Train Industry's Watchdog Prez thinks Y2K affecting rail shipping : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Lengthy article. The crux of the Y2k matter is in a paragraph with italics, near the bottom of the page. Italics mine)

Sunday, January 9, 2000

Story last updated at 11:44 p.m. on Saturday, January 8, 2000

A little off track

Six months after CSX's merger with Conrail, it's apparent things aren't running smoothly

By Mark Gordon, Times-Union business writer

Seconds before a CSX executive vice president spoke to shareholders at a company retreat last summer, he flipped on a pair of sunglasses.

The shades were part of a larger message Aden Adams was delivering - that thanks to a merger with Conrail, the railroad's future was blinding.

Six months have passed since Adams donned the sunglasses, but the sun has yet to come out.

Trains frequently arrive late. Cargo cars supposed to be full are coming in empty. Customers are asking for refunds and demanding answers.

''Everyone thought it would be solved by now, and no one seems to have an answer as to why it hasn't been,'' said Ed Emmett of the service problems. He is president of a Virginia train industry watchdog group that has been closely following the merger. ''The railroads are responding, but they don't seem to know what to do. The problems do not seem to go away [and] they are a long way from getting it done.''

Shareholders got whacked last month when the company issued an earnings warning. At the time, CSX said it would likely earn between 18 and 24 cents a share. Wall Street analysts had pegged the number at 53 cents a share; the actual amount will be released later this month.

Meanwhile, the customer service issue could come to a head this week when CSX officials join other railroad executives in meeting with dozens of customers in Philadelphia. The meeting is being sponsored by the Conrail Shippers Forum, a side venture of the National Industrial Transportation League.

Hope vs. reality

CSX and Norfolk Southern, the third- and fourth-biggest railroads in the country, bought Conrail in 1997 for $10.2 billion. CSX, which has a corporate office in Richmond, Va., and a transportation unit in Jacksonville, took over 42 percent of the railroad last June. Norfolk Southern picked up the rest.

Railroad experts say the deal prevented Conrail from maintaining a monopoly on shipping cargo by trains in the northeastern United States. CSX had originally gone after Conrail alone, but after months of negotiations, Norfolk Southern came aboard.

But even though a potential monopoly has been smothered, customers who use the rail lines to ship products ranging from grain to cars are not feeling the positives of the merger. In separate interviews last month, CSX and Norfolk Southern spokesman acknowledge that mistakes have been made in the integration process, but are confident good times should come rolling in soon.

Wall Street analysts, some CSX shareholders and independent railroad analysts aren't so sure. They were hoping for a smoother transition.

And as problems linger, the stocks have taken a dive.

CSX was the latest to issue an earnings warning, coming out just before Christmas with the news that the 1999 fourth quarter will be well below analysts' expectations. CSX officials said there were other issues that played an equal or even greater role in the shortfall.

Shares are down about 20 percent since the June 1 merger, and hit a 52-week low point late last month, a day after the earnings warning. Shares are down almost 40 percent over the past year.

Norfolk Southern, too, has its share of earnings problems that can be connected to the merger. Shares at the Norfolk, Va.-based company are down almost 50 percent over the past year.

Bad timing and complications

So what derailed this merger made in train heaven? A high-ranking CSX official blames a few dominoes that fell consecutively, starting with Hurricane Floyd, the storm that walloped the First Coast in September. After that, vice president for systems and transportation Clarence Gooden said a robust economy across the country sparked a need to utilize railroad shipping more frequently. Those factors combined to slow down many trains.

Emmitt, the president of the Alexandria, Va.-based National Industrial Transportation League, thinks computer glitches could be the root cause of the problems. Emmitt said that soon after the switchover, it is possible that Norfolk Southern computers began spewing out wrong information about scheduling.

Then, trains being run by both CSX and Norfolk Southern started leaving railyards stations without cargo when they were supposed to be full. Other trains were late, turning some tracks into traffic jams.

Jason Kuehn, a former Conrail employee who now works for a New Jersey railroad consulting firm, offers a third option: bad planning. While not specifically criticizing CSX or Norfolk Southern, Kuehn said the the impact of the merger on customers could have been researched more thoroughly.

''I don't think railroads do a really good job of planning right now,'' Kuehn said from his Denver office, ''and this is just systematic of that.''

Kuehn, the vice president of applications at MultiModal Applied Systems, said part of the problem in attempting to de-congest the railroads is the sheer number of trains. Thousands of miles of tracks are covered by the rail systems of both companies. ''It's an extremely messy problem,'' Kuehn said. ''These mergers are so big and complex that it is tough to make big changes.''

Norfolk Southern spokesman Frank Brown, as well as a host of others at CSX, stress that this merger was not easy. They said they prepared as best they could by forming study groups, researching other mergers and consulting with outside experts.

''It wasn't as simple as 'You take this track. I take that track,' '' Brown said from his Norfolk, Va., office recently. ''The flow of trains changed in some ways that could not be anticipated.''

Source: "Business" section, Jacksonville, Florida

-- Lee Maloney (, February 01, 2000


Response to Train Industry's Watchdog Prez thinks Y2k affecting rail transportation

Whoa... On second thought, Sysops... would you please change my subject line to read: "Train Industry's Watchdog Prez thinks Y2k affecting rail shipping" (instead of "rail transportation") Thank you!

-- Lee Maloney (, February 01, 2000.

Goes to show that manual operation of scheduling issues was not an effective alternative.

I recall there were problems relating to snafus from the merger in the shipment of coal last fall. This is the coal that the northern utilities were attempting to stockpile. Coal and grain are supposed to be two of the easiest loads, because they can take up the entire train and do not require the train to be broken down at distribution yards.

This may not be y2k-caused, but if it in any way is affecting the fuel shortages we are having in the northeast and difficulties of switching from one fuel type to another, then it is y2k-related.

-- Brooks (, February 01, 2000.

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