Mark Wallace joined CSX Corp. in early 2017 as part of a sweeping overhaul of the Jacksonville-based railroad company’s top management.
As far as he’s concerned, the new team is succeeding in its goals of improving the company’s operations, Wallace said Dec. 10 at the quarterly luncheon of JAXUSA Partnership.
“I don’t think it would be overstating it to say we have managed to fundamentally transform the company,” he said at the event at the Hyatt Regency Jacksonville Riverfront.
More than 450 people attended the event. JAXUSA Partnership is the economic development division of JAX Chamber.
Wallace, CSX’s executive vice president of sales and marketing, moved to Jacksonville to join the company shortly after the late Hunter Harrison became CEO in March 2017.
“It was March 2017 that CSX embarked on the transformational process,” he said.
CSX has cut about 5,000 jobs in its operations throughout the Eastern U.S. over the past three years, but not because of “ruthless cost-cutting and downsizing,” Wallace said.
“One my main goals today is to debunk that,” he said.
Increasing efficiency on the railroad will help grow revenue by bringing back freight customers who are using trucks to transport their goods.
Wallace said railroads only have about 8% of a $980 billion annual transportation market in North America.
“Truckers have been eating railroaders’ lunch for decades,” he said.
“Enter the scheduled railroading operating model.”
Scheduled railroading is an efficiency initiative being implemented by other major North American railroads after the recent success of CSX.
CSX has reduced its operating ratio (operating expenses divided by revenue) below 60%, about 10 percentage points lower than it was three years ago. Analysts consider that a key metric of a railroad company’s efficiency.
While operating costs have declined, Wallace said CSX is benefiting from its efficiency by providing better customer service.
“For many years, North American railroads have not been providing a very good product to their customers,” he said.
CSX’s share of the transportation market is a little more than 1%, Wallace said, but even a half-point increase in market share with better service would mean big revenue gains.
“It represents billions and billions of dollars of market share opportunities,” he said.
While many in the industry refer to the initiative as precision scheduled railroading, or PSR, CSX has been avoiding that term and calling it “scheduled railroading.” Wallace used only that term in his talk Dec. 10.
“I’ve been working under that model since 1998,” the railroad industry veteran said after the meeting.
“Everybody in the industry is now calling itself a PSR railroad,” he said. “I think it represents something different for every railroad.”
When the new management team came on board in 2017, longtime CSX Chief Executive Michael Ward left the company. While current CSX executives don’t often talk about Ward’s tenure, Wallace gave credit to Ward for encouraging CSX employees to become involved in Jacksonville community causes.
“A tip of the hat to Mr. Ward,” he said. “We are committed to keeping up the good work he championed.”
While the new management team largely came from outside of Jacksonville, Wallace said after the meeting the city does “absolutely not” have to worry about the Fortune 500 company moving its headquarters.
“Had we not done what we have done at CSX, the headquarters might be in Omaha,” he said.
He said CSX’s low stock price before the new team came in made the company vulnerable to a takeover by a company like Omaha, Nebraska-based Berkshire Hathaway Inc., which acquired Burlington Northern Santa Fe Corp. in 2009.
“I think we’re the acquirers now” if there are big mergers in the railroad industry, Wallace said, adding he expects CSX’s office to remain in Downtown Jacksonville.
“500 Water St. is going to be CSX’s headquarters for as long as I’m here.”
