Yahoo Finance Transportation Secretary Pete Buttigieg: Railroad safety is still a big concern
US Transportation Secretary Pete Buttigieg is ramping up pressure on the country's largest freight railroads to improve safety after a series of high-profile derailments.
"I continue to be concerned about this push for cost-cutting," Buttigieg said on Yahoo Finance Live (video above). "A lot of these measures go by the collective name of precision scheduled railroading, although I have never seen a completely satisfactory definition of the things that go into that. Bottom line, there needs to be a level of safety and accountability."
Longtime railroad exec Hunter Harrison pioneered precision scheduled railroading (PSR) as a means to cut costs and prop up operating margins. The system has three key components: minimize railroad car downtime, run longer trains at higher speeds, and minimize power requirements.
Critics of PSR contend the process has been an exercise in cutting employees and running less-safe railroads to maximize the bottom line.
A recent ProPublica analysis of Federal Railroad Administration (FRA) data found that 20 train derailments from 2005 to 2020 could be linked to trains being too long, for instance.
There have been 41 freight train derailments alone in 2023 according to data from Mira Safety, although it's unclear if PSR is to directly blame for any of them.
Nonetheless, the PSR model has come into focus amid several Norfolk Southern derailments this year.
On Feb. 3, a Norfolk Southern train with 150 cars carrying hazardous materials derailed in East Palestine, Ohio. The NTSB found the operators of the train tried to stop it after a wheel bearing overheated to a worrying level. An official cause of the derailment has not yet been shared by the NTSB.
The company incurred a $387 million charge in the first quarter related to potential clean-up efforts from the Feb. 3 derailment.
Then in early May, nine cars from a Norfolk Southern freight train derailed in Pennsylvania.
Norfolk Southern CEO told Yahoo Finance Live his railroad is safe, and it will not fully jettison PSR.
"There are some components of PSR that we're going to continue to endorse, and that's developing our people, working safely, investing in our assets," Shaw said.
He later added: "Last year at Norfolk Southern, our number of derailments was the lowest in two decades. We can do better. We're looking at this stuff. We're working very closely with the NTSB."
Buttigieg is proposing tougher oversight of the railroads in the wake of Norfolk's stumbles.
The FRA has released plans to prioritize inspections of train routes where hazardous materials are carried. Two-person crews would also have to be the standard inside the train.
"This is basic, basic common sense [to have two-person crews]," Buttigieg said. "But believe it or not, railroads have continued to push to be able to have just one person, even on a train that could be two, three, or four miles long. We are pushing the railroad companies to do the right thing."
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis? Email brian.sozzi@yahoofinance.com
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