Dive Brief:
- CSX CEO E. Hunter Harrison expressed his regret to dissatisfied customers for service disruptions, blaming delays on unhappy employees, according to an email seen by Reuters Tuesday.
- Last week, Cowen & Co analysts reported that approximately 80% of CSX customers surveyed found service problematic, resulting in a 40% departure rate to Norfolk Southern. Service was described by one former client as "a complete disaster."
- Harrison cites employee pushback as the problem. He intends to address internal conflict and resolve any service issues customers have experienced.
Dive Insight:
It's beginning to look like Harrison's Waterloo, as the railroad legend is flanked on all sides with dissatisfaction following the start of the railroad's transition to Precision Scheduled Railroading.
Dissatisfaction began to become evident when, on July 18, the CEO told investors the railroad was expecting a rocky transition, as closed rail yards and thousands of layoffs could affect service. Since then, it has only been tough news for the company, as Railway Age published a scathing editorial on his performance and the Surface Transportation Board demanded the CEO be more transparent with the operating changes and its effect on customer service.
CSX's stock has fallen 11% from July 18 to press time and has fallen 1.5% since the markets opened Tuesday, following Harrison's official letter to shippers.
Within the letter to shippers — published in full on Railway Age — Harrison writes, "I think we can agree that more-reliable service and improved asset utilization is a win-win for your business and ours." His vision, as he expressed in a similar letter to Railway Age, is to improve CSX's reliability and cost-effectiveness.
However, he later turns to blame the service disruption on a resistant staff: "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. This resistance to change has resulted in some service disruptions."
The letter further confirms a continuing drama at CSX that goes beyond operational changes and is impacting the company's culture. The anonymous comments sent earlier to Railway Age describe a demoralized staff amid large layoffs. Whether this is the cause of resistance, or not, other reports indicate CSX's transformation is losing the railway provider clients. The question is, how long will the drama and disruptions last?
