By JIM RUTLEDGE

D.C. Correspondent

WASHINGTON, D.C. — The day before CSX Corp. announced its CEO hired just 10 months ago was taking sudden emergency medical leave, the federal Surface Transportation Board (STB) sent a letter to Hunter Harrison requesting an explanation for shipping delays and rail bottlenecks that have plagued the nation’s third-largest rail carrier over the past several months.

Harrison, 73, died two days later on Dec. 16, following continued unexplained medical issues that had caused him to constantly use a portable oxygen tank and work at home, 400 miles from CSX’s Jackson, Fla., headquarters. On the cause of death, a company spokesman only told Farm World the CEO died “due to unexpectedly severed complications from a recent illness.”

On Dec. 22 the CSX board of directors appointed James M. Foote to succeed Harrison, also giving him the title of president. Foote, 63, had joined the company in October as its new operations chief, at Harrison’s urging.

Within months of Harrison’s hiring last March, the renowned railroad turnaround artist – as he was described by The Wall Street Journal – launched an aggressive restructuring of the 21,000-mile rail service that is used by farmers and food shippers from the Midwest to the Mid-Atlantic and Southeast.

The plan, which Harrison called “Precision Scheduled Railroading” (PSR), slashed hundreds of staff positions, shut down a major rail hub, idled hundreds of locomotives and extended the length of CSX freight trains, several that hauled hundreds of railcars running more than two miles in length.

The PSR plan calls for fewer trains to run on longer routes so as to stick more closely to delivery schedules, a change the company said should ensure more timely deliveries that are meant to be a better use of its locomotives.

Farmers and ag companies and other food suppliers make up 7 percent of the thousands of CSX customers that together generated up to 11 percent of the railroad’s 2017 third-quarter revenues (ending in September) of $2.74 billion.

Three months ago Harrison tagged his former railroad colleague, Foote, to serve as his chief operations officer. Following Harrison’s death, the board named him acting CEO, then permanently selected him as president and CEO six days later.

Foote was marketing executive at the Canadian National Railway Co. from 2003-09, when Harrison there led a turnaround of the Canadian rail service, and earlier, at Canadian Pacific Railway. Shortly after Foote was hired, three top CSX executives resigned, depleting the executive ranks during a time of increased regulatory scrutiny by the STB.

The STB held a rare “listening” session with CSX executives and its customers in October over hundreds of customer complaints about service delays that have caused missed deliveries, the lack of railcars and trains being sent hundreds of miles out of the way, further complicating schedules. At the time of the public hearing at STB’s Washington, D.C., headquarters, federal officials were in constant communication with CSX executives, monitoring progress.

The Dec. 14 two-page letter to Harrison requested “detailed updates” on five issues, situations that had previously prompted STB review, and on Jan. 3, CSX responded:

•Car order fulfillment: Shippers continued to raise concerns over CSX’s lack of progress in improving its railcar order fulfillment. CSX replied: “As network velocity continues to improve and cars cycle more quickly, CSX expects to continue fulfilling demand at high levels, which is good for customers and the company.”

•Local service performance: Issues affecting CSX’s ability to match or exceed its local service performance in 2016, including missed switches and poor-on-the-ground communication and coordination with customers.

CSX responded: “With terminals and line-of-road in a fluid state, and velocity and dwell substantially improved, we are targeting enhancements in yards, local service and efficient switching. Accordingly, we expect ongoing improvement in our local service measurements concurrent with other performance measures.”

•Car trip plan performance: CSX’s progress in developing car trip plans and its actual performance versus plan, which CSX has indicated is a key metric for its new operating plan. The response: “CSX is making good progress in our development of the end-to-end trip plan compliance measure and methodology.

“We anticipate a testing period of approximately 90-120 days to ensure the measurement works as intended and to educate and train our teams on how to modify operating practices through the lens of optimizing trip plan compliance, which will directly benefit customer experience.”

•Communication: CSX’s initiatives to proactively improve communication with shippers, including providing advance notice of important service changes and maintaining effective resources to receive and resolve customer service problems. The response: “As the new CEO Foote said, ‘I am committed to a culture of customer advocacy.

“’CSX Customer Service personnel receive and address customer concerns when needed to supplement the direct outreach channels of local operations and sales and marketing. We also prepare and update our customers regularly utilizing the electronic platforms of ShipCSX, Service Advisories and Intermodal Fast Facts.’”

•Chicago: Any modification, implemented or planned, concerning CSX’s operations in and around the Chicago gateway. In brief, CSX said: “Our Chicago interchanges remain current and fluid with no operational modifications currently planned.”

 The STB also directed Foote to set up an “in-person” meeting with the government panel to discuss operational issues. The letter was signed by STB Acting Chair Ann Begeman and Vice Chair Deb Miller. No date has been set for Foote’s appearance.

Ever longer trains

 In addition to the new STB inquiries, the investigative arm of Congress, the Government Accounting Office (GAO), announced it had launched a probe into the safety of increasingly long freight trains operated by CSX, Union Pacific Corp. and other major railroads, aimed at boosting profitability.

CSX began extending its trains by more than 400 feet to 6,833 feet, which at the time, the company said, was part of Harrison’s PSR streamlining moves. Prior to Harrison, the average train lengths were about 1.5 miles long, but Harrison ordered the train lengths extended up to three miles.

Since then, the longer trains have suffered at least three major derailments, including one in June with a 13,147-foot train in Crestline, Ohio. The causes of the derailments are still under investigation by the Federal Railroad Administration as well as the STB and the National Safety Transportation Board.

With regard to the GAO inquiry, a company spokesman told Farm World, “CSX has not yet been contacted by the GAO. Any such study should include a face-based discussion that defines the term ‘longer trains’ and highlights the efficiency and environmental benefits of increased train lengths.”

In April, the CSX board approved Harrison’s compensation package of $12.9 million that included a base salary of $2.9 million, a bonus of $3.5 million and $6.5 million in non-equity incentives. That was in addition to $29 million he was reimbursed as early retirement compensation when he left Canadian Pacific Railway in February; last year, he earned $18.8 million there.

The board approved an additional $55 million to pay activist investor and CSX shareholder Mantle Ridge for reimbursement in payments it made to Harrison to get him to join CSX.

New fees for freight shipments

Effective Jan. l, CSX began charging new fees for freight shipments to Mexico, and hiked charges to customers that failed to load or discharge railcars by contracted deadlines or shipped unsafe loaded or overweight railcars.

The company sent a notice to its customers Nov. 15 to encourage them to better conform to CSX’s schedules as it faced persistent service delays and disruptions caused by the PSR operations overhaul.

Among CSX’s new fees, demurrage fees for cars carrying flammable materials will rise to $250 per day from $175, and to $150 from $105 for non-hazmat cars.  Refrigerated cars will be charged $250 per day, up from $200.

Charges for overloaded railcars will rise to $1000 each from $750 and $1,000 per unsafely loaded railcar, up from $750. For shipment to Mexico, food shippers and others may be charged a new fee of $200 per railcar for incomplete or erroneous customs documentation or data, and a service fee of $25 per railcar for paperwork and processing.

Scott Jenson, a spokesman for the American Chemical Council, a lobby group, said, “Customers are already dealing with increased transportation costs and major service disruptions because of the ongoing CSX service failures.”

An independent rail analyst, Anthony Hatch, told Reuters, “Shipper-caused delays are a part of the whole story, along with CSX-caused delays.”

In an email to Farm World, a CSX spokesman said in explaining the fees. “This is the first time in five years that CSX has increased demurrage fees. These fees and other charges are designed to improve accountability, and help the company and our customers plan more effectively, so we can provide cars in a timely and consistent manner.”