Buzz Shaw

Railroad Weekly Mar. 13 2023

Inside This Issue  

·   Buzz Shaw: Norfolk Southern Chief Grilled on the Hill

·   The Intermodal Slump: Will Things Turn Around?

·   Employment Enjoyment: Another Good Month for U.S. Job Market

·   But a Manufacturing Sting: Goods Producers Now Shedding Jobs

·   25 or 50? What’s the Fed’s Next Move?  

·   Wab Slinger: Wabtec Bullish on Locomotive Demand

·   Looking Back: CN’s Journey from Pig to Prince  

·   Looking Ahead: Railroads Will Present This Week at a JPMorgan Event  

Track Talk

“I am deeply sorry for the impact this derailment has had on the people of East Palestine and surrounding communities, and I am determined to make it right.”

-Norfolk Southern CEO Alan Shaw  

The Latest

·   When Alan Shaw ascended to the top job at Norfolk Southern last May, he was hoping to focus on his strategic vision for the railroad, a vision that targets long-term volume growth, even if that means some short-term margin sacrifice. Since early February, however, Shaw has spent much of his time managing the aftermath of an unsettling train derailment in East Palestine, Ohio. There were no deaths or injuries from the derailment, and a preliminary report by accident investigators said the train’s crew—as well as the sensors in place to identify overheated axles—acted as they should. The train was in fact running below its speed limit. But the incident caused a major public health concern and broader concerns about rail safety. What’s more, it became a national news story, even creeping into the thorny realm of federal politics.

·   And so, Alan Shaw the railroader was forced to become Alan Shaw the crisis manager. Last week, he appeared before a committee of angry and accusatory Senators, some criticizing Norfolk Southern’s cleanup efforts, others simply seeking assurances that the company will fairly compensate East Palestine’s residents and ensure that the town is still a safe place to live. Inevitably, the criticism morphed into attacks on the entire U.S. railroad industry, and on Corporate America more broadly. Ohio Senator J.D. Vance criticized the initial cleanup and accused railroads of enjoying “special subsidies” and “legal carveouts,”—a “massive industry,” he exclaimed, “that’s in bed with big government.” He went on to assert that Washington’s actions in ending the recent rail labor dispute was tantamount to an industry bailout. Vance and others are now pushing for a new law that would enhance safety measures for trains carrying hazardous materials, require more wayside defect detectors, increase fines for procedure violations, and—most controversially—mandate two-person train crews, a labor union priority. Vermont Senator Bernie Sanders, a key ally of rail unions during last fall’s labor dispute, again blamed Precision Scheduled Railroading and its associated staff reductions. Senator Whitehouse of Rhode Island focused on the industry’s expensive lobbying efforts and generous stock buybacks. Ohio’s Sherrod Brown accused NS of following “the Wall Street business model: Boost profits by cutting costs at all costs, the consequences for places like East Palestine be damned.”  

·   Shaw’s cool and collected responses to such questions stressed several points: That NS is committed to doing what’s right, that it’s working closely with environmental and community leaders, that its safety record has improved over time, that it invests heavily in safety, that it’s hired 1,500 new workers since Shaw became CEO, and that the recent events in East Palestine are “not who we are as a company.” Shaw said he personally donated almost $450,000 to fund scholarships for seniors at East Palestine High School, aside from company commitments to the town exceeding $20m. (For context, NS earned a $3.3b net profit last year, on almost $13b in revenues). NS does oppose the bill that Senator Vance talked about, featuring the two-person crew requirement. Instead, the railroad proposed its own six-point plan to improve safety, which includes adding more hot box detectors to its network (it’s already started doing so) and accelerated adoption of digital train inspections. Shaw, furthermore, said NS supports tighter tank car standards and more training for first responders.

·   Adding to Norfolk Southern’s current despair, one of its conductors was killed on the job last week, also in Ohio (at a steel facility in Cleveland). Less tragically, another NS train derailed in Springfield, Ohio, on March 5^th, leading to the discovery of loose wheels on a specific model of railcars. The incidents will surely add to the momentum for more safety measures.

The Economy

·   There’s a lot going on. For starters, the February jobs report came out, and it was another pretty good one. The U.S. added 311,000 jobs during the month, more than a third of which were in the leisure and hospitality sector (restaurants, bars, hotels, etc.). Other job-creating sectors included retail (led by general merchandisers like