MIAMI BEACH, Fla. — Canadian National’s ongoing effort to operate a “leaner and more productive” railroad is now focusing on terminal operations, CEO Tracy Robinson told an investor conference today (Tuesday, Feb. 17).
Chief Operating Officer Patrick Whitehead is currently focusing on those terminals, Robinson said.
“That’s where something like 50% of our operating labor is,” she said. “He’s going through every terminal — they’re calling it fast-tracking to redo the processes. We look to make sure we’re fluid, we get the right resources, but we’re not over-resourced, whether it’s facilities or locomotives or people, and create that next level of fluidity.”
Robinson said the railroad is “poised” for growth when it appears, through recent capacity expansion projects and reserves in equipment and manpower.
“We’ve got locomotives tucked away,” she said. “We’ve got 800 or 900 people furloughed that we’re staying every close to. We showed a great ability to get those guys back on the property. And so we’re poised. … When it comes, we’ll have considerable operating leverage. You’ll see that fall directly to the bottom line.”
Robinson noted that the railroad is currently enjoying strong grain traffic — almost records for the company from September through December, and the second-best January in history — and that “we’re being surprised a little bit on the upside of potash, which is good for us. But from a contour perspective, we’re not expecting the international intermodal volume to be strong anywhere in North America through the first half of the year. So we’ll see that start to come only towards the second half. Our energy volumes are strong and will continue to strengthen through the year. Our coal volumes will continue to strengthen through the year. What we can’t see right now is what the impact of the tariffs are going to be.”
That’s particularly true as the United States-Mexico-Canada Agreement on trade is renegotiated this year.
“It’s a little blurry out there,” Robinson said. “Do you know what’s going to happen on the negotiations? What we’ve done in our plan, because I think that’s the only thing we can do, is we’ve assumed the same tariffs as we have now. There is opportunity if, in the negotiations, that the tariffs on lumber, on steel, on aluminum and automotive are moderated somewhat. … We’re focusing right now on what we can control, bringing our cost base down. It’s going to be lower this year than it was last year, and lower last year than it was the year before.”
Merger concessions?
As is now standard in any public forum for a rail executive, Robinson was asked about CN’s stand on the proposed Union Pacific-Norfolk Southern merger.
“We’re very positive on competition and we’re very much aligned with the industry on wanting a lighter touch on regulation to make us more nimble and able to invest,” Robinson said. “And this merger application works against both of those things. … There’s areas on the two networks where you will in effect see a reduction in competition, and they’ve done some work to address that, but not nearly enough.”
Given the regulatory requirement that a merger increase competition, “and increase it in a way that you couldn’t do in any other way but a merger,” she said, “it’s difficult to imagine how bringing together those two railroads and having one railroad that large is going to reach that hurdle.”
Because CN originates 85% of its traffic and originates and terminates 65%, she said the railroad is “a bit ring-fenced” in terms of the impact of a UP-NS merger. “So the impact is likely to be less on us than on anyone else, but there will be an impact.” And so, she said, there are “certain areas on the continent where we would look for the ability to get into new markets, the ability to service customers that we don’t serve right now” through “various mechanisms to pricing, trackage rights, those kinds of things.”
Robinson was speaking at the Barclays 43rd Industrial Select Conference. Union Pacific officials including CEO Jim Vena are scheduled to speak at the conference on Wednesday, with CPKC CEO Keith Creel appearing on Thursday.
— To report news or errors, contact trainsnewswire@firecrown.com.
Drone surveillance, cut corners and maintenac and worker intimidation, added with pricing out small customers of carload service put Tracey’s stock options into the money! What is not to like about that!