Okay, welcome back. Up next we have CSX. We have Joe Hinrichs, President and Chief Executive Officer, presenting here today, rolling along on the transport track of the JPMorgan Industrials Conference. So, Joe, I know you have a little bit of slides here to kick us off, so why don't you go ahead and do that, and we'll cut in.
Yeah, thanks, Brian. Good morning, everyone.
Thanks, Frank.
Thanks for the opportunity to be here.
Thank you.
Just brought a couple of slides to set context so far of what's happening in the first quarter, and then look forward to a dialogue. Hopefully we can have a good discussion, a lot more fun to do it that way. To see what's happening on volume so far, it's interesting, actually. We broke this up into the first four weeks and then the last six weeks. And what you'll see is, January got off to a little bit of a slow start, if you see that on the right chart. And actually that third week is when the Arctic blast kind of went through the country, and I think everyone was affected by that. But actually what we've seen since then is actually strong volumes, especially on the intermodal side. We'll talk a little about that.
But importantly, we have a couple of tough comps from last year. For us to set the context, we didn't run that well in 2022, and so we were running a lot better towards the end of 2022. And so in early 2023 we were able to replenish most of the utilities in the South with domestic coal, which was why we had so much thermal coal volume in the first quarter of last year. That's not repeating. Also, we got a—it was a warmer winter last year, and we got off to a really strong start on aggregates. Not worry about aggregates at all. It should be a growth opportunity for us this year. But year-over-year we're down a little bit.
So other than that, what you're seeing is strong coal, export coal demand, international intermodal coming back, and domestic modal domestic intermodal kind of continuing on its path of progress in the last half of last year. So we feel good about where the volumes are, especially in February and March, and this project provides a little bit of that context. But put this together just to show you kind of what we've seen so far. This is year-over-year. This is not versus our plans or what we were expecting. But basically what we're seeing is growing demand year-over-year so far on the volume side in automotive, chemicals. Chemicals are really important because almost entirely for the 2023 chemicals were down year-over-year. That's our largest customer segment base, so important to see that starting to grow again. Export coal continues to be strong.
As I said, international intermodal continues to show some signs of life, which should be good for the year. Kind of what's kind of keeps kind of trending the same, kind of year-over-year basis is, in the middle there. Again, I think forest products is an opportunity for us for the year this year. I think you'll see a little bit of progress there. What we're watching very closely is ag and food. For lots of different dynamics, the Brazilian crop last year and also some other things going on, grains and feeds have been a little bit light. Fertilizer is a little bit low in production in Florida, but we'll should see that pick up. Not worried at all about domestic coal and minerals. It's a little bit off, that's comp year-over-year.
So I'd say a good start to the year overall on volumes. This is something that we've been really working on, actually, especially since Mike Cory joined us, was really looking at our train tonnage and looking at our train lengths. And this is a three-month moving average, so it takes into account everything that's kind of happening over a period of time period. And what you're seeing, they were starting to make really good progress on our train tonnage, which, as you know, is really important to the efficiency of the network. And importantly also better utilization of our locomotives and our crews. I mean, on any given day, if the weather isn't an issue or if there isn't a major construction or a derailment or whatnot, really it's up to our you know, the constraints are our locomotives and crews.
And so this is really helpful in that regard. So you're seeing significant progress there, and we should see significant progress throughout 2024. That's a big, big area of focus for us. Again, a three-month moving average, so you're starting to see that really roll into the February-March time frame and hopefully from beyond. So that's all I brought. It was just a little opportunity to set context to what's happening in the first quarter. Just a reminder, our 2024 guidance remains unchanged from what we did in our earnings call in January. We expect low to mid-single digit volume growth and revenue growth, driven by, as I said, strong merchandise. Remember last year we grew our merchandise volume and the market was down, so we feel really good about our momentum there. Profitability was supported by solid pricing.
We're seeing good pricing, improving efficiency like I just showed you on the tonnage, and lower cost inflation on a year-over-year basis, clearly, even though we do have a 4.5% wage increase for the unions this summer. Then our CapEx is, as a reminder, about $2.5 billion. We have still ongoing expenses for Pan Am, although that's pretty much going to conclude a lot, most of that this year. Really excited about the new interchange point with, in Myrtlewood, Alabama, with CPKC, which should go into effect this year, and some other projects we have going on. So, our return, you know, portfolio, if you will, for shareholders, our strategy hasn't changed, so you'll see us continue to do buybacks. We've raised the dividend, as you saw, and we'll continue to have a good balanced approach to capital return.
That's kind of a quick summary of where we are. Look forward to the dialogue. Thanks.
Okay. Thanks for that, Joe. Maybe just one question. I didn't see train speed in the JOC on there, but it looks like they've been under a little bit of pressure maybe over the last couple of weeks. Is that related to the longer and heavier trains, or is that something else, you know, happened on the network?
No, actually, it's not necessarily. We haven't seen it related to the tonnage. What's happened is we had a couple pretty meaningful derailments in February that were in key spots on dual track and double track. And so, we felt the effects of that also hit our trip plan compliance in February a little bit as well. I don't see anything in our network that gives us any concern about where we are. But we had the weather, of course, in January, but we also had a couple key spots get hurt. And we also have our Fitzgerald Sub, which is down by Waycross. Once a year we do major work, and we're in that right now, which really slows a big part of our network down. But this finishes this week.
I think the combination of those things, you'll start to see those numbers start to get back to where they've been.
Okay. Understood. So on the heavier trains, you did obviously show the graph, and Mike's been talking about that for a little while, since he's been there, not too long, obviously. Is that something you can do, you know, independent of volume? Do you need to make some more changes on the network? It looks like it's still early, but how should we think about that?
Yeah, I mean, our network is capable, and we don't really see—I mean, there's some yards we need to do some work on, but that's kind of necessary just to get our capacity where we want it to be. Our sidings are in pretty good shape. I think what we've really done is just, you know, we've had a new set of eyes come in and take a look at just everything, and you can see where in some cases we had trains that were running that were pretty short, and there's lots of reasons for that.
But we had a chance with some of the new sets of eyes coming in and new energy to say, "Oh, this is a re-look at the whole network and see, you know," and with our marketing and sales team right with us, where will we not affect customers? Because obviously, you know, we've made a brand for CSX on trip plan compliance and also on our customer service, and we're not obviously intending to lose that at all. And so we worked really hard on making sure that we're not affecting customers, but yet we can be more efficient.
In fact, again, as I said, when you look at crew availability, you look at engine usage, etc., we think we can actually be better serving the customer by running more efficiently, and we're seeing starting to see some of the effects of that in March. There's not really much we need to do in the network. I mean, we're putting about $2 billion back into the network this year, so it's pretty sizable. And we feel really good about where we are. You know, we do have some opportunities in a couple of yards to to probably put some more track back in to give us a little more flexibility on the switching side, but it's two or three yards, so it's nothing substantial, and it's included in our capital spend.
So Mike's been there only for a little while now. What are some of the mentioned a few of them, I guess, the productivity measures that he's focused on. Is that something that'll just be kind of an ongoing process? Is it going to reach a level where potentially you could quantify that in terms of like a dollar amount or an operational target?
Well, I mean, we still have work to do to overcome the inflation of the last couple of years, especially on the labor side. And so, you know, obviously we're looking for efficiencies to help to help take care of that. But Mike and I are aligned, and when I talked to him about taking the position, you know, he was really excited about coming out of retirement to do it, largely because we're trying to do what we're trying to do and how we're trying to do it. And so focus on the customer and focus on employees. So Mike's been really, if you know Mike, he's been really focused on leadership, on getting to our managers of train operations, our superintendents, about on, on leadership.
Because our belief is that we have to get our employees more engaged, feel more part of the team to help with efficiency, but also most importantly safety and service. And so we're really focused on that and really aligned on that. So a lot of work on leadership behaviors, a lot of work on leadership, how we use data and how we have visibility to the network and transparency so we can deal with issues, but also a lot of work on some of these efficiency actions. And frankly, what I'm seeing also is a lot more collaboration between our engineering department and our transportation department on planning work so that we can, you know, be more efficient, impact customers less, and also be able to keep the network running fluidly. And so just a number of things.
Every time you get a new set of eyes in with a lot of experience, you get a chance to kind of re-look at things, which has been great. But our focus remains on what we, you know, obviously what we've branded One CSX, which is around our core belief that in order to serve customers better, we've got to provide a better environment for our employees to be engaged. It isn't. We don't lower expectations for efficiency or for safety or for how, you know, work ethic, but we do it together, and that's kind of what the approach we're still seeing.
So you mentioned the One CSX. At this point, do you feel like you're able to attract and retain the talent that was a big part of being out in the field and getting everybody back, you know, after the challenges of COVID, after the challenges of the labor negotiation, which was quite contentious? So where do you feel like you are right now when you look at the network?
Yeah, we feel good about our manpower levels. It took us a while to get there, but we're pretty stable now. Our team, we had count between 7,300 and 7,400. We feel good about that. So we're not having to hire as many people. We still have to hire for attrition. Obviously we still have attrition, but we feel good about where we are. We're seeing our attrition rate has slowed down. There's probably lots of reasons for that, but certainly we believe one of those reasons is the culture we're creating and the environment we're trying to create with our employees and our union partners. So we're not seeing as much attrition, both in the new hires and during the training cycle, but also just overall. But we still have attrition, and that's okay.
We want to have attrition so we can use some that for some fit for efficiencies, but also we can, you know, manage where the volume moves around. I think the key thing for us, we do surveys every year. We actually just finished our major survey, our annual survey, is just to see how engaged our employees are and how much feedback they're giving us on how to continue to improve the network and improve the environment that they're in. So I would say, you know, it's really important to us. If you look at the railroad industry, at least what I've learned is, you know, for the longest time, most of our workers came from referrals from our current workers, either friends or family.
During COVID and during that contract period, etc., we saw a lot of that dry up. Matter of fact, they were no longer advocating for people to come to work here. They were telling them not to, which was worse.
Right.
That has flipped because we do net promoter score surveys with our employees. We'd get, you know, would you recommend, your, you know, and friends and family to work for CSX? Those numbers have changed dramatically. So that's the kind of things we're seeing, and they're more likely to stick if they're recommended by a friend or family to come work here. You're going to look out for them. And that comes into safety. It comes into so many different areas. So we feel good about the progress we're making, but I want to be very clear. There's still a long way to go. I mean, there's still a long way to go. And our employees tell us that, remind us that, but we've made a lot of progress.
I think that's played out in some of our efficiency, but also and more importantly, probably in our in our service. Now, we need it to play out in our safety numbers too. We had our probably our best quarter ever last quarter in safety, but we've had a not a good start to the year, in, in January and February. Again, more work to be done there for sure.
Is one of the areas still to be implemented or maybe even done more on in the next round, work rest rules, sick pay, time off, are those all sort of in implemented already and reached agreements too when it comes to CSX? I know it differs quite a bit when it gets down to local level.
Yeah. Well, I mean, I think everyone, if you think about the contract, which, you know, we'll start that process later this year, I think no one has a good taste in their mouth of what happened last time, all parties, the employees, the union, leaders, the companies, and we all have different perspectives on that, but I think everyone has a bad taste in their mouth. So, you know, we have to learn from it. We can't change it, but we have to learn from it, and we have to work together. However, you know, we have to continue to get more efficient. We have to continue to get more safe. We have to continue to work together as an industry.
I think there's a lot more collaboration happening, at least discussions happening in the industry about how to make that happen. At the end of the day, the customer experience is holistic. And so, you know, if Union Pacific runs well and we have a handoff and then they give it to us and we don't run very well, that customer experience isn't good for everybody. And so at the end of the day, you know, I think there's more opportunity there. When it comes to paid sick leave, we have deals with all the unions except for BLET. It's been a little frustrating, frankly. But in all honesty, you know, our employees are in good shape, and we feel good about where we are.
We were the first ones to do the deals, and really feel that, you know, it should be a collaborative discussion and could and should be a process we work together on. You know, the industry will come together and decide on what their priorities are for the next round of negotiations, and the unions will do the same. But I don't think you'll see the same kind of contentious, you know, focus on one or two issues, and we certainly don't intend for it to last three years. And I don't think Congress wants us to come back, so we'll have to make sure that we do our best to make sure that doesn't happen.
But at the same time, we have businesses to run, so I think it's in all our interest to find a solution that doesn't take three years.
Right. Well, one of those points, that was, I think, contentious and at least surprised me a little bit was the single-person crew or the grounded conductor role. I know you said the issues are still kind of being formed on both sides, but is that something that you believe the industry, the rail industry, might try to pursue again? Because I don't know if that was particularly well received. Obviously, it was a pretty contentious.
Yeah, it was very contentious. It was legal and otherwise. I mean, I think it was misunderstood. I mean, I wasn't involved, so it's easier for me to talk about it. I came in at the end, right, after the tentative agreement had been reached. I think there was a lot of misunderstanding. I think it wasn't well understood or communicated what some of the railroads were trying to do. CSX wasn't really pushing it too hard, but because we didn't think we were ready. But there are some pretty, you know, well-thought-out proposals that have been put forth about ground-based conductors as opposed to riding on the train, but still having conductors to be available. I think it was largely misunderstood and, frankly, poorly communicated, and it became a cause célèbre. It became a fight.
Again, I think we have to work together with everybody to see what's the, what's the safest, most efficient way to serve our customers. If we stay focused on that, we can take a look at options. Listen, you know, we still hear from our employees, especially our T&E employees, the number one issue is work-life balance and, you know, being stuck away from home and etc. And so and some of these are ways to try and alleviate some of those issues. So I think it goes back to a foundation of lack of trust. And so we have to have a better level of engagement and communication going both ways so that we can talk about these issues without them being, you know, emotional about trying to draw lines in the sand. As an industry, we've got to evolve.
You know, we have to get for our employees. Younger generation isn't going to spend as much time away from home or isn't going to spend on their holidays. And so we've got to but we have to serve the our customers all year round. So we've got to find a way to listen better to each other and be open to new solutions. If we keep doing things the same way we've been doing, we're going to have the same issues. And we're 197 years old and, you know, and we've got to evolve. Same thing on technology. We've had to evolve with technology. I think, you know, technology's undefeated over time, so why fight it? You just have to use it to be better for everything. And so our industry hasn't and our unions haven't always embraced technology either.
So but again, I think the core of that is there's just been a breakdown in trust, and we got to find a way to rebuild that. And, you know, we have great opportunities for people to have careers and have retirements and have a fulfilling, you know, our railroads are very proud. They're very, you know, proud of what they do, but also and with the role they play in our society and our economy. So at the end of the day, we got to find a solution that works for everybody, but we have to be open to new ideas. Otherwise, we're not going to change.
One of the things is pretty clear now. The industry is definitely focused a lot more on growth. And one of the things that excuse me, we've heard at least from CSX is it doesn't have to come, you know, at the expense of operating margins, which I think is sort of the perception you have, you know, either or, you know, at least at the high level. So maybe you can walk us through, like, how you think of that and, you know, is there a limitation on growth to keep the margin profile where you would like? Is it really service-dependent? We haven't really seen that, you know, been unlocked. How do you view that trade-off if you think there is one?
Yeah, I think there's another area that's largely misunderstood. If you can add volume to existing trains, the incremental margins are substantial, whether it's intermodal or merchandise or anything. So I think that's largely misunderstood. If you have to do a train start, which ties up an engine locomotives and crews, then you have to be able to justify it, on the revenue and margin side to use that capital and those important resources. But there's all kinds of opportunity to grow volume on our network, and I assume other networks, without having to put a lot of capital in place and to be able to do it on existing trains. So, you know, listen, we grew coal volume pretty substantially last year. We didn't; it didn't affect our, you know, our cost structure. We grew automotive volume last year.
It didn't affect our cost structure. It was all good for the business. Intermodal business picking back up this year. We're not having to, you know, make major investments or things. A lot of that's on existing trains anyway. So I think the key thing is, you can't overburden the system and shock it so you lock it up. I mean, it's all about fluidity of the network. And, you know, I'm still not even 18 months on this job, so I'm still learning a lot, but it's all about keeping the network fluid. And if you can do that and add volume, then the margins are pretty substantial. If you lock the network up, either in your switch yards or your hump yards or wherever, or you don't have crews, then you're, you know, you're going to feel that effect.
So it's managing volume in a way that keeps the network fluid. That is the challenge. And, you know, I think our team's done a really good job of doing that so far, and we don't see any signs of that letting up. And, you know, listen, at these margins, you know, vol most volume is really attractive.
So on the volume front, we look at the sort of the back half recovery, which is, you know, more or less the consensus from a lot of companies look at in the market. What are some of the things that are, you know, sort of key to CSX, and then what are some of the ones, I guess, and how much would you if you had to allocate between that market recovery versus CSX. Is it the way to kind of bifurcate that?
Yeah. I mean, for us, you know, the year-over-year comps get easier as you progress through the year. So even for ourselves, that's true because we had a strong first quarter last year. Some anomalies in the first quarter. We had a $50 million legal settlement that was a benefit to us in the first quarter last year. Plus, as I said, we had the replenishment of all the utility coals in the South and some other things that happened in the first quarter of last year. But we do believe that throughout the year, you should see some sequential improvement in the market. Automotive should be strong and should, should build strong, and metals should come with that. Forest products are an area that we see some opportunity year-over-year, and same with chemicals.
So, I think it's not unique to CSX. I think it's true across our industry. You know, we see a path. We have to see it unfold. We see a path where, you know, you could see stronger volumes in the second half of the year. A lot of that's intermodal. Domestic intermodal continues to come back, and international intermodal continues to come back even stronger, which for us is even more helpful because we have more share of international than we do domestic intermodal needs. So I think there is an opportunity for that to happen, and I think we do have the potential for that to build throughout the year. We'll see what happens with export coal prices. You know, they continue to be strong. That's important to us.
You know, not as strong as they were a year ago, but they're still very strong, and that business continues to grow. And we don't see any signs of that slowing. So you can you can build a case where you can see, you know, where volumes as, you know, we've, we've as you as you saw, we've projected single- to mid-digit volume growth this year and revenue growth. And so far, we don't see anything that contr that contradicts that.
Okay. Well, in terms of the truckload conversion, obviously, that's been something the industry's focused on, you know, for, for quite some time. To me, it's still a little surprising to hear that domestic intermodal has been as strong as it, it has been. And we've seen some numbers as you present them. So but we always hear the truck market is just really, really weak. And obviously, being an Eastern railroad, you think that would hit that hit your, yourselves a little more, you know, significantly. So what, what is it that's driving that, that growth? And just in general, how do you feel about converting and keeping, freight from the highway?
Yeah. I mean, remember, we own a trucking company, so, you know, Quality Carriers is about a $900 million revenue, you know, trucking company, so it's pretty sizable. So we get to see that end of it as well. I'll say a couple of things. First of all, you know, rail has advantages over truck, even if there's some in this market. We're still lower cost, almost, especially on a longer haul, and we're better for the environment. And, you know, there's all kinds of other benefits that come with that. And what you've seen is a lot of, you know, the IMCs have been pretty aggressive, bring some of that work back on. And you've seen some of the retailers do their own in-house work and start to grow their intermodal business, which is good. So you've seen some of that, you know, the Amazons and etc.
So that's been good to see as well. When you look at the trucking business overall, you know, they've also had a shortage of drivers. Now they don't. They had a shortage of chassis. Now they don't. But a lot of this is contractual. A lot of this is set up as contracts, and a lot of it is set up as a routine. And so you get in that mode that works pretty well. I think as an industry, we need to continue down this path. We need to do it efficiently. We need to do it, you know, where we don't chase volume, which will, you know, to a point where it starts to negatively affect margins significantly. But there's still a lot of opportunity out there.
And when the next cycle comes, you know, I don't think it's going to be easy for truck companies to get truck drivers again. And so we have an opportunity in the next cycle to, I think, to pick up even more volume when that happens.
So when you speak to shippers, obviously, CSX service has been, you know, quite good for a while. They're the first one to get off the STB's list and scores well from the Journal of Commerce Survey. Are people or shippers really willing to commit more volume, at this point, or is it like, "Well, this is nice. We've seen this for a while," and, you know, come back to us when we've got a couple more quarters?
I would say we've been able to see some benefits from it, clearly. We've had a couple instances with some major customers where we've gotten longer-term contracts than we would have historically, which is good. And that's on the back of they believe that we care about service now and that we're delivering better service. We've won some business, on the automotive side and some other things that we didn't have. So that's been progress as well. Every customer's in a different place. Everybody has to have a different experience. And I remind people that, you know, while our service has improved and we've become much more stable and we've delivered better service, we're still a long way from where we should be and where we could be.
Now we're really focused on the outliers, bring the distribution down because there's a lot of, you know, if you're a couple hours late, it doesn't really change another most of the time, it doesn't really change the customer's business. But if you're a couple days late, it could. So we're really working on the outliers. There's still a lot of those, too many of those. So until we get a lot of that under control, I think you're going to, it'll still be out there that, "Yeah, you know, you 90% of the time, you're on time. But that one time you missed, if you missed it by three or four days, that really hit us." We don't forget those things, right? So, that's still a challenge for the industry and for ourselves. But, by and large, our customers have been very complimentary.
They've been very supportive. We've done a lot of sessions, whiteboard sessions and whatnot with our customers on how we could take a look at their network, you know, logistics network, and how can we be part of that. Those are the kind of things you can get to do once you build trust and build a relationship that people believe you care about it. You know, I was a customer for a long time. You can't get that out of me. I tell every day, I talk to our employees and our team about that, about how we if we want to grow, we have to provide better service. So really focus on that.
But, you know, the fascinating thing about this industry that I've learned and observed is, you know, the best way to serve a customer is for the network to run well or the best way to have control your costs for the network to run well. They're not in conflict with each other. As long as you're not, you know, shortening the trains or adding more days of service than the customer really needs, those are things that have been done in the past sometimes. But in reality, if the network runs really well and you focus on serving the customer, you know, most of the other things take care of themselves. And so that's, you know, to the question itself, we still see lots of opportunity.
We're getting a lot of feedback, good feedback from our customers. Obviously, the STB has had some good things to say about us, but there's still a long way to go. I mean, you know, the bar historically in this industry on service has been pretty low, and so we got to keep raising it.
So, on the slide you showed earlier, I think it was the end markets versus year-over-year, not necessarily versus CSX and your expectations, but coal's obviously a big factor for all the railroads, including yourselves. Natural gas prices are still pretty low and not looking good soon. And export coal's still relatively high, but it's shown a little bit of softness here recently. So I don't know if those two, domestic and export, specifically metallurgical coal, you know, how do those markets look relative to sort of what you're expecting, going into this year?
Export coal continues to be strong. And so, we came into the year expecting it to be strong. It's still strong. Prices are holding up. So you I could see a scenario where export coal is a positive even to what we expected for the year. Thermal or domestic coal, our expectations are pretty well where we're seeing. While natural gas prices are low, there are some minimums with all the utilities because they want to maintain, obviously, the network and maintain the capability for us to deliver coal. Export thermal coal, you know, has been picking up a little bit. So I'd say, though, you know, again, we're not even three months into the year, but there's a chance that, you know, total net coal could be a positive contributor this year to what we were expecting.
Again, we'll have to watch the net coal prices. On the export side, that's probably the most important impact to that. But volume-wise, everyone that we talk to says they expect a strong, strong year for export coal, and we're seeing that.
So the industrial pipeline or industrial development pipeline has been a big focus for CSX. And the rail seem like they're trying to use their land holdings a little bit more strategically in the long term. So I think you said you're looking at potentially 1 point of growth from merchandise this year, from this pipeline, which obviously takes quite a while to build. Maybe you can give us a sense in terms of, like, what that is. And then some of them seem like they're, you know, EV projects or things tied to electric vehicles that have been, you know, probably going the other direction and, you know, with the ribbon cutting suspended. So does that have any impact?
Yeah. I mean, it's the, the highest profile ones are the EV plants in the Southeast. But, you know, there's over 500 projects that are underway on our network right now. You know, the Ford plant outside of Memphis and Stanton, Tennessee, is under construction and, you know, nearly finished, actually. You're right. The Rivian plant's been suspended. VinFast's still planning on building their plant in North Carolina. But importantly, there's so much industrial development work happening in the Southeast. You know, we're fortunate to be located there in the lower Midwest. That's where the majority of a lot of this activity is happening in the United States. There's a lot happening in Texas, too, but, you know, obviously, the scale of Southeast is even more. And so we feel very fortunate. So yeah, there's a couple of high-profile things that make a delay.
But in actuality, all the other projects are moving forward, and more are coming almost every day. So we feel really good about that. Whether that point or two of margin, you know, revenue is this year or next year, you know, we'll have to see how all that plays out. We still see some of that coming online this year, which is great. Aggregates, you know, things that you don't really talk a lot about. There's some big metals projects, etc. So those are all progressing nicely. And I think we feel really good about where we are. If the EV volumes end up being lowered and/or getting pushed back a little bit, it's not going to dramatically affect our business, and what's going on in industrial development. We have about 1,000 sites across our network.
They're mostly smaller that we work with states to be ready. The bigger spots are harder to find, obviously. We're working hard to make sure we get more of those so we can have those ready for big projects. But all those little projects add up, especially if they connect directly to our lines and add to existing trains. So we're pretty excited about it. Our team's done a great job. And again, we're blessed because a lot of the activities in the Southeast were where we're strongest.
Excuse me. So I think the, you know, the one I want to ask about is just the partnerships. It seems like the industry is more willing to work together. And so we've seen, you know, the Meridian and Bigbee. Obviously, that's more of a transaction. This still needs to be approved. But, are there more of those that can be done, you know, as you look across the broader North American network? And are these really targeting, again, truckload conversion?
I think so. I hope so. I mean, obviously, the new interchange point with CPKC, we expect the STB to approve that this year. Obviously, they need to do that. But we feel good about that. But, you know, I've shared with you other people publicly my view on this. I don't, you know, Norfolk Southern's a competitor to us. I don't view the other railroads largely as competitors to us. There's some overlap we're seeing in a few spots. But generally speaking, it'd be better for all of us if we worked more together. Jim and I have had a lot of conversation, about, you know, Union Pacific is the largest merchandise on the West. We're the largest merchandise on the East. You know, how can we work better together? Same conversations with a number of other railroads.
I think it's in the industry's best interest to continue to work better. If we provide better service and work better together and work on projects together, and not get hung up on who has the longer the longer part of the haul and, you know, who's getting more of the revenue, I think, on balance, it'd be better for all of us. I, I see a change, in the industry in that regard, even in my, you know, short time here. I think that's a good change. I think it's an opportunity for all of us. You know, with the with the margin structures in this business, when we can work together as an industry to grow the volumes, it's it can create a lot of shareholder value and also create opportunity for our people and for, frankly, the economy. What an opportunity we have.
And I see a lot more good collaboration happening, you know, certainly with us and the Western Railroads, on projects, on trying to go after some business or truck conversions or other things. And I, I think that will continue. I think there's a real desire to see us elevate our performance together, again. And, you know, we're not in direct competition with BNSF or UP or even CPKC. And we should work together. And we should we should be better partners. And we should expect them to be better partners so we can work together to, to grow the business and be better for society, better for the economy, better for the environment, and better for our businesses. And so that's the approach I think I see people taking. And I and I'm encouraged by that.
So we have a regulatory panel coming up next. So maybe we can close with just your thoughts on, you know, first, the East Palestine, you know, one a little bit over one year later, what are some of the ramifications? We should still be thinking about implications of that incident. And then I think the last thing on STB's docket that seems meaningful, at least for the near term, is reciprocal switching. Obviously, there's still rulemaking that's going on, but the industry's been heavily involved in that. So, maybe some thoughts on those two to close this out here.
Yeah. I mean, I think at the end of the day, on the reciprocal switch, you know, we're not afraid to compete. So if the metrics are service, customer service, I know with CSX, we're happy to compete and try to provide better and better service. Obviously, devil's in the details. You got to make sure the measurement systems and the targets and whatnot are practical and measurable and fair. So a lot of that's in the details. We'll see what the STB rules. But so far, they've, you know, the triggers have been based on service. And so I think that is something we can hopefully work around and work with, in service of our customers.
In general, the regulatory environment, you know, we need to continue to work together with the FRA to advance safety technology and technology overall to advance the industry forward. There's lots of technology that can help us. So we need to continue to work together on that. You know, but at the end of the day, the STB has really been focused on customer service. And, you know, as long as we stay focused there, when we all get better, we can I think we can work together to make things happen. Obviously, we'll see what the panel has to say. But, you know, our view is, you know, let's compete.
Okay. Well, we're out of time, unfortunately. But, Joe, thank you very much for the.
Thank you all.
your time. Appreciate it.
Thank you, guys.