CSX Acquisition of Pan Am Railways

newpylong wrote:I do not think you will find many who share the opinion that "Pursuing growth is a primary reason CSX adopted Hunter Harrison's PSR principals in the first place".

Beyond opinions, many unqualified, and in pursuit of the facts amongst all of the issues, when CSX's directors and owners chose Hunter Harrison as CEO for his transformative Precision Scheduled Railroading principals they did so for its on-the-record and unassailably-demonstrated primary benefits:

1. sustainable volume and revenue growth
2. improvement to operating ratio
3. strong free cash flow generation and lower capital intensity
4. superior shareholder distributions and returns.

A 2017 quote early in CSX's transformation attributed to Harrison (that) "we're going to get bigger in the rearview mirror of the competition and then pass them on the left" sounds like a primary pursuit of growth, no?

Without PSR and its benefit of strong free cash flow generation providing the resources and improved operating ratio and sustainable growth coming from greater efficiency and reliability providing the financial justification, doubtful CSX woulda/coulda pursued this acquisition even with available operational capacity and risk of 1 of 2 of the Canadians, already operating under Harrison's PSR principals, acquiring PAR. With this possibility in mind, how might that alternative have gone to CSX's pursuit of growth instead?

FWIW: I think there definitely were many mistakes made in implementing PSR on CSX and elsewhere, but its fundamental diagnosis of the issues with railroad service is spot on. Ever since the 1920s, carriers have been haltingly trying to reduce the amount of time trains spend in yards and terminals with "maintrackers," blocking schemes, unit trains, etc, because the average car in manifest service spends <10% of its life actually making money for the railroad -- that is, moving with a load.

The problem is that the most effective approaches to this problem require strong and consistently delivered schedules, which allow intensive use of pre-blocking capacity as a substitute to constant re-classification. That's historically been a weak point for railroads, whose rather singular obsession with train length productivity (over asset productivity and overall service quality) has led them to constantly annul, combine, and delay freights for the sake of tonnage maximization, leading to a persistent reliance on yards. PSR mixes service products, cuts down on as-needed trains, and lengthens freights, all of which makes for a really powerful operating framework **if actually implemented per these principles**.

That latter bit is where many operations fall down -- especially now, with the crewing crisis -- but it should not be lost on us that CSX had industry-leading performance metrics towards the end of 2019, and that PSR pioneer CN can move a manifest load from Chicago to Vancouver in considerably less time than it takes (PSR averse) BNSF to move an equivalent load from Chicago to Seattle. I don't want to whitewash the managerial mistakes (on crew reserve capacity, or yard closures) or continuing structural problems (the overwhelming incentive to only chase the most profitable growth, rather than all remunerative growth) in the industry, but this is food for thought IMHO.

I don't think this is the place to debate the merits of PSR, CSX's implementation of PSR, or even if Pan Am would have been acquired if they had not implemented PSR. It is all water under the bridge and very opinionated. I should have kept my post to only the first paragraph, which was the publicly stated reason for the acquisition. I hope we were able to answer the poster's question.

People want to read the tea leaves. If we come back in a year we will have a good idea.

I'm sorry but I cant allow this PSR propaganda to stand unchallenged. I'm kind of tired of "crew shortage" being the excuse for everything now, seeing as it was totally self-inflicted. All they did was cut at the start of covid, even though it was unlikely the pandemic traffic levels would be the new normal .

The airlines did the same thing even though they were given a 54-billion-dollar bailout with the catch they couldn't lay off employees, and now thousands of flights are being canceled.

The numbers may look good for wall street, but the class 1 US railroads are in meltdown right now. You can spin the numbers however you want but the bottom line is getting trains out of the yards just to have them sit on the main lines means the product is not getting to the customers.

All that said, I agree don't expect to see any big changes with PAR for a year. The M426 will be staying the same for a while, but Pan Am crews will get qualified all the way down into Worcester, probably as far west as CP48, and into the P&W yard.

The massive Global oil tank farm in Revere has been sold. There goes that controversial ethanol train proposal. However unlike Everett, Revere is keeping things industrial and the buyer is going to build two giant distribution centers there. Being on the east side of route 1A there is no existing rail on the property and apparently no plan to bring rail over there. That would have been a great opportunity for a large rail-served center.

Although the entire oil farm on the east side of 1A has been sold, the area west of 1A has not been sold. So we are left with two scarce oil tanker berths with no storage facilities and an existing but dormant rail line. Was the money wasted to rebuild the Chelsea Street draw bridge for these ships (although there is one additional pier at Gulf Oil on the Chelsea side).

So I suppose there still is potential for some new storage tanks and possible rail terminal on that side but the chances are probably extremely low. But I do have to wonder what will replace this massive oil storage facility. The need for fuel is not going away anytime soon. Where is all this fuel going to be coming from?

Update: State Safety Report on this proposal is below for anyone interested. Note that this report was written a couple of months before the horrific Lac-Megantic incident.

https://www.mass.gov/doc/report-on-the- ... l/download

I don't believe the Irving facility was sold so there should still be an operating tank farm moving forward.

I've noticed a lot of track work at the spur that connects the old mountain div to the main line. Also, a lot of attention around the wye near the bridge over the fore river. Seems like this wouldn't be to much of a priority in the overall scheme of things. A12 car ballast train made its way across the fore river and headed east yesterday.
Lots of activity at Rigbey. Earthwork near the old roundhouse, tearing up the roundhouse floor slab has been going on for the last few days. anyone know what's planned for that area?

S

Any ideas or reactivating the tracks in Charlestown where they offload cars? Seems like that would be a great place to drum up business

You mean Charlestown, Boston?

There has been a plan for a new haul road/rail corridor for years. Nothing has happened and there has been a lot of housing built in the meantime, some very close to the existing ROW, so expect the typical NIMBY opposition. The tracks (FX diamond) to the Mystic Pier Branch were removed years ago and will probably be not reinstalled although OWLS diamonds would be a good solution. Also consider that there is not sufficient clearance for autoracks outside of the facility which kills that idea. Certainly other things could be transported like cement and large bulk cargo from ships which Massport says they are lacking and would like to offer.

Here is a look at the last actual attempt to do something that never materialized. This was almost 30 years ago!!!

P.S. That doublestack was for display purposes only and would never have made it out of the facility.

https://www.youtube.com/watch?v=28SAiCVkFRk&t=19s

According to a Trains Magazine article discussing CSX Q2 2022 earning results, CSX paid $601M to purchase Pan Am Railways. And per the earnings con call, the acquisition added 50 basis points to CSX operating ratio (ie, 0.5%).

So $100 million less than reported by many sources.

If I read that right, at $600M, PAR is much less profitable than the rest of CSX, or possibly unprofitable? Big companies like CSX won't put up with that for very long and will have a plan to fix the problem or obscure it.

Hasn't that been the plan all long - newer more efficient locomotives, upgraded track, better crew utilization, better equipment in general, single line service, new business, job cuts/consolidation, etc, all in an effort to increase profitability.