You have 7 views remaining. Click here to learn about the Unlimited Membership!

Home / News & Reviews / News Wire / CP’s Creel sees mergers as inevitable, but delayed by Precision Scheduled Railroading NEWSWIRE

CP’s Creel sees mergers as inevitable, but delayed by Precision Scheduled Railroading NEWSWIRE

By David Lassen | January 6, 2020

Creel: 'If I did and said some of the things Hunter said and did, I’d be in jail.'

Email Newsletter

Get the newest photos, videos, stories and more.

CP Keith Creel speaks.
CP Keith Creel speaks.
Canadian Pacific CEO Keith Creel speaks during the National Railroad Construction and Maintenance Association Conference on Monday, Jan. 6.
TRAINS: David Lassen
CORONADO, Calif. — Consolidation of the rail industry is “inevitable,” Canadian Pacific CEO Keith Creel says, but the industry-wide embrace of Precision Scheduled Railroading has likely pushed the merger process from a five-year window to a 10-year period.

Creel, the keynote speaker Monday at the National Railroad Construction and Maintenance Association Conference, also delivered a strong defense of PSR, and, while continuing to pay homage to his mentor, PSR pioneer Hunter Harrison, noted ways in which both he and CP have adjusted from Harrison’s philosophy.

Creel, CP’s CEO since 2017, says consolidation will come because of the need to increase rail capacity to deal with growth.

“The need for transportation is going increase; it’s not going to decrease,” he says. “… Eventually, to create more capacity — because nobody wants to build any more railroads; you can’t justify them and nobody wants you in their backyard — you’ve got to create capacity by eliminating handoffs and interchanges, and bigger, longer networks that are optimized.

PSR, in creating more capacity through scheduling and more efficient use of assets, has delayed that inevitability, Creel says.

“Two years ago, I would have said that consolidation, driven by trouble, driven by lack of capacity … would have occurred in a five-year timespan,” he said. “I think [now] it’s more of a 10-year deal.”

He acknowledges that the regulatory barrier is significant, because the Surface Transportation Board, which must approve any merger, is “pro-service and pro-competition. The only way you’re ever going to meet or exceed that challenge is to be a railroad that can do both. And if we are able to continue to sustain our success, then I believe we can. … When it comes time to dance, we want to be a pretty attractive dance partner.”

PSR, he said, is primarily about change, something he said benefit the long-term stability of the railroad.

“Because if we go away, or we’re carved up into short lines that aren’t going to have the same resources that the main line might have, I would suggest that’s not good for your business, either,” Creel said. “So embrace it. It’s not going to go anywhere.”

Creel acknowledged that now-retired BNSF Railway Executive Chairman Matt Rose spent some time prior to his departure criticizing the industry’s embrace of PSR. Rose, in fact, addressed that topic a year ago in his own appearance at the NRC Conference.

“I would suggest it’s just a lack of understanding,” Creel said. “… You’ve got to remember if you do PSR right, it’s a long-term story. It’s about creating a well-run company that’s highly capital intensive that you can invest money back into, to sustain success long-term and to grow with.”

While Creel remains effusive in his praise for Harrison and his impact on railroading, he said he also knew he would have to operate in a different fashion as CP’s CEO.

“He had tremendous insight into the industry, but not a lot of patience,” Creel says. “… I was in tune enough to realize that I could not be Hunter Harrison. If I did and said some of the things Hunter said and did, I’d be in jail. I told him that, and I’ll tell you that.”

Creel said he wanted to connect more with customers, employees, and regulators.

“Hunter didn’t like the roads going to Ottawa. He didn’t like the roads going to Washington D.C. He just didn’t see a whole lot of value in it. But I see it as necessary. Because if nothing else, if you’re driving change, if you don’t go to explain your story and you’re not understood, it can become very dangerous. … If you can lead to a better understanding that leads to a better outcome, based on facts and not politics, that’s a pretty good recipe.

“Hunter was human. He didn’t get it all right. But I’m telling you, I never met another railroader — and I know he’ll go down in history as the best railroader in the history of railroading — that got as much right as that man did. And it might not have been the popular thing, but it was the right thing.”

–This story was edited Jan. 7 to fix a reference to PSR

17 thoughts on “CP’s Creel sees mergers as inevitable, but delayed by Precision Scheduled Railroading NEWSWIRE

  1. The last thing we need is to double the lackluster performance of moving freight by rail through mergers.

  2. Growth? Really? This industry is not interested in growth, it’s only interested in running shippers off and shrinking into oblivion.

    PSR is a going out-of-business strategy, nothing more. All it does it wilfully creating imprecise and unscheduled operations that do not fit the customer’s needs.

  3. While I’ll never agree on the PSR observations that Mr. Creel has, he is right that some sort of consolidation is going to be necessary sooner or later. But I think what’s important is that the “right” mergers have to take place. And the most obvious one in my mind is CPRS + KCS.

  4. If they need capacity so badly, why not re-double track their mains and reactivate the ones they’ve pulled up?

  5. I can see UP and CP. UP would finally get their own Chicago-KC line, leaving only the hottest trains on BNSF, though they could have had this over 40 years ago if they had completed purchase of Rock Island. CP would be able to interchange traffic from western Canada with CSX and NS in St. Louis, bypassing Chicago. Avoiding Chicago increases capacity.

    To get past regulators, UP & CP would have to sell lines and/or grant a lot of trackage rights in the upper Midwest. The standard is now increased competition, not just preserved competition. In the end more competition, routing traffic around congestion, and more single line hauls is a win for everyone.

    I can also see CP-KCS, more than CP-UP. I don’t see both as KCS & UP have a lot of overlap.

  6. PSR will ensure NO mergers take place. PSR is a disaster for customers, the public, and railway employees. PSR railways running 15,000 foot trains, blocking countless city crossings, splitting towns in half, telling customers when they can get cars dropped off/picked up as opposed to the customers getting them when they need them, adding all sorts of additional, outrageous fee’s, and trying to get rid of conductors all while making these trains longer and longer all so activist investor’s and Wall Street can reap major profits, is going to lead to major regulations. The public and railway customers will demand it. Matt Rose is the only RR executive who see’s this and was against PSR. Hunter, Creel, and others will do ANYTHING to push profits higher and higher at any expense. Don’t kid yourself. And people wonder why “socialism” is making such inroads in America. PSR is a prime example of why.

  7. Floundering around trying to find the Square Root of a negative number. If you can’t run a railroad it doesn’t matter if you merge or don’t merge, doesn’t matter if you sell a line or purchase a line. Hey guy, you’re on the wrong path. When you’re in a hole the first step is to admit your in a hole and dammit stop digging.

    And let me add CPRS, I’ve seen your three-mile long trains through Waukesha County. Break down or derail two of them in double-track territory and you could block every crossing for six miles and split Brookfield / Elm Grove in half for days to come. .

  8. UP+NS+CP, and BNSF+CSX+CN
    In this deal, NS’ LSMS (Cleveland-Chicago, and other connecting NYC trackage), Milwaukee Road, DME, DRGW/WP, and CP’s line south from Lethbridge to the border switch sides in exchange for the Fort Wayne (CFWE), C&S/FW&D (Denver-Metroplex), WC.

  9. Interestingly, it’s a West Coast Railroad (CP), that just hedged its bet by buying its old line that had been spun off as a short line (CM&Q), that brings up the “M-word.”

    Let’s face it: Western Railroads are the ones that need to merge, because most of the US population is located east of the Missouri and Mississippi Rivers. And UP’s CEO Lance Fritz is screaming bloody murder because President Trump has changed the import game rules and UP’s traffic is dramatically off until the supply chain lines reform. This is important because railroads transport goods, that American consumers will purchase. Trains carry consumer goods to Market locations, where consumer goods are delivered to Distribution Centers, before being delivered to retail stores.

    So for an analysis, take a list of the top 100 Cities/Consolidated Metropolitian Statistical Areas. Include Cities/Consolidated Metropolitian Statistical Areas that are less than 300 miles from a port (as it’s only marginally profitable to transport containers less than this distance).

    Divide the cities up that are ports where container ships can unload their intermodal shipping containers from the other cities. Pull those port cities out of the list (but don’t throw them away), as containers from the ships can easily be transported to distribution centers in those towns by truck. Check to see if these ports are in the top 20 port in North America using a simple Google Search (you’ll note that none of the Great Lakes cities, Duluth/Superior, Milwaukee, Chicago, Gary, Detroit, Toledo,/Sandusky, Cleveland or Buffalo/Niagara) are in that listing.

    Then divide the remaining Cities/Consolidated Metropolitian Statistical Areas into those East and West of the Missouri River. These Inland cities are Market Centers that can/should be served by trains. See where the major markets are located?

    Next, figure out where the major rail routes are from the top 20 port cities to the marketing centers. Note where most of the Marketing Locations are located. Now, look at the probable routes from the ports to those marketing centers. How many mountain ranges will each route cross? How many crew changes will each intermodal train make to get from Port A to Marketing Center X? Is there a shorter route or one that crosses fewer mountain ranges? Also consider that if a Plus-Pana-Max container ship carries 12,500 TEUs ( or 6250 40′ containers – that’s just under 21 trains of 300 containers, with a single crew, versus the cost of (multiple crews X 21 trains). Finally, consider that the West Coast Longshoremen and Stevedores Union average pay and benefits is the equivalent of $285,000/year,

    Together, all of these thoughts will point to a singular conclusion: It’s cheaper to ship these intermodal containers on a container ship to a port that’s closer to the intended Distribution Center than it is to ship containers transcontinentally by rail.

    In saying this, I’m also saying that Eastern North American Railroads will get this business on their existing tracks from ports to many of the Distribution Centers east of the Missouri River, where the majority of the Market for consumer goods is located. CSX and Norfolk Southern are already there along with joint venture partners Meridian Speedway and Pan Am Southern. Don’t forget CN’s Illinois Central water-level route from New Orleans to Chicago.

    Unfortunately, the CP, BNSF and UP are the odd men out in this scenario. Berkshire-Hathaway has deeper pockets and could buy either CSX or NS – IF either would consider becoming a small part of a mega-railroad, which neither have an urgent need to merge (or be consumed).

    With the growing Nationalistic policies, I don’t see CP having an easy time merging with a US based railroad and being the surviving company

  10. Any new mergers would be end to end. It is ridiculous that the U.S. has no true transcontinental railroad under one flag. Amtrak is as close as it gets. The U.S. railroads will continue to under perform until this situation is resolved.

You must login to submit a comment