Eastern Railroad Discussion > The Timidty of NS Management

One of the most surprising things post 1999 about Norfolk Southern has been the timidity of its management in the face of opportunity.

The management that fought to buy Conrail and ended up with 57% of the franchise passed on almost every single other opportunity to expand the reach of their network, to their detriment and to the benefit of their competitors.

Examples:

Pan Am Railways - NS "partnership" in 2008 for low margin business to Ayer, MA, purchased outright by CSX in 2022 to create an effective New England monopoly.
Kansas City Southern - NS "partnership" in 2005 for low maring business to Dallas, purchased outright by CP in 2021, complete failure to value the opportunity of Mexico or direct access to Texas chemical markets
Delaware and Hudson - timid purchase of only part of this subsidaiary in 2014 when CP had for years been looking to unload the entire line, after the purchase, still no action to buy Pan Am Southern
Bessemer and Lake Erie - NS sat by and let an agressive growing railroad (CN) buy a disconnected line into the heart of NS territory in 2004 with still unknown future outcomes

A striking feature of all these events has been a discounting of high margin captive manifest and bulk business and a focus on intermodal ventures in marginal markets.

The self-satisfied company that refuses to expand eventually gets taken over.
 

abyler Wrote:
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> One of the most surprising things post 1999 about
> Norfolk Southern has been the timidity of its
> management in the face of opportunity.
>
> The management that fought to buy Conrail and
> ended up with 57% of the franchise passed on
> almost every single other opportunity to expand
> the reach of their network, to their detriment and
> to the benefit of their competitors....

Appears that the ghost of Fishwick haunts NS.
 

Good points, and I agree, esp. about the D&H and ex-BM/Guilford stuff. Years ago N&W (and NS to a lesser degree) had a real good carload/automotive franchise and less focus on intermodal. While I agree on their more recent focus on intermodal traffic I also think they've almost lost their way on carload, like most roads I guess. Never understood why they didn't buy all of the D&H and Guilford stuff, and even when they only bought part of them, why they never fully developed either side. With the capacity already there, why not try to fill it? Probably could have done better than CP with the D&H, including the gateway to Canada, and surely could have more than 2 trains a day into NE if they bought the whole thing, likely more than 4 a day as they used to have. Now they're gonna have to rely on the competition to get their intermodal through. As for the BLE, they could have made some good money off of owning it but I don't think it was that big of a miss as the future of the BLE is still in doubt. With blast furnace steelmaking on the way out here in the US, and the USS ET Works pretty old and decrepit, I doubt the ore trains will be running several years from now. With NSSC potentially owning USS that may change, but there isn't enough other traffic there if they decide to drop the BFs and change to EAFs. Lots to look back on and ponder about NS though like you said...

JG

Will  NS become  the NS  in BNSF?

mvrr10 Wrote:
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> Will  NS become  the NS  in BNSF?


That has always been presumed...but Warren Buffet himself pooh poohed the idea...he did not, at the time, think NS was well managed. But then he doesn't understand spaghetti bowl railroading...it has somewhat higher costs. PSR wasn't really meant for the east. 

NS should have purchased FEC before Fortress or Grupo Mexico got it. Its a logical extension of the NS system

NSDTK Wrote:
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> NS should have purchased FEC before Fortress or
> Grupo Mexico got it. Its a logical extension of
> the NS system

And if they had, I can almost guarantee there would be no such thing as Brightline right now.

Freightwise, I agree with you 100%.

Posted from Android

Shortly after the D&H takeover a bunch of the bigwigs came up to Binghamton for a couple of days. They had big plans to make the D&H and Southern Tier to Buffalo a "relief valve" for the Pittsburgh Line back when it was extremely busy. Not only did that not happen, they took traffic *off* of the Tier and D&H and sent it via Conway and Harrisburg.

Wick Moorman had plans for the D&H, but when he left so did the plans. After that it was all cuts, especially the pool to Allentown.

I won't be surprised if Ancora tries to dump it all if they get control of NS. It'll be a quick buck, just like when Hunter sold the D&H to NS.

abyler Wrote:
-------------------------------------------------------
> One of the most surprising things post 1999 about
> Norfolk Southern has been the timidity of its
> management in the face of opportunity.
>
> Pan Am Railways - NS "partnership" in 2008 for low
> margin business to Ayer, MA, purchased outright by
> CSX in 2022 to create an effective New England
> monopoly.

This was such a obvious opportunity lost to the direct competition.  Pan Am Southern could have been the stepping-stone to acquiring all of the rest of Pan Am (Guilford).  Just spend a day on the old B&A and with the right investments in the track structure, Hoosac Tunnel clearance improvement efforts and marketing the entire integrated network with the objective of going after half the intermodal and manifest freight that CSX now has a big lock on now.  Ultimately, they sat on their hands for 10 years and did nothing in this corridor.     

> Kansas City Southern - NS "partnership" in 2005
> for low maring business to Dallas, purchased
> outright by CP in 2021, complete failure to value
> the opportunity of Mexico or direct access to
> Texas chemical markets

KCS seemed like a logical extension of their own railroad.  As with Pan Am Southern, the Meridian Speedway should have been the stepping-stone to going after the entire KCS Railroad.  They enjoyed three direct connections to KCS: Kansas City, Meridian and New Orleans together with their 50% Meridian Speedway franchise so would have been an end-to-end combination.  Big advantages in Texas and Mexico that could have been beneficial to the overall NS-KCS railroad lost to CP, and CP has found a way to run around NS with a new connection with CSX in the Deep South.    

> Delaware and Hudson - timid purchase of only part
> of this subsidaiary in 2014 when CP had for years
> been looking to unload the entire line, after the
> purchase, still no action to buy Pan Am Southern

NS, when negotiating for the D&H in the 2015 should have looked to obtain the entire line to Rouses Point on the Canadian Border for direct connections to both CP and CN verses just the South End.  EHH would have sold the entire railroad for the right price and integrating the D&H with former Guilford lines and the rest of the NS network would have made the D&H much more valuable with traffic feeding in from all points of the compass.  Now the D&H North End is in jeopardy of losing much of the Maritime Canada traffic to CSX.
   
>
> The self-satisfied company that refuses to expand
> eventually gets taken over.
>  

So true.  PSR and short term "make a buck fast" mentality has left the railroad as the clear under dog in the east.

For what it’s worth, you are IMHO off base about the B&LE. As others have noted, 90% or more of the B&LE’s traffic is the daily iron ore train from Conneaut shuttling taconite to Edgar Thomson. The long term future of these kinds of mills is very much in doubt, and NS already gets a large daily share of that facility’s high value outbound steel traffic via the URR. The NS also already has plenty of routes in western PA and has a parallel route from Conway to Ashtabula that is already underutilized due to the closure of the rest of the integrated mills in the region and then the collapse of the lake coal market. CN has done virtually nothing with the B&LE since they got it. It was essentially a throw in with the EJ&E, so having the CN in western PA hasn’t affected them one iota.

Posted from iPhone

Northern Wrote:
-----------------------------------------------------
> NS, when negotiating for the D&H in the 2015
> should have looked to obtain the entire line to
> Rouses Point on the Canadian Border for direct
> connections to both CP and CN verses just the
> South End.  EHH would have sold the entire
> railroad for the right price and integrating the
> D&H with former Guilford lines and the rest of the
> NS network would have made the D&H much more
> valuable with traffic feeding in from all points
> of the compass.  Now the D&H North End is in
> jeopardy of losing much of the Maritime Canada
> traffic to CSX.


We have a customer who buys paper from 2 mills in Maine on occasion.  When they source from one of these mills, it's usually 30-40 cars at a time that ship 5 - 10 per day for a week or so.   Traditional routing was Pan Am to Pan Am Southern to NS, then interchange to us.  Now one mill goes CSXT Buffalo NS to us, other goes CN Toledo NS to us.  

In all fairness to NS if I remember correctly US Steel was trying to unload its entire railroad empire in one bundle, I think CN originally only wanted the "J" but US Steel said take them all (DM&IR, B&LE, EJ&E) or get nothing.


Jeff
Chicago

NS buying KCS was discussed multiple times, but the facts are that it probably wouldn't have passed muster. Simply because since NS would then be the only eastern road with direct access to Mexico AND the Chemical Coast, they would have had a single haul advantage over CSXT. There's no way NS could have arguing with using the pre-2001 rules either for that buy because of that one reason. 



Edited 1 time(s). Last edit at 02/25/24 19:58 by Mojacket.

It seems to me like NS made some significant changes after the East Palestine derailment. They’ve added more defect detectors and stopped focusing so much on the operating ratio. I don’t work for NS so have no inside knowledge but read they were trying to increase retention by having more predictable schedules for more employees. To me these sound like good moves and I hope they continue rather than get taken over by greedy cost cutting people that definitely wont grow the business.

Posted from iPhone

Steve Gass
Linden, VA
B-LineRailfan

The letter from Amit Bose to NS about keeping up the good work on safety reinforces that point.

Posted from Android

Mojacket Wrote:
-------------------------------------------------------
> NS buying KCS was discussed multiple times, but
> the facts are that it probably wouldn't have
> passed muster. Simply because since NS would then
> be the only eastern road with direct access to
> Mexico AND the Chemical Coast, they would have had
> a single haul advantage over CSXT. There's no way
> NS could have arguing with using the pre-2001
> rules either for that buy because of that one
> reason. 

Exactly! While NS would have been a good system fit with KCS, people completely forget how the STB essentially blocked even CN from acquiring KCS. Now switch that to NS... we would have seen CN, CP, CSX, BNSF, and UP all screaming about anti-competitive issues. There would have been minimal chance the STB would have allowed that merger.

engineerinvirginia Wrote:
-------------------------------------------------------
> mvrr10 Wrote:
> --------------------------------------------------
> -----
> > Will  NS become  the NS  in BNSF?
>
>
> That has always been presumed...but Warren Buffet
> himself pooh poohed the idea...he did not, at the
> time, think NS was well managed. But then he
> doesn't understand spaghetti bowl railroading...it
> has somewhat higher costs. PSR wasn't really meant
> for the east. 


Given what we just watched with the CP-KCS merger in the last few years (especially with CN being blocked by STB), NS or really any other class 1 isn't merging with anybody. It's much more likely we are headed back into a re-regulation period as the era of class 1 mergers is effectively dead post CPKC forming.

AaronJ Wrote:
-------------------------------------------------------
> engineerinvirginia Wrote:
> --------------------------------------------------
> -----
> > mvrr10 Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > Will  NS become  the NS  in BNSF?
> >
> >
> > That has always been presumed...but Warren
> Buffet
> > himself pooh poohed the idea...he did not, at
> the
> > time, think NS was well managed. But then he
> > doesn't understand spaghetti bowl
> railroading...it
> > has somewhat higher costs. PSR wasn't really
> meant
> > for the east. 
>
>
> Given what we just watched with the CP-KCS merger
> in the last few years (especially with CN being
> blocked by STB), NS or really any other class 1
> isn't merging with anybody. It's much more likely
> we are headed back into a re-regulation period as
> the era of class 1 mergers is effectively dead
> post CPKC forming.

Some form of re-regulation is likely the direction that railroading will take, absent a complete R takeover of the government. Control of FRA, DOT, Justice, FTC, etc will likely tilt toward less regulation, less friendly to consumer / unions / safety.

My guess is that the class 1 lines will begin to shed secondary main lines, large branches, etc to focus on the longer line hauls. I expect that will take place regardless of whether R or D or split party control happens.