Heard at RailTrends 2022
11/18/2022
By Jeff Stagl, Managing Editor
It was enlightening. It was informative. It was entertaining. It was provocative. It was engaging. It was conversational.
There are many ways to describe the content, execution and takeaways of the 16 presentations conducted at our RailTrends conference, which was held Nov. 15 and 16 at the New York Marriott Marquis in the heart of New York City.
Attendees in the packed meeting room heard thought-provoking and sometimes surprising comments from speakers, who ranged from Class I CEOs and high-ranking officers to short-line leaders to the Surface Transportation Board chairman to major association presidents to rail industry observers and stakeholders.
Following are quoted or paraphrased comments from a sampling of the 29 RailTrends presenters.
This year is the most intense year we’ve ever had, following what was the most intense year we ever had in 2021. We’re not doing ourselves any favors at times. With the latest labor agreement, we lost a full year of negotiations because of COVID. Plus, social media has influenced this round of bargaining. I am hopeful yet confident we can get this contract done.
— Ian Jefferies, president and CEO of the Association of American Railroads
Canadian Pacific leader Keith Creel talked about the advantages of and need for his Class I’s proposed merger with Kansas City Southern. An STB decision on CPKC is expected in early 2022. Jeff StaglRailroads have somehow become the bad guys. The labor situation was the top story in the New York Times, Washington Post and Wall Street Journal at the same time. But we have a good story to tell shippers, legislators, regulators and others, so there is an opportunity to fix that. Other transportation sectors are mad at us, and it’s our job to flip that around.
— Chuck Baker, president of the American Short Line and Regional Railroad Association
Listening to what the Class I CEOs said during their third-quarter earnings calls, there is a clear aspiration for growth. But they need to turn aspiration into action. The CEOs are not declaring how different their service needs to be. They are not yet convinced that growth is the way to maximize the value of their rail franchise. Railroads have been clawing their way out of a death spiral for some time now. The four actions they should take are: acknowledge the need for a service transformation, which could take several years to accomplish; use the current downturn as a runway for that transformation; don’t remain in only a cost-cutting exercise and convince stakeholders that volume growth will provide huge benefits compared to continued market share losses; and try to help foster a regulatory environment that levels the playing field with trucks.
— Adriene Bailey, a partner with international management consulting firm Oliver Wyman
The benefits of our Canadian Pacific-Kansas City transaction make me excited not just for shareholders but for all stakeholders. It’s all about growth and enhanced competition. For shippers, it’s not a horizontal merger, it unlocks opportunities on two underutilized routes. Shippers tell us they want an alternative. They would get a more hungry and more aggressive railroad. The facts of CPKC will prove out. This is serving a purpose. The STB is taking its time to review this. They will vet this out. It will show this is a necessity, not a nicety.
— Keith Creel, president and CEO of Canadian Pacific
“It feels good to be free,” exclaimed former CSX leader Jim Foote, who retired as president and CEO in late September. He used the opportunity to freely speak his mind about the impediments of improving rail service. Jeff Stagl“I think CPKC will pass, but it will be the last big one. It’s been tough year after tough year after tough year for the industry. For railroads, the trend lines are improving. But what will the response be if we do declare a recession? Railroads are usually good at beating a recession. The railroads can talk the talk now, but they can’t walk the walk because of the labor issues.”
— Tony Hatch, independent rail industry analyst and RailTrends program consultant
“The United States-Mexico-Canada Agreement is the gold standard by which future trade agreements will be judged. It will benefit all three nations for years to come. We now have trade certainty for the next three years. What we still need to work through is to recognize its potential in Mexico. The intermodal opportunity there is a huge opportunity. We have tried to take advantage of the opportunities by investing $1 billion in our cross-border network since 2013. Our second international rail bridge at Laredo will open at the end of next year. It’s a $100 million, 1.5-year project.”
— Patrick Ottensmeyer, president and CEO of Kansas City Southern
You can’t do the same things the same old way they’ve always been done. It shouldn’t take 7,000 unnecessary tasks on a car en route. Cars go down to a yard in Birmingham, and then they figure out where they need to go. So instead of two days, it takes a car 11 days to reach a destination. Cars arrive on time 50% of the time and the other 50%, they don’t even know where the cars are. It takes hard work — this can be done. You need desire and passion and an entrepreneurial style. I would say there is hope, great hope. I know we are on a smart track. It is possible to do great and wonderful things in this industry.
— Jim Foote, former CSX president and CEO who retired in late September
STB Chairman Martin Oberman was highly critical of Class Is’ service performance, approach to doing business and workforce management of late. Jeff Stagl
“You can find opportunities regardless of economic impact. The key thing is consistency. The easiest way to grow is to get consistent service. Don’t miss switches and interchanges.”
— Stefan Loeb, executive vice president and chief commercial officer for Watco
“We are trying to restore the legendary focus on service at CN. I see it from the operator view and the customer view, and understand the end-of-supply-chain frustration. We can’t expect regulations to fix it. Priority No. 1 is getting back to basics with scheduled operations. This gives us a view on where we have capacity in the network and where the pinch points are. Our second priority is people. We can’t reach our potential without people. The challenge is developing the next generation of front-line workers. We need them to power growth, and change how we work. We want to be an employer of choice. We have great talent, we just don’t have enough of it.”
— Tracy Robinson, president and CEO of CN
“I want to step back and reflect as to why there’s an STB and why I have this job. It’s not about velocity creeping up or dwell time creeping down or having a lower operating ratio like some contest. Railroads are not functioning optimally well. It’s beyond question that railroads’ service problems are a direct result of the reductions in their workforce. It hurts customers every day. Railroads have said that once their crew ranks are back at full strength, service will return to pre-pandemic levels. But why should that be the goal? That is simply a return to mediocrity and rail service that continues to be a damper on the economy and is completely unacceptable. When I say I take things the railroads say with a grain of salt, it’s more like a 270,000-pound rail car of salt.”
— Martin Oberman, chairman of the Surface Transportation Board
“We only make one thing that people want to buy: service. I wake up every day and think about all the people who depend on us. It’s an important job that we have, and we take it very seriously. We launched our TOP|SPG operating plan in June and it covers three critical things: that we have a good plan, good resources and good execution. We are on a trajectory to better growth. Our leader Alan Shaw says we’re not there yet, but we’re getting better. The three key characteristics of service are simplicity, reliability and consistency. No one wants to deal with something complex and unreliable. We need service that delivers on those three characteristics.”
— Ed Elkins, executive vice president and chief marketing officer for Norfolk Southern Railway
I accept this award on behalf of the entire Watco team. People are a critical aspect to our business. We depend on the caliber of the Watco team. We serve over 5,000 customers every day. It’s foundational that we value our customers. The No. 1 thing I learned in my 39 years in this business is that the only thing we have to sell is service. The things I’d like to see the industry do are balance the needs of customers with the expectations of shareholders with a good outcome for all; continue to embrace technology, like autonomous technology; and help ensure any new regulations or changes consider the true cost of each mode.
— Rick Webb, executive chairman of Watco and the winner of Progressive Railroading’s Railroad Innovator Award for 2022
