CSX Wants To Grow Headcount So It Can Grow Network Capacity

CSX is looking at how it attracts new hires as the railroad strives to add employees so that it has enough capacity to handle demand.

Like other industries, the railroads have encountered challenges finding potential employees, and that challenge has stunted CSX's CSX plans to improve service metrics such as terminal dwell and train velocity, said CSX President and CEO Jim Foote during his company's second-quarter 2021 earnings call on Wednesday.

Jacksonville, Florida-based CSX needs to examine its hiring practices on a long-term basis to ensure that there will be qualified applicants down the pipeline, according to Foote. The challenge in this current environment is that although the jobs — particularly for train and engine crews — pay well and have good benefits, those perks aren't attracting people as they once did, he said.

A referral system will help CSX in the short term, but "I'm convinced, and I think the team is convinced, that we need to look at this from a long-term perspective and say, ‘What do we really need to do to make sure that we have a stable, long-term pipeline of people that enjoy coming to work and doing what they need to do?'" Foote said.

He continued, "We have to look at the whole big picture and we'll do that because we need employees to run railroads, simple as that. And so we're going to change our thoughts, our processes and throwing money at people these days is not the answer."

CSX had said early this year that it would be hiring more employees, according to Foote. And although it has hired 200 new employees so far this year to make up for those lost to attrition and to bolster its roster, that total is several hundred short of what the railroad had hoped to hire by this point in the year. It has been hard to find people wanting to be train conductors, he said.

Hiring more train and engine crews would enable CSX to improve its service metrics, particularly those that figure into CSX's trip plan performance for carloads. CSX's trip plan performance for carloads was 69% in the second quarter of 2021, compared with 81% in the second quarter of 2020. CSX defines carload trip plan performance as the "percent of measured cars destined for a customer that arrive at or ahead of the original estimated time of arrival, notification or interchange."

Although there will still be "noise" in the supply chain in the form of conditions such as chassis shortages and port congestion, having adequate T&E crew levels "would clean up the vast majority of issues" CSX has for trip plan performance for carloads, Foote said.

"It's not nirvana but it would certainly help us improve the reliability of our product and get it back to where it was so we can focus on making it even bigger and better," Foote said.

Despite hiring challenges, CSX said it has been seeking to ensure that the supply chain congestion experienced on the West Coast doesn't spread eastward by being "very, very committed to making sure this railroad runs well," Foote said, noting that CSX has been able to keep its terminals open in Chicago.

"It has been an unbelievable challenge. I have never seen any kind of a thing like this in the transportation environment in my entire career where everything seems to be going sideways at the same time," Foote said.

Although CSX anticipates "double-digit full-year revenue growth" in 2021, there are some market unknowns, such as when the chip shortage will cease and the automotive sector can resume full production, which also makes it harder for CSX to predict what kind of margins it might see in the second half of this year, executives said.

Both CSX and its customers are facing potential cost inflation and so the railroad is working with customers to see if these cost pressures are transitory or long term as contract renewals come up in the fourth quarter.

"I don't think there's anything in this environment that changes our overall approach to how we go to market. It's about being transparent with the customer around the cost pressures that we're facing in our business. They get it. They're facing the same issues and having a discussion around that," Foote said.

To ensure that CSX has the network capacity available for customers wanting additional capacity into 2022, the railroad has been working with customers' forecasts so that it can match resources with anticipated demand.

"What we're asking our customers to do is tell us what that volume looks like so we can resource and prepare from a headcount perspective all the crews," said Kevin Boone, CSX executive vice president of sales and marketing.

"We certainly have the locomotives. We have the assets out there to go and service that business. So we want to get ahead of that. It's been an incredibly hard market to predict what volumes are going to do and we've all been surprised about the shape of the recovery. But what we're trying to do is get out in front so we know how much we need to hire and get way out ahead of it to make sure that we're there for the customer going forward," Boone said.

For CSX's second-quarter financial results, click here.

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