Impact of Precision Scheduled Railroading on the Industry

Good Day Everybody,

It has become clear the past few months that Precision Scheduled Railroading is now becoming the industry standard, with all but one the Class 1 railroads, either fully implementing PSR, or implementing parts of it. The implementation of PSR is clearly due to pressure from Wall Street, and their short-term thinking.

Hunter Harrison successfully implemented his PSR operating model at Illinois Central, Canadian National, Canadian Pacific, and CSX Transportation. Each time, it was characterized by initial service disruption, consolidation of facilities, conversion of hump yards into flat switching yards, closure of yards, selling of lines, unhappy shippers, and unhappy labour. PSR also resulted in massive improvements in efficiency, through longer trains, and shifting of unit trains to the manifest network. This resulted in lower dwell times, higher train speed, a lower operating ratio, and a very happy Wall Street.

More recently, Union Pacific has announced that they will implement their own version of PSR. UP have stated that no lines will be sold off and that no hump yards will be closed. They have started consolidating some of their facilities and laying off workers. They are not implementing PSR all at once, instead, they are rolling it out one line at a time, starting with the Wisconsin to Texas corridor. Kansas City Southern and Norfolk Southern have stated that they will implement parts of PSR, while not going head-on into it.

Is this a good or bad thing for the Industry at large? In my opinion, it depends on how the Class 1's handle it. In a time of unprecedented economic growth, railroads should be growing, not shrinking, and If Wall Street gets their way, we will only see the latter. However, if Class 1's streamline their network through the implementation of PSR, while also reinvesting money back into their network, and trying to gain new shippers, though, I will admit that PSR isn't the most customer-focused operating model, I think that it will be a good thing for the industry.

Buzzword BS for the benefit of Wall Street

And still the Street analysts ask, on quarterly conference calls, "What have you done for me lately?"

The story of the goose and its golden eggs comes to mind.

I recall an interview (maybe in the WSJ) some years ago in which the CEO of a major Midwestern company was complaining that Wall Street was always hammering him about short-term quarterly results and how difficult it made long-range planning. Then he added, musingly, "of course, that's what I look for in managing my own investments ..."

Maybe Wall Street is simply trying to comply with its own customers' expectations; if it does, maybe its customers will get what they wish for.

Hedge fund managers squeeze out the good stuff in short-term gains and leave husks of formerly dynamic, prosperous companies. People like Buffett understand this and build for long-term growth. Others, not so much.

First, allow me to extend a hearty welcome to Mr. Shortline with his insightful opening post at this topic.

No question whatever, Yager (Elwood, EHH, whatever printable) impacted the railroad industry in his fairly short lifetime. As Mr. Shortline notes, the concept of Precision Scheduled Railroading - PSR - is impacting the entire publicly traded industry - and it cannot be ruled out that it will not spread to privately held BNSF.

From the Wall Street Journal, here is a story regarding the impact of PSR on the UP:

https://www.wsj.com/articles/union-paci ... 1540484670" onclick="window.open(this.href);return false;

Fair Use:

.Union Pacific Corp executives defended the phased rollout of the railroad’s turnaround plan, saying they are seeking to avoid disruptions that marked similar overhauls at some of its rivals.

The railroad this month began implementing its version of precision-scheduled railroading, an operating strategy pioneered by deceased railroad executive Hunter Harrison, on the eastern portion of a network that spans the Western U.S. Analysts have said that a slower introduction indicates that Union Pacific isn’t fully committed to the changes necessary to improve results.

“I can assure you that is not the case,” said Tom Lischer, Union Pacific executive vice president of operations

No doubt PSR is a product of Wall Street's quarterly mindset. It also pronounces the intramural battles between Marketing and Operations. Yager was "take no prisoners" so far as Marketing went."I'm going to move this traffic over the road in the most efficient way I know. You get it when you get it".

Of course, a PSR concept of starting two trains from opposite terminals, having them meet midway after five and a half hours running, swap crews and head home. Presto, no meals and lodging away from home. If a "dog catcher" is needed (expired under HOS), they won't be that far out on the road.

Now PSR is a great concept if railroad traffic was solely comprised of mine and agriculture products. But so much traffic handled by the UP is containers and trailers that have timetable parameters as if they were passenger trains. I'd hate to think of how or if those high value shipments would otherwise get to market. There are simply not enough drivers out there to safely handle those trailers on the highways.

Hopefully the seven Class I's (including BNSF) will find economies with "The Gospel According To Saint Hunter" without jeopardizing the manufactured goods traffic sector. It will be an interesting ride moving forth.

disclaimer: author holds long position UNP

PSR is a farce! I agree with scheduling trains, but for Hunter, it was a militaristic way to “hold people responsible.” I am not talking about those not doing their job. If an air hose comes apart, then there is a major investigation, like the one about who shot Kennedy. Then they try to blame it on train handling, car knocker not noticing something..........................

The other secret is that PSR wasn’t what made Hunter the big bucks. He sold everything that wasn’t nailed down. If you got on the asset disposal site, you’d see it. He told all but the most profitable customers to F off, either directly, or by giving poor service. Much needed track was ripped up. Look at the NP lease to MRL. A friend who works at MRL was telling me about how many BN trains they have been hauling. That’s another Hunter short sighted cash grab. Crews are down to minimums, so they’re always robbing Peter to pay Paul. Locomotives are mothballed, so they don’t have to be maintained. That’s fine until one breaks down, and there are no spares to be had. That’s OK because he can say that some machinist screwed up. That’s the way the front lines guys got treated. He held employees in complete disdain.

Lots of the cuts looked good on paper, but were so down to the bone, that there was no contingency. Some of these roadblocks weren’t screwups, but things like bad weather. Crews are cut to such a minimum that a winter flu outbreak would be a major calamity. Factor in the fact that marking sick required doctor notes, and review by the medical department, which was to be sure some worker didn’t give a doctor $20 to write a bogus note. This made guys go in sick, which just increased the epidemic.

I think that the poor service to all but the preferred customers is going to eventually invite reregulation.

Engineer Spike wrote:I think that the poor service to all but the preferred customers is going to eventually invite reregulation.

So says Matt Rose.

If anyone other than Harrison had branded "precision schedule railroading" I'm sure the foamers and unions would probably be supporting it as the best idea ever...

That said, I know I've seen schedules for freights prior to the 1960's, so is this really a new concept, or a matter of dusting off and improving on old practices?

My take is that schedules work, and as already noted, both the UP and BNSF have a high percentage of scheduled unit trains today coming out of the ports towards the center of the country. It might take some getting used to, and there are always issues when you deal with diamonds, but the western roads don't have as many of those to contend with. As those issues get worked out, it can only improve things for Amtrak reliability.

Could someone give me a quick precis of what Precision Scheduled Railroading actually means and how is differs from previous practice? Bear in mind I'm from the UK, where all freight trains run in timetabled paths (but may or may not take up those paths depending on circumstances on the day).

“If anyone other than Harrison had branded "precision schedule railroading" I'm sure the foamers and unions would probably be supporting it as the best idea ever..”



It’s not about scheduled trains. It’s all a con game to drive up profits in a short term, while hedge funders make large returns. As I explained, it’s by selling off assets, and withholding repairs.... Why are you union baiting on this eoleson? I may be a dumb railroader, but also one who went to school. Did you ever hear of Patrick McGinnis? He’s a guy who manipulated railroad stocks, a sort of hedge funded of the 1950s. Boston and Maine was a well managed company, but was doing poorly financially, because of industry moving south, and interstate highways opening. Consequently, the management wasn’t paying dividends. McGinnis promised that he could get dividends out, if he was elected. He followed through, but ended up bankrupting the company, and also went to prison for some of his other games there.

Hunter played the same game as McGinnis. He coined the phrase PSR, but it’s nothing new that he’s offering, but just a catch phrase to get investors interested. Running trains on schedule is a good idea. So are cutting back equipment, and manpower. My whole point, which has apparently been lost is, that he took it way too far. It’s a great idea to have each boxcar, locomotive, and employee make as many trips as possible. It’s not a good idea to cut to where there are no spares. Because of no spares, something like a natural disaster leave 0 spare equipment as a contingency. The Canadian and US governments were really upset with him over his low priority handling of grain. That was because he reduced the capacity in equipment, employees, and probably track to handle this sessional traffic, all for a buck.

Wayside, I hadn’t read where Matt Rose spoke about reregulation, even though I’m a Berkshire Hathaway investor. Since I didn’t plagiarize it from Rose, I guess my pea brain came up with the same conclusion.

Engineer Spike wrote:Wayside, I hadn’t read where Matt Rose spoke about reregulation, even though I’m a Berkshire Hathaway investor. Since I didn’t plagiarize it from Rose, I guess my pea brain came up with the same conclusion.

Matt Rose in Railway Age:

https://www.railwayage.com/freight/clas ... ot-better/

"I think we’re at a tricky time now. The Street—I’m talking about sell-side analysts—has been extremely aggressive with the publicly traded railroads. They’re saying that less is better. Less capital is better. Fewer market opportunities are better. Fewer unit trains are better. It’s all about lowering the operating ratio. I disagree with almost all of that. I truly believe that every industry, every business, needs growth."

Engineer Spike wrote: It’s not about scheduled trains. It’s all a con game to drive up profits in a short term, while hedge funders make large returns. As I explained, it’s by selling off assets, and withholding repairs.... Why are you union baiting on this eoleson?

Wow, that's a lot to try and unpack, yet your response sort of proves my point... you hear the term PSR and immediately jump to robber barons looking to manipulate the books and re-regulation.

Frankly, most of the behaviors you're pointing to won't work in a Sarbaines-Oxley world or a social media driven culture. It took a long time to get over the market manipulation from creating Conrail and Amtrak, but post-Staggers, it does appear railroads have figured out again how to be profitable without resorting to deferred maintenance like we saw in the 50's and 60's....

There was an article in Trains Magazine last week about Matt Rose's comments at the meeting.

Fair use quote from the article:

“When you start redefining markets, I think then the federal policymakers will look at this, and quite frankly, they will not be happy with us,” Rose told the National Railroad Construction and Maintenance Association.

Link to article:

http://trn.trains.com/news/news-wire/20 ... ailroading" onclick="window.open(this.href);return false;

In my opinion federal and congressional scrutiny may eventually bring bad consequences ie: reregulation.

J. Lang

I guess I’m not as stupid as eolesen was trying to make me look. Never mind the fact that he doesn’t know my credentials, like the fact that I have a degree in logistics, or that I was raised in a family with a logistics and transportation business.