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CSX: Near-term cost cutting may last beyond COVID-19

04/05/2020
in Business, Rail
CSX: Near-term cost cutting may last beyond COVID-19
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  • CSX has put 400 locomotives in storage since the end of March to cut costs in light of down volumes caused by the manufacturing and economic slowdown from COVID-19. CSX’s total volume for the first quarter was down 1% year-over-year
  • Crew starts were down 11% YoY in the first quarter (ended March 31), and the railroad has been working aggressively to reduce train starts further since the middle of March, said CFO Kevin Boone.
  • Total employee counts were down 7% at the end of the first quarter. Railroad executives did not say to what degree it is reducing staff further, but outlined a plan for train and engine (T&E) workers to sign up for a “retention board” from which furloughed employees could retain health coverage and come back to work with just 48 hours notice when volume returns. Foote said a large number of T&E staff have chosen this option over a traditional furlough which would require 15 days of notice before returning to work.

With 400 additional locomotives off the network, CSX’s total count is now less than 50% of the 4,000 it operated before implementing precision-scheduled railroading in 2017.

Foote said CSX is working to maintain what it sees as a high level of service despite the down volumes. Still, some rail shippers are going to notice the latest cuts.

“The reason that we’re reducing train starts is because their volumes are down and all we need to do is to have an honest dialog with our customers about the fact that we don’t think we can serve them five days a week, how about three,” said Foote.

The railroad now has the task of maintaining the service and reliability improvements it’s achieved through PSR, while cutting costs further than that strategy has dictated, executives explained.

“We have worked like dogs to get these service levels of this railroad up to where they belong and to win back credibility from our customers,” said Foote. “We continue to do that and we’re not going to, just because volumes are declining … walk away from that strategy,” added Executive Vice President for Sales and Marketing Mark Wallace.

Despite this concern, executives said CSX will also attempt to use the down volumes to permanently take more costs out of the network.

“We’re really starting to pivot and use the current environment to go after structural opportunities in our operation. We will continue to adjust our network as demand dictates going forward, but we are also making changes where assets will not need to come back in the future,” said Jamie Boychuk executive vice president for operations — adding that the railroad will still be ready to “not leave a carload behind” when volume growth returns.

Source: https://www.supplychaindive.com/ 

Tags: covid19CSXfeatured
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