By coinnews 
0:05 spk_0
Welcome to a new episode of the opening bid podcast. I’m Yahoo Finance executive editor Brian Zazi. Like I always say this, the podcast that will make you a smarter investor, period. And of course opening bid sponsored by our friends in Vanguard, and we’re bringing you this episode, uh, from the big beautiful NASDAQ in Times Square. Special, real special guest here today, CSX, uh, President CEO Joe Henris, Joe, good to see you. Last time I think I saw you was when you were running the ship or operations at Ford way back when and now.I think we look the same,
0:33 spk_1
but yeah, well, you know my hair is a little grayer, but you look good. You look good.
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You all hairspray, but good to see you here, of course, now you’re in CSX got here what in September 2022. That’s right. So I know a lot about railroads. I think I do. I don’t know as much as about railroads as you do. Levels set for investors. What what is, what is CSX today and what do the operations look like?
0:55 spk_1
Sure, I mean, CSX is the largest revenue railroad in East Mississippi, basically the way theRailroads are set up in America. There’s two Class One railroads in the West, BNSF and Union Pacific, and two in the east, Norfolk Southern and CSX. We’re the largest in the east. Basically, the way we’re set up is the Mississippi River is mostly dividing line, so the interchange points happen in Chicago, Memphis, you know, New Orleans, East St. Louis, um, and so we operate in the 26 states east of Mississippi, 2/3 of the US population.About $14.5 billion of revenue, but importantly, a good, you know, all the things you take for granted, all of us take for granted every day wouldn’t move without the railroads.
1:32 spk_0
This hadto be a no brainer, but you had to have had some knowledge of the railroads while you were working at Ford. Don’t we ship auto parts across this country ontrains?
1:40 spk_1
Yeah, we do, especially automobiles for sure. Actually, my second job at Ford Motor Company was running material planning logistics worldwide, which included all transportation.Logistics scheduling, you know, inventory, which of course included the railroads. I got to know the railroad CEOs got because we spent billions of dollars on moving automobiles and parts. It’s interesting because now pretty much the only thing that moves on rail are finished vehicles. Um, those auto parts now are pretty much all trucked except for from Mexico perhaps up to the Midwest. that’s something that’s interesting that’s changed over time. We can talk about that, but.But yeah, I got to know the rails and a matter of fact, in 2003, I was invited by Norfolk Southern, now our competitor, to speak to their board of directors about auto business and rail and how we could help get better. So it’s fascinating how the world turns.
2:24 spk_0
Norfolk Southern didn’t know who they had in the building. Iwhat’s going on there?
2:26 spk_1
Yeah, well, it was, you know, 20 years in the making, but we’re, you know, we’re, we’re in there.
2:31 spk_0
What is the um what is an operations person such as yourself, you know, I think back to what you were working on at Ford helped launch many vehicles around the world now that you’ve settled into CSX a couple of years in, what operationally have you been working on?
2:44 spk_1
Yeah, I mean, the thing about railroads is it’s all about operational discipline and process. You think about to closed network.You have all these yards. You’re taking in all these containers and all these cars from all over the place, and you have to have discipline to run the processes because if the yards get jammed up, if trains don’t run on time, as we say, as we all say in our society, then everything gets ingested and what is so critical to orchestrate the locomotives, the engineers and conductors who actually run the trains, and then all the cars and building the cons system, etc. so so much operational process discipline is required.And importantly, you know, we have 14 unions. It’s, you know, we’re 198 years old. There’s a lot of complexity to the management union relationship and the labor part of this because 90% of our employees are unionized, which of course goes back to my experience in the automobile industry as well.
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What you know you have under contracts with the labor unions like what what were those
3:39 spk_1
negotiations? We do matter of fact, they are 5 year contracts. They just they were just coming due at the end of December.And we took a historically new approach to this last summer. We actually said, why don’t we try to do this early because historically they’ve been very acrimonious. They always wait till last minute. Last time around took 3 years to get a deal, so we’re 3 years into 5 years and ended up going to Congress to get voted on to not allow them to strike to enforce a deal that the presidential emergency board recommended to the company and the unions. That’s how complicated these relationships have been over the years.And so 14 unions, 16 different agreements, we’re all, we’re down to one, down to 1 now. We have them all done. We had half of them done early, which had never been happened before, and that’s trying to change the culture and change the relationship of the railroad industry so that we can get better service.To our customers, ultimately be more be more efficient and safe as well.
4:27 spk_0
Railroading, uh, I guess I don’t have to tell you this. It is a hard gig. So what, what do you have to put in these new contracts to help support theseworkers?
4:36 spk_1
The hardest thing about the railroad industry is actually it’s an outdoor sport, and Mother Nature isn’t always kind to us. Uh of fact, the hurricanes last year really hurt our network, but what you put in the contracts really is just the opportunity to work together and what’s important to employees, of course, safety.Um, their, their, their scheduling and their work-life balance because we’re a 7 day operation, 12 hours a day. We don’t take the holidays off. I mean the railroads never stop. And so how do you orchestrate schedules and orchestrate a process that is, that can, you know, help people with their lives.You want to be more efficient, but obviously you want to earn a fair wage as well and be well compensated, so you try to work all together, but you really want to work together to serve the customer because railroads historically the last couple of decades have not grown volume. Coal volumes have declined. Other motal volume has increased, but generally speaking, not a lot of growth because the service levels weren’t really that good when I was at Ford when I was president of Ford Motor Company. We’re moving away from rail to.And get better service from trucks, but our challenge to our team is how do we work together to provide better service to customers so we can grow because better for everyone in society if we do more work on the rails. It’s safer, takes trucks off the roads, a lot of congestion. The taxpayers pay for the roads. We pay for our own infrastructure, so it’s better for all of us as taxpayers. It’s also frankly, more efficient and better for the environment.
5:53 spk_0
I want to get into what maybe some signals that I think your business or may or may not be sending right now from an economic standpoint, but what is the future of railroading look like in this country? Uh, does the next generation, if you’re 15 years old right now, do they want to be working on a railroad?
6:09 spk_1
Well, there are, there are those um fans out there, trust me, we see them everywhere we go who I just love trains and, and, and love the industry, but you know, to the point.You know, working with your hands, outdoor sports, 7 day operation, these are the types of operations that more challenge to get people
6:26 spk_0
there’slike a historical truck trucker shortage. I’ve been hearingabout this or
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mechanics and you know technicians and automobile dealerships right for service. These are types of jobs that over time.You know, our younger generations have moved away from it. We need to get them back in because they’re six figure jobs and good benefits. Our business actually still has a pension, so I,
6:44 spk_0
if I wanted to work at CSX, I can earn 6 figures. Yes,
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right out right from the start, once you’re trained, takes a little while to get trained, but with a pension and with all kinds of great benefits. But, but you’re also gonna have, you know, a 7 day operation, you know, 24 hours a day. You’re going to be some challenges when sometimes with some of the holidays and things. So there are trade-offs, but importantly,We need to get people back in love with railroads again because because what we have in North America is a gift. I mean it happened because of how we grew as a nation, but our freight rail system in North America is the envy of the rest of the world. We have the best freight rail network in the world. Now others have better passenger rail systems than we do, right? China, Japan, Europe, but we focused as a growing nation go east from east to west, and the railroads made that happen, so we still have that andSo getting that capacity, using it efficiently, safely, better for the environment is what we’re all trying to do.
7:39 spk_0
Youever ride the New Jersey Transit? What a dog.
7:42 spk_1
I have not. I have not ridden. We
7:44 spk_0
don’t do passenger trains. Don’t sendthis guy comments. It has nothing to do with the New Jersey. Amtrak,
7:51 spk_1
right? Amtrak. No, we don’t obviously Amtrak is run independently. However,That’s part of the challenge of all this because Amtrak runs on our on our rail network. It’s a private network. We control it. We keep it up. We spend the money to all the infrastructure.About $2 billion a year just keeping our network up and running and safe, but Amtrak is allowed to run on our tracks as well as the other Class One railroads. So that that forced marriage relationship is an interesting one foryou.
8:16 spk_0
All right, so you heard it. Poor Joe has nothing to do with New Jersey Transit and everything going on there and Amtrak.
8:21 spk_1
Thankfully they settled.
8:23 spk_0
Yeah, we’ll take that offline. So let me ask you about there’s so much going on.Right now tariffs. There’s a push by the administration to build more stuff in the US. What is the view of the economy from a freightbusiness like CS? Yeah,
8:38 spk_1
because one of the cool things about being a railroad is we see the economy, you know, all we are. I mean, I think even Warren Buffett once said if he could only have one source of data, he was on an island somewhere he wants the rail shipping data because we’re an early indicator. So what we’re seeing interest rate sensitive parts of the economy, autos, housing.are not reaching their potential, let’s say it that way. Um, you know, autos are still in the 1516 million SA and we were 17 million SAR 4 years before COVID, right? Um, housing is, you know, we all know about the housing situation, so definitely interest rate sensitive parts of the business. Um, having said that.Industrial development in our part of the country, Midwest, Southeast is booming. We have 600 projects right now that we’re working on in our network to bring new businesses onto our network over the next several years. We had 37 that started this year, gone into production this year already, so that’s exciting. That’s part of this whole tariffs, you know, post-COVID realization of how we should have our supply chains, but also obviously the stuff going on.Um, we think of bubbles coming through because of all the trade tariff things on the ports in Port Cliff they call it, yeah, I mean what happened was we had a bunch of stuff come in early and now we’ve got a 90 day pause. Some more stuff’s coming, but there was a gap there so freight vessels, you know, declined across the waters for a little bit. Who knows where it goes, but of course when that hits the ports in big numbers, it can cause congestion. So we’re watching that very carefully. But the rest of the economy when it comes toAggregates and minerals like construction is still is still strong, right? Grain harvest was good this year. Coal export coal’s volumes are strong. Coal business is good. So there are parts of the economy that are good, but, but obviously we’re feeling the pressure on some of the interest rate sensitiveparts.
10:26 spk_0
The merchandise inside of your trains um that you transport, is it if it’s a car, it’s food, whatever it is, is it inflationary?
10:36 spk_1
Well, not when it’s on a railroad, so the transportation piece isn’t inflationary because we’re lower cost than trucks and a lot more efficient. But having said that, um, you know, if more and more things come to the United States, which would be great for our business and great for for jobs, depending on what it is, it could be inflationary, right? I mean, because it was made today in Mexico or China, be more cost to produce here, but logistics costs will go down. So you have to look at the total cost equation, but.As far as our contribution to this, we’re getting more efficient, you know, and you know, while we do have some pricing that happens every year, you know, normally a little bit above inflation, um, you know, we can be more efficient and help and help with this equation.
11:18 spk_0
All right, hang with us, Jared. We’re going to go off for a quick break. We’ll be right back on opening bid.All right, welcome back to opening bid here at the NASDAQ in Times Square. Of course, opening bid sponsored by our friends, uh, at Vanguard, having a great chat here with CSX president CEO Joe Henris. Um, you know, we’re talking about the state of the economy as seen through the, the eyes of a railroad. Is this economy still one that is growing? Is it growing strongly? Is it growing slower? Is it a recession? How would you characterize it?
11:49 spk_1
Well, we see volume growth this year, um, still low single digits, so, so with anything that you would,
11:56 spk_0
you know,
11:56 spk_1
that was the guy that you put on in April. It is, um, so we still see growth. Some of that, a lot of that’s coming from what we would call bulk train business grain, coal, some of that aggregates construction related. We see lots of potential but not yet realized yet in autos, um, and some others, metals, you know, steel and aluminum have been depressed for the last couple of years.The way I would characterize it is this the service economy has been strong, continues to be strong. The industrial economy has been in a recession for the last couple of years, and we’re more tied to the industrial economy because of all the, you know, materials, raw materials being removed and finished things being produced. So if we can see more industrial growth, production growth, that would be a big deal to the economy and for CSX and to the railroads as well. But right now that’s been pretty stagnant. It’s not as bad as it was the last couple of years. That’s a big potential here.But we still see a little bit of growth. A lot of that is intermodal traffic, so containers moving across the country, whether coming into the ports or just moving in. But yeah, I wouldn’t say it’s a booming economy, but it’s certainly growing. It’s not in a recession, at least in the demand data we see. Every week we look at our order fill requests, so the demand coming in from our customers, and we don’t see a decline, not big growth, we don’t see a decline either
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is the.Set up structurally to handle bringing jobs back to America. What would that mean to a rail suchas CS?
13:15 spk_1
Well, it’d be great for us because you know a lot of times when these companies want to build new manufacturing facilities or build any facilities, they want access to rail because it’s lower cost, better for the environment, more efficient and safer. So that’s good while we have 600 projects underway on our network right now.Um, but what do they normally look for? They look for power, manpower, so, so electricity and utilities, um, you know, human resources, land and access to logistics, and you know those are the main things they’re looking for which we which we can help and we’re a big part of that industrial and economic development for states, um, but do we have the workers? I mean, you know, one of the challenges that we are gonna have I think in the future and we’re all talking about is.If immigration is down significantly, which, you know, obviously all the work going on in the southern border has been great, how do we make sure we have the workers for the future as well? We’re not having enough babies in this country if you read all the articles, and so, uh, I have enough babies. Yeah, I’m, I’m beyond that point, you know, I had, we had 3 and we’re blessed, but, but, but importantly, do we have the human resources to do that and how do we manage that going forward
14:20 spk_0
as some of that work, uh, has spent really before CSX decades in the auto industry, how hard is it to build an auto plant?I think that is something getting lost in this trade discussion that a Ford or GM can take a plant that is in Canada or Mexico and poof, flip a switch and they’re making cars in a year. the way on the ground,
14:39 spk_1
yeah, yeah, actually I was in when I was in for 3 years I was running China and Asia Pacific. We built 10 plants in in in that region.It takes 5+ years. If you think about Ford’s been building a plant outside Memphis, Tennessee for a number of years. The Hyundai plant just opened in Savannah, outside Savannah, that was announced in 2019 and just opened in early 2025, so you can kind of get a feel for the time frame. Now the supplier plants can open much more, much sooner than that. The vehicle plants are huge and they take a lot of time, but you’re talking 5 years, roughly, give or take.To make that happen now thankfully the administration is working hard to make sure the patent, the, the permit process and everything is easier and better and more efficient that can help because permitting can be a big part of this. You have to have, you have to find the land. All those things are part of that. So if you have all that lined up, you can go faster, but still you’re talking 4 to 5 years.
15:34 spk_0
Yeah, so it’s not overnight. This is not
15:35 spk_1
overnight, but there is capacity already existing.In the US, so there are a number of manufacturers who have plants running on one shift or two shifts where they could go to 2 or 3 shifts, for example, you’re seeing that some of the announcements have already come out. GM has announced to increase production at a truck plant in Indiana. I mean, Ford just recently added a shift to their plant in Wayne, Michigan. So there’s things happening to add, you know, use existing capacity and make more volume.In the US, which ultimately good for CSX actually because we move a lot of those finished vehicles.
16:05 spk_0
Whatadvice would you give to your fellow CEOs trying to navigate all this uncertainty?
16:10 spk_1
Well, you know, businesses don’t like uncertainty, as you know, and so obviously having resiliency is important, but you need you need a scenario plan. You need to look at different scenarios, say what if this happens, what do we do? This happens, what do we do? And you need to basically just keep running the fundamentals well because at the end of the day, the most efficient, the best quality, you know, the best run businesses will not only survive but prosper.This environment, but you need to be opportunistic, you know, because things are changing pretty regularly, right? I mean we have the tariffs and they came off 90 days and etc. so you really have to be nimble and you have to really be looking at things every day and respond accordingly.
16:49 spk_0
This has this caused any operational headaches for CSX?
16:52 spk_1
It’s caused a little bit of issues around, you know, the volume movements for most of the ports. So you had a lot coming in in the first quarter, not yet a law coming for the next few weeks and then more coming.As we understand it, you know, the Chinese manufacturing plants kept producing, so there’s volume ready to come to the US now this 90 day reprieve has been given on the tariffs. Um, so that, you know, most businesses like stability, right? We handled it fine. There were no issues with CSX, but you know, just managing that fluctuation of volume can be a challenge.But so far so good when it comes to handling that so far this year. What
17:27 spk_0
is it like going, I guess, head to head with Warren Buffett and a Burlington Northern?
17:32 spk_1
Well, the good news is we don’t really have to go head to head because the way we’re structured is Norfolk Southern and CSS compete in the east and BNSF and UP compete in the West, and we are partners. We interchange so we interchange a lot with BNSF and UP in places like Chicago, New Orleans, Memphis, so they’re more partners than they are competitors, which is great, um.They’re bigger on the west because part of the it’s tonnage and mileage, and so they have a lot more mileage because a lot of stuff is coming west to east. But importantly, if the rail industry works better together, including all of the Class ones, including the two in Canada, you know, we can help this industry be better holistically and we’ll all benefit because we can get more volume on the rails, take them off the roads, it’s better for all of us.
18:15 spk_0
Well, Mr. Buffett recently said, I think it was his, his annual meeting, quote, BNSF is not.Earning what it should be, is it something specific to them, or do you see that in your
18:26 spk_1
operations? Well, we would, we would say that’s true for CSX the last two quarters as well. I mean we were arguably the highest margin railroad in 22, 23, and most of 24, and then the hurricanes hit us and then a bunch of other things happened for the last 6 to 8 months we’ve been in recovery mode.So last couple of quarters, our earnings are disappointed as well, to be candid about that. But we last four weeks we’re running a lot better and we’re getting ourselves we have two major projects. We lost basically the way our network is there’s 4 main north-south routes in the east. One comes through the I-95 corridor, one’s down to East Tennessee, then Nashville South Birmingham, Alabama, and we lost one of those 4. The hurricanes took out 8 miles of track, 40 miles damage. It’s costing us $400 million to replace it.Um, so we don’t have that, that channel right now, and that’s really causing disruption in our network as addition to some other things happening, so.I can’t speak to BNSF’s issues specifically, but typically when you look at the railroad business, it’s about efficiency of the operations, how fluid is the network? How are things moving? Do you have the cars moving? Because the interesting thing about the railroad, the better you run, the fewer cars you need on your network. It’s counterintuitive because your cycle times are better and you don’t need as many cars, but when you run slower, the customers put more cars on your network, which actually slows it down.So you have to get your network running fluidly to get cars off so you can run more fluidly and run faster and that’s all the work that we all have to do.
19:55 spk_0
I always, uh, I always think back to that, that deal that, um, Buffett made for Burlington or like. You look back and you now you’re like, wow, how, how did that happen.Do you ever see something like that ever happening again where the railroad gets takenover?
20:09 spk_1
Well, I think it could happen. I mean, obviously investors can, you know, privatize or they can, you know, we’re all, you know, higher valued organizations because we’re very profitable, you know, we generate a lot of cash and a lot of returns to our shareholders. I mean our market caps, you know, in the high 50s, it should be higher than that, but that’s a reflection of what’s happened in the last several quarters
20:27 spk_0
and of course you check that stat on Yahoo Finance platform.
20:30 spk_1
exactly, but I mean.The reality is there’s only so many of these things and we have the physical assets andThere’s not going to be new railroads built in the United States, you know, so what we have is existing, it’s very competitive, very efficient, and very important to the economy as we saw why Congress wouldn’t intervene. And so those are good things. Now what we need to do is continue to run better railroads so we can get more volume, generate more profits and returns for our shareholders, but also get more volume for for society and for the economy, and that’s the focus we all have.But yeah, I mean there could be, you know, there’s been some talk about, you know, you know, is there anyone left to merge with because of competition? Basically I have 2 in the east, 2 in the west, and 2 in Canada of the Class One railroad. So I think there’s a lot of, we have a lot of regulatory oversight, um, for obvious reasons, I think, and, and so I think it’d be challenging to have something beyond that, you know, that set up today exist. Alright,
21:28 spk_0
so stay tuned on that front and in the last two minutes we always love to get a hot take from our guest. I understand you have quite the the car collection.
21:35 spk_1
31 years in the auto industry. I did, I did buy a few cars over the years.
21:38 spk_0
So what whatare your babies in there? I’m I’m a car guy, so you’re you’re, I get it. Like I’m, I’m in your camp. I maybe don’t owe what you own, but I mean I could strive to own that. Well
21:48 spk_1
oneof the things that we have in common is we remember the 2017 4 GT model very much, and I have VIN number 3. The 1st 3 that we built in that in that 4GT.Um, you know, the carbon fiber, great vehicle we built in red, white and blue race livery of the car we ran in Le Mans in 2016 and won and beat Ferrari again. Ford versus Ferrari 50 years after the first time it happened in ’66. And so I’m fortunate to have one of those three red white. You don’t drive that.I have 300 miles on it and which is I think 299. You’re not driving it. I’ve driven it. I’ve driven it. Well, I drive those 300 miles, but it’s basically giving people rides, you know, you want to ride, you take a little ride, take a photo, and then you put it back away. Um, I have an ’05 GT as well, which is the generation that we did before that, um, VIN number 5. I’ve got a few other fun vehicles as well, but I was, I, I was the champion of bringing back the Bronco into the lineup. So I have like 4 or 5 Broncos, original ’74 and some of the new ones, including a Bronco Raptor, which is fun.Um, so yeah, and I, and, you know, I was, I half of, I’m half Italian, um, my mom’s a fanelle, and so once I retired from Ford, I could buy a few Italian cars as well, which was pretty fun.
22:55 spk_0
And that’s it for the latest episode of Opening Bid, of course, sponsored by our friends over at Vanguard. As always, continue to hit us with those likes on YouTube and those thumbs up on all the podcast platforms. I learned a ton from your feedback. We’ll talk to you soon.