As new CSX president and CEO Joe Hinrichs settles into his post, he will prioritize building a company culture that values not only the railroad’s existing and potential customers but also its people.
The “One CSX” cultural project was developed months ago. Still, recent tensions between railways and labor unions, as well as some distrust between shippers and railroads due to service disruptions, make it an excellent time for the firm to commit to the initiative, according to Hinrichs.
“At the end of the day,” Hinrichs said during CSX’s third-quarter earnings call Thursday, “if we’re going to make more progress in [the] rail industry and then here at CSX, we have to have a better relationship with our union partners and with our workforce out in the field doing the work that creates value for our customers every day.” “And I [and our team] feel… we can have a better railroad and better overall performance on areas of our business if we can have employees working better together, solving challenges, and helping us deliver better for our customers.”
Hinrichs joined CSX (NASDAQ: CSX) in late September, succeeding outgoing president and CEO Jim Foote, who has retired but will continue to serve in an advisory capacity until next March.
Hinrichs described himself as a rail sector client for 20 years while working as an auto executive. He was previously head of Ford Motor Company’s global automotive operations.
Hinrichs faced complicated labor relations during his time in the auto sector.
“The labor side of the business expertise in the automotive industry is extremely applicable to our current position,” Hinrichs added, referring to “labor union partners, tenant agreements and ratification, and dealing through those challenges.” “[As a previous customer,] I urged us to continue to look at things through the eyes of the customer to ensure that we are holding ourselves to a higher standard of service and accountability for our side of this relationship.”
Keeping an eye on macroeconomic risks
Despite high inflation and the likelihood of further increases, CSX plans to capitalize on market demand for service that the railroad has been unable to exploit fully due to difficulties, according to Kevin Boone, CSX executive vice president of sales and marketing.
“Our goal [is] to position ourselves so that no matter what the economy holds, we’re taking our fair share and then some,” Boone said. “And that’s where the team’s confidence is very high.” And we were just with our short-line partners, and I believe there’s a lot of confidence that they’ll be able to go out into the market and grab share away from the truck.”
The eastern United States railroad will also seek new client collaborations through its select site program. It collaborates with businesses to create projects along CSX’s network to assist customers with their sustainability efforts using the railroad’s online carbon calculator.
“I think the degree of the slowdown would be a question for us because there is demand that we haven’t been able to meet,” said Boone.
Although railways have traditionally furloughed staff during market downturns, CSX officials indicated they would look into other options to ensure enough network capacity when demand returns.
“We simply need to keep a forward-looking eye on what’s going to happen not only in the next month or two months, but…. nine months, ten months from now and safeguard the T&E [train and engine] headcount that we have,” said Jamie Boychuk, CSX senior vice president of operations. “There is natural attrition if we come into a scenario where we need to do something new.” Our annual natural attrition rate is 8% to 10%. And if we need to pause [conductor training] lessons, we can. But, ultimately, we want to protect the existing T&E workforce.”
According to Boychuk, the third-quarter headcount of active train and engine staff, the category that runs locomotives, was the largest since 2020.
“The hiring pipeline is still strong,” he said. “In the third quarter, we averaged over 500 trainees.” We are motivated to maintain the pipeline full, allowing us to keep filling courses as we move toward our objective of 7,000 active T&E employees by the end of the year.”
CSX’s financial figures for the third quarter of 2022
In the third quarter of 2022, CSX reported a net profit of $1.1 billion, or 52 cents per diluted share. In the third quarter of 2021, the company expects to earn $968 million, or 43 cents per diluted share.
Revenue increased 18% yearly (y/y) to approximately $3.9 billion, owing to increases in coal, intermodal, automotive, and food, and agricultural products, among other things.
Expenses rose by 25% to $2.3 billion, with expenditures rising across the board, including gasoline and labor.
