CSX to engage workers, customers as it rolls out culture initiative

As new CSX president and CEO Joe Hinrichs settles into his role, a major focus for the former auto executive will be instilling a company culture that values not only the railroad’s existing and potential customers but its employees as well.

The culture initiative, named “One CSX,” was actually established months ago, but recent tensions between the railroads and labor unions, as well as some distrust between shippers and the railroads because of service disruptions, make it an opportune time for the company to commit to the initiative, Hinrichs said.

“At the end of the day, 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 the value for our customers every day,” Hinrichs said during CSX’s third-quarter earnings call Thursday. “And if we can get people working better together, solving problems, helping us deliver better for our customers, I [and our team] believe … we can have a better railroad and better performance overall on aspects of our business.”

Hinrichs began his tenure at CSX (NASDAQ: CSX) in late September, replacing outgoing president and CEO Jim Foote, who has retired but will serve in an advisory role until next March.

Hinrichs describes himself as having been a customer of the rail industry for 20 years when he served as an auto executive. He most recently worked as president of Ford Motor Company’s global automotive business.

During his time in the auto industry, Hinrichs also dealt with complex labor relations.

“The labor side of the business experience in the automotive industry is certainly very applicable to our situation that we’re in now, when you look at … our labor union partners, tenant agreements and ratification and working through those issues,” Hinrichs said. “[As a former customer, I] have challenged us to continue to look at things from a customer perspective to make sure that we are holding ourselves to a higher standard of service and accountability for our side of this relationship.”

Keeping an eye on macroeconomic uncertainties

Despite high inflation and the prospect of continued rising, CSX intends to lean into the market demand for service that the railroad was unable to take full advantage of because of issues, according to Kevin Boone, CSX executive vice president of sales and marketing.

“Our objective [is] to position ourselves no matter what the economy holds — that we’re taking our fair share and then more of it,” Boone said. “And so that’s where the confidence is very, very high across the whole team. And we were just with our short-line partners, and I think there’s a lot of confidence there that they have opportunities to go out into the market and take share from truck.”

The eastern U.S. railroad will also look for new customer partnerships through its select site program. It works with companies to develop projects nearby CSX’s network to help customers with their sustainability efforts via the railroad’s online carbon calculator.

“I think the magnitude of the slowdown is what would be a question for us because there’s demand that we haven’t been able to meet,” Boone said.

Although the railroads have traditionally furloughed employees during times of market downturn, CSX officials said they would consider other options so that the railroad can ensure there will be enough network capacity when demand returns.

“We just need to stay with the forward-looking view on what’s going to happen in not just next month or two months from now, but …. nine months from now, 10 months from now and really protect that T&E [train and engine] headcount that we have,” said Jamie Boychuk, CSX executive vice president of operations. “If we get into any type of situation where we need to do something different, there’s natural attrition. Our natural attrition is 8% to 10% each year. And if we need to pause [conductor training] classes, we’re able to do that. But ultimately, we want to protect that T&E workforce that’s there.”

The third-quarter headcount of active train and engine employees, the category that drives locomotives, was at its highest level since 2020, according to Boychuk.

“The hiring pipeline remains robust,” he said. “We averaged over 500 trainees again in the third quarter. We are determined to keep the pipeline full, allowing us to continue filling classes as we work toward our goal of 7,000 active T&E employees by year-end.”

CSX’s Q3 2022 financial results

CSX reported net profit of $1.1 billion, or 52 cents per diluted share, in the third quarter of 2022. That compares with $968 million, or 43 cents per diluted share, in the third quarter of 2021.

Revenue rose 18% year over year (y/y) to nearly $3.9 billion amid revenue gains for coal, intermodal, automotive products and food and agricultural products, among others.

Expenses increased by 25% to $2.3 billion, with costs higher in all categories, including fuel and labor.