Norfolk Southern’s first-quarter earnings report Wednesday gave the railroad the opportunity to publicly defend CEO Alan Shaw’s strategy again before investors decide on May 9 whether to back him. Since the railroad already preannounced its disappointing results earlier this month when it disclosed a $600 million settlement over the disastrous February 2023 Ohio derailment there were few surprises in Wednesday’s numbers.
Norfolk Southern confirmed the $53 million, or 23 cents per share, that it earned in the first quarter. Without the settlement and some other one-time costs, the railroad said it would have made $2.39 per share while Wall Street was predicting earnings of $2.60 per share. The Atlanta-based railroad’s profit dropped from $466 million, or $2.04 per share, a year ago even though the railroad delivered 4% more shipments during the quarter.
“Our strategy is about balancing service, productivity and growth with safety at its core,” Shaw said, and he promised to close the profit margin gap with other major railroads over the next couple of years though several analysts have expressed doubts about whether Norfolk Southern will be able to do that as all the other railroads keep improving.
The railroad and Ancora Holdings disagree over whether Shaw ’s strategy of keeping more workers on hand during a downturn to be ready to handle the eventual rebound is the best way to run Norfolk Southern and whether he is the best man to lead the railroad.
Ancora's CEO candidate, Jim Barber, was formerly UPS’ chief operating officer and said keeping more workers on hand during slower times is wasteful.
“This concept of Precision Scheduled Railroading is the exact same way that UPS has run its network for 60 or 70 years, which is you run it very efficiently, very effectively, and very balanced with as few assets as you can and leverage the efficiency of your employee base and the assets,” Barber said in an interview with The Associated Press.
All the railroad unions, which have been complaining about the deep job cuts since PSR became the industry’s standard operating model, came out in support of Shaw even though Norfolk Southern has also cut workers. And key regulators at the Surface Transportation Board and Federal Railroad Administration warned that Ancora’s strategy could jeopardize the advancements in safety and service Norfolk Southern has made since the East Palestine derailment.
But control of the railroad will ultimately be decided by investors — not the unions or regulators — who will vote on Ancora’s seven board nominees, and investors have reason to be disappointed in Norfolk Southern’s results given that the railroad’s profit margins have lagged behind peers. Several big investors, including EdgePoint Investment Group that ranks in the top 10 of the railroad’s shareholders, have said they will back Ancora’s slate, and a Deutsche Bank analyst said in a research note that the activists seem to have strong support among institutional investors.
Barber and Ancora’s pick to be chief operating officer argue that Norfolk Southern needs to aggressively implement the lean Precision Scheduled Railroading model to make the best use of its locomotives and crews and bring its profits in line with the other major freight railroads. That model calls for running fewer, longer trains on a tighter schedule and switching cars less often, so the railroad won’t need as many workers, locomotives and railcars.
If keeping more workers on hand was really the answer, Barber and the man Ancora wants to be Norfolk Southern’s Chief Operations Officer, Jamie Boychuk, questioned why Norfolk Southern can’t deliver more shipments on time now while business remains slower. The railroad said Wednesday that during the first quarter, it delivered 86% of the shipping containers it handled and about 76% of all the other goods on time. Norfolk Southern predicted that would improve in the second quarter, but its nearest competitor in the East, CSX railroad, was already significantly better.
Ancora wants to shrink Norfolk Southern’s workforce by about 1,500 jobs through attrition over the next three years while working to cut more than $800 million in expenses in the first year, and another $275 million by the end of three years.
Norfolk Southern says there’s no way to save that much in a year without laying off about 2,900 workers. The railroad said it believes the steps Ancora has outlined would only save about $400 million in the first year. Norfolk Southern has predicted that its own plan will generate that much cost savings within two years.
In one example of the dueling letters and presentations to investors, Ancora replied to that criticism and said most of its initial $800 million in projected savings come from things like parking hundreds of unneeded locomotives and thousands of railcars and improving fuel efficiency — not from layoffs.
Boychuk has experience helping CSX implement Precision Scheduled Railroading after a different investor group pressured that railroad to hire industry legend Hunter Harrison in 2017. That led to all kinds of service problems that year when CSX overhauled its operations quickly in the last few months of Harrison’s life, but since those initial problems CSX has come to be regarded as the industry leader in most respects and routinely outperforms Norfolk Southern in the eastern U.S.
Boychuk and Barber have promised to implement the model more gradually at Norfolk Southern, but they say major changes are needed — not the incremental adjustments the railroad is making under new Chief Operating Officer John Orr that it paid CPKC railroad $25 million to get the right to hire this spring.
Orr touted his background at other railroads and the efforts he has made in the first month on the job to streamline the way Norfolk Southern's railyards are working.
But Boychuk said improving the way individual railyards operate without reworking the entire network will just push the problems out somewhere else along the railroad.
“It’s not about a point here, a point there. Or because I massaged a yard,” Boychuk said.
Norfolk Southern shares fell more than 3.5% Wednesday to trade around $236 after the report. Ancora predicts shares will reach between $420 and $525 over the next three years if it implements its plan.
Regardless of how the vote ends up, the fight over Norfolk Southern has already put all rail CEOs on notice, and the industry already had a history of investors forcing changes. Just last year, Union Pacific hired a new CEO in response to pressure from a hedge fund, but the most famous examples were when CSX and previously Canadian Pacific both hired Harrison to implement Precision Scheduled Railroading.
Current CSX CEO Joe Hinrichs knows he has to keep costs in line while also trying to improve customer service and grow the railroad.
“I think the way to bring those two together is to continue to deliver efficiency while demonstrating the ability to serve customers. And that’s the balance we’re trying to achieve and what we’re focused on,” Hinirchs said. “I think when you can’t achieve that, like we’ve seen, people are going to push for improved cost performance, to improve margins. And so we talk very openly and actively with our team about that.”
FILE - A Norfolk Southern freight train runs through a crossing on Sept. 14, 2022, in Homestead, Pa. Norfolk Southern reports earnings on Wednesday, April 24, 2024. (AP Photo/Gene J. Puskar, File)
WILMINGTON, N.C. (AP) — This North Carolina voter is nervous.
Will Rikard, a 49-year-old father of two, was among several hundred Democrats who stood and cheered for Joe Biden as the first-term president delivered a fiery speech recently about the billions of dollars he has delivered to protect the state's drinking water.
But afterward, the Wilmington resident acknowledged he is worried about Biden's political standing in the looming rematch with former Republican President Donald Trump.
“There's not enough energy,” Rikard said of Biden's coalition. “I think people are gonna need to wake up and get going.”
Exactly six months before Election Day, Biden and Trump are locked in the first contest in 112 years with a current and former president competing for the White House. It's a race that is at once deeply entrenched and highly in flux as many voters are only just beginning to embrace the reality of the 2024 campaign.
Wars, trials, the independent candidacy of Robert Kennedy Jr. and deep divisions across America have injected extraordinary uncertainty into a race for the White House in which either man would be the oldest president ever sworn in on Inauguration Day. At the same time, policy fights over abortion, immigration and the economy are raging on Capitol Hill and in statehouses.
Hovering over it all is the disbelief of many voters, despite all evidence to the contrary, that Biden and Trump — their respective parties’ presumptive nominees — will ultimately appear on the general election ballot this fall.
“I think we have an electorate that’s going through the stages of grief about this election,” said Sarah Longwell, who conducts regular focus groups with voters across the political spectrum as co-founder of Republican Voters Against Trump. “They’ve done denial — ‘Not these two, can’t possibly be these two.’ And I think they’re in depression now. I’m waiting for people to hit acceptance.”
Trump is in the midst of the first of potentially four criminal trials and facing felony charges. The Constitution does not prevent him from assuming the presidency if convicted — or even if he is in prison.
Biden, who will turn 82 years old just weeks after Election Day, Nov. 5, is already the oldest president in U.S. history; Trump is 77.
Privately, Democratic operatives close to the campaign worry constantly about Biden's health and voters' dim perceptions of it. In recent weeks, aides have begun walking at Biden’s side as he strolls to and from Marine One, the presidential helicopter, on the White House South Lawn in an apparent effort to help mask the president's stiff gait.
Still, neither party is making serious contingency plans. Whether voters want to believe it or not, the general election matchup is all but set.
North Carolina Gov. Roy Cooper, a Democrat, said many voters are recovering from what he called “a knock-down, drag-out fight” that was the 2020 presidential election.
“Many of them have not wrapped their heads around the fact that it is, in fact, going to be a rematch,” Cooper said in an interview. “When they do, I don’t think there’s any question that Joe Biden is going to win the day."
Even before voters begin paying close attention, the political map in the fight for the 270 electoral votes needed to win the presidency is already taking shape.
Biden's campaign is increasingly optimistic about North Carolina, a state he lost by just 1 percentage point in 2020. Overall, the Democratic president's reelection campaign has several hundred staff in more than 133 offices in the seven most critical states: Georgia, Michigan, Pennsylvania, Arizona, Nevada, Wisconsin and North Carolina.
Trump's team has barely begun to roll out swing-state infrastructure, although he campaigned in Wisconsin and Michigan over the past week, sending a clear signal that he wants to block Biden's path to reelection via the Democrats' Midwestern “blue wall."
Trump campaign senior adviser Chris LaCivita said Trump is making plans to invest new resources in at least two other Democratic-leaning states.
At a private donor retreat in Florida on Saturday, LaCivita discussed the campaign's plans to expand its electoral map into Virginia and Minnesota, based on the Trump team's growing optimism that both states are within reach.
“We have a real opportunity to expand the map here,” LaCivita told The Associated Press. “The Biden campaign has spent tens of millions of dollars on TV ads and in their ‘vaunted ground game’. And they have nothing to show for it.”
Biden's campaign welcomed Trump's team to spend money in Democratic states. “The Biden campaign is going to relentlessly focus on the pathway to 270 electoral votes, and that’s what our efforts represent," campaign communications director Michael Tyler said.
Biden has been spending far more aggressively on election infrastructure and advertising heading into the six-month stretch toward Election Day.
In the eight weeks since Trump essentially clinched the Republican nomination, his campaign has spent virtually nothing on television advertising, according to the media tracking firm AdImpact. Outside groups aligned with Trump have spent just over $9 million.
Over the same period, AdImpact found, Biden and his allies have spent more than $29 million spread across Michigan, Arizona, Pennsylvania and Wisconsin.
Trump's team has been unusually conservative, in part, to avoid the perceived mistakes of 2020, when his campaign essentially ran out of money and was forced to cut back on advertising in the election's critical final days, but also because it has struggled to reignite its appeal with small donors and because of the diversion of some dollars to the former president's legal defense.
Trump's team insists it will soon ramp up its advertising and on-the-ground infrastructure, although LaCivita refused to offer any specifics.
It is clear that Biden and Trump have serious work to do to improve their standing with voters.
While optimistic in public, Biden allies privately acknowledge that his approval ratings may be lower than Democrat Jimmy Carter’s numbers at this point in his presidency. Trump’s ratings are not much better.
Public polling consistently shows that voters don’t like their 2024 options.
Only about 2 in 10 Americans say they would be excited by Biden (21%) or Trump (25%) being elected president, according to an AP-NORC Center for Public Affairs Research poll conducted in March. Only about one-quarter of voters in the survey say they would be satisfied about each.
A CNN poll conducted in April found that 53% of registered voters say they are dissatisfied with the presidential candidates they have to choose from in this year’s election.
Another major wild card is Kennedy, a member of the storied political dynasty and an anti-vaccine conspiracy theorist who is running as an independent. Both major campaigns are taking him seriously as a potential spoiler, with Trump's allies notably ramping up their criticism of Kennedy in recent days.
For now, Biden's team is most focused on reminding voters of Trump's divisive leadership. Three years after Trump left office, there is a sense that some voters may have forgotten what it was like with the former reality television star in the Oval Office — or his efforts to overturn the 2020 election that have landed him in legal peril.
“The plan is reminding voters of what life was like with Trump and also demonstrating to voters that the ways in which the world feels uncertain to them now are not, in fact, caused by the president, but can actually be navigated by this president," Biden pollster Mary Murphy told the AP. "Voters will trust his leadership and stewardship, knowing that things can be a lot worse if it’s Donald Trump.”
Biden's team is also betting that fierce backlash to new restrictions on abortion, which Trump and Republicans have largely championed, will drive voters to Democrats like it did in the 2022 midterm election and 2023 state races.
But Biden's success also is dependent on the Democrat's ability to reassemble his winning coalition from 2020 at a time when enthusiasm is lagging among critical voting blocs, including Blacks, young voters and Arab Americans unhappy over the president's handling of the war in Gaza.
Trump has been forced to adapt his campaign to his first criminal trial in New York. Prosecutors allege he committed financial fraud to hide hush money payments to a porn actor, Stormy Daniels, who says she had a sexual encounter with Trump. He denies her claim and has pleaded not guilty.
For now, Trump is forced to attend the trial most weekdays. A verdict is likely still weeks away. And after that, he faces the prospect of more trials related to his efforts to overturn the 2020 election and his handling of classified documents. The Supreme Court is weighing whether Trump should be granted immunity, or partial immunity, for the actions he took while in office.
Trump over the past week wedged in campaign stops around his court schedule, rallying voters in Wisconsin and Michigan, where the abortion debate is raging.
Trump seemed to be searching for a way to lessen the political sting from the upheaval over the Supreme Court’s overturning of national abortion rights. The former president suggested the issue will ultimately bring the country together as states carve out differing laws.
“A lot of bad things will happen beyond the abortion issue if you don’t win elections, with your taxes and everything else," he told Michigan voters.
Trump's camp privately maintains that his unprecedented trial in New York will dominate the news — and voters' attention — for the foreseeable future. His campaign has largely stopped trying to roll out unrelated news during the trial.
Even if Trump were to be convicted by the New York jury, his advisers insist the fundamentals of the election will not change. Trump has worked aggressively to undermine public confidence in the charges against him. Meanwhile, more traditional issues work in his favor, including stubbornly high inflation and the situation at the U.S.-Mexico border, in the view of the Trump team.
LaCivita said that such issues constantly reinforce Biden's weakness as “the news of the day keeps getting worse.”
Both sides seem to agree that the dynamics of the race may yet shift dramatically based on any number of factors, from how the economy fares or the course of the wars in Gaza and Ukraine to crime or migration trends or other foreseen events. Potential candidate debates this fall could be another wild card.
Such uncertainty, said Biden's battleground states director Dan Kanninen, can play to their favor.
“That dynamic is an opportunity as much as a challenge for us," he said, "because we will have the resources, the infrastructure and the operation built to be engaging voters throughout all those difficult waters.”
Miller reported from Washington. Associated Press writers Linley Sanders in Washington and Michelle L. Price in Freeland, Michigan, contributed to this report.
FILE - Former President Donald Trump appears at Manhattan criminal court before his trial in New York, May 3, 2024. Just six months before Election Day, President Joe Biden and Trump are locked into the first presidential rematch in 68 years that is at once deeply entrenched and highly in flux. Trump is in the midst of the first of potentially four criminal trials and could well be a convicted felon by November. Still, nothing prevents him from assuming the presidency if convicted, or even if he is in prison. (Curtis Means/Pool Photo via AP, File)
FILE - Republican presidential candidate former President Donald Trump arrives to speak at a campaign rally, May 1, 2024, in Waukesha, Wis. Just six months before Election Day, President Joe Biden and Trump are locked into the first presidential rematch in 68 years that is at once deeply entrenched and highly in flux as many voters are only just beginning to embrace the reality of the 2024 presidential election. (AP Photo/Morry Gash, File)
FILE - President Joe Biden gestures after speaking May 2, 2024, in Wilmington, N.C. Just six months before Election Day, Biden and former President Donald Trump are locked into the first presidential rematch in 68 years that is at once deeply entrenched and highly in flux as many voters are only just beginning to embrace the reality of the 2024 presidential election. (AP Photo/Alex Brandon, File)
In this combination photo, President Joe Biden speaks May 2, 2024, in Wilmington, N.C., left, and Republican presidential candidate former President Donald Trump speaks at a campaign rally, May 1, 2024, in Waukesha, Wis. Just six months before Election Day, Biden and Trump are locked into the first presidential rematch in 68 years that is at once deeply entrenched and highly in flux as many voters are only just beginning to embrace the reality of the 2024 presidential election. (AP Photo)
