Northwest Arkansas Democrat-Gazette

Restructur­ing rolling along at CSX rail

New chief executive officer says he’s pleased with consolidat­ion efforts so far

- THE ASSOCIATED PRESS JOSH FUNK

OMAHA, Neb. — CSX’s new chief executive is defending the restructur­ing progress made in the first four months since he was hired to lead a turnaround of the railroad.

CEO Hunter Harrison, who’s previously led turnaround­s at three other railroads, says he’s pleased with the improvemen­t so far.

“I thought we had a hell of a quarter,” Harrison said Wednesday.

The Jacksonvil­le, Fla.-based railroad has taken nearly 900 locomotive­s and 60,000 freight cars out of service and laid off 2,300 people this year. Harrison said those changes haven’t all paid off yet.

Changing the operating model a railroad uses is difficult because everyone who works there is used to operating a certain way. Harrison said the level of resistance is about what he expected.

CSX is working to eliminate infrastruc­ture it doesn’t need and consolidat­e operations. That includes shutting down most of the railroad’s 12 rail yards to eliminate redundancy.

The railroad will also consolidat­e all of its dispatchin­g into one central location instead of the current nine early next year.

CSX reiterated last week that it’s on track to achieve a forecast 25 percent improvemen­t in earnings per share this year. Analysts surveyed by FactSet had been predicting adjusted annual earnings per share this year of $2.29.

Harrison was hired by CSX in March after pressure from the Mantle Ridge hedge fund that owns 5 percent of the railroad. Harrison previously led turnaround­s of Canadian Pacific, Canadian National and the Illinois Central railroads.

CSX Corp. said earlier this month that its second-quarter net income improved 15 percent to $510 million, or 55 cents per share, as it hauled 2 percent more freight. That’s up from $445 million, or 47 cents per share, a year ago.

Coal was somewhat of a bright spot in the quarter with a 7 percent increase in the volume CSX hauled. But demand for coal has crumbled over the past several years because natural gas has been so cheap and environmen­tal concerns have been growing

Harrison offered a bleak long-term outlook for the fuel and said he wouldn’t make any major investment­s to haul coal.

“Fossil fuels are dead. That’s a long-term view,” Harrison said. “It’s not going to happen overnight. It’s not going to be two or three years, but it’s going away in my view.”

The railroad’s quarterly results were weighed down by $122 million in restructur­ing charges. Without those charges, the railroad said it would have reported earnings per share of 64 cents.

Most of the $122 million restructur­ing charge in the second quarter was related to Harrison’s hiring. CSX agreed to cover $84 million in compensati­on that Harrison forfeited at Canadian Pacific when he retired early. Shareholde­rs approved those payments last month.

CSX operates more than 21,000 miles of track in 23 Eastern states and two Canadian provinces.

 ?? AP/GENE J. PUSKAR ?? A CSX freight train passes through Homestead, Pa., earlier this year.
AP/GENE J. PUSKAR A CSX freight train passes through Homestead, Pa., earlier this year.

Newspapers in English

Newspapers from United States