Heard at RailTrends '23
11/27/2023
By Jeff Stagl, Managing Editor
A record number of attendees packed a meeting room during RailTrends® on Nov. 16 and 17 in New York City hoping to learn more about the state of the rail industry and gain valuable insights from a number of key stakeholders.
And the 31 speakers who participated in 19 presentations at the New York Marriott Marquis in the heart of the Big Apple did not disappoint. Interesting, thought-provoking, informative — and at times, surprising — comments abounded.
The speakers ranging from Class I CEOs and high-ranking officers to short-line leaders to the Surface Transportation Board chairman to major association presidents to industry observers to executives from railroad suppliers tended to keep the standing-room-only crowd highly engaged — and in the room. They covered a broad range of topics, including the economy, regulations, legislation, labor, rail service, customer centricity, capital investments and trucking competition.
(From left to right) Tony Hatch and Progressive Railroading Editor-in-Chief Pat Foran presented the 2023 Railroad Innovator Award to NS President and CEO Alan Shaw on Nov. 16. Jeff Stagl Following are paraphrased comments from a sampling of the 31 presenters at the 19th annual RailTrends conference.
Rail safety legislation is front and center. We see an opportunity for consensus-based legislation. It comes down to beliefs versus data. Data is always better. The data will set you free. And as for railroads and labor unions continuing to agree on contracts, it comes down to meeting employees’ changing demands. Employees want set work days to plan out their life — it’s what they expect these days. It’s possible to meet employees’ expectations but still run a strong railroad.
— Ian Jefferies, president and CEO of the Association of American Railroads
It’s been a rough six years in the industry at this point. But I feel the next six years will be better than the last six. We are starting to see green shoots in the industry, that we are turning a corner. Safety is first now, and it has to be that way. We are far, far safer than the competition and far, far safer than we used to be, but we have a ways to go. The Norfolk Southern accident in East Palestine, Ohio, was an example that things aren’t perfect.
— Chuck Baker, president of the American Short Line and Regional Railroad Association
I am happy to accept this award for all the 20,000 people at NS and others who contribute to our success. We certainly had our challenges in 2023. But challenges are an opportunity to reveal your character and test your resolve. We needed a better way forward — we had to be a more customer-centric organization. We need to listen to customers, to tell them what we can do. We only sell one product: service. We need to build trust with customers, so they trust they are getting a safe and reliable service product. We have violated the trust of some customers because we didn’t have enough resources. We now will continue to invest through all economic cycles. A faster railroad is a less expensive railroad. We want to be known as the railroad that keeps its promises.
— Alan Shaw, president and CEO of Norfolk Southern Railway, and the winner of Progressive Railroading’s 2023 Railroad Innovator Award
CPKC now operates “the most relevant rail network in modern times,” said Keith Creel, the president and CEO of the industry’s newest Class I. Jeff Stagl Now that we are on the other side of the journey that started last year to combine Canadian Pacific and Kansas City Southern, we see it was a battle worth fighting for. This is the most relevant rail network in modern times. The truths and facts are playing out. We created competition and the nation gets stronger as a result. We said we would put two railroads together and it would be better, and that has happened. The most important thing is we are doing it in a very sustainable and safe way. Competition is undeniably changing to the benefit of all stakeholders. We are the only Class I that can equally partner with or compete against all the other Class Is. When you do both, the customer wins, they have more choices. Competition makes us better. Sometimes complacency can set it, so it was good to do something challenging like this.
— Keith Creel, president and CEO of Canadian Pacific Kansas City
My term expires on Dec. 31, and I have decided that I will not seek a reappointment on the board. Under the holdover provision, I will continue to serve on the board several months into next year. There are several things I’d like to get done before I go — I still have much work to do and many initiatives to complete. I look forward to saying more over the next few months about lessons learned and the opportunities for our country that are achievable through a robust railroad industry, including possible paths on how we might get there. It has truly been a privilege to serve in this role. We extended the comment period on the reciprocal switching rulemaking. It has become apparent to me that many of the ills of the national freight-rail network stem from a lack of competition in the industry and the fact that many rail customers are captive to one Class I. The proposed new rule sets specific, objective and measurable criteria for when prescription of a reciprocal switching agreement will be warranted.
— Martin Oberman, chairman of the Surface Transportation Board
By 2030, the industry will need to replace 4,000 locomotives. And by 2040, that need will grow to having to replace 12,000 locomotives. But replace with what is the question. Railroads already are transitioning to become net-zero railroads. In terms of replacing the locomotives, we want to reduce the risk of $20 billion to $30 billion in the cost of asset write-downs. How fast and cost-efficiently can railroads get to net zero? Whether they are battery- or hydrogen-powered or use catenary, all the alternative locomotives have benefits and challenges. We believe that renewable-fuel mandates should properly allocate what now is a scarce supply; policies on alternative fuels should be multimodal and continental, including Canada and Mexico; and railroads should accelerate and scale propulsion alternatives together.
— Adriene Bailey, a partner with international management consulting firm Oliver Wyman, a diamond-level RailTrends sponsor
G&W’s Miller: Railroads need to collaborate though an ecosystem approach, which promises enhanced agility, improved supply chain management and increased innovation. Jeff StaglThere is no growth in the industry. People say it’s because of coal, but other freight hasn’t grown, either. That’s sad because we have a good story to tell. Our safety is better, there’s the high fuel efficiency of rail and our strong sustainability story. So why is there no growth? We don’t serve the new supply chains, the transit experience on rail is so unpredictable and rail is not easy to do business with. We’ve got to be a better partner with customers. We have to be customer-centric to better meet customers’ demands and offer an integrated solution to make it easier for them. Our competition will always be a little bit better at this, so how do we fix that? We have to collaborate though an ecosystem approach. That means enhanced agility, improved supply chain management, increased innovation and greater efficiency.
— Mike Miller, CEO-North America of Genesee & Wyoming Inc.
Railroads’ service metrics are too low to mean their customer service is good. “What we strive for most people would laugh at,” CSX President and CEO Joe Hinrichs stressed. Jeff StaglCustomer service is one part of the industry’s image problem. The service metrics are too low in the industry to mean good customer service. What we strive for most people would laugh at. We want customers to be excited about doing business with us, and then we give them what they need and when they want it 88% of the time. That’s not great. It’s better but it’s not great. Do we just want to be OK? That’s not very motivating. If you go to your mom and say you got a 70 or an 80 on a test, that’s not great. If we can do better, then a lot of our problems would go away. We have to make service our highest priority after safety. Words and messages matter. If our service isn’t significantly better, customers won’t want to listen to us. We can do great things, we just need to get out of our own way.
— Joe Hinrichs, president and CEO of CSX
Our focus areas are safety, service and operational excellence. We have developed a training program for our 33,000 employees. Every single person will participate in it. They will learn about our strategy and goals and be able to ask questions about it. We expect to do all the training in 2024. One area of growth for us is intermodal. We recently launched three new services: the Falcon Premium with CN and Grupo Mexico; the Eagle Premium into Mexico; and a Port of Houston on-dock service. We are also establishing pop-up intermodal facilities around the U.S. in the Twin Cities in Minnesota, Kansas City, Lathrop in California and the Inland Empire near Los Angeles. The Inland Empie is one of the fastest-growing markets in the U.S. We might create intermodal terminals at the sites of the pop-up facilities depending on growth and demand.
— Beth Whited, president of Union Pacific Railroad
Railroads are changing the narrative after three big blows: the supply-chain crisis, labor contract rounds, and NS’ East Palestine derailment and its ramifications. So, are railroads inept, greedy and dangerous? None of those things are true. We can change this narrative. At the three investor conferences this year at NS, CN and CPKC, they all talked about growth. If none of them are going to talk about it, it won’t happen. I think Mexico is the economy of the future. The opportunities are so huge in crossborder intermodal. It’s interesting that the No. 1 beer in North America [Modelo] is Mexican.
— Tony Hatch, independent rail industry analyst and RailTrends program consultant
We have now split the chief operating officer job, with Patrick Whitehead as executive vice president and chief network operating officer, and Derek Taylor as executive vice president and chief field operating officer. It’s a bigger job now and we are thinking more long term. We think this COO model works best for us. We have spent the last 18 months focusing on getting back to the basics to realize our full potential. Our three main priorities are service excellence, growth and our people. We have five strategic beliefs: the economy will grow more slowly; customers have evolving expectations; employees’ expectations are changing; competition is increasing in automation, efficiency and customer technology; and shareholders and rightsholders are increasingly active. Our service metrics have barely moved despite some disruptive events, and that’s not by chance. Service improvements are embedded in all we do.
— Patrick Lortie, senior vice president and chief strategy officer for CN
The United States-Mexico-Canada Agreement (USMCA) created trade certainty, which was a big help at KCS. When it passed in July 2020, it was approved by a combined 863-83 vote in the three countries. But now there are storm clouds on the horizon for the USMCA, which will face renewal in July 2026. We are now more than halfway through the six-year agreement. We will see how the next administration puts the renewal together. There also is a presidential election coming up in Mexico. Canada and Mexico now are the United States’ top trade partners. The renewal is an opportunity to update the USMCA. NAFTA was a 25-year deal and wasn’t regularly updated. The renewal is also a mechanism to keep the USMCA relevant and current, and tighten or eliminate loopholes.
— Patrick Ottensmeyer, the former president and CEO of Kansas City Southern who now serves as a senior adviser to CPKC
J.B. Hunt Transport Services Inc. and BNSF Railway Co. recently launched Quantum, an intermodal service designed to accommodate the service-sensitive freight transportation needs of supply chains. The service offers up to 95% on-time delivery performance and about a day faster transit time than traditional intermodal services. J.B. Hunt estimates that 7 million to 11 million loads of freight could be diverted from truck service to intermodal service. J.B. Hunt and BNSF have conducted business together for more than 20 years and have developed a unique relationship. Together, they have moved nearly 26 million loads, but volumes have flattened out. Cost, capacity and service are the main reasons why shippers buy intermodal service, and there is a need in the market to offer and excel at all three. J.B. Hunt expects to grow its container fleet by 150,000 units by 2027, and they don’t want to stop there. So, Quantum is key.
— Tom Williams, BNSF’s group vice president-consumer products business group, and Darren Field, J.B. Hunt’s executive vice president and president of intermodal
Enhanced train control (ETC), which is Canada’s version of positive train control (PTC), will be phased in starting in 2030. There are two different systems that will be implemented: a driver-assisted system and automatic train control. The version that’s used will depend on the corridor. There are discussions underway now about who will pay for ETC and how we can get access to radio spectrum. These are expensive systems to implement, and they have to be interoperable. ETC will provide the same safety and operational benefits as PTC.
— Marc Brazeau, president and CEO of the Railway Association of Canada