Business

CSX, Union Pacific Battle to win back customers




CSX Corp.


CSX 1.13%

and

Union Pacific Corp.


UNP 0.23%

runs faster trains with longer trains and operates more efficiently. They have a bigger challenge going forward with winning over multiple senders who remain skeptical after years of subpar service.

Both companies are at various stages of implementing a railroad philosophy, known as precision scheduled railroad which focuses on keeping railways moving and running trains on tighter schedules.

CSX CEO

Jim Foote

said the Jacksonville, Fla.-based railroad, which began the transformation nearly two years ago, is trying to persuade customers to move more of their cargo to rail from the truck by showing that delivery times have become more reliable.

"There are sales, but we must regret decades of poor service and experience," Foote said in an interview Wednesday, not only talking about CSX, but about freight transport in general.

The company has had some success in persuading some senders to make the shift, he said. Others are reluctant to switch to rail service, though it costs about 1[ads1]5% less to do so.

Union Pacific started the changes last year after struggling to improve service. It has reduced residence time at terminals, and cars come more often on time. The changes have not done enough to offset broader financial issues that have reduced shipping volumes, including the decline in coal shipments. The railway also struggles with truck rates which have fallen dramatically due to excessive capacity.

"Not only can you get a truck when you want, but it's a very competitive price," says Union Pacific CEO

Lance Fritz

said in an interview Thursday.

Union Pacific has rolled out new technology that gives dispatchers alerts when the rail cars arrive. It has also introduced some new services where intermodal trains, which carry goods in containers from ports to trucks, are combined with other types of goods.

"The victories that arise are overwhelmed by macroeconomics," Fritz said.

Railways can use an extra volume, down 4.1% to mid-October from a year ago in the United States, partly because of the softening economy and concerns about international trade.

The cost cuts from the new operating procedures help maintain profits in the meantime. CSX on Wednesday said it cut spending by 8% in the third quarter compared to last year, offsetting a fall in revenue of 5%. The rail volume fell by about the same amount.

Overall revenue fell by about 4%, but topped analysts' expectations. Shares of CSX rose 1.1% on Thursday.

Union Pacific saw a larger decline in revenue, which fell 7%, while operating expenses fell 10% in part due to a 13% reduction in workers from last year. The railroad said it planned to cut jobs further because of weak demand.

The company employed an average of 36,659 employees as of the third quarter.

Overall profit fell 2% to $ 1.6 billion, short of Wall Street projections. Union Pacific shares continued to rise slightly.

Amtrak's proposal to change or eliminate some of its long-distance routes, in favor of more frequent services where the population grows, is facing opposition among those who fear rural America will suffer. Reports WSJ's Jason Bellini. Photo: Getty

Write to Paul Ziobro at Paul.Ziobro@wsj.com

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