Three letters that pushed railroads to record profits: PSR : The Indicator from Planet Money After a series of train derailments, the railroad industry is under scrutiny from politicians, the public and rail workers themselves. Many workers blame a relatively new management philosophy called precision-scheduled railroading (PSR). What is PSR and how has it changed the industry?

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How three letters reinvented the railroad business

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The head of Norfolk Southern Railway company, Alan Shaw, appeared before the U.S. Senate today.


ALAN SHAW: I'm terribly sorry for the impact this derailment has had on the folks of that community.

MA: Lawmakers called him there to answer questions about a toxic train crash that happened last month in East Palestine, Ohio.


SHAW: Could you repeat the question?

UNIDENTIFIED SENATOR: Well, we've got reports that East Liverpool in Ohio is receiving this waste from East Palestine that has been disposed of. Is that accurate?

SHAW: Senator, standing here today, I don't know if that's accurate as of this time.

UNIDENTIFIED SENATOR: So do you know where the waste is going to, then?

SHAW: It is - we're in the process of working with the EPA on a number of facilities.

UNIDENTIFIED SENATOR: So we haven't identified where it's moving to yet.


There is a lot of scrutiny on railroad companies at the moment, not just from politicians, not just from the public, but from railroad workers themselves who claim that these sort of accidents have become more likely in recent years because of the way that railroad companies are being operated now. And that got us wondering - what do they mean by that?

MA: Well, it turns out that they're talking about this thing called precision-scheduled railroading, or PSR - not exactly a household term, but it's actually one of the biggest trends to shape the railroading business in over a century.



WOODS: And I'm Darian Woods. Today on the show - how this new business model propelled railroad companies to record profits and dramatically changed how their workers do their jobs.


MA: For decades, the business of freight rail operated like this. The railroad companies brought in their trains, and the customers loaded them up with their corn or their coal or chemicals or whatever. And when that was done, the trains hauled the stuff away. And in this way, railroads were sort of like big taxis, right? Customers dictated the schedule.

WOODS: Then in the 1990s came a railroad executive by the name of Hunter Harrison. And in the world of freight rail, he is talked about like a rock star 'cause he pioneered this new approach to the business - precision-scheduled railroading, or PSR. It was all about cutting costs and making things more efficient.

MA: Here he is talking about it on Bloomberg TV about a decade ago.


HUNTER HARRISON: I think organizations every so often have to go through a cleansing. This organization had gotten in a rut. Clearly, the board of directors had gone to sleep, in my view. And, you know, we're not taking care of the shareholders' interest. And...

MA: Precision-scheduled railroading, PSR, was Hunter's way of cleansing. And under his system, freight trains became less like taxis and more like commercial airliners. Now railroad companies, not their customers, would dictate the schedule. And if the customers missed their departure time, tough noogies.

WOODS: So tough for the customers learning this, but really good for the railroad companies' bottom line because another aspect of PSR was doing more with less. It was reducing the number of employees and trains while making the remaining trains longer and loading them up with more cargo. Fewer employees, fewer trains, more cargo - that meant bigger profits.

MA: And we're not just talking theoretically here. Hunter's system was credited with turning around two struggling Canadian railroads, companies that then saw their stock price double and even quadruple. Now, Hunter passed away in 2017, but not before he brought his system to an American rail company called CSX. And before long, CSX's competitors looked at this and said, hey, that's a great idea. And they implemented their own version of PSR and, in the process, also cut their workforce about 20%. During this time, railroads saw record profits, and their stocks also soared.

WOODS: And so that's what's happened on the railroad companies' end. But we also wanted to know what the change felt like for the workers. So we called up Eddie Hall, who was a train engineer for about 25 years. And if you're not exactly sure what an engineer does, Eddie explains it like this.

EDDIE HALL: A train is a lot like - the only way I can explain it is like a Slinky. And when you're running a train, you either want that train all together bunched up like a Slinky, or you want it stretched out.

MA: Eddie, by the way, is head of a union called the Brotherhood of Locomotive Engineers and Trainmen. And he says with PSR sweeping the industry, that Slinky of a train got longer and longer. And it used to be that a typical train, with its cars and its engines all lined up, maybe it was a mile and a half long and weighed about 6,000 tons.

HALL: Where nowadays a train is closer to three miles long, and the tonnage is over 20,000 tons.

MA: That's a big increase.

HALL: It is a big increase, and that's because - I don't know if you've ever heard the old adage that an engineer runs from the seat of his pants. What you did on a train was you felt the train. You knew what was behind you. You no longer do that. I can no longer feel what's happening three miles back.

WOODS: And as you can probably guess, Eddie is not a fan of PSR. He says the longer trains tend to run into more mechanical problems, and they have to move a lot slower. So a route where a train used to go 35 miles an hour might now only go to 12. And he says that takes a toll on the crew.

HALL: It's like if you were to get in a vehicle and get on the highway and drive for five hours at 12 miles an hour, you know, with nothing else to do but stare out a window - no music, no nothing. So there's a fatigue factor there that a lot of people don't talk about. And it has definitely come into play since PSR.

MA: One more thing that's happened with PSR is that it's put more pressure on employees to keep the trains moving. Eddie says the terminal managers who direct traffic in and out of the rail yards, they're now judged by various metrics like dwell time, which is basically how quickly can they take incoming cars and get them back on the rails. And as a result, Eddie believes that all the safety checks and the maintenance that are supposed to happen when trains are in the yard don't always happen.

HALL: I mean, I hate to say it because there are a lot of good managers out there, but you're going to borrow, steal or cheat to make your numbers. It just is what it is. I mean, when it comes to, am I going to get a bonus this year, I'm going to hit my numbers. But I don't think the upper management actually sees what's going on. So they really don't see what's happening on the ground down at our level.

MA: Which may include cutting corners.

HALL: Yes, which does include cutting corners, whatever it takes. But I've always said, since they've started PSR, we're basically just an accident waiting to happen because of the way they run it.

WOODS: In short, Eddie believes PSR has made railroads less safe.

IAN JEFFERIES: Well, I can tell you that the data don't bear that out. If you look at the data across the industry, we're in the safest era ever that our industry is seeing.

WOODS: That's Ian Jefferies. He's the president of the Association of American Railroads, an industry group. And the data he's talking about comes from an industry regulator, the Federal Railroad Administration. Among other things, it shows the number of derailments occurring each year hovering near record lows.

JEFFERIES: We just take a look at 2022, for example, when it comes to Class 1 railroads, we had the lowest all-time accident rate across our main lines in our history.

MA: Main lines, by the way, those are basically the highways of the rail system. And if you look at the accident rates for major railroads on those main lines, it went down about 9% during the years when precision railroading was really taking off in the U.S. But Darian, you know as well as I do that stats like these can be sliced and diced a lot of different ways.

WOODS: That's true.

MA: And turns out if you factor in the accidents that happen off the main lines during the same period - we're talking about accidents that happen on smaller rails or in the rail yards - you know, they tend to be fender benders, not full-on crashes. But if you factor in those accidents, the industry's accident rate actually increased 20%.

WOODS: OK, hard to make too many conclusions from this.

MA: Exactly, right? These accident numbers do not tell a clear-cut story in either direction about how PSR has impacted safety.

WOODS: And in any case, Ian says the industry doesn't want any accidents.

JEFFERIES: As we've seen in recent weeks and when even one accident occurs, it can have a dramatic impact on a community. And so as an industry, we need to keep our commitment to further reducing those numbers and continuing our drive towards zero incidents.

MA: And in the not-so-distant future, the industry may get some extra help on those numbers from lawmakers and regulators, whether they want it or not. A bipartisan bill on railroad safety is chugging its way through Congress right now.


MA: This episode was produced by Noah Glick, with engineering from James Willetts. Dylan Sloan checked the facts. Viet Le's our senior producer. Kate Concannon edits the show. And THE INDICATOR is a production of NPR.


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