Commentary by Richard L. Beadles

The views expressed below are those of the writer, and do not necessarily correspond with the position of VRPI. 

The writer is solely responsible for content.


February 20, 2017

It seems likely now that the infamous Hunter Harrison will soon become the CEO of CSX Transportation.  The stock market has already given him a vote of confidence, enhancing CSX market value by about $10 billion, a highly-speculative bet that Harrison will actually succeed Mike Ward and do to CSX what he has done to the former Illinois Central, the Canadian National and the Canadian Pacific. But what did he really accomplish?  Short-term gains in perceived market value for sure, but from the standpoint of service footprint and transportation utility value to the states and Canadian provinces they serve, are any of these railroads really better off than when Hunter arrived?  I doubt it.


Mike Ward and his CSX leadership team, under threat from Harrison and under duress from Wall Street, have already started doing what Harrison will now accelerate; namely, shrinking, downsizing and hollowing out the transportation utility value of the CSX network.  This is what they have been compelled to do to keep their jobs.  I dare say that these individuals regret having to take such drastic steps, but the unfortunate fact is that Wall Street dictates and compels them.


The writer owns shares of stock in all of the major U.S. and Canadian railroads. He likes to see appreciation in market value, and increased dividends, but he is more interested in seeing rail management create long-term, sustainable value, by enhancing the franchise through new business development and solid revenue growth, not through speculation, such as the market’s recent bet on what Hunter might be able to accomplish at CSX.


The Commonwealth of Virginia has itself made a major investment over the last 15 years, or more, in rail infrastructure and service development.   Is anybody concerned?  We  should be because another arm of State government will likely be voting in favor of Hunter Harrison and all that implies.  I refer to the Virginia Supplemental Retirement System.  Has anybody asked VRS how many shares of CSX their fund managers hold in accounts for the benefit of State employees, or how they will be voted?


The conflict briefly described here is much bigger than just the State of Virginia.  But the immediate problem is, we suspect, that it is not even on the agenda of folks who should be considering both the upside as well as the downside of bringing Hunter to Jacksonville. I believe that his reach will have profound, and likely net-negative, ramifications for Virginia.

January 20, 2017

Sooner or later – and hopefully sooner – public policy makers at both the federal and state levels of government must confront the elephant in the room; namely, shall our railroads continue to be the playthings of Wall Street hedge-fund managers, or do the railroads of the USA still have a public service role?   If the answer is the former, then let Wall Street continue its dis-stabilizing and debilitating game of short-term financial plays at the expense of long-term transportation infrastructure and service development.   If there is still a public service mandate imbedded in railroad charters, then that aspect must be addressed once again, in light of the public’s clearly-articulated desire for more and better rail freight and passenger service.


In less than a year, we have seen the same individual, Hunter Harrison, terrorize and seek to intimidate the executive managements of both Norfolk Southern and CSX.  Neither of our two Class I railroads are above, nor should be immune from, legitimate questions concerning efficiency, service quality, and future business plan strategies to replace disappearing coal traffic.  Nevertheless, both of these Virginia railroad have performed reasonably well under difficult conditions.  Stock prices have risen, rather than fallen, in the face of strong headwinds.


On January 18-19, news broke that Harrison is once again intent upon taking over the management of CSX, which resulted in CSX stock jumping about 24% in market value.  We would guess that not one executive-level employee at CSX did any work on those dates designing new and better freight service offerings to gain market share from Virginia highways.


Virginia has made, and is making, large investments in rail infrastructure – both freight and passenger – with the hope and expectation that rail will play a more important role in the Commonwealth’s transportation future.   That isn’t likely to happen if Hunter Harrison is running the show.   Harrison has only one goal, to cut a fat pig, and leave town soon after.


Virginians who look forward to better rail passenger service ought to be concerned, and they would do well to inquire of their elected representatives as to how the State’s investment in rail is going to be protected in the midst of such hedge fund activities.  Harrison won’t be the last.