Back in the closing days of 2015, Canadian Pacific CEO E. Hunter Harrison was in hot pursuit of a merger with Norfolk Southern, partly so he could implement his Precision Scheduled Railroading operating model on one of the big eastern systems.
We know how that turned out. NS said no repeatedly, CP gave up early in 2016, and a year later Harrison wound up running CSX Transportation.
Little remembered from the NS merger battle, perhaps, is this nugget: Harrison said NS was using way too many locomotives. A Harrison-led NS, he said, could move the same tonnage with a locomotive fleet that was 35% to 40% smaller.
This week on the railroad's quarterly earnings call, NS executives outlined their rationale for purging the locomotive fleet of 703 older models, exceeding the goal of a 500-unit reduction they had forecast a year earlier.
The bottom line is that Norfolk Southern is now pulling its freight with an active locomotive fleet that is 35% smaller than the overall fleet was back in 2015. That’s precisely what Harrison had predicted.
As an outsider looking in from Calgary, how could Hunter possibly hit the bullseye?
One of Harrison’s former colleagues, who worked with him in a senior operations position at Canadian National, has the answer.
“Hunter had an incredible nose for the numbers that mattered when it came to understanding fleet size,” he recalls. “While not perfect, his gut was always close, if not spot on and usually within a small margin of error compared to those who analytically were calculating numbers with a much larger margin of error. I saw it over and over and over again!”
Harrison had a knack for fully grasping the complex relationship involving a railroad’s gross ton miles, locomotive miles per day, horsepower per ton requirements, gross ton miles per available horsepower, mean time between failures, and, well, you get the idea.
“His ability far exceeded anyone else in putting the right numbers together and coming up with a fleet size on the spot,” the former CN executive says. “I’d suggest the numbers quoted for NS were probably a combination of a challenge by him on what the number would be, backed up by an analytical exercise by others.”
Another former CN person confirms this account. Hunter, he says, walked around with locomotive formulas in his head. If you had “X” amount of traffic, you needed “Y” amount of locomotives to move it across the railroad. Simple as that.
This is how Harrison reduced the locomotive fleets at CN, CP, and then CSX before his death in December 2017.
If you think Hunter would say, “I told you so,” to people in Norfolk, you might be right.
Says a CN colleague: “It happened to me with my region’s annual budget that we had dissected umpteen different ways and when presented to him, he had a different number that at the end of the year was much closer than what my budget guys had come up with. And I had to listen to the ‘I told you so’ in January when the final numbers came in.”
You can reach Bill Stephens at bybillstephens@gmail.com and follow him on twitter @bybillstephens
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