Norfolk Southern puts a price on its Ohio derailment as rail safety practices come under greater scrutiny
Track record… Yesterday, Norfolk Southern said that the February derailment of one of its trains — which spilled toxic chemicals into a small Ohio town — would likely cost the company $387M, or about 12% of its profit last year.
Cleaning up: The price tag includes $31M pledged to help local residents recover. So far, Norfolk said it’s spent $55M removing contaminated soil and water.
Lawyering up: That includes legal fees, because Norfolk faces lawsuits from the DOJ, Ohio, and shareholders, among others.
The issue runs deeper… than just one spill. The National Transportation Safety Board launched a special investigation into Norfolk’s general safety practices. The company’s workforce has shrunk by almost 40% since 2012, a steeper drop than that of rivals BNSF, CSX, and Union Pacific. From 2013 to 2022, Norfolk’s accident rate spiked more than 80% — nearly 3X the industry average. The Ohio disaster has led to greater scrutiny of the rail industry’s safety practices.
Accidents up: In the past decade, the seven major US freight railroad operators have had 27% more accidents. Lawmakers and safety officials point to an industry-wide strategy called Precision Scheduled Railroading, or PSR, as a reason for declining safety.
Profits up: PSR aims to boost profits by cutting costs and increasing efficiency through measures like lengthening trains (some up to 3 miles long), shrinking staff, and cutting inspection times.
Financial efficiency can hurt operational efficiency… Since 2010, rail companies have paid shareholders almost $200B through dividends and stock buybacks. While PSR has helped rail corps haul in record profits, it’s also led to widespread safety problems and worker dissatisfaction. In December, President Biden blocked a nationwide rail strike that would’ve cost the US $2B/day.