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EAST PALESTINE -- On Sunday, Ancora Holdings issued a presentation laying its case for a takeover of Norfolk Southern (NS) and what it called "urgent need for leadership, safety and strategy changes" -- zeroing on the railroad's response to last year's train derailment and its decision to vent and burn five tankers of vinyl chloride in the days following.
Ancora, which holds 928,921.28 shares of NS common stock and a $1 billion stake in the company, and the embattled board of the railroad are now months into a proxy battle which began in January.
"What the company has done to 'make it right' in East Palestine is not enough,"Ancora's presentation states. "Its failure to publicly address changes in its derailment response processes indicates that it is not prioritizing safety."
In the days and months following the derailment, "making it right" became the unofficial tagline connected to the response and the promises made to East Palestine in the wake of the derailment. NS CEO Alan Shaw, who Ancora is hoping to oust and replace with shipping industry veteran Jim Barber, has repeated that phrase during countless trips to the village. The railroad has contributed over $100 million to the community since the rail disaster, but Ancora maintains the current NS powers-that-be dropped the ball.
Ancora called "the board and management's flawed response is costly" -- noting clean-up efforts alone have cost the railroad over $1 billion. The presentation charges that "a lax operating culture and lack of discipline" has led to "operational and safety deficiencies with devastating results" and that "leadership botched its response" to the derailment and that, over a year later, the derailment's "impact is still ongoing."
"In addition to financial damage, the company's insufficient response to the derailment has caused innumerable community and reputational damage," it states.
The presentation heavily scrutinizes the railroad's decision to vent and burn 1.1 million pounds of vinyl chloride -- a decision that National Transportation Safety Board chair Jennifer Homendy has since said was made with "incomplete information." The vent and burn was conducted to prevent an uncontrolled BLEVE (boiling liquid expanding vapor explosion) of unstable tan cars, but Homendy said during a Senate hearing in March that the tankers were cooling down and the decrease in tank temperatures indicated that polymerization could not occur, meaning there was no risk of an explosion. OxyVinyls, the company that owned the vinyl chloride, had representatives on the ground in East Palestine, but their input and assessment of the situation was relayed to Norfolk Southern contractors but it did not make its way to Ohio Gov. Mike DeWine or incident commander Keith Drabick, the East Palestine Fire Chief.
Ancora criticized Norfolk Southern for the role it played in the vent and burn, calling it "an action that lacked sufficient scientific basis which sent a massive plume of toxic chemicals into the air, leading to long-term health and environmental concerns."
The presentation also lambastes NS for "vehemently opposing the 'two-person crew' mandate." The two-person requirement is one of many operational changes listed in the Railway Safety Act of 2023 -- proposed legislation meant to strengthen railroad safety that was introduced on March 1, 2023 and has seemingly stalled. Shaw has been vocal in his opposition to the mandate, maintaining that the rule would not have prevented the derailment in East Palestine as three crew members were on board that night.
"Despite repeatedly touting an emphasis on safety, Norfolk Southern was adamantly opposed to a mandate proposed by the FRA to standardize two-man crews in an effort to enhance safety in the railroad industry," the presentation states.
On April 2, the U.S. the Transportation Department's Federal Railroad Administration (FRA) finalized a new federal rule that requires a two-person crew on Class I freight and passenger trains. Rail unions applauded the rule, but, last week, the rail industry asked federal appeal courts to throw it out. Last year, on the state level, Ohio Gov. Mike DeWine made two-person crews mandatory for all trains that transport commodities through Ohio when he signed the $13.5 billion state transportation budget. The day before the rule was to go into effect, the rail industry pushed back when the American Association of Railroads (AAR) filed suit in U.S. District Court to block the provision, arguing jurisdiction of the U.S. railways is exclusive to federal agencies.
While most of the rail industry and Norfolk Southern are against the two-man crew mandate, Ancora supports it.
"Following the March 2 derailment in Pennsylvania, our nominees penned a white paper focused on safety," Ancora states. "In the white paper, our nominees specifically state that they are committed to Norfolk Southern ensuring a two-person crew on mainline trains as a measure to enhance safety."
The derailment in Lehigh Valley, spilled diesel and plastic pellets into the nearby river. Local authorities said no injuries reported, no evacuations were necessary and no hazardous material was a threat to the community. An early investigation by the National Transportation Safety Board reported that an eastbound Norfolk Southern train collided with a parked train on the same track. The derailed train was later struck by a westbound NS train. Ancora's presentation highlighted that derailment as proof that Norfolk Southern's "safety overhaul has not been effective".
"We believe last month's Lehigh Valley accident was preventable and represents an indictment of Norfolk Southern's current operations, management and culture," Ancora states.
The presentation asserts that, in 2024, Norfolk Southern has had derailments in 14% of the U.S. states in which it operates and the month's derailment in Pennsylvania caused approximately $2.5 million in damages to equipment and track. It also charges that NS trains have been involved in four significant accidents this year -- a derailment on Jan. 31 in Decatur, Alabama that claimed the life of a railroad engineer, a derailment on Feb. 7 in Norfolk, Virginia involving nine , the Lehigh Valley derailment and a derailment in Winston Salem, North Carolina on April 6.
While Ancora expresses support of the two-person crew mandate, the presentation, which details how Ancora plans to increase profits and touts the qualifications of its board nominees, offers little to no detail on how rail safety would be improved under its leaderships, stating only that their plans would implement "employee-led safety committees throughout the network that are accountable for safety metrics."
Norfolk Southern has been busy presenting its own case to retain the railroad's current board ahead of the shareholder meeting which is set for May 9 and will decide the future direction of NS.
In a letter to shareholders last week, NS rebuked Ancora's takeover attempt.
"Ancora's reckless plan and demands for an overhaul of management and the board would decelerate the momentum of Norfolk Southern's strategic transformation, force substantial furloughs, and destroy long-term value for shareholders," it read. "Norfolk Southern believes all of its 13 nominees are uniquely qualified to oversee the company's strategy, drive sustainable value, and hold management accountable."