- Hunter Harrison, the new CEO of CSX, plans to idle approximately 550 locomotives and 25,000 railcars, The The Wall Street Journal reported reported last week. Further closures are under consideration.
- Since Harrison took over in March, CSX has seen a 9.6% surge in revenue, and a $10 billion increase in share value, with a 6.4% increase to $49.94 per share. Dividends have been raised accordingly, and a $1 billion share buyback has been planned.
- In June, current shareholders will decide on whether to compensate Harrison to the tune of $89 million, which he sacrificed when breaking his contract with Canadian Pacific to head CSX. If his desired compensation package is not approved, Mr. Harrison plans to quit his new position.
Significant hype has surrounded Hunter Harrison's appointment as CEO of CSX, and recent results have investors excited about his tenure at the helm of the Class I railway. The reason? The railroad legend plans ot implement his trademark precision railway management strategy at CSX, just as he did at Illinois Central Railroad (IC), Canadian National Railway (CN) and Canadian Pacific (CP).
Though he has thus far fulfilled his promise of reducing operating costs by reducing rail yards, there's quite a bit more to the process of precision railroading, including the prioritizing of punctuality of shipments over available space, similar to passenger planes wherein scheduled departures occur regardless of available seats. Further, with the elimination of locomotives and railcars, "precision" is achieved through improved flow. Running fewer trains faster while keeping to a tight schedule allows better utilization of remaining yards and cars, and can ultimately produce savings.
However, it should be noted Harrison's tenure with CSX has been short so far, and scrutiny over the success of his strategy for a U.S. railroad will continue. Regardless, change appears to be coming for the railroad industry, and it will be interesting to see if performance improves for shippers alongside better operating margins.