About Alan Shaw
Norfolk Southern CEO Alan Shaw has continued to defend the company’s safety record and strategy amid ongoing scrutiny following the February 2023 train derailment in East Palestine, Ohio. One year after the derailment, Shaw stated that Norfolk Southern “was a safe railroad” and that he promised to make it “even safer.” He said the company has invested more than $100 million in East Palestine and that it has kept every promise made to the community. Shaw also said he has visited the town 20 to 30 times since the derailment. During a Senate hearing, Shaw apologized for the derailment and said the company is “determined to make this right,” but he declined to commit to specific demands from lawmakers, such as paying for long-term medical testing or compensating homeowners for diminished property values, instead saying he is “committed to doing what’s right.”
Shaw has also been engaged in a proxy fight with activist investor Ancora, which sought to replace him as CEO. Shaw said the company “vigorously disagree[s]” with Ancora’s recommendations and argued that Ancora’s plan lacks credibility. He stated that Norfolk Southern has offered board seats to the activists but called their responses “unreasonable.” Shaw emphasized that the company is focused on a strategy balancing safety, service, productivity, and growth, and that it has the support of 11 of its 13 unions. He also said the company is targeting a 400 to 500 basis point improvement in its operating ratio in the second half of the year and a sub-60% operating ratio within three to four years.
Source: AI-verified profile updated from Alan Shaw's recent appearances.
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Transcript (10 segments)
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Morgan Brennan0:01
Shares are up 10.5%. Alan Shaw joining us fresh off earnings last night. Great to see you. Seems like the headline, more efficient, despite derailment settlement, shareholder fight, and that full operating ratio, which is a key metric for the industry, a lot of investors going into this print didn't think it would be the case. What gives you confidence?
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Alan Shaw0:35
We're doing exactly what we said we would do, Morgan. We laid out aggressive targets for the year. Despite a weak freight environment, we've overcome that with accelerating our productivity initiatives. At the same time, we're offering a great service product. And we're growing in our most service-sensitive markets, intermodal and automotive. We're growing and driving productivity. That gives us a lot of confidence to reaffirm our margin guidance for the second half of the year, which is effectively a 400 to 500 basis points improvement year over year.
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Morgan Brennan1:10
It's interesting to hear you say you're growing intermodal and auto. Carmakers had a rough week in earnings. Intermodal ties back to what we saw with GDP yesterday and the buildup in inventory. But these are very economically sensitive areas of goods you transport. How are you able to grow them right now?
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Alan Shaw1:30
Service. That's the essence of our strategy. We're improving service. We're reducing costs. We're growing revenue. We're enhancing safety. We said we were going to use service as an enduring competitive strength. We have a franchise built for growth. So, we're growing in our most service-sensitive markets. Intermodal grew 8%, automotive grew 7%. We have a lot of confidence going forward. Customers see our improvements.
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Morgan Brennan1:57
Cost cuts, improving efficiency, and also working to improve safety as well. We have this settlement tied to East Palestine derailment in the last couple of months. We've seen the investigation report details from regulators, too. Can we confidently say the worst of that situation is behind us?
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Alan Shaw2:16
There is ongoing litigation, but we've certainly reduced the majority of the outstanding liabilities with the settlement. And there will be third-party recoveries as well.
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Morgan Brennan2:31
Let's talk a little bit about pricing because you did bring down your full-year revenue guide. What are we seeing in pricing?
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Alan Shaw2:37
Pricing in the merchandise network remains really strong. We're offering a very good product. And we're creating value for our customers and we're securing that through price. Pricing in domestic intermodal is weak. We're starting to see an inflection in truck spot rates. That's encouraging for us as we move forward. And the coal market really is defined by the underlying commodity price in coal.
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Morgan Brennan3:05
So, we have been in this freight recession for quite a number of quarters now. We keep hearing how challenging it is not only for the railroad but broader transportation industry. How much of that is a read-through to what we're seeing in the slowdown in U.S. economic growth, which everyone seems to be trying to get their arms around?
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Alan Shaw3:24
Yeah. We participate in a broad cross-section of the U.S. economy. You look in the consumer markets, the consumer's still purchasing durable goods but not at the rate it had in the past. Our customer is seeing signs there might be a peak season in terms of consumer demand in the fall. They're starting to ship goods to stores and build inventory. Commodity prices are weak. Whether that's in energy, whether that's in grain, whether that's in metals. So, that's putting some pressure on us. So, how we overcome that has really accelerated our productivity initiatives.
