Dive Brief:

• All automotive shipments moving through CSX's Lordstown, OH, rail yard have been halted in a "freight embargo," Reuters reported, based on an e-mail sent out Sept. 8, which the outlet acquired.
• The Ohio yard is a transshipment hub for vehicles, unloading automobiles from trains so they can be trucked to dealerships. The embargo was put in place to give workers time to relieve congestion.
• CSX executives insist the problems are transitional, and some customers agree there have been improvements. However, many still cite "serious service problems" from Cincinnati to New Orleans, according to Reuters.

Dive Insight:

The recent disruption in Ohio shows the effects of the transition are far from over, and shippers are still being affected negatively by congestion in rail yards.

CSX executives have brushed off the disruptions throughout the transition, consistently promising they would be but "temporary hurdles" that could be resolved quickly. But even a small disruption can amount to large losses for shippers, many of which rely on small margins due to just-in-time production and lean strategies. Widespread congestion and lack of communication on steps to remediate it even led the Surface Transportation Board (STB) to get involved after receiving numerous complaints from shippers.

Now, all eyes will be on CSX in October, as two major events reveal the severity and financial impact of the railroad's transition to Precision Scheduled Railroading (PSR).

On Oct. 11, company leadership will be in Washington, D.C., for a STB listening session, where stakeholders will discuss shipper complaints and whether the railroad is sufficiently addressing these. The company is already in weekly communication with the regulator, but this will be the first time the railroad is publicly held accountable for the disruptions before their clients.

Not long thereafter, stakeholders will be privy to the financial effects of the disruptions during the company's Q3 earnings call, set to take place Oct. 17. Much of what is said at the STB listening session will have been heard before, but the chat with investors — and the questions thereafter — will reveal how damaging the disruptions have become for the railroad. 

Shippers have been reportedly defecting to trucking and Norfolk Southern for their transportation needs. These changes may have only been temporary solutions, but the company is already feeling the effects. Earlier this month, Reuters reported CSX slashed its financial outlook by up to 4% due to the disruptions.

CSX has remained steadfast in its messaging despite the various challenges in the transition to PSR. At the Cowen & Company Global Transportation Conference, the company was unapologetic about the disruptions and changes. The transition may have affected Q3 and EPS performance, but the "long-term vision remains intact," and resources have been fully deployed to guarantee future success, according to a CSX presentation.

These shifts in resources include redesigning the CSX rail network, increasing train length, improving locomotive efficiency, decreasing fuel consumption, reducing operating units, slashing crew starts and minimizing its workforce by 3,700 employees. 

If the presentation serves as a prelude, stakeholders can expect CSX to remain resolute and boast its successes over Q3, despite the effects on shippers. To date, CSX stock is 78% higher than a year ago and only 4.7% below its July 12 peak.