David R. Goode
1941–

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Chairman, president, and chief executive officer, Norfolk Southern Corporation

Nationality: American.

Born: January 13, 1941, in Vinton, Virginia.

Education: Duke University, AB, 1962; Harvard Law School, JD, 1965.

Family: Son of Otto Goode (owner of a small department store and later a real estate broker) and Martha (a homemaker; maiden name unknown); married Susan Skiles (a schoolteacher) on June 22, 1963; children: two.

Career: Norfolk & Western Railway, 1965–1967, tax attorney; 1967–1968, assistant general tax attorney; 1968–1971, general tax attorney; 1971–1981, director of taxation; Norfolk Southern Corporation, 1982–1985, assistant vice president of taxation; 1985–1991, vice president of taxation; 1991, executive vice president for administration; 1991–1992, president; 1992–, president, chairman, and CEO.

Awards: John T. McCullough Logistics Executive of the Year Award, National Industrial Transportation League and Distribution magazine, 1997; Railroader of the Year, Railway Age magazine, 1998; Virginian of the Year, Virginia Press Association, 1999.

Address: Norfolk Southern Corporation, 3 Commercial Place, Norfolk, Virginia 23510–2191; http://www.nscorp.com.

■ Less than five years after he took over as chairman and chief executive officer of Norfolk Southern Corporation, which operates Norfolk Southern Railway, David Goode faced the biggest challenge of his career. He learned that CSX and Conrail, Norfolk Southern's chief rivals in the eastern United States rail freight market, had quietly reached an agreement to merge. If allowed to proceed, the merger would have completely changed the competitive dynamics of the eastern rail market, leaving Norfolk Southern a much smaller force. The Virginia-born Goode, normally noted for his courtly manner and gentility, moved quickly and forcefully to block the merger with Conrail. Ultimately, Goode engineered a fairly even split of Conrail's operations between CSX and Norfolk Southern, preserving his company's position as a major player in the eastern rail freight market. Widely admired, according to Railway Age (January 1, 1998), as "a man who says what he means and means what he says," Goode shaped for Norfolk Southern a four-pronged business strategy that served his company well. The four key goals of Goode's strategy were (1) creating higher-quality, higher-value service, which could then be leveraged; (2) pushing high-value pricing and (3) increasing volume; and (4) improving efficiency of all operations and services.

TRAINS AS ACCOUNTANT AND LAWYER

Born in Vinton, a suburb of Roanoke, southwest Virginia's premier business center, Goode gained his first business experience by keeping the books for his family's small department store. Goode was a bright student who also enjoyed sports. He played baseball and tennis enthusiastically but never really excelled at either game. Voted most likely to succeed by his high school classmates, Goode was named class valedictorian. Although he received a scholarship to nearby Washington and Lee College, a visit to the campus of Duke University in Durham, North Carolina, changed his plans. Smitten with everything about Duke, Goode turned his back on Washington and Lee and enrolled at prestigious Duke as a liberal arts student. He later settled on accounting as his major. For three summers between his studies at Duke, Goode worked as a seasonal park ranger for the U.S. Forest Service.

At the beginning of his junior year, according to Norfolk's Virginian Pilot , Goode returned early from his summer as park ranger to start selling advertising for the Duke Chronicle , the university's daily newspaper, on which Goode served first as advertising manager and later as business manager. He also met the sophomore Susan Skiles. Goode earned his bachelor's degree from Duke in 1962 and then attended Harvard Law School. In June 1963, shortly after Skiles graduated from Duke, the two were married and moved to Cambridge, Massachusetts, where Goode continued his law studies while his wife worked as a schoolteacher. In 1965 Goode received his law degree.

Fresh out of law school, Goode returned to southwestern Virginia and took a job as an attorney in the tax department of Norfolk & Western Railway (N&W), headquartered in Roanoke. For the next two decades he worked his way up through the ranks of the tax department. In 1967, two years after joining N&W, Goode was named assistant general tax attorney, and a year later he was promoted to general tax attorney. In 1971 Goode was named N&W's director of taxation, a post he held until 1982, when he became assistant vice president, taxation, for the newly formed Norfolk Southern Corporation, created when N&W and Southern Railway merged. Three years later Goode was named vice president, taxation.

GOODE PUT ON FAST TRACK TO EXECUTIVE SUITE

Although all of Goode's experience with N&W and Norfolk Southern had been within its tax department, by the end of the 1980s he had come to the attention of Norfolk Southern's top management as a strong candidate for a leadership position. He was groomed as a successor to the company's retiring CEO, Arnold McKinnon, who in 1990 sent Goode to Harvard Business School's advanced management program. Shortly after completing his studies in Cambridge, Goode in 1991 was named executive vice president, administration. Later that same year he was promoted to president.

In 1992, soon after Norfolk Southern began its second decade in business, Goode's duties increased significantly when he was given the added responsibilities of chairman and CEO. In the early 1990s Norfolk Southern was one of the three major players in the eastern U.S. railroad freight market, the other two being CSX Corporation and Conrail. Formed in 1976 under the Railroad Revitalization and Regulatory Reform Act to take over the operations of six bankrupt railroads in the Northeast, Conrail for the first decade of its existence was heavily subsidized by the federal government. In 1987 the federal government sold its controlling interest in Conrail in a $1.9 billion initial public stock offering (IPO), the largest such IPO up to that time.

Both Norfolk Southern and CSX negotiated joint operating agreements with Conrail that gave them access to some of the major ports and transportation hubs within Conrail's network in the Northeast. Under Goode's leadership, Norfolk Southern in 1993 signed on Conrail as a partner in Norfolk Southern's Triple Crown Services, which used trailers that could be operated over both rail and road. In 1995 the two railroads launched north–south double-stack service. Neither CSX nor Norfolk Southern made any secret of its interest in Conrail's strategically valuable trackage throughout the Northeast. However, Goode was taken by surprise in mid-October 1996 when he learned in a telephone call from John Snow, then CEO of CSX, that Conrail and CSX had reached an agreement to merge.

GOODE SEES NORFOLK SOUTHERN'S FUTURE AT STAKE

Goode was seriously concerned about the effect that such a merger would have on Norfolk Southern's competitiveness in the eastern rail freight market, especially by its exclusion from key markets in the Northeast. Interviewed by Justin Martin for Fortune magazine, Goode said that his immediate concern upon learning of the CSX-Conrail merger plan "was what to say to the world. We decided to make a strongly worded response indicating Norfolk Southern planned to take action and wouldn't rule out any options."

That was just what Goode did. Norfolk Southern countered CSX's bid for Conrail with an even larger purchase offer. When Conrail's board of directors turned it down, Goode began a campaign to persuade Conrail shareholders to reject the planned merger with CSX, which they did on January 17, 1997, thus clearing the way for Goode's next move. About a month after Conrail's shareholders decided to oppose the proposed merger with CSX, Goode sent off a letter to Snow and David LeVan—the CEOs of CSX and Conrail, respectively—suggesting a compromise solution to their standoff. He proposed that Conrail's existing operations be split roughly 50–50 between CSX and Norfolk Southern. However reluctantly, Snow and LeVan agreed, and by early April 1997 a new plan for the division of Conrail between the two railroads had been hammered out. It was then submitted to the Surface Transportation Board (STB), which eventually approved the breakup of Conrail despite vigorous opposition from some smaller eastern railroads that argued that the plan would hurt them competitively. Also speaking out against the breakup plan were railroad customers who believed that the realigned rail structure would reduce competition in the East and rail labor unions fearful of layoffs.

The resulting division of Conrail created what Goode described to Fortune in 1997 as "two overlapping and pretty much competitive systems. Both Norfolk Southern and CSX will be able to offer single-line long-haul routes." Previously both rail lines had been reliant on Conrail to provide the connection for many of their long hauls. Under the final agreement approved by the STB, Norfolk Southern acquired 58 percent of Conrail's assets, including roughly six thousand Conrail route miles, and CSX got 42 percent of Conrail's as sets, including about 3,600 route miles. Approximately one thousand Conrail route miles located in northern New Jersey adjacent to the Port of New York and New Jersey, southern New Jersey and the nearby Philadelphia port area, and Detroit were reserved in the Shared Assets Area, jointly owned by the two railroads. Operation over that trackage was accessible to both Norfolk Southern and CSX and continued, in the early 2000s, to operate under the Conrail name.

KEY COMMODITY MARKETS EVENLY SPLIT

Although the division of Conrail route miles appeared at first glance to be somewhat tilted in Norfolk Southern's favor, their submissions to STB showed that the agreed-upon division gave both railroads roughly equal shares of key commodity freight markets. After the breakup, the railroads estimated that CSX would hold 53.7 percent of the agricultural products market, compared with 46.3 percent for Norfolk Southern. The breakdown in other key commodities between CSX and Norfolk Southern, respectively, were as follows: chemicals, 58.8 and 41.2 percent; coal, coke, and iron, 49.7 and 50.3 percent; metals and construction, 52.4 and 47.6 percent; motor vehicles and parts, 48.6 and 51.4 percent; paper, clay, and forest products, 50.5 and 49.5 percent; and intermodal (moving via two or more transport modes), 44.9 and 51.1 percent.

As of early 2004 Norfolk Southern operated over a network of 21,500 route miles connecting 22 states and the District of Columbia in the eastern United States and the Canadian province of Ontario. CSX, on the other hand, had a route system of 23,000 miles, linking 23 states, the District of Columbia, and the Canadian provinces of Ontario and Quebec. Under Goode's leadership, however, Norfolk Southern steadily increased its annual revenue, climbing from roughly $5.2 billion in 1999 to about $6.5 billion in 2003. Over the same period CSX revenues plummeted from nearly $10.2 billion in 1999 to just under $7.8 billion in 2003. More impressively, Goode led Norfolk Southern to solid gains in profit every year except one between 1999 and 2003. After net income of $239 million in 1999, Norfolk Southern's profit dipped to $172 million in 2000, a decline attributed to a slowing economy, depressed coal market, and higher diesel fuel prices. Stung by the decline, Goode moved quickly to slash costs at Norfolk Southern, laying off between one thousand and two thousand workers in 2001, adding to layoffs of nearly 3,700 workers in 2000. Norfolk Southern's net income climbed sharply in 2001, hitting $375 million. The upward climb continued in 2002 and 2003, with net incomes of $460 million and $535 million, respectively.

To keep Norfolk Southern growing and better able to meet the needs of its customers, Goode in December 2003 announced plans to spend $810 million on capital improvements in 2004, including $517 million earmarked for roadway projects and $258 million for new equipment. According to Fortune , Goode's long-term goal for Norfolk Southern was to provide a full range of transportation services for its major customers, covering all phases—from distribution to billing—involved in the movement of goods.

OTHER ACTIVITIES

Goode, who in 2004 lived with his family in the Norfolk area, was active in both industry and civic affairs. He was a member of the Business Advisory Committee of the Transportation Center at Northwestern University, Business Council, Business Roundtable, Coal Industry Advisory Board, National Freight Transportation Association, National Grain Car Council, and Virginia Business Council. He also sat on the boards of the Association of American Railroads, Aeroquip-Vickers, Caterpillar, Georgia-Pacific Corporation, Texas Instruments, Business Committee for the Arts, General Douglas MacArthur Memorial Foundation, Hollins College, and Virginia Foundation for Independent Colleges.

See also entry on Norfolk Southern Corporation in International Directory of Company Histories .

sources for further information

Dinsmore, Christopher, "How Norfolk Southern Derailed the Merger of CSX and Conrail," Virginian Pilot , March 5, 1997.

——, "Norfolk Southern Earmarks $810 Million for Capital Budget," Virginian Pilot , December 11, 2003.

——, "Norfolk Southern Pours It On; Coal Tonnage Is up for the First Time in a Decade with Renewed European Interest," Virginian Pilot , November 9, 2003.

——, "On Track toward Railroad History," Virginian Pilot , June 29, 1997.

Holcomb, Henry J., "Rail Executive Profile: Norfolk Southern's David Goode," Philadelphia Inquirer , November 25, 1996.

Martin, Justin, "Surviving a Head-on Collision," Fortune , April 14, 1997.

Miller, Luther S., "The War Is Over: The Real Fight Begins," Railway Age , April 1, 1997.

"Railroad Executive Is Honored: Press Group Names Goode Virginian of the Year," Virginian Pilot , June 29, 1999.

"Railroader of the Year Goode: In Troubled Times, an Optimist," Railway Age , April 1, 1998.

Thomas, Jim, "Logistics Executive of the Year David R. Goode: Restoring Rail Competition to the East," Distribution 96, no. 12 (November 1997), p. 38.

Welty, Gus, "The World's Best Freight Railroad and the Man at the Top: David R. Goode: Railway Age 's Railroader of the Year," Railway Age , January 1, 1998.

Wilner, Frank N., "Good-bye Conrail. Hello, Competition," Railway Age , July 1, 1998.

—Don Amerman



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