(The following interview by Bill Choyke was posted on the Virginian-Pilot website on February 20.)
NORFOLK, Va. — As he begins the next phase of his life, David Goode can take pride in having helped build Norfolk Southern Corp. into an $8.5 billion company that Forbes magazine this month featured in a cover story titled “This is how to run a railroad.”
The 65-year-old reached mandatory retirement age Jan. 13 and relinquished his title as chairman of the Norfolk-based railroad Feb. 1. In November, after 13 years, Goode turned the day-to-day reins as chief executive officer of Norfolk Southern over to Wick Moorman, the former head of information technology tapped as president and heir apparent about a year earlier.
Goode led Norfolk Southern through a sometimes-tumultuous period that included economic downturns and a complex takeover battle, break-up of and consolidation with Conrail. As he looks back on his tenure as CEO, Goode says he takes particular pride in having helped foster a culture that not only emphasized safety and customers’ needs but high ethical standards and transparency. Norfolk Southern today, he says, is “a company that does what it says it will do.”
On Tuesday, Goode sat down with The Pilot and reflected on four decades at the railroad, the global and national economies and the challenges facing the business community in Hampton Roads. Excerpts from the interview follow:
Q. As you reflect on 40 years at Norfolk Southern and 13 years as its top executive, what has provided the most satisfaction?
A. As I think over the years that I have been CEO, we really are a very different company than we were, and I think my satisfaction to the extent that I have any personal satisfaction is being able to move with this company through a period when the world changed dramatically.
I think the company is stronger today in a number of ways than it was when I began as CEO, and yet we had during that period of time a great many challenges and difficulties and ups and downs.
I tell young people when I talk to them that if you are going to be in business for very long, you should expect there to be ups and downs – it’s a roller coaster ride. You need to expect that things will not always be a good and even ride. The mark of a strong company and the mark of good people in a strong company is you are able to take the adversity and come out at the end better than you were before.
And I think this company has done that.
Q. Was there a critical event, such as the successful bid to compete with CSX to acquire Conrail in 1997, that launched Norfolk Southern to its current level of success, or was it a series of events?
A. Everybody looks at Conrail because that was a dramatic event. It was big news and it got a lot of attention both at the time and subsequently, and it was, indeed, a big event.
But the things that people sometimes forget, that is apparent to those who are close to this company and certainly to the insiders, is that Conrail was a piece on a continuum for us. We had a strategy starting back in the early ’90s, and certainly during my tenure as CEO. It became apparent to us that we were seeing significant change in the economy. The world was becoming more global. We were becoming more exposed to the changes occurring with globalization of the economy.
We looked at where we were. We had grown beyond the little regional railroad that Norfolk & Western was when I started with it 40 years ago. But even if you look back at 1992 or ’93 at the Norfolk Southern map, we had put together two great railroads. We had been through the assimilation of that combination. We had a well-running machine that was ticking along, and yet we saw the economy was changing in ways that were going to be very significant for us.
It became apparent to the thinkers around the company we were seeing the development of what I call the consumer economy – we had a great position in coal, had a great position in the industrial Midwest and South, and that was great because industry was moving to the South. What we did was set out to grow the business so we could be in a strong position whatever happens. That meant, among other things, growing the intermodal business. So this company set out – from nothing, really, from a standing start – and we made lots of moves that, maybe in isolation, didn’t look like a piece of the whole.
What we saw in the Northeast is that’s where the people were. It’s great to have plants on your railroad, but you need to be where the people are, because ultimately goods are going to be consumed.
Q. Moving to today, railroads are hot, as reflected by the recent issue of Forbes, suggesting Norfolk Southern was leading the way. Are there lessons to be learned for embattled U.S. industries from the bounce of the railroads in general, and Norfolk Southern in particular?
A. The thing to remember is that we are, in some ways, different than some of these other companies. In a sense, our challenge as a railroad-based transportation company is we are labor-intensive and capital-intensive. We do own those tracks and we own all of our assets – that makes us capital-intensive at the same time we are labor-intensive. And that’s a difficult combination.
On the other hand, that capital intensity turns out, in some ways, a good thing, because it’s not so easy to start a new railroad today. That differentiates us dramatically from the airlines. The way the airline business is today, anybody can start an airline, get it going, and that creates this intensity of competition in the market. We have plenty of competition because we are competing in the transportation world with trucks. Right now there are difficulties in that business – high fuel prices and the difficulty of getting enough drivers, the hours of service and other things make that a difficult business to enter.
Q. One barometer of the economy has been railroad activity, which would suggest a booming economy. But economic signs are mixed. How do you read the national economy at this time?
A. I look at railroad car loadings and a lot of people do. When I go to meetings, sooner or later somebody will come up to me and say, “Tell me what the car loadings are.” And I think that is a good barometer. But as the economy has changed, that is not the only barometer; I think there are a lot of other factors.
Back in 2000, I remember going to The Business Council meetings and the cable news people would do interviews with all the CEOs who were there, I was the only guy for a time who was saying: “Oh no, I think you’d better be worried a little bit about this. I am seeing some negative signs.”
It turned out there were some negative signs in the economy, although we did better after that than others. If you look at rail car loadings today, they are really at record levels. January was very strong. I think the consuming economy is continuing to work. The question is how long will the deficits that are out there in the national economy and the trade deficits and the dislocations we have principally with China, how long until that produces a correction? And I don’t know the answer to that.
Q. A few months ago, you said in a speech before the World Affairs Council of Greater Hampton Roads that we, as a society, were more concerned with intelligent design than creating an atmosphere for intelligent children. Are you concerned that the United States is losing its status as a global business power?
A. I had just come back from China when I made that speech. I was struck in China as I went around and visited plants by the enthusiasm of young people and the hunger for education and the number of young, graduate engineers that you run into in all the plants in China.
I look around and I see the difficulties our company and others are having finding people with the right educational backgrounds, and that concerns me because I think our strength as a nation has been we’ve been able to educate people for innovation and energy, and we need to maintain that position. As long as we have the ideas, the innovation, we will be fine. But all of us better be worried about maintaining that.
Q. What steps would you recommend that the umbrella of leaders in Hampton Roads take to best leverage economic growth opportunities presented by the growth of imports from China and other Asian countries?
A. The challenge for Hampton Roads – and I have been here 15 years now; that’s a relative newcomer but it is also long enough to know a little something about the area – continues to be getting some kind of uniformity of views. It is focused by transportation, of course, where we really need to have a regional transportation plan and push it through the General Assembly. We need to find some ways to get all of our delegation together in Hampton Roads – we would have a lot of power. But we continue to have our differences about how it is with five cities to get that agenda right, and that continues to be the challenge.
I said that 10 years ago. I guess we have made some progress, because it continues to be on the agenda. There is a lot we should be concerned about, because we have a great port facility – arguably the best on the East Coast and one of the best in the world. And that is an enormous advantage in today’s economy. But it is an advantage only to the extent we can move things. Now, we are set on providing a world-class rail system moving to and from this port. I think you can depend on Norfolk Southern to continue to keep that state of the art. But we are going to have to have a world-class road system. We are going to have to have a world-class system for getting people in and out of here.
If you look at the map, our strength is also our weakness. We’re down here with our port, but we could very easily become isolated. That’s why we need not only the road network connecting us with Richmond and Washington and New York and Raleigh, but we need a high-speed rail network. I think our continued reluctance to develop a state-of-the-art rail service connecting Norfolk with the population of the rest of the East is something we are going to deeply regret 10 years from now if we don’t do it today.
Q. In terms of regional cohesion, what is the proper role for business leaders like yourself in terms of building infrastructure and visibility to make Hampton Roads a key market nationally?
A. To some extent, I wish we had more Fortune 500 companies or large companies headquartered here. We have a good, strong business community, but we all are very diverse and very different. I was limited over time in what I could do to bring leadership to the area. Norfolk Southern, for one, is a company with deep roots in the area, but from a pure business of Norfolk Southern standpoint, this is just one of a number of important areas for us. So our focus has to be much broader, and the focus of a CEO of this company has to be much broader.
The business community here needs to somehow find a way to do a better job and get together to sort of combine our talents to try to encourage leadership. I think there is some very promising political leadership in the area – certainly (Norfolk) Mayor (Paul) Fraim in many ways has done a remarkable job in pulling things together. I would hope that some of the mayors could get together and solidify the political leadership, which would make it much easier for the business group to have a focus as well, and that would be a useful thing.
Q. On a personal note, you reached the mandatory retirement age of 65 in mid-January. Some folks might suggest that you are at the top of your game at your departure. Should companies force employees to step down because of age?
A. A company like ours has a life. Like most companies, this is a company that changes. It is a company that depends not upon one or two or a half-dozen leaders, but it depends on tiers of talent. One of the things that people say about our company, which I think is true, is that we have a lot of bench strength. And we do. It is the kind of thing that gets you through challenges like the aftermath of Conrail and rebuilding the company to the position of strength that it has today.
What that means, I think, is there is a progression, and the CEO who stays until he or she is in advanced age is not encouraging that. Wick Moorman across the hall here is ready to go. His team, which he will build, includes a lot of continuous members of the team. But in a relatively short period of time that will change, because behind everybody in the senior management of this company is one or more people ready to go. I think that gives the company great strength. And even if the CEO feels, as I do, at 65 pretty young and ready to do some things and maybe even at the top of my game, I think it makes eminent sense for that progression to occur in the company, and that’s what we are doing.
Q. In the next phase, given you were active in Democratic politics in a different era, do you think you might get active again?
A. I really don’t. I’m sure an opportunity might be open under certain circumstances if certain people got elected, but I certainly can’t see myself in elected politics. That was a road that I crossed when I was 30 years old back in Roanoke.
I must say I am happy the way it turned out.