{"id":1392,"date":"2012-11-09T14:17:02","date_gmt":"2012-11-09T19:17:02","guid":{"rendered":"https:\/\/www.dantranscon.com\/cn-rail-and-cp-rail-canadas-two-precision-railroads-set-to-power-its-economy\/"},"modified":"2012-11-09T14:17:02","modified_gmt":"2012-11-09T19:17:02","slug":"cn-rail-and-cp-rail-canadas-two-precision-railroads-set-to-power-its-economy","status":"publish","type":"post","link":"https:\/\/www.dantranscon.com\/cn-rail-and-cp-rail-canadas-two-precision-railroads-set-to-power-its-economy\/","title":{"rendered":"CN Rail and CP Rail \u2013 Canada\u2019s two \u201cPrecision\u201d Railroads set to Power its Economy"},"content":{"rendered":"<p><span style=\"font-size: 12pt;\">Pierre Berton, the late, famous Canadian author noted in his book, \u201cThe Last Spike,\u201d that CP Rail has held a respected place in the country\u2019s history.\u00a0 He wrote that \u201cno other private company, with the single exception of Hudson\u2019s Bay Company, has had such an influence on the destinies of the nation.\u201d For most of the past 15 years, CP Rail faced stiff competition from CN Rail as Paul Tellier and Hunter Harrison led the company\u2019s move from a bloated government run enterprise to a highly profitable public company.\u00a0 In fact CN\u2019s operating ratio of 61.3 is not only the best among the major North American railroads, it is one of the best of any company in the transportation industry.<\/span><\/p>\n<p><span style=\"font-size: 12pt;\">The fact that CP Rail lagged so far behind CN Rail and the other class 1 railways in North America led the activist investor Bill Ackman, of Pershing Square Capital, to launch his \u201cpalace revolt\u201d proxy battle that resulted in the replacement of CP\u2019s former President with Hunter Harrison, whom he brought out of retirement to drive the railway\u2019s profit improvement.<\/span><\/p>\n<p><span style=\"font-size: 12pt;\">As we pass through the last quarter of this year, Canada\u2019s two largest railroads are heading down separate tracks.\u00a0 With an operating ratio is the low 80\u2019s, Mr. Harrison has embarked on a series of actions to reduce costs through improved asset utilization.\u00a0 This is another way of saying that CP Rail is planning to move its equipment more quickly and efficiently, to become Canada\u2019s second \u201cprecision\u201d railroad. \u00a0\u00a0It is seeking to accomplish this by undertaking a series of initiatives.\u00a0 These include:<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 12pt;\">Building trains at CP\u2019s intermodal terminal in Vancouver with blocks of cars for long haul destinations. This reduces stops and streamlines connections.<\/span><\/li>\n<li><span style=\"font-size: 12pt;\">Increasing average train lengths to 7,000 to 12,000 feet<\/span><\/li>\n<li><span style=\"font-size: 12pt;\">Speeding up the fueling of trains<\/span><\/li>\n<li><span style=\"font-size: 12pt;\">Improving daily scheduling<\/span><\/li>\n<li><span style=\"font-size: 12pt;\">Investing $1.2 billion in 2012 and $1 billion in 2013 on key infrastructure projects<\/span><\/li>\n<li><span style=\"font-size: 12pt;\">Working with customers at both ends to improve coordination<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 12pt;\">The net result of these changes is that CP Rail now provides 4 day transit times between Vancouver and Chicago and Toronto.\u00a0 These changes represent half of the transcontinental trains that CP launches daily across its network.\u00a0 Mr. Harrison is not expecting an overnight drop in the company\u2019s operating ratio.\u00a0 He told Bloomberg News that he is targeting about 65 percent in the next four years.<\/span><\/p>\n<p><span style=\"font-size: 12pt;\">Shippers appear to be taking notice of improved service on both major Canadian railways.\u00a0 <\/span><\/p>\n<p><span style=\"font-size: 12pt; color: windowtext;\">In the 2011 Canadian Industrial Transportation Association Shippers\u2019 Pulse Survey, the respondents gave the railways\u2019 intermodal service a 78 percent favourable rating as compared to 82 percent for LTL and 84.5 percent for truckload.\u00a0 Carload service was ranked at 70 percent.\u00a0 These scores are 45 percent better than the ratings in 2009.\u00a0 The railways\u2019 quality rankings were also up 22 percent as compared to 2010.\u00a0 <\/span><\/p>\n<p><span style=\"color: windowtext; font-size: 12pt;\">The railways offer three primary types of services to its customers – – unit trains, carload service and intermodal.\u00a0 Both railroads are positioned to capitalize on trade between NAFTA partners but also trade with Asia and Europe.\u00a0 Michael Bourque, President and CEO, Railway Association of Canada, highlighted in his presentation at the 2012 Surface Transportation Summit that <\/span><span style=\"color: windowtext; font-size: 12pt;\">Oil, LNG, shale development (sand, steel pipe, chemicals) are now moving by rail.\u00a0 This is not just a stop gap measure.\u00a0 There are many long term contracts now in place alongside pipeline shipments.\u00a0 The railways can supply capacity and service to a variety of industries.<\/span><\/p>\n<p><span style=\"font-size: 12pt;\">CN Rail, that already climbed the efficiency mountain under Hunter Harrison, is seeking profit growth from these specific opportunities.\u00a0 CN is enjoying steady growth through the Port of Prince Rupert, BC, the closest North American port to the Asian market.\u00a0 The 13% year\/year growth in intermodal traffic through this port is helping drive CN\u2019s intermodal volume increase.\u00a0<\/span><\/p>\n<p><span style=\"font-size: 12pt;\">It is also planning to capitalize on the boom in commodities, namely iron ore.\u00a0 It is expecting to invest $3 to $6 billion on infrastructure to service the mines in Sept-Iles, Quebec, on the Gulf of St. Lawrence, in northern Quebec.\u00a0 Iron ore exports are expected to rise more than 35 percent as China seeks to diversify its sourcing of this key steelmaking ingredient.<\/span><\/p>\n<p><span style=\"font-size: 12pt;\">With such a high profile and well publicized change in leadership, everyone is expecting big things from Hunter Harrison and CP Rail.\u00a0 As rail speeds and efficiencies improve, this will open up a larger share of the truck market for conversion to rail service.\u00a0 With rail being such an energy efficient alternative to road transportation, on longer lengths of haul, we should expect an ongoing series of sales and operations initiatives as both Canadian railways look to capitalize on these opportunities and spur growth in the Canadian economy.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Pierre Berton, the late, famous Canadian author noted in his book, \u201cThe Last Spike,\u201d that CP Rail has held a respected place in the country\u2019s history.\u00a0 He wrote that \u201cno other private company, with the single exception of Hudson\u2019s Bay Company, has had such an influence on the destinies of the nation.\u201d For most of […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[67],"tags":[173,171,94,84,109,175,170,172,174],"class_list":["post-1392","post","type-post","status-publish","format-standard","hentry","category-rail","tag-cita-shipper-pulse-survey","tag-cn-rail","tag-cp-rail","tag-freight","tag-intermodal","tag-nafta","tag-rail","tag-railway-association-of-canada","tag-transportation"],"acf":[],"yoast_head":"<!-- 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