December 19, 2017

E. Hunter Harrison—1944-2017

He fed shippers Castor Oil, told them it would make them better, and often it did.

By Mark B. Solomon

Not long after Canadian National Railway (CN) acquired Wisconsin Central Transportation Ltd. (WC) in 2001, E. Hunter Harrison, then CN's vice president and COO, visited a bloc of paper shippers who were WC customers. The companies had a long-standing way of tendering freight to the WC. But Harrison had other ideas.

Harrison preached the merits of a model that he had created known as "Precision Scheduled Railroading," which he had deployed as CEO of the Illinois Central Railroad before CN bought it in 1998. By running trains on rigid, pre-set schedules, then managing the network planning and rolling stock flows so the trains were always full, the shippers would get their goods moved faster, more reliably, and cheaper because excess cars wouldn't need to be kept at the ready to offset schedule variability that railroads were notorious for.

The problem for shippers was that Harrison didn't frame the model's adoption as a choice. It would be his way or (no pun intended) the highway. According to veteran rail analyst and consultant Anthony B. Hatch, the shippers initially didn't think it would work, and they also didn't like to be told by a railroad when to ship. Yet after what would subsequently become years of enjoying the efficiencies that have come with "not having to control 100 cars to use 50 if the 50 get used," the shippers have long since been won over, Hatch said. "They love CN now," he said in an email today.

Since Harrison's death on Saturday at age 73, the tributes and the reminisces have poured in, and they invariably address the legacy of who more than a few regard as the finest operator in the long history of American railroading. Some of his work will forever remain unfinished. Harrison's long-held desire to build a single-line transcontinental network by buying Norfolk-based Norfolk Southern Corp. was scuttled in 2016 after it met with a broad wave of opposition. And his ambitious turnaround of venerable CSX Corp. was only nine months old when he died. The mantle has now been picked up by James W. Foote, CSX's COO and a Harrison disciple, who was named interim CEO on Thursday. In a briefing Friday with analysts and media, Foote said there would be no change in the "pace and magnitude" of the work that Harrison began.

In transforming the industry, Harrison maintained what could be considered a narrow focus: He knew what worked, even if he was sure that others doubted him. He spent little time dwelling on pushback from shippers, labor unions, other railroads, or communities where his trains went through. If a shipper's mindset didn't align with Harrison's vision of the model and the network, he didn't want the shipper or their freight. "Hunter saw no reason to handle freight that did not fit his road's operational strengths," said Charles W. Clowdis, Jr., a long-time consultant. "He was wise enough not to chase 'cheap, ill-fitting' freight nor make costly changes to attempt to make cheap freight revenue profitable."

Harrison's approach didn't sit well with some shippers when he ran Montreal-based CN from 2003 to 2009. It sat even less comfortably with shippers of rival Calgary-based Canadian Pacific Railway (CP), which Harrison led from 2012 until 2017 before jumping ship in March to sign a four-year pact to head Jacksonville-based CSX.

It also angered labor unions who saw Harrison's model as a threat to their members' livelihood because its objective was to reduce or eliminate the number of yards that Harrison saw as a waste of time and capital. "Hunter hates yards," Larry Gross, an independent rail consultant, said in an interview on Friday before Harrison's death.

Yet Harrison left CN, CP, and the Illinois Central Railroad (IC), which he ran until CN bought IC in 1998, a much better and more profitable business than he had found them. Not only did the precision railroading model result in tangible service improvements, but it paved the way for a renewed focus on sales, marketing, and customer relationships once the networks were whipped into shape. Ironically, those "soft" business attributes surfaced at CN and CP after Harrison had left both.

CN is viewed by many as the world's finest railroad because of its operating prowess, and, according to consultant Lee Clair, because it has been the one North American rail that's "consistently good at looking at all markets, and getting business that it didn't have before." The powerhouse that is today's CN "is Hunter's legacy," Hatch added.

Another legacy will be Harrison's influence on his fellow railroaders, all of whom have, to some degree, adopted his model in regards to a greater emphasis on reliable scheduling. Harrison's model effectively called for committing crews before a train was fully built, an approach that scared many railroaders concerned that the volumes wouldn't justify the labor costs. However, it reflected Harrison's confidence that once the business was transitioned into the schedule, the train size would be less important because the incoming flows needed to build the train could be relied upon.

Unfortunately, the jury will forever remain out on what Harrison could have accomplished at CSX. In ill health for a while and perhaps recognizing that his time was limited, Harrison hit the railroad like a raging bull, attempting, in Clair's words, to compress years of mismanaged operations "into one year." Thousands of employees were laid off. Eight hump yards—huge facilities that are used to switch isolated cars onto tracks for the assembly of trains—were closed. An intermodal hub in the northwest Ohio town of North Baltimore, designed to transfer east-west freight without routing through the Chicago chokepoint, was shuttered in November just six years after it opened to great fanfare. CSX reportedly scrapped plans to build a similar intermodal transfer facility in Rocky Mount, N.C., and backed away from paying its share of a project to enlarge the Howard Street tunnel in Baltimore which would have created greater clearance for the shipping of double-stack container trains.

Yet the precision railroading model ran afoul of CSX's challenging network, which is the product of multiple mergers of railroads that were not all natural fits, and where trains run over shorter distances through congested areas or through small, one stop-light-type towns requiring trains to slow their speeds. In the late spring and into the summer, shippers began complaining about increased transit times, unreliable switching operations, and inefficient car routings. A survey by investment firm Cowen & Co. released in August found that 80 percent of respondents had experienced service issues since CSX began implementing Harrison's plan.

Harrison testified in October before the Surface Transportation Board (STB), the federal agency that regulates railroads. In the hearing room, Harrison's frail appearance and use of supplemental oxygen to help his breathing provided stark evidence of his weakened condition.

Clowdis said that Harrison "seemed to undervalue intermodal, which may have been due to its higher importance at CSX than at his prior CEO stints" at railroads where intermodal wasn't as much of a priority. Clowdis stressed that this "wasn't necessarily a fault" of Harrison's, rather the byproduct of a "learning curve in stepping into a rail system at CSX with many subtle differences from his last two rails, including market area and geography and speed-to-market demands."

Still, for his brief time there, Harrison will leave a mark on CSX that will benefit the railroad for years to come, Clowdis said. "He leaves a legacy that growth without profit is futile," he said. "It's a lesson many transport executives in every mode should heed."

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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