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Aug.21, 2017

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SURFACE & DOMESTIC TRANSPORTATION TRUCKING | RAIL | INTERMODAL | AIR & EXPEDITED | DISTRIBUTION 40 THE JOURNAL OF COMMERCE AUGUST 21.2017 By Reynolds Hutchins SOME CSX TR ANSPORTATION customers say changes instituted under new CEO E. Hunter Harrison are contributing to dis- ruption in delivery and lackluster customer service, forcing them to shift intermodal cargo to rival Norfolk Southern Railway or trucking. Harrison, who took the helm at the Jacksonville, Florida-based railway in March, has acknowledged the service dis- ruptions and apologized to customers, while attributing the difficulties to unhappy CSX employees resisting the aggressive cost- cutting measures that are part and parcel of his so-called precision railroading busi- ness philosophy. Despite a flurry of customer complaints, critical survey results, and a letter from US rail regulators on the Surface Transporta- tion Board, Harrison has stuck to his guns. He has rejected complaints as attempts to "low dollar and second guess" his judgment, and has rejected the idea that CSX is losing or will lose business to competitors because of his decisions. During a second-quarter earnings call on July 18, Harrison said the greatest chal- lenge the railroad faces is the "cultural change" taking place as the railroad transi- tions under his leadership. He faced similar opposition to his precision railroading strat- egy while leading Canadian Pacific Railway until late 2016 and, before that, Canadian National Railway, boosting profits at both. "There's going to be a little pain and suffering," he told investors and analysts in the earnings call. "I don't know frankly how to get there without some busting CSX'S PAINFUL TRANSITION New CEO Hunter Harrison apologizes for disruption as some customers say they've been pushed past their limit "There's going to be a little pain and suffering."

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