterson said.
“There were disgruntled customers through the transition, and some of that business spilled over to the competitor,” Paterson said.
Glitches while closing down hump yards did temporarily hurt service, though the problem has been resolved, said Sanborn. CSX is also pushing shippers to schedule more frequent freight pickups, including on Sundays when some don’t work, said Fredrik Eliasson, chief marketing officer.
“Many of our coal customers already had the capabilities, but they didn’t necessarily want to do it,” said Eliasson. “What we’re saying here now is ‘We really need you to do it.’ ”
The reward for customers is a faster-operating railroad that returns their rail cars quicker, allowing shippers to keep smaller fleets, Eliasson said.
No one is better than prodding both executives and customers to adapt to those sorts of changes than Harrison himself. “He knows what’s on the other side of the mountain,” Sanborn said.