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Rail shippers ask U.S. regulator for more oversight over CSX

Hunter Harrison became CEO at CSX in March, and quickly began implementing changes to the company’s operating methods. He closed several rail yards, idled locomotives and cut staff, measures he had taken at Canadian Pacific Railway and Canadian National Railway.

Luke Sharrett/Bloomberg

Railway customers unhappy with services at Hunter Harrison's CSX Corp. aired their complaints before the U.S. regulator on Wednesday.

Several companies and industry groups appeared in Washington at a hearing called by the Surface Transportation Board into service problems at Florida-based CSX.

The two board members heard testimony from industry representatives that changes brought about by Mr. Harrison left them with rail cars that were never picked up, never delivered or could not be found for several days.

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Shippers told STB acting chair Ann Begeman they wanted the regulator to have more oversight over CSX, a greater ability to choose a competing railway and a streamlined complaints process.

Most of the company representatives said they were "captive" to CSX's network and had no ability to switch to another railway when CSX cancelled pickups without consultation. Many said they had moved much of their shipments to trucks, a more costly and less-efficient method.

"I can't give my business to another railroad," said Eddie Johnston, a government affairs manager at chemical maker Chemours Co.

"They do what they want, when they want, regardless of what it does to your business," said William Scott, a vice-president of South Carolina-based Collum's Lumber Products.

Mr. Harrison became chief executive officer at CSX in March, and quickly began implementing changes to the company's operating methods. He closed several rail yards, idled locomotives and cut staff, measures he had taken at Canadian Pacific Railway Ltd. and Canadian National Railway Co.

Mr. Harrison acknowledged the company has made mistakes, but said the problems did not stem from his model of operating, known in the industry as precision scheduled railroading.

"I want to apologize to our valued shippers," said Mr. Harrison, who has insisted the company's service has improved recently.

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In testimony at the hearing on Wednesday, several of his customers disagreed.

"A major point of frustration has been CSX's decision to close yards without notice," said Justin Louchheim of the Fertilizer Institute. Some loaded rail cars belonging to institute members, which were intended for a yard that had closed with little warning, were sent to dead ends instead, and unavailable for several days, he said. In one case, a shipment sat in a rail car until spoiling and was rejected by the customer, he said.

Mr. Louchheim said CSX's problems were "self-inflicted," and a result of changing operations "too much too quickly with too little communication."

"In a competitive market, shippers would vote with their business," he said.

Chemours, a chemical maker with several plants in the eastern United States, has had to spend $1.3-million (U.S.) to move its goods by truck after watching CSX's service deteriorate. "The events of the last five months have cost Chemours dearly," said Kevin Acker, a logistics manager at the company.

Cargill Inc. vice-president Brad Hildebrand said at least one of the agricultural company's plants was forced to close for a period because it could not get adequate rail service and goods. Other plants reduced output as rail traffic slowed. "We experienced similar pains with both CN and CP when they were rolling out [precision scheduled railroading]," Mr. Hildebrand said.

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Bruce Ridley, a vice-president of box maker Packaging Corp. of America, said a meeting in May held with CSX representatives yielded no improvements in service.

"We have done extraordinary things at elevated costs to make sure we service our customers," Mr. Ridley said.

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