It’s been a tough two years for Norfolk Southern since its derailment in East Palestine, Ohio.
But new CEO Mark George is turning the corner into 2025 with “strong” financial results that make him optimistic about the future, as well as big plans to change the Atlanta-based company’s culture.
Since the high-profile 2023 wreck, the railroad has faced more than $2 billion in costs and litigation, multiple investigations, scathing criticism from federal safety regulators and an activist investor takeover attempt, not to mention the firing of its CEO for an inappropriate work relationship.
George, who took over last fall from his CFO role, confirmed at an investor conference in September that the last 18 months had been “brutal.”
But in the company’s year-end earnings release Wednesday, George was bullish about the future: “We are seeing momentum in all areas from consistently prioritizing safety, productivity and operational excellence. We are well-positioned to build on our success and drive long-term value for all our stakeholders,” he said in the statement.
The company’s fourth-quarter earnings slightly beat analysts’ expectations. For the full year the company brought in about $12.1 billion in revenue and $4.1 billion in profit, about $1.2 billion more than 2023.
(Adjusted for one-time charges like sales of some railway lines, full-year income was up 5% from last year.)
Credit: Norfolk Southern Corporation
Credit: Norfolk Southern Corporation
Just eight months ago, as activist investor Ancora Holdings' takeover attempt was at its peak, Ancora executive Jim Chadwick denounced then-CEO of Norfolk Southern Alan Shaw for having missed earnings estimates six quarters in a row and “destroyed a town in our own state.”
Today, however, the company has “delivered or exceeded on all the commitments we made” in the last year, George assured investors in a call Wednesday morning.
While the takeover failed, Ancora this fall secured concessions, including the nomination of three board members and the appointment of a new independent one, who was announced this week.
The company has also seen its costs from the East Palestine accident begin to level out, with now three consecutive quarters in which it has recouped more insurance money than it had to spend.
The grand total cost to Norfolk Southern sits at nearly $2.2 billion, George said, but with insurance money it drops to $1.4 billion. “There will be more, but it won’t be to this magnitude,” he said.
That cost includes a $22 million settlement announced this week with the Village of East Palestine, which includes money for village public safety and infrastructure improvements.
George called it “a culmination of all of that good-faith work we’ve put in,” noting the village leadership voted to support the settlement unanimously.
A ‘speak up’ culture
In an interview with The Atlanta Journal-Constitution, George said 2024 featured efficiency and productivity improvements across its 22-state network: moving “a lot more volume with the same resources.”
That has looked like train speeds improving about 10%, he said, and less congested terminals with trains killing less time. The company moved 3% more volume in the fourth quarter, he told investors Wednesday morning.
Meanwhile, crew overtime and terminal detention costs were both down 19% year-over-year, COO John Orr added, promising the company is “closing the service and productivity gaps with our peers.”
Norfolk Southern saw a “meaningful” headcount reduction in 2024 after targeted 7% cuts to management and staff through voluntary buyouts a year ago, George said.
The improvements also extend to safety, he told the AJC.
The company has invested in seven digital train inspection “portals,” including one in Jackson, that take photos of trains in motion and leverage AI technology to proactively detect any safety or maintenance issues.
Just recently, “we identified a cracked wheel before it actually broke,” he said, preventing what would have certainly resulted in a derailment.
Finally, George is trying to change the nearly 200-year-old company’s culture into one that emphasizes “speaking up.”
“We want (employees) to raise concerns when they see them, speak up whether it’s regarding safety … or ethics or ideas on how to be smarter in the way we run our business.”
As to how to actually execute that change in a roughly 20,000-person organization, “It’s going to be repetition through various means of communication to try to get people to understand that we sincerely want to hear from them.”
When asked if he thought a culture like that would have prevented some of the recent negative headlines the company has weathered, George said he “wouldn’t go that far … but I can just tell you that I think it’s going to pay dividends in a lot of different ways going forward.”
About the Author
