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Aug 17, 2017

Hunter Harrison fires back at U.S. trade groups' rail complaints

CEO Hunter Harrison of CP answers shareholders questions during the company's 2014 AGM in Calgary

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CSX Corp (CSX.O) Chief Executive Hunter Harrison hit back at dozens of trade groups that urged a federal probe of service disruptions at the No. 3 U.S. railroad, saying their complaints were "grossly exaggerated," according to a letter seen by Reuters on Thursday.

The Rail Customer Coalition this week asked federal rail regulators to investigate CSX's "chronic service failures." It called on Congress to make it easier for shippers to file complaints and allow other railroads to use CSX track during disruptions.

Harrison responded to the coalition in his letter on Wednesday by saying "transformational changes" were being implemented since he took over as CEO in March to boost CSX's productivity and finances.

A septuagenarian known for turnarounds of Canadian railroads, Harrison also slammed the group for not discussing its complaints with him first, saying it went public to advance its own legislative agenda.

"CSX was greatly disappointed with your many unfounded and grossly exaggerated statements in your letter of August 14 related to the service experienced by some customers," Harrison wrote.

A Rail Customer Coalition spokesman said its letter reflected "broad agreement" among its members - which include chemical and agricultural companies, steel makers and beer producers - that "further action was needed to address CSX's ongoing service problems.

"CSX was greatly disappointed with your many unfounded and grossly exaggerated statements in your letter of August 14 related to the service experienced by some customers," Harrison wrote.

"The changes we are implementing today will deliver measurable improvements in key service metrics, resulting in our customers' freight moving more consistently, reliably, and cost efficiently across the CSX network," he said.

Harrison said the Jacksonville, Florida-based railroad was acting aggressively to address service disruptions and would work with the Surface Transportation Board, the main U.S. rail regulator, as it monitors CSX's "ongoing improvement."

The Rail Customer Coalition's Monday letter echoed complaints from current and former employees and union officials who told Reuters that job cuts and rapid-fire changes to operating procedures - like closing hump yards, where rail cars are sorted, and doubling the length of trains - are disrupting service.

Shippers and employee sources said Harrison's changes are causing rail cars and trains to sit idle or be re-routed across multiple states, delaying product shipments and leading to inadequate customer service.

An analyst survey last month found shippers have moved freight to rival Norfolk Southern Corp and truckers.

On Tuesday, the Surface Transportation Board said it requested CSX submit weekly service performance data as it holds ongoing talks with senior management and monitors "CSX's service levels and the effectiveness of its recovery efforts."

A spokesman for the STB did not immediately respond to a request for comment on Harrison's letter, nor did the Rail Customer Coalition.