As Hunter Harrison works to improve operations at CSX Corp., the Jacksonville-based railroad company is losing some business during the transition because of service issues that have caught the attention of federal regulators.
In a research report Tuesday, Cowen & Co. analyst Jason Seidl said 80 percent of respondents surveyed by his firm have experienced service issues with CSX since it began implementing Harrison's Precision Railroading plan.
That has prompted nearly 40 percent to switch some of their freight shipments to CSX rival Norfolk Southern Corp., and 67 percent have moved shipments to truckers, Seidl said.
Comments from shippers quoted by Seidl called CSX's transition a “dumpster fire” and a “complete disaster.”
The U.S. Surface Transportation Board also has been hearing complaints from CSX customers, prompting the board to send a letter to Harrison last week expressing its concerns about the service issues.
Precision Railroading is a system Harrison implemented at other major railroads that emphasizes more efficient scheduling and movement of freight.
Harrison joined CSX in March and said he would implement his system, which has been expected to improve CSX's operating efficiency.
However, according to the STB letter, “shippers have complained that transit times have increased significantly and/or become unpredictable; loaded and empty railcars sit for days at yards; switching operations have become inconsistent and unreliable; car routings have become circuitous and inefficient; and CSX customer service personnel have been unable to provide meaningful assistance.”
The STB requested top CSX officials have weekly service calls with the board to monitor the company’s progress.
Seidl said Harrison sent an email to customers Monday promising to improve operations.
Reuters news service Tuesday reported Harrison blamed employee resistance to his changes in the email.
“The pace of change at CSX has been extremely rapid, and while most people at the company have embraced the new plan, unfortunately, a few have pushed back and continue to do so,” Harrison said in the email, according to Reuters.
That “resistance to change” caused service disruptions, he said with an apology.
CSX has cut about 1,400 jobs in the first six months of this year, including some before Harrison arrived, and Harrison said last month there could be more jobs cut before the end of the year.
Seidl believes the issues are “transitory” and won’t hurt CSX over the long term.
“While it is painful for many shippers today, we expect that over the next 12-18 months CSX customers will be more pleased with the rail's service quality,” he said.