E. Hunter Harrison, Controversial Railroad CEO, Has Died (sued, financial, profit)

[2nd trick op]

Over the weekend, and not announced until the markets were closed, (Ewing) Hunter Harrison, CEO of CSX, one of North America's seven remaining major railroads (2 of those are Canadian) died of natural causes; he had been in ill health for some time.

The financial history of the (North) American rail industry since 1945 can be characterized as forty years of slow decline, followed by a return to stable, but unspectacular profitability after a single quantum shift along several fronts (economic regulation, work rules, and basic technology) in the early 1980's . The major players, including Warren Buffet's Burlington Northern Santa Fe, can best be likened to loosely-regulated utilities -- safe and suitable for institutions and endowments, but unlikely to post major-gains; that would be possible only among a small, more-entrepreneurial component on the fringes -- an example of which is provided further below.

The years since 1945 have not been kind to rail labor, with the work force reduced by about 85 per cent from the 1.5 million railroaders employed at the close of World War II; The typical freight train is twice as heavy, twice as long (about 8000 feet, or more than a mile and a half) and operates with a crew of two, rather than five (wo)men. Mountain grades have been shunned -- even at a cost of many miles of diverted routing. Small communities formerly heavily dependent upon a freight yard or crew-change point have seen their fortunes decline, and while all the major lines have pursued this strategy to some degree, Hunter Harrison made no secret of his intention to accelerate this strategy. His passing has not been mourned on a number of "railfan" sites.

There is an alternative to the "Harrison strategy"-- a policy of shorter, faster, and more frequent services endorsed by a relative handful of more-entrepreneurial, and usually smaller rail companies; some of these, such as New England's Providence and Worcester, were spun off from the moribund Penn Central years ago; however, they don't have the large volume of heavy-industrial commodity traffic common to the "Big Five". And rail labor, at least on the majors, enjoys its enviable position mostly due to the high amount of capital invested per employee -- union membership has little to do with it.

But with Harrison's passing, the die has been cast; if his "slower and leaner" strategy leads to deterioration of service and loss of business, he can be used as a scapegoat, but if the supposed efficiencies do pan out, and the industry continues to shed high-demand merchandise traffic (save in containers) in favor of the sort of cargoes sought by (and recaptured from) the barge lines and lakeships, then the "Harrison plan" will continue to unfold.