CSX, Shippers Clash Over Service Problems

CSX Corp. Chief Executive Hunter Harrison says his railway has never run more smoothly. Some of his largest customers disagree.

Mr. Harrison and shippers clashed over CSX service issues during a hearing on Wednesday that was called by the Surface Transportation Board, a federal regulator, amid complaints about widespread CSX delays and congestion over the summer. While Mr. Harrison says the company has ironed out the problems, some customers say they are still suffering.

Agricultural giant Cargill Inc. said that as recently as Monday, it had to shut down a Lafayette, Ind., plant during the morning because local train crew members, having exceeded the number of hours they were allowed to work, couldn't take its railcars. About a week earlier, a Sidney, Ohio, plant shut down for two days because it hadn't received empty cars from CSX to load.

Brad Hildebrand, a Cargill vice president, said service levels haven't improved from last year and warned federal regulators from drawing conclusions based on recent CSX r eports showing improvement. "One month does not make a trend," he said.

Mr. Hildebrand laid the blame on Mr. Harrison's "precision scheduled railroading" strategy, saying it has resulted in worse service. "In a nutshell, PSR means having to do with less," Mr. Hildebrand said.

Mr. Harrison defended the strategy, saying that trains are running faster, cars are spending less time in yards and complaints from shippers are down.

The problems during the summer were due to bungled execution, he said. He apologized to shippers and acknowledged that it was a mistake to close as many hump yards, key facilities that sort railcars along the network, as CSX did earlier this year.

"This is not a failure of precision scheduled railroading," Mr. Harrison said.

Other shippers on Wednesday were eager to share their experiences. Chemical company Chemours Co. said CSX failed to provide scheduled service more than half the time during the summer, and it has spent more than $1.3 million in excess costs to ship product to customers.

"The last five months have been a costly disappointment for us," said Kevin Acker, Chemours strategic relationship and category manager for rail.

"If anything, it has gotten worse in September and October," said Lisa Powers, distribution manager at chemical company Cristal. "It's a very miserable time trying to deal with them."

Kellogg Co. also detailed problems at its Pringles factory in Jackson, Tenn., which at times has waited on CSX cars being shipped from Illinois that instead wound up in Idaho.

Sharron Moss-Higham, a distribution executive for Kellogg's snacking business, said the company has been able to avoid shutdowns at the Pringles plant by trucking some ingredients, a delivery method that is triple the price of rail, and increasing its stockpile of potato flakes to make sure it doesn't run out of the key ingredient. But the company had to shut down parts of a production line at a North Carolina plant.

Shippers called on the Surface Transportation Board to require CSX to provide notifications when it changes train schedules or routes, among other changes.

Mr. Harrison said that CSX is seeking to develop the most efficient rail network, using data and conversations with customers, rather than bow to each shipper's demands.

"We cannot have, with due respect, each individual customer designing their own schedule," he said.

The Surface Transportation Board has been meeting weekly with CSX executives to assess the status of the railway and pace of improvements. It has also mediated service problems between some shippers and the CSX.

Write to Paul Ziobro at Paul.Ziobro@wsj.com

(END) Dow Jones Newswires

October 11, 2017 13:48 ET (17:48 GMT)