NS Quietly, Slowly Moved Toward PSR

Norfolk Southern began its move toward the precision scheduled railroading operating model long before the company publicly embraced it, an analysis by Trains magazine found.

The analysis described as wrong the perception that pressure from Wall Street investors forced NS to change course despite CEO James Squires having once been critical of the practice.

Shortly after becoming NS CEO, Squires said in November 2015 that PSR was a “short-term, cut-to-the-bone strategy that could cause Norfolk Southern to lose substantial revenues from our service-sensitive customer base.”

In particular Squires said the focus on lowering the operating ratio, which is central to PSR, would drive away truck-competitive traffic.

But earlier this year Squires said during an investor day that NS had adopted PSR “because it works.”

The Trains analysis noted quietly hired a consultant with PSR experience long before Wall Street analysts began asking why NS couldn’t be more like CSX.

Mike Farrell, who had worked at Canadian Pacific when it was run by PSR guru E. Hunter Harrison, studied NS operations with the idea of designing lower-cost, more efficient, and more reliable local and terminal operations, Trains reported.

“At the beginning, NS had one toe in and one foot out, all along testing PSR strategies,” Farrell, now senior vice president of transportation during the investor day.

NS has since began to phase in what it has described as a kinder, gentler version of PSR that will cut costs and provide reliable service while still seeking growth in merchandise and intermodal traffic.

Farrell said NS is seeking to work with customers rather than impose PSR on its customers as CSX did.

Although NS plans to cuts its workforce by 3,000 positions, the Trains analysis said that is about how many employees NS would lose through normal attrition.

Still, like CSX, NS plans to operate fewer and heavier trains.

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