Author Topic: NS's new "strategic plan"  (Read 2404 times)

ckpcpqq

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NS's new "strategic plan"
« on: February 11, 2019, 10:35:53 PM »
NS announced today an operating plan based on PSR.  Below is a brief summary; note the emphasis on operating ratio, dividend payout ratio and share buybacks, all designed to appeal to Wall Street types.  As a result NS stock soared on the news, up $5.49/share, a 3.2% increase in a single day.  Make of it what you will:


Norfolk Southern announces strategic plan targeting a 60 percent operating ratio at Investor and Financial Analyst Conference

NORFOLK, Va., Feb. 11, 2019 – Norfolk Southern Corporation (NYSE: NSC) today will provide details of its strategic plan – focused on increased productivity, efficiency, and revenue growth, and targeting an operating ratio of 60 percent by 2021 – at its Investor and Financial Analyst Conference in Atlanta.

“Our strategic plan capitalizes on the strength of our exceptional franchise to lower costs, operate more efficiently, and deliver stronger margins,” said Chairman, President and CEO James A. Squires. “As we implement precision scheduled railroading, our initiatives are focused on five key principles: serving our customers, managing our assets, controlling our costs, working safely, and developing our people. The success of our customers, our employees, and our company will ensure the success of our shareholders.” 

Highlights of Norfolk Southern’s financial targets

•   Full year operating ratio improvement in 2019 of at least 100 basis points on our 2018 operating ratio of 65.4 percent
•   Full year operating ratio of 60 percent by 2021
•   Revenue growth at a compound annual rate of 5 percent through 2021
•   Capital expenditures between 16 percent and 18 percent of revenues through 2021 to promote safety, efficiency, and     growth
•   Dividend payout ratio of 33 percent and continuance of share repurchases using free cash flow and borrowing capacity

crblue

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Re: NS's new "strategic plan"
« Reply #1 on: February 12, 2019, 06:08:44 AM »
NS posted this video on YouTube yesterday:


510Russ

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Re: NS's new "strategic plan"
« Reply #2 on: February 12, 2019, 12:16:42 PM »
Hi, there!

At Russ's Railroad, Inc., we're optimizing our value proposition by minimizing process suboptimization!  Let's take a look at the Balanced Scorecard...

(Can you tell I used to work for a large Indy corporation for many years?)

:)

-- Russ

pabrankle

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Re: NS's new "strategic plan"
« Reply #3 on: February 12, 2019, 03:39:18 PM »
NS plans to cull 500 locomotives
Eastern railroad plans to make locomotive more efficient with motive power, operational changes


ATLANTA — The ongoing modernization of Norfolk Southern’s locomotive fleet will be a key element of the financial and operational gains the railroad is seeking with its shift to Precision Scheduled Railroading.

Norfolk Southern’s new TOP21 operating plan will reduce the size of a locomotive fleet that will become more reliable, more productive, and spend less time in the shop, CEO Jim Squires said during the railroad’s investor day on Monday.

“We have really four initiatives under way to reduce the size of our locomotive fleet,” says Doug Corbin, assistant vice president and chief mechanical officer.

NS will run heavier trains with increased used of distributed power, continue its DC-to-AC conversion program, reduce the size of the switching fleet as local and yard service becomes more efficient, and run the same number of trains in each direction every day, which balances power requirements and keeps locomotives where they are needed.

“Through those four initiatives, we do intend to pull over 500 locomotives out of the fleet,” Corbin says.

NS aims to increase locomotive productivity by 30 percent by 2021, based on gross ton-miles per unit, and boost train length by 12 percent, to an average of 7,130 tons.

The smaller fleet will be able to handle more tonnage, Corbin says, because it will have higher tractive effort due to the near doubling of the percentage of AC-traction locomotives on the active roster.

“Computerized control of AC-traction technology gives us a huge boost in the amount of freight we can move with a locomotive with no additional horsepower,” Corbin says. “That’s the beauty of this program.”

NS will ramp up the DC-to-AC conversion program, which has completed 190 units since it began in 2016. The program allows NS to get a modern locomotive for half the cost of buying new.

“We’ve been very pleased with the results,” Corbin says.

By 2021, NS will convert 527 of its 1,200-unit fleet of DC-traction Dash 9s that were purchased between 1994 and 2004, Corbin says. That will boost the AC-traction percentage of the fleet to 61 percent, up from the current 32 percent.

The rebuilding contract runs past 2021, NS officials noted, so it’s likely that the railroad will convert more AC-traction units beyond its current three-year plan.

NS will supplement the rebuild program by buying some new locomotives, Corbin says.

By using fewer locomotives NS hopes to reduce its operating expenses at it aims for a 60-percent operating ratio by 2021, down from 65.4 percent last year.

A smaller, more reliable fleet needs fewer shop workers, Corbin explains, and AC-traction power needs fewer replacement parts than their DC-traction cousins.

And moving tonnage on fewer, longer trains also reduces fuel consumption. The practice better matches horsepower to tonnage and keeps locomotives running in their higher power range, which is more fuel efficient, Corbin says.

DRLOCO

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Re: NS's new "strategic plan"
« Reply #4 on: February 12, 2019, 04:48:22 PM »
Ponzi
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Professional Locomotive Engineer and train nerd with most social skills.

Rick

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NS's new "strategic plan"
« Reply #5 on: February 12, 2019, 06:52:28 PM »
Had a dpu train in the yard the other night.  Even with dpu it couldn’t get the air flow down.  After 5 hours they left with a mechanical crew following it all the way to leesburg.  Plan was to get it to leesburg and split the train up.  I don’t know how many trains where delayed on the Marion branch that night. 

As for reducing shop employees.  They don’t have enough right now to keep up.  And for the new rebuilt locos, they do and will have problems. 

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xgap

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Re: NS's new "strategic plan"
« Reply #6 on: February 12, 2019, 11:48:05 PM »
Maybe just say that's the plan and then fudge the numbers. The outside of the industry folks don't/won't know the difference for a few years.
LOL, No way can NS cut any thing without a result of crappy service, let alone any growth.

scraphauler

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Re: NS's new "strategic plan"
« Reply #7 on: February 13, 2019, 08:33:14 AM »
Maybe just say that's the plan and then fudge the numbers. The outside of the industry folks don't/won't know the difference for a few years.
LOL, No way can NS cut any thing without a result of crappy service, let alone any growth.
Optimism spring eternal!

Quite a few lines already quietly be shopped.
Ton of equipment retired and lots more to come.  All but 40 or so SD60 and variety being sold and ALL remaining Dash 8s on block next.
Potential new customers being directed to connecting shortlines (currently negotiating with one NS referred us)
Existing customer being directed to shortlines and logistics centers to help manage their traffic flow and eliminate as much single car traffic as possible (already picked up a new customer as a result - first 11 cars showed up this week)
EVERY local, transfer,swtich job under microscope - end result is only jobs that will be ran will be ones that can have 8 hours of real work, 7 days per week - other solutions will be found for traffic that does not fit that pattern (other carrier, transload, run off, etc)

This is REAL.  The Moorman Railfan Utopia period is over.  In my personal opinion, maybe because they've been at it longer, maybe its beacuse the departing of EHH slowed the activity,  but perinial fan whipping boy CSX is implementing PSR in a more responsible manner and still seems to be interested in growth than the other carriers.

The opinions, views, and incoherent ramblings presented here do not necessarily represent the view point of any company I work for or own,  any logical thinking being, or even me.

Rick

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NS's new "strategic plan"
« Reply #8 on: February 13, 2019, 09:25:00 AM »
All our local/road switcher jobs have already switched to 7 days a week with the exception of one, I think.  From what I’ve seen on one job the customers are being served better than before when it was 3 day a week service.  The cars are being pulled within 24 hours of release and when their cars come in they are spotted to them that day. 
The plan, minus the dpu trains, seems like a good idea and will work as long as all the pieces fall into place.  Managers are singing a different tune since Ferral took over also.  They are more interested in helping rather than looking for petty infractions of employees.  We were testing the plan for a couple weeks and I was impressed on how smooth it was and how this plan made so much more sense.  Even for a yard our size trains were built and out in 2 hours most of the time. 

The thing I’m surprised they didn’t talk about was the RCO operations.  One, they operate slower than en/co job does. Two, they break down all the time and I mean all the time.  Cost to replace one, I was told 2-3 million dollars.  I would like to see how much time and money is devoted to repairing these units. 

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scraphauler

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Re: NS's new "strategic plan"
« Reply #9 on: February 13, 2019, 09:59:24 AM »
Job that works our interchange has gone 7 days as well and we've seen SOME improvement.  What we were told was that job would run "several" months as 7 day and would then be analyzed and decisions made from there.  For example, a job could now be running 7 days a week and customer sees improved service, etc, but if it does not meet the daily volume criteria they have established for the train, it's work would be somehow "reworked" and split between other trains, farmed out, or simply priced out of market. 

Here's example of what COULD happen.  Two locals work out of yard - both used to be 5 day jobs and early quits where not uncommon. Shortline interchange makes up half of the local 1's work load.  Decision COULD be made to eliminate local 1, give shortline access into yard to do direct interchange,  then schedule local 2 to handle it's normal work 4 days a week and pickup local 1's remaining work the other 3 days, 
The opinions, views, and incoherent ramblings presented here do not necessarily represent the view point of any company I work for or own,  any logical thinking being, or even me.

Rick

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NS's new "strategic plan"
« Reply #10 on: February 13, 2019, 10:04:26 AM »
Job that works our interchange has gone 7 days as well and we've seen SOME improvement.  What we were told was that job would run "several" months as 7 day and would then be analyzed and decisions made from there.  For example, a job could now be running 7 days a week and customer sees improved service, etc, but if it does not meet the daily volume criteria they have established for the train, it's work would be somehow "reworked" and split between other trains, farmed out, or simply priced out of market. 

Here's example of what COULD happen.  Two locals work out of yard - both used to be 5 day jobs and early quits where not uncommon. Shortline interchange makes up half of the local 1's work load.  Decision COULD be made to eliminate local 1, give shortline access into yard to do direct interchange,  then schedule local 2 to handle it's normal work 4 days a week and pickup local 1's remaining work the other 3 days,
That’s exactly what I’ve heard as well for local jobs.

Once the old heads retired and the next generation of seniority guys step in, that was the demise of many jobs across the railroad.  They became lazy and didn’t want to work, I know that sounds cliche.  The preferred “quit” is what killed many long time retirement jobs. 


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TomB

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Re: NS's new "strategic plan"
« Reply #11 on: February 13, 2019, 10:07:50 AM »
NS should spin-off its local South Bend switching operations to a shortline much like the E&W farther east.  There's enough business in South Bend to make it worthwhile for an operator like Pioneer Rail.

Rick

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Re: NS's new "strategic plan"
« Reply #12 on: February 13, 2019, 10:22:25 AM »
NS should spin-off its local South Bend switching operations to a shortline much like the E&W farther east.  There's enough business in South Bend to make it worthwhile for an operator like Pioneer Rail.
It’s definitely a possibility.  The issue I see is ns  still has to get the cars to and from there.  The b99 has no time to do that, they barely get to and from burns harbor in 12 hours.  The yard local might be able to but that’s really pushing them and would negatively affect their current customers.  All other locals/road switchers go east.  Now, add to the fact Peru guys are going to be taking rock trains back there just adds to to congestion and track time. The south bend job actually does all its own work.  They get their cars out of the bowl, they do their own class 1 test, hang and test marker, then go to south bend, switch out the cars if need be, now they go and pull and spot whatever industries need work.  I don’t see them having a crew just build train and take it there and bring back the power.  Road trains can’t drop the cars off because of track alignment and blocking a main or the siding.  Peru won’t be coming and going daily so they are out.  I’m not sure if this can be made better than it is.



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ckpcpqq

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Re: NS's new "strategic plan"
« Reply #13 on: February 13, 2019, 05:59:51 PM »
Potential new customers being directed to connecting shortlines (currently negotiating with one NS referred us)
Existing customer being directed to shortlines and logistics centers to help manage their traffic flow and eliminate as much single car traffic as possible (already picked up a new customer as a result - first 11 cars showed up this week)
EVERY local, transfer,swtich job under microscope - end result is only jobs that will be ran will be ones that can have 8 hours of real work, 7 days per week - other solutions will be found for traffic that does not fit that pattern (other carrier, transload, run off, etc)


Suppose there's a shipper who does not have shortline access, only NS.  Suppose also it can only supply a certain number of cars per month and it's less than what NS wants under the new plan.  What happens to him?

scraphauler

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Re: NS's new "strategic plan"
« Reply #14 on: February 13, 2019, 06:19:01 PM »
Suppose there's a shipper who does not have shortline access, only NS.  Suppose also it can only supply a certain number of cars per month and it's less than what NS wants under the new plan.  What happens to him?

He is enticed thru rates to make other arrangements, be it transloading, switching to truck, moving, etc.    If he's on a mainline, he may be screwed.  If he's on a branch, work with the local economic development types to try to find similar people to work with and push to get line shortlined.  Work with your state and federal congressmen.  Hire a STB attorney.  The playing field is not level - the small guy has to be creatrive to stay alive and play the game that is stacked against him.  And sometime the ugly econimic truth rears it's head - no matter how just, how noble, how right your fight is, sometime you simply can not afford to continmue to fight even if you have a good chance of winning. 
The opinions, views, and incoherent ramblings presented here do not necessarily represent the view point of any company I work for or own,  any logical thinking being, or even me.

indyspy

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Re: NS's new "strategic plan"
« Reply #15 on: February 13, 2019, 06:29:56 PM »
Re-regulation HERE WE COME!
If in doubt, Notch it out!

CSX_CO

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Re: NS's new "strategic plan"
« Reply #16 on: February 13, 2019, 08:40:02 PM »
Re-regulation HERE WE COME!

Why? 

This is really no different than the automakers phasing out sedans, and focusing on the cars people are buying.

Sure...they might make some money making a 4 door sedan.  But, why waste money and resources on sedans, when people are buying different platforms? 

Railroads are pricing out, or pushing if you will, the smaller customers, and focusing on the big ones. 

You all forget that the railroads don’t have to provide excellent service to everyone.  Give the big accounts the best service, and the rest get good enough service to keep them shipping by rail.. There are 18 wheel alternatives to getting your stuff by rail if you don’t like the level of service.  Or, ship/receive more, and service improves.

The old adage isn’t “the customer is always right”, it’s “the customer always thinks they’re right”.  Anyone who has ever worked directly with customers knows that, or has heard it.  You ask them, every car of theirs is hot. Every car is a shutdown car, etc.  they’re usually the smaller ones.  Meanwhile, the big ones know the way it works, and works with the railroad.  Guess which ones going to get the most help? 

ckpcpqq

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Re: NS's new "strategic plan"
« Reply #17 on: February 13, 2019, 11:19:36 PM »

This is really no different than the automakers phasing out sedans, and focusing on the cars people are buying.

Sure...they might make some money making a 4 door sedan.  But, why waste money and resources on sedans, when people are buying different platforms? 

The old adage isn’t “the customer is always right”, it’s “the customer always thinks they’re right”.  Anyone who has ever worked directly with customers knows that, or has heard it.


Gee whiz, if that's the case maybe the automaker be should selling fewer SUVs and more sedans.  Force the customer to buy something he doesn't want, just like CSX and NS are forcing some shippers to spend lots of money on alternatives when they'd really prefer to stay with rail.

Better try another analogy.

CSX_CO

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Re: NS's new "strategic plan"
« Reply #18 on: February 14, 2019, 09:58:21 AM »
Gee whiz, if that's the case maybe the automaker be should selling fewer SUVs and more sedans.  Force the customer to buy something he doesn't want, just like CSX and NS are forcing some shippers to spend lots of money on alternatives when they'd really prefer to stay with rail.

Then they (the customer) will have to deal with that *they* deem subpar service.  They want service at the railroads beck and call, then be prepared to pay a premium for that service.  That’s the issue.  The little accounts are complaining about crappy service, when they aren’t paying the premium price.  Really, they’re getting switched just the same, just not when they think they want it. 

Makes no sense to offer a customer 5 day a week service, when they only use it two or 3..  Schedule them for 2, so you can better balance the work load on a job.  That’s what PSR is about.  Maximize productivity of your assets (jobs, crews, locomotives, facilities).  Isn’t that what every business is supposed to do?  Maximize asset utilization?  Or are the railroads supposed to be different for some reason?

Look at the line to Shelbyville.  10 years ago, Knauf insulation was getting 10 to 12 cars inbound a day.  Other customers up there maybe 1 or 2 a day at best.  Knauf volumes started to decrease when housing market crashed.  Why would CSX run a job 5 days a week, when they’re only moving 3-4 cars a day?  Why not every other day, and make it 8 cars?  Other customers won’t notice, as they get a trickle of cars compared to Knauf.  Better asset utilization.  The days that crew doesn’t go to Shelbyville, they can do something else.

No different than the automakers focusing on what makes them money, and drying up the parts that don’t.  Maximize their product lines to make their owners the most for their investment.  Makes no sense to make a million sedans, when you’ll never sell that many.  But, because they’ve sold that many historically, they should keep making them, even if they’ll just sit. 

hobodano

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Re: NS's new "strategic plan"
« Reply #19 on: February 14, 2019, 11:03:16 AM »
Re-regulation HERE WE COME!

https://www.bizjournals.com/jacksonville/news/2019/02/13/amid-regulatory-scrutiny-csx-leads-nation-in.html

Amid regulatory scrutiny, CSX leads nation in revenue from fees
CSX Corp. (Nasdaq: CSX) generated more than $365 million from customer fees last year, more than any other railroad in the country.
CSX collected $365.7 million in demurrage and accessorial fees in 2018, $30 million more than its East Coast competitor, Norfolk Southern (NYSE: NS), which had the second highest fee-generated revenue.
After other railroads began changing their rules and fees, Surface Transportation Board Chair Ann Begeman requested all major railroads in the U.S. disclose the quarterly revenues generated from such fees.
The fees relate to rules railroads give to their customers for ordering, using and returning railcars, so customers can be fined for ordering more railcars than is needed, for submitting incorrect shipping instructions, diverting a shipment in transit and the like.
But customers last October told the Business Journal that CSX had significantly changed its rules and fees without notice, which cost customers thousands. A CSX spokesperson said at the time that customers had been informed of the changes “including a reduction in the grace period and an increase in the daily fee, all of which aligns with industry standards.”
The disclosures, filed in recent weeks, show that CSX generated the most revenue from both demurrage and accessorial fees nationwide. It was the only railroad in the country to collect more than $100 million from the combined fees in the fourth quarter.
"From the outset, it's helpful to understand that we don't view accessorial and demurrage tariff items as a key driver of CSX revenues – they only represent 3% of our total 2018 revenues," CSX CEO Jim Foote wrote in the company's filing with the STB.
Foote goes on to say that the fees relate to customer requests to do extra "ancillary services," which conflict with the company's ongoing transition to an efficiency-focused operating model, precision scheduled railroading.
"In all cases, [the fees'] purpose is to further the efficient management of assets and promote a fluid transportation pipeline," Foote wrote. "While CSX has always had these tariff items, prior to implementing scheduled railroading, the company didn't consistently update and enforce them. In my view, that's not an acceptable way to run a railroad."
CSX's revenue from fines increased 22.8 percent over 2018, less than NS's 23.5 percent increase. Canadian Pacific collected only $43.8 million from the fees in the U.S., but it enacted the steepest increase: 114 percent.

Fairly familiar with southern Indiana trackage