Schneider shifts eastern intermodal from CSX to Norfolk Southern

Schneider National is transferring its eastern intermodal operations from CSX to Norfolk Southern, ending a prior relationship in favor of a growth-driven realignment. This monumental shift moves all eastern rail business to Norfolk Southern, complementing Schneider's existing western alliance with Union Pacific and positioning Norfolk Southern as its exclusive eastern partner.

Executive perspective

Michael Baumgardt, Schneider’s executive vice president of intermodal and logistics, said the decision followed a lengthy evaluation focused on network reach, train frequency, and proximity to population centers. He described the move as starting with growth and a desire to get closer to customers. The new eastern rail provider will expand access to key markets, increase network flexibility, and create new opportunities to better serve customers.

Schneider's intermodal service is executed with its own drivers and tractors, 23,900 chassis, 26,800 containers, and over 60 rail hubs in North America. Baumgardt argued this asset-based model gives Schneider a structural advantage in managing capacity bottlenecks.

Market context and capacity

The partnership is framed against a backdrop of truckload rates carrying a significant premium over intermodal rates. Truckload rates currently run more than 30% above intermodal rates, making rail an increasingly attractive option for shippers. Baumgardt said the primary capacity constraint is not equipment availability but rather dray capacity and driver supply.

Reaction and transition

Customer response in the first 24 hours after the announcement was positive, particularly around Schneider’s asset-based model. On the transition itself, both sides said planning began immediately after the agreement with the goal of a seamless handoff. Norfolk Southern's Vice President Shawn Tureman said the railroad pulled forward some infrastructure investments specifically to prepare.

"What I hope, 3 months from now, for our customers not to have noticed anything," Tureman said. He added that a smooth transition would set the stage for joint sales efforts heading into what he called a strong intermodal market in 2026 and 2027.

Broader industry implications

The deal positions Norfolk Southern as Schneider's exclusive eastern rail partner alongside Union Pacific in the West. Norfolk Southern grew from the third- to the second-largest intermodal franchise in the United States by 2018. In 2022, the railroad set a new target to double its intermodal franchise again and has been directing discretionary capital toward that goal ever since.

Both executives said the pending Norfolk Southern-CSX merger was not the driver of this agreement, though they acknowledged it could improve the product. Baumgardt said the merger would be icing on the cake for enhancing service, reliability, and speed. Tureman echoed that view, pointing to potential benefits like single-line service and reduced interchange friction.

Schneider reported earnings growth in its intermodal segment in the third quarter. The announcement was made in conjunction with Schneider's third-quarter report, which showed adjusted earnings per share of 29 cents, a penny below consensus but 17 cents higher year over year. The new service begins in January.