I couldn't help but notice that there was no mention of how the "operating efficiencies" led to some of the derailments and other "accidents" the CN has had in the last few years.
Not that I expected Hunter to admit to that problem, but the author of the article could hardly be ignorant of the above-mentioned incidents.
Railroads are steeped in tradition: this is the way we've always done it syndrome. Hard to change 175 year old procedures and thinking. But when it does happen, it usually works for the better. What really has me concerned is the arrogance that "this is my product and here is how I will deliver it to you" ignores American business custom of "the customer is always right". Yes, you've got to orgainze yourself to delever the best product at the best price, but you also have to bend somewhat to customer needs and demands. Likewise, customers have had a field day demanding and getting what they want rarely having to pay the consequences of higher prices or whatever. Hunter is right, "this is how my product works for you and this is what it costs". The message has to be absorbed by the industry that that is who they have to be to succeed in the future...and the customers have to see and accept the way it best serves thier interests. If there is no meeting of the minds, then there is no business and the guy in the next business gets the business!
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That's true...but "the customers is always right" is one of those bromides that gets passed down through the generations without anyone really thinking about it much. Customers are people after all...and people are never always right. But it does have alot to do with the presentation...CN probably CAN improve the entire shipping process via intense asset utilization however they do need to get the buy in from their customers and they do need to sell their customers on the advantages of change over the status quo.. Just using the carrot and stick approach to smooth out the ebb and flow of the shipping cycle does not come across the right way. CN and their larger accounts need to sit down and go over the potential pros and cons of going to a seven day shipping cycle...a big plus for CN may not be a big plus for the shipper when all is said and done. At the end of the day one size does not fit all..they will find that their seven day cycle works well for some but not at all for others. And instead of penalizing the ones who don't fit the mold...maybe look at alternatives. I view any account to pays me a fair rate and who pays me on time as a GOOD account. Everything else is up to me..if the shipper doesn't like my way of doing things or if he needs something that I can't provide then that's my problem to fix...but not by trying to force a square peg into a round hole.
Customer satisfaction is down, morale is the worst it has ever been. Oh yes, Hunter is a "great" man.
His cost cutting killed more than a few employees. Remember the bridge collapse in McBride, BC? What about the runaway at Lillooet? Caused by he and his minions trying to squeeze every penny out of the assets.
He has instilled a culture of fear and intimidation, his management teams consist of psychopaths, nitwits, and yesmen. Running trade employees are being fired for sneezing the wrong way yet the Boom Boom Boychuck(responsible for the Lillooet runaway and the disaster at Prince George) gets a promotion.
I have absolutely zero respect for the man and I know many who would not brake if they saw him crossing the street.
UlrichA shipper says CN is impossible to work with... that's a damning statement..
A shipper says CN is impossible to work with... that's a damning statement..
It's the truth. Customer satisfaction is a term rarely heard on the CNR. And if you don't believe me I will put you in touch with some of the local customers. Any customer that is not shipping more than 20 cars a day, CN will refuse to switch them. The Ainsworth mill in Lillooet is scrambling to find alternative transportation because CN has told them "either give us 20 cars a day, or we won't switch you."
and if whoever said it believes it to be true then he/she should reveal himself/herself and be prepared to defend that statement. Moreover, hiding behind a cloak of anonymity detracts from the statement. Same with Glassdoor.com...or whatever it is called...have something negative to say then show who you are and be prepared to defend what you say...calling someone a thief without provding any kind of details is assinine and cowardly.
A co-worker of mine recently came forward to talk about how badly CN treats its employees on one of these websites. Someone from CN saw his posting and for the next 3 months supervisors were constantly tailing this person, who was an excellent railroader, trying to find something, anything to fire him for.
Managers at CN are hired from McDonalds and Starbucks and don't have a clue how to run a railroad. They have no clue as to the operating rules and employees have been fired for insubordination because they will not break an operating rule. In formal company investigations after an accident or for any reason that management has pulled you in for a hearing, any evidence that can incriminate you is front and centre, in the evidence package that is given to you. However any evidence that could exhonorate you is surprisingly missing. It's to the point now that many employees have a personal recording device to record any conversation with a supervisor.
Ulrich The article has one person stating that we're afraid of Hunter...why? Does he breathe fire? Good grief...the worst he can do is send you packing...
The article has one person stating that we're afraid of Hunter...why? Does he breathe fire? Good grief...the worst he can do is send you packing...
Speaking on behalf of those with mouths to feed, student loans to pay off, and a mortgage to pay, in a recession no less, HUH?!? "The worst he can do is send you packing" as a reason for not being afraid of him?
I would be FAR less scared of someone who breathes fire.
Gabe
Well the good news then is that there's change coming at the top. According to Trains the new man has strengths that Hunter does not have ( and vice versa I'm sure)...
enr2099 A co-worker of mine recently came forward to talk about how badly CN treats its employees on one of these websites. Someone from CN saw his posting and for the next 3 months supervisors were constantly tailing this person, who was an excellent railroader, trying to find something, anything to fire him for. [emphasis added - PDN]
Sounds like a really productive use of supervisory personnel and their costs . . .
enr2099 Managers at CN are hired from McDonalds and Starbucks and don't have a clue how to run a railroad. They have no clue as to the operating rules . . .
Perhaps that's why Hunter requires that everyone at CN become qualified as conductors and engineers, if I understood that part of the article correctly . . . . I hadn't heard or read that before - despite having followed CN and owned its stock for over 10 years now - maybe it's because that's the only way to get them trained [Q]
enr2099 . . . and employees have been fired for insubordination because they will not break an operating rule. In formal company investigations after an accident or for any reason that management has pulled you in for a hearing, any evidence that can incriminate you is front and centre, in the evidence package that is given to you. However any evidence that could exhonorate you is surprisingly missing. It's to the point now that many employees have a personal recording device to record any conversation with a supervisor.
How is it going with the investigations, and the union representation [Q] Is the turnover that much higher than any other similar railroad - say, CP, BNSF, or UP [Q] Are these being appealed to arbitrators or the courts - not sure how you do that in Canada - and who is winning most of the time [Q] If this is too far out of line, why hasn't the union called a walkout, or at least filed a grievance on this [Q]
Just curious - I don't have an agenda here, other than the long-term viability of the company. I've been around long enough to see the good and the bad of these types of personalities - it isn't fair to Rob Krebs to use his name in the same sentence as Drew Lewis, but that illustrates my point - I'm just trying to get a measure of which Hunter is, and by how much. Or, could this be the result of someone else - a 'hatchet-man' - in the middle-management ranks [Q] Then again, someone who can talk at a meeting or seminar for 8 or 9 hours straight as Hunter is said to have done either must have something really interesting to say, or is afflicted with the common-enough dictator's syndrome of being in love with the sound of his own voice [think of Fidel Castro's and Saddam Hussein's half-day speeches to the crowds assembled in the squares . . . . ].
- Paul North.
I don't think anyone can argue with the fact that Hunter is a very capable railroader...however his "tough as nails" bull in a china shop management style often doesn't work because the end result is fear (which staff readily enough admit to) and fear of course breeds anxiety and anger. Unfortunately, as is so often the case...his greatest strength may also be his greatest weakness. His tough managment style is what got him promoted right along at CN and at other roads...but has worked against him as a leader at CN where a more concilliatory tone with staff and customers might have been more effective. Nonetheless...I won't take anything away from him..he's had quite a run from his start as a carman at Frisco.
enr2099 [snip] His cost cutting killed more than a few employees. Remember the bridge collapse in McBride, BC? What about the runaway at Lillooet? Caused by he and his minions trying to squeeze every penny out of the assets. The infrastructure is falling apart, CN will not maintain anything until it breaks, often in the case of track and bridges, catastrophically. Locomotives and rolling stock aren't much better. Crews turn in locomotives for safety or mechanical defects and are threatened with disciplinary action for delaying the assignment because CN doesn't make any money if the locomotives are in for repairs. I can understand sweating the assets, but he's pushed them to the breaking point. [snip]
Subjective claims are hard to evaluate, but objective, quanitifiable matters - 'metrics' - usually seem more believable. So - Do the usual statistics -other than the 'Operating Ratio' ['OR'] - shed any light on this [Q] lSuch as - M/W Ratio, work done each year - number of ties replaced, miles of rail laid, and miles of track surfaced, etc., lost-time injuries per 100 or 200,000 hours, fatalities per year, wreck damage per year, loco availability percentage, average age of the loco fleet, car bad-order ratio, etc.
I could look them up, but I'm busy with some other things right now. Right off the top of my head, I believe that 2007 was a pretty lousy year for employee injuries and deaths on CN. Was that part of a trend - or a fluke, a one-time spike, an 'outlier' in the data [Q] Has CN ever taken home any of the Harriman Safety Awards in the last 15 or 20 years [Q]
Yes, I know well that statistics can lie - for examples, deferring bridge maintenance takes a long time to show up, and even then can be so sporadic and different in how it shows up as to seem random to the casual and uninformed observer. But deferring tie renewals and surfacing will show up in 3 to 5 years - and Hunter has now been in charge for like 10 years - so if that's what's been done, then it will come home to roost. Remember the conclusion of what Abraham Lincoln said - 'You can't fool all the people, all the time'.
UlrichMoreover, hiding behind a cloak of anonymity detracts from the statement. Same with Glassdoor.com...or whatever it is called...have something negative to say then show who you are and be prepared to defend what you say...calling someone a thief without provding any kind of details is assinine and cowardly.
Ulrich —
You're absolutely right, of course. I think there's the misperception out there that journalists like using anonymous sources. My preference is always to get on-the-record comment whenever possible.
However, I'm sure you can also appreciate why a rail shipper or employee would be reluctant to talk on the record about this kind of stuff. Not specific to CN, as it's certainly not my place to cast aspersions on them, but I think most employees would be fearful of talking on the record and saying negative things about his employer, and same with a rail shipper toward his railroad. In cases like these, background reporting is often the only way to get the story. Your choice is basically, anonymous sources, or no sources at all.
When a journalist uses a background source like Fred did, he's asking his readers to place some trust in him. There have certainly been journalists through the years that have abused that privilege. However, being a longtime fan of Fred's writing, my opinion is that his request for our indulgence is well-placed. But I guess it's up to each reader to agree or disagree, and I wouldn't deign to tell you or anybody else what your interpretation should be.
Best,
For the most part, I like what CN has been able to do with the former IC/ICG Iowa Division and making it look like something again although I am disappointed that they haven't pushed for a paired track arrangement with UP between Denison and Council Bluffs AND pushed the Council Bluffs/Omaha gateway harder; particularly for auto and auto parts traffic.
Great response Mr Cummings...and I too am a fan of Fred's writing. I don't fault Fred or Trains...however I'm more critical of those folks who make very serious negative comments. I appreciate that Trains and other news media must use discretion when revealing sources. My view is that if I can't sign my name to it then I don't say it (or I say direct to the offending party for his/her ears only)..
Regarding the use of unidentified 'sources' in the Hunter Harrison article -
1. Frailey's got the background and 'street credibility' as a working journalist outside of Trains magazine to make it believable - to me, at least - that he needed to use those sources without attribution, or he wouldn't be able to get their comments.
2. It's interesting to me that people who are protected by a contract - and a union - are manifestly afraid or at least concerned about speaking against Harrison and/ or CN 'on the record'. Their actions in requiring anonymity speak loudly that they are genuinely concerned - you can decide whether that's rational or not, or they are over-reacting, paranoid, etc.
At the shipper level, it's even more interesting, and curious. All rail shippers are large corporations [no 'Mon 'n' Pop' grocery stores have sidings]. As such, they are 'big boys' - have lobbyists, are accustomed to the rough 'n' tumble of the business world and the customary frictions with politicians and consumers, etc. Neither the businesses nor their important officials can be afraid of taking a stand - publicly, if they have to - and some even seem to relish 'pulling the tiger's tail' from time to time. Yet here even that supposedly tough crowd seems cowed and muted compared to their usual willingness - nay, enthusiasm - to gripe about a railroad - which usually bounces off it anyway. So I have to ask why is that dynamic different here - 'Why isn't that dog barking [Q]' - and what does that mean [Q]
Maybe hunter really does breathe fire..
I don't get it either... I've never had a problem getting people to open up about their problems to my face. Maybe because I've encouraged that...and strongly discouraged the other kind. Straighforward pointed discussion can be useful...is often very humbling...and at the end of the day the person who "unloaded" feels heard...
When a strong character causes significant change, it tends to polarize the constituency into those who will be elated and those who will be dismayed. As humans, we tend to place little stock in supporters, thinking them biased, and we tend to look more to cues that provide us with important information about hazards that could cause us trouble. We tend to sympathize with, and to pay more attention...and credence...to those who give the appearance of caution, of being cynical, and somehow aloof from the hubris spouted by the supporters.
IOW, we'll gladly believe what we wish to about an organization or a person, and lend much more weight to information that bolsters our pre-conceived notions. Also, many of us can't stand it when someone powerful succeeds, even if it isn't necessarily at our expense.
-Crandell
Re: Tyler W posting, specifcally this quote:
I assume you meant the accident of 29 June 2006. I reviewed the report and I do not find any blood on Harrison's hands. According to my reading, the Transportation Safety Board of Canada was never able to pin this accident on any specific cause. They noted that the air brakes on the one car in the train did not appear to have operated properly. However, the car's control valve did operate properly in testing. Inspection noted metal shavings inside the control valve. These shavings "could" have caused the control valve to malfunction. This was a condition that was present created when the control valve was manufactured and not something that CNR was responsible for.
When BCR ran this railroad only units equipped with dynamic brakes were used on this run. When CNR took over the DB units were pulled and a non-DB unit was assigned. DB is great; however, railroads have succesfully operated mountain grade without DB for years. In any event I really doubt it was Harrison who actually pulled the DB units off the mountain.
I would like to quote from the report:
The investigation learned that some railway operating employees were concerned about GP 40-2L locomotives being able to safely perform in the same manner as DB-equipped locomotives that were formerly assigned to the Exeter Switcher. These concerns were not communicated to management either formally or informally for their review and response. Furthermore, they were not reported to the local OSH Committee because the operating employees did not participate in the committee in spite of management's invitation to select a representative (my emphasis.) Since employee concerns regarding the use of non-DB-equipped locomotives on this territory were not brought to the attention of management through the local OSH Committee, or by any other available means, an opportunity was lost to resolve this safety issue."
I don't think Harrison is responsible for this accident. There is a lot of guilt to go around.
enr2099 [snip] Any customer that is not shipping more than 20 cars a day, CN will refuse to switch them. The Ainsworth mill in Lillooet is scrambling to find alternative transportation because CN has told them "either give us 20 cars a day, or we won't switch you." [snip]
OK - but what's 'The rest of the story' here - at what rate, and on what terms, is CN refusing to switch for less traffic than 20 cars a day per shipper [Q]
If it's at a market rate - yeah, then we'd have to wonder what CN is thinking. Or, did the mill negotiate a more favorable multi-car rate based on '20 or more cars tendered at one time' [Q] And now, with the economy as it is of course, the mill is finding that it can't live up to that end of its deal - but the mill still wants the benefit of the lower rate, naturally enough [Q] Or, did CN agree to send out a local -'patrol' - to make individual switches of the mills at certain times of the day, but only if the mills guaranteed a 20-car minimum shipment to make it worth CN's while to call the crew, incur the engine start, and tie up the main line's other traffic with the local, etc. [Q] Or maybe none of the above - the mill is the wronged innocent, and CN is the black knight. But we need more data - and both sides [or more] of the story - to evaluate all that for ourselves.
Allow me to emphasize a slightly different portion of the report quoted above;
'These concerns were not communicated to management either formally or informally for their review and response.'
On the other hand - the management should not - and should not have to - depend on the rank-and-file to tell them when something is being or is about to be done wrong - that's why they're the managers. 'This ain't rocket science here, people'. Imagine the dialogue that somebody should have had -
'Well, we've got this here steep grade that's been run with dynamic brake-equipped locomotives for the past so-many years. What d'ya say - why don't I take the DB units away from the crews, and give them much less-capable units instead [Q]'
What were they thinking [Q] [or not] What part of that makes any sense [Q] Somebody should have some explaining to do - not only the person who made the loco change, but at least his immediate supervisor, too - for failing to properly train and instruct the subordinate.
Ulrich [snip] . . . he's had quite a run from his start as a carman at Frisco.
Can someone enlighten me, please [because I don't have that issue or any other references handy at the moment] -
Has Mr. Harrison ever attended or graduated from a full-time, multi-year course of study/ degree program at a significantly accredited college or university [Q]
If not, has he done anything reasonably similar, but just not as long - such as a semester or two in an MBA-type or management course or program, etc. [Q]
Or, is he truly an up-from-the ranks [only], 'self-made' man [Q]
- PDN.
clarkfork Re: Tyler W posting, specifcally this quote: His cost cutting killed more than a few employees. . . . What about the runaway at Lillooet? Caused by he and his minions trying to squeeze every penny out of the assets. I assume you meant the accident of 29 June 2006. I reviewed the report and I do not find any blood on Harrison's hands. According to my reading, the Transportation Safety Board of Canada was never able to pin this accident on any specific cause. [snip]
His cost cutting killed more than a few employees. . . . What about the runaway at Lillooet? Caused by he and his minions trying to squeeze every penny out of the assets.
I assume you meant the accident of 29 June 2006. I reviewed the report and I do not find any blood on Harrison's hands. According to my reading, the Transportation Safety Board of Canada was never able to pin this accident on any specific cause. [snip]
See the Transportation Safety Board of Canada's RAIL REPORTS - 2006, esp. the 2nd one for 29 June 2006, Report Number R06V0136, which is available as both HTML and PDF formats at -
http://www.tsb.gc.ca/eng/rapports-reports/rail/2006/index.asp
It involved a locomotive and - only a single, fully-load loaded lumber car. The ruling track grade was 2.2 per cent, but may have varied locally to as high as 2.85 per cent. There appear to have been issues with the brake shoes and wheels, as well as 4 other major derailments on the former British Columbia Railway from August - December 2005.
Paul_D_North_Jr Has Mr. Harrison ever attended or graduated from a full-time, multi-year course of study/ degree program at a significantly accredited college or university [Q]
Paul,
CN's website makes no mention of Mr. Harrison attending a tradional institiution of higher learning. It does say he started working at the Frisco 1963 while attending school; he would have been 19 years old at the time.
Re: Tyler W. Post and Paul North response
I agree that pulling DB off the hill was a bad idea. But I was responding to the assertion of Tyler W. repeated below:
The way I read it the author is blaming Harrison personally for this accident. And just I don't think that is right. Unless he has something that directly connects Harrison with this accident I don't think he should make these accusations.
As to the union participation in the OSH, I didn't come up with that, the Tranportation Safety board did. In my experience (not CNR) union types try to play "hardball" with safety. My employer had some sort of union-management safety structure. Some of the unions participated and some did not or they periodically dropped out over various issues. That imay be their perogative. But in this case it might have made a difference.
enr2099The Ainsworth mill in Lillooet is scrambling to find alternative transportation because CN has told them "either give us 20 cars a day, or we won't switch you."
This would be a "captive shipper" type of situation. If the mill can't use CN then they are looking at trucking it out.
In today's economy you can easily see that business is way below normal. The mill may have an order for 10 carloads to arrive at the customer's door by so and so date, but if the mill has to wait until it has orders to fill the next ten cars to different customer's they will lose the order for the first ten cars. At this point CN should smarten up and get the ten cars because they could end up moving zero cars.
There must be a government regulator the mill can complain to, but for the life of me I can't recall who it would be. And even then the process may involve having to change the entire contract instead of some sort of arbitration process that could set some sort of solution to get everybody past these difficult economic times.
The bottom line I can't get past though is; do you want to move ten cars or zero cars.
AgentKid
So shovel the coal, let this rattler roll.
"A Train is a Place Going Somewhere" CP Rail Public Timetable
"O. S. Irricana"
. . . __ . ______
I think it is important to point out that what Tyler is saying has as much to do with the operating practices and culture of CN under Mr Harrison's watch as anything elso I believe this is so for the following reasons:
1. As the TSB report points out CN did not consider db equipped locomitives to be necessary on the BCR. The practice, as the report points out, was not even addressed as on of the 19 items covered in the Risk Assessment Assessment Report filed by CN before acquisition of the BCR. Why was this? Previous BCR operating practice was to use db equipped locomotives in that territory. If you've been to that area (as I have) you will know that there is little if any room for error. RAilroading here is not for the faint of heart. There was also a defect in one of the centrebeam car's braking system IIRC (it's been a while since I read the report) Lack of redundancy in the braking systems was a factor, especially as the brakes began to fade on the downgrade leading to the wreck. Where was the braking backup in a one car loaded train. Sounds like squeezed assets and 'flatlander' thinking to me.
2. Following this wreck and the one at Cheakamus Canyon, then federal Minister of Transport Lawrence Cannon ordered a report into the operating practices and workplace culture of CN and other Canadian railways. CN did not come off well in this report. The words 'culture of fear' were used in this form or in various other ways to describe a railway whose management practices were 'bluntly coercive' to put it kindly. The report is worth a read. Look on the Government of Canada Website, Transport Ministry, for links to the report. CN ranked close to if not at the bottom for the quality of its workplace culture in that report. Is it any wonder that operating employees were (and perhaps still are) unwilling to participate on OHS committees, given that type of management style use here and elsewhere (and on the BCR) by CN. It's not just unions that employ hardball tactics with regard to safety. The possibility of retribution also comes to mind. I for one consider Mr Harrison to be accountable, directly or otherwise, for such practices and workplace culture. He is the CEO of the company. The buck and the responsibility stops at his desk.
3. Assets are being indeed squeezed. As the TSB report into the MacBride wreck points out, the bridge causing the wreck was structurally deficient. This report pointed out that the centralizing and downsizing of the Bridge Engineer's department at Kamloops was a significant factor in bridge assessment and repair practices, resulting in the failure of this particular bridge of this specific design. If that's not asset squeezing I don't what is. I believe locomotive power doesn't come off a lot better for condition and repair.
Like it or not, CEO's are responsible for and accountable what occurs on their watch as corporate leaders. Workplace culture, operating practices and the like are his responsibility as much as they are those under him. CN has much to do to improve its record IMO. Listen to Tyler and people like him. They have a point.
Charlie
Chilliwack, BC
I keep hoping that Clique of One would post here soon; I'd bet HE has some interesting stories to tell us about this "great" man.
Ulrich I don't think anyone can argue with the fact that Hunter is a very capable railroader...however his "tough as nails" bull in a china shop management style often doesn't work because the end result is fear (which staff readily enough admit to) and fear of course breeds anxiety and anger. Unfortunately, as is so often the case...his greatest strength may also be his greatest weakness. His tough managment style is what got him promoted right along at CN and at other roads...but has worked against him as a leader at CN where a more concilliatory tone with staff and customers might have been more effective. Nonetheless...I won't take anything away from him..he's had quite a run from his start as a carman at Frisco.
I can. Just ask the folks who worked GTW. Pulling up a second main line, then without admitting stupidity, had to replace it because traffic got fouled up. The list goes on. When they took over WC, customers were last in consideration, unless they were large shippers. All that good will built up by WC was for naught.
Capable railroader my foot. As it goes, most good rails remain rails, those who wash up, become Management, or some government lackey. Now that so many management types no longer come from the ranks, they have no clue how to move a box car from one track to another without a meeting and filling out job briefing forms.
I have guys out here who know about the business, and the fact that without customers, we become unemployed. They take care of their customers, and as a result, we still have business. It was drilled into my head as a brakeman, and today forgotten by some middle management.
I have seen too much business go away because of Management arrogance, and indifference. In these times no amount of begging will bring it back.
clarkforkThe way I read it the author is blaming Harrison personally for this accident. And just I don't think that is right. Unless he has something that directly connects Harrison with this accident I don't think he should make these accusations.
The person ultimately responsible for the Lillooet runaway is a product of EHH's management school, one of Hunter's proteges.Therefore I stand by my acusations. It IS EHH's fault!
selector.....many of us can't stand it when someone powerful succeeds, even if it isn't necessarily at our expense.
I suppose it somewhat depends on who the 'powerful' screwed on their way to the top. If you think like the "screwer", then other people are just 'resources' to be used or discarded; however, if you think more like the 'screwee", then you realize that you're the resource to be used or discarded.
The phrase used by the morally bankrupt to justify the way they treat their subordinates is, "Nothing personal, it's just business". To me, that speaks volumes about their philosophy.
Too often, the ends do not justify the means.
[quote user="zardoz"]
[quote user="selectorThe phrase used by the morally bankrupt to justify the way they treat their subordinates is, "Nothing personal, it's just business". To me, that speaks volumes about their philosophy.
[/quote]
Very true...because it's always personal..
Some late thoughts.
In the best of circumstances, changing a business from government ownership to privite ownership is not culture change, rather culture shock. In the former, the bosses are politicians with a focus on people and their votes. Obviously, private ownership puts the focus on the bottom line and in the course of the transition, people lose their livelyhood or, for those who keep a job, find they are expected to do much more with less resources. It is no surprise that criticism will be bitter. Much of the criticism may be valid, but it is hard for an insider to be objective and harder for an outsider to get to the details of the matter to make an accurate assessment.
Very few people possess the skill to manage such a change and still have the general apporval of the rank and file. Conrail's Stanley Crane comes to mind. It is clear that Harrison won't ever win a popularity contest and only time will tell whether his strategy will prove to have worked for the longer term. Allegations that assets are not being replaced as they are used up would give one pause.
When I worked on the shipper side, one of the first things I was taught was to be very careful with complaints about carrier service. Get on the wrong side of the local trainmaster, and consider yourself lucky if your switch shows up on time, or his buddy, the local mudchicken, doesn't come up with a long list of defects on the plants tracks. And I guarantee, having your complaint written up with attribution in a widely circulated publication that covers the business will dramaticly reduce returns to your e- and voice mail messages.
"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics
CN has been a corporation for almost 15 years now..that ship sailed long ago. Any adjustments from crown corp. status to corporate status happened long ago. I don't think there's alot of featherbedding going on at CN..everything I read tells me they are running a tight ship...maybe even too tight given what some of the operating people are saying.
CN's change from public to private ownership happened and was over long before Hunter Harrison came onto the scene, so that's not what the problem is here. Instead, that was accomplished when Paul Tellier was CEO. Significantly, Tellier had never held a private sector job before then, either - he was a lawyer who had 'maxed out' by rising to the top of the Canadian federal bureaucracy as Chief of Staff of the Privy Council [or similar - apologies to our Canadian members, whose governmental structure I fear I have just mis-named, mangled, or worse]. So maybe it was better, because Tellier could legitimately take the moral high ground position of not asking anyone to do something that he wasn't also - Tellier could in effect say - 'Hey - I'm making this transition to a for-profit culture right along with the rest of you'.
The problem with the advice that jeaton was given when he was on the shipper side is this - 'OK, then what recourse or means of redress are you left with to fix things that are clearly wrong [Q]' If fear of retribution - legitimate or not - means that you've been silenced, it ain't ever gonna get better, fella, unless you've got some other method in mind, such as bribery or favors of some sort, or intercession by higher-ups [which also often cause the retribution], etc. Now to be fair, jeaton said 'be very careful . . . [don't] Get on the wrong side', not 'Don't ever complain', which does leave some room for legitimate gripes - we hope, as contrasted with just cutting off incessant whining and begging by shippers. But if the channels of reasonable communication are blocked, then the pressure will build until it blows in some uncontrolled and unforseen manner - like a boiler that's had its safety valve ['pops']tied down.
Or worse..that nothing boils over and the customer votes with his feet and leaves without saying a word. That's how it usually happens..most don't complain...they just quietly disappear.. That's why shippers who complain should be appreciated...they are the few who WILL give the carrier a chance to make it right before calling it quits. Hopefully CN doesn't believe that their accounts have no options...because they sure do. Even shippers who depend on rail (where truck or boat isn't an option) can close up shop and move somewhere else.
On the Missabe, which the CN totally butchered, AND tried to get away with non DB units for awhile, things are pretty bad. Got rid of all the MISSABE SPECIFIC units, and brought in crappy IC units, and now wants more EJE units? The crews are much more worse off. For example, the Sat-Sun Proctor Roadswitch is run by furloughed crews. Yes furloughed crews. Which means they really arent making enough money for it to be worth it.
Mechanical Department "No no that's fine shove that 20 pound set all around the yard... those shoes aren't hell and a half to change..."
The Missabe Road: Safety First
Ulrich - right you are. There's almost always an alternative - not necessarily the ones you'd want, or prefer, or that are good for you and/ or the other guy - but they're out there, and if that's what it takes or what the shipper gets forced into, that's better than economic starvation or suicide.
Shifting gears ever so slightly - coborn35's post above reminded me of it again -
Reviewing the Canadian TSB's report on the 2006 Lillooet wreck above, it seems that both the lumber car and the locomotive had brakes that were at least partially defective for a variety of reasons and factors - such as a 'load indicator plate' for the 'Empty / Load Adjustment Valve' missing from the top of a truck of the lumber car. Something was also assembled wrong - a spring was mis-seated or in the wrong place, as well as others. None of this happened just before or during the wreck - they were all pre-existing conditions, which could have been caught by a routine thorough mechanical inspection, it seems to me. Since that quite evidently didn't happen, it starts to look like this kind of negligence has become habitual - or at least failure to counter-act such inattention - a common enough pre-cursor to many disasters. This raises the question of what the 'culture' there at CN has become - Is it now, 'Don't be pro-active, and just do the absolute minimum necessary' [Q]
As a result, a full-size main-line locomotive could not successfully hold back a single loaded lumber car on a 2.2 per cent grade. Doesn't that seem odd to you [Q] Even back in the day of the steam locomotives and hand brakes, they did better than that. Sure, the dynamic brakes would have prevented this, but that misses the key question of, 'What else went wrong here [Q]'
And finally - A couple months ago there was a thread here about the FRA being pretty zealous about checking car inspections at one of the former WC shops - North Fond Du Lac, if I remember correctly, for a period of several weeks. Such an action says to me that the FRA wasn't trusting the integrity of CN's inspections and quality control process for same there any more. So - Anybody here know what eventually happened with all that [Q] [I shouldn't have to draw pictures to complete my analysis here, I think.]
- Paul North
Re: Service complaints. It's not if you do it, it's how you do it. I don't know that it is all that different dealing with any vendor of goods or service.
On railroads, much of what happens is based on decisions made by the front line managers. Unless there have been dramatic changes in the last two decades, they daily have to make tough choices between who gets and who doesn't. The shipper with the biggest freight bill is always going to get a lot of attention. But if you are a shipper that is back in the pack, you probably want to keep a good working relationship with the local trainmaster. You may have contacts further up the management chain, but a very good way to find yourself at the bottom of th list is to make your first call to his boss, or better yet, the president of the company.
From what I'm seeing all the Class 1s should take a close look at what the regionals and shortlines are doing. Why is that some of these lines...once spun off to a small operator...become successful? Look at Montreal, Maine & Atlantic for example.. In the last days of CP traffic on the Shortline was pretty much dead..in the final days of ownership under CP.trains were often nothing more than a tired RS-18u..followed by boxcar and a gondola. Now there's real traffic..even some double stack on that line because MM&A is a smaller more entrpreneurial operator who is responsive to the needs of the local shippers. Same can be said for CN's old Sherbrooke and Berlin subdivisions.. Emmons (and then Gennessee and Wyoming) brought that line back to life and now it is prospering like it hasn't in at least 50 years. Marquette Rail in upstate MI is another great example of a line that floundered under CSX but is now once again prospering. Maybe huge systems with tens of thousands of employees just don't work so well.
Dan
CN is still dealing with the changes made in the 1920'a when it was converted to government from several private bankrupt lines like GTR, GTP, CNoR, National Continantal, Inter Colonial. CN was rationalized out of these companys. If I remember right CNR was already a very efficient operating tatio by the 1980's if you discounted a few lines like, Newfoundland narrow gage, PEI, Montreal comuter lines and prairy branch lines, wich they don;t have to account for now anyways. CNR had the lowest grades for a transcontinental railway in North America, this matters if the transcontinental trains are the most profitable. This takes away from Hunter's credit but....
Maybe Hunter is just in the right place at the right time and his efforts just improve the bottum line . What about Teleir ? CN worked well for him too. Thornton's consolidations at that time are still the base on CN across canada.
Maybe what jeaton is saying is the "good ole' boy" network often works with more effect and more in favor to the shipper than a complaint up the offical chain of command.
Quite offten, if it is a "one day fix" type of defect, a call or word to assistant roadmaster or to his assistant, maybe over lunch, often results in the problem being handled promptly.
Keep in mind that no matter what the road, or class of road it is, MOW resources are often thin, because major capital projects are planned 2 or 3 years in advance...it is the "emergency" repairs that throw a wrench into the works.
Not to say most roads don't have a contengincy plan for such things, but personal experience has shown me that if you start with the guys who actually swing the spike maul so to speak, you can get a lot of defects fixed quite quickly.
If it is a major problem, say a frog or switch need to be replaced, a call to your assistant roadmaster buddy will most likely get the problem on the A sheet faster than a call to superintendent...and a demanding call or letter to the super will almost always get the switch leading into your plant spiked for a good while, because offically the MOW guys always, always have a long long list of higher priority things that "have" to get done, or should have been done yesterday.
And the reverse works too...if I am working a plant, and come across a defect that merits attention right now, I normaly don't call our trainmaster or roadmaster...I usualy go find the guy in the plant responsible for the track...they may have a private contractor that does their repair or they may do their own work...when I find him, I take him out, show him the problem, and hopefully we find a way to work around it for that day.
If we have to highball the plant, I am now in a position to report to my trainmaster that A: there is a problem, B: the problem has already been brought to the plants attention, and C: this is what I was told by the plant manager the fix will be.
If we are the ones who maintain the track inside the plant, (rare to find this now) then we already have a heads up, and both the guys who needs to address the problem are now aware if it.
While the good ole boy network may seem out moded in todays business world, it is alive and well in the T&E department and the MOW department of every railroad out there...because it ulitizes assets in a fast manner...trust me, the roadmaster may not be aware he has a crew sitting around for a day or two waiting on a delivery of ties or spikes, but the assistant RM does know, and he can see the sense in sending these guys who would have spent the rest of the day drinking coffee and sitting in their trucks out on a one day fix to keep a mid level shipper happy.
No wasted time, one happy shipper, the cars keep moving and the problem solved, most of the time without a complaint of any kind needed.
23 17 46 11
Ed
You describe exactly the kind of extra effort that keeps things flowing. It is good business, but it is extra work and it deserves appreciation. So how inclined would you be to make the extra effort if the plant traffic manager had a hissy fit and called the superintendent every time something delayed the switch job and the engine showed up a little late?
Paul_D_North_Jr<snipped>As a result, a full-size main-line locomotive could not successfully hold back a single loaded lumber car on a 2.2 per cent grade. Doesn't that seem odd to you [Q] Even back in the day of the steam locomotives and hand brakes, they did better than that. Sure, the dynamic brakes would have prevented this, but that misses the key question of, 'What else went wrong here [Q]' <snipped>
<snipped>
Paul, that train is a dangerous combination due to the fact that there was only one freight car to one locomotive, and worse that one freight car exceeded 100 tons per operative brake system. Look at BNSF or UP's ETT covering operation of such a train on a similar grade like Cima Hill on the UP or Cajon on BNSF. There is no margin for error in the train handling, the safe course would have been to bring along 4 or 5 empty freight cars for extra braking effort. As for being safely done in the Steam Era, no trains in that era had freight cars approaching that weight on four axles, retainers would have been used without question, and the rules would have specifed that the train had to have added empty freight cars for additional braking effort.
zardoz ...Too often, the ends do not justify the means.
...Too often, the ends do not justify the means.
Agreed. In fact, they never do in my way of thinking...not when dealing with humans. I am a proponent of Kantian ethics and morality, so utilitarian reasoning is fraught with defects in my view. Utilitarianism is what allows us to default to "majority rules" at the expense of one or more, as long as they are in a minority.
But to supplant moral courage and reasoning with the politics of envy is not effective. That was my point in your quote of me earlier.
Jay,
I would put forth all the extra effort needed to make sure I found every single item that could be considered a defect...from lose joint bars or a sloppy switch to a frog with a chipped nose to debris in the toe path...and I would try my best to see if we could arrange it so that is the very last plant we work on our shift...
And then work the plant as slow as possible.
On the other hand, if the plant manager or transportation manager met me at the gate, and explained he has a serious need to receive his inbounds by 8 am because of a new shift rotation in his workforce, or some tooling set up that has to be done early...or he simply points out that we are a little later than expected, and he would like to know why so he can cover his fanny to his boss, then odds are I would go out of my way to see if there is a way to work his plant first or second, and I would make sure that information was forwarded along to the trainmaster or yardmaster in a manner that wouldn't ruffle any feathers.
For most local and switch crews, being on time or working a plant in the most efficient manner is actually a source of pride, and we do take pride in our work, because for us, this is the grass roots of railroading, this is where it all begins, spotting and pulling cars out the industries.
If it is one of those plants where you make a call as your running around your spot cars, and by the time you get shoved down to the plant gates, the gates are open and someone is there with the outbound list and your all lined up for the inbound track...well, when guys like that ask for a favor, say they need a car moved from a back track to a loadout rack because their in house switcher is broken or their track mobile is buried, then we normally take care of it for them without a fuss.
The flip side of this is if it is one of those plants where you shove down there, and no one is ever out there on time to open the gates, and you have wait around half an hour and call back several times just to get a person to come unlock the gates...well, when they need a favor like the one described above, trust me, I write down every move we have to make to get that car out, and call it all into the chief clerk, who will promptly bill them for every in plant move we make for them beyond their entitled spot move.
Just like Vegas, what happens in the field stays in the field...
Unless the problem is an obvious safety issue that is ignored, or a major disruption to service and operations, the need or desire to call in the brass is usually the last resort chosen...simply because most industries that ship by rail have been doing so for decades, and almost every issue on service and such has been worked out long ago...both the shipper and the railroad have long since worked out a routine that works best for both of us...it really is a "you scratch my back I'll scratch yours" world out in the field.
Something that, in the outside world seems like a minor issue, like an anglecock left open on the rear of a 60 car outbound pull...becomes a major issue when you're the guy that has to walk the 60 cars in 100 degree heat to close it...then figure out a way to get back to the locomotive .
On the other hand, knowing the guys in the plant have laced up all the hoses and closed the rear up...well, you are a lot more inclined to work a little harder for them or make that one off the books move they might need to make their day go easier.
jeaton Ed You describe exactly the kind of extra effort that keeps things flowing. It is good business, but it is extra work and it deserves appreciation. So how inclined would you be to make the extra effort if the plant traffic manager had a hissy fit and called the superintendent every time something delayed the switch job and the engine showed up a little late?
Its interesting to see and read the different views in the way some people think of CN and Mr.Harrison.Have anyone of you ever read Mr.Harrison's book on the CN? Its called "How We Work and Why",the other is, "The Pig that Flew", by Harry Bruce. I recommend you read them both.Then you might just realize and understand what is going on.I respect Mr.Harrison,and I wouldnt mind shaking his hand, and asking for his autograph,to be put in my book he wrote.What Mr.Harrison has done to CN and the other railroads merged into it,was for many reasons.Any of you feel that you could run CN any better,even in todays economic status?I sure would like to see you try.Granted I have heard ALOT of complaining from both sides of the fence on CN ....more than anyone will ever know.The biggest problem with CN and the other railroads is lack of people,and in some cases, its sad,but some people that just dont really care.Some, if not most of us work 8 -10 hour shifts.These CN workers put in 12 very long, and tiring hours..then are suppose to have the remaining time off, till they are called for their next job assignment.It doesnt work that way at times.I've seen CN people work 7 days straight with out a break,due to some other worker,not showing up for their shift,lack of a worker(s),or someone not qualified to do the job at hand.Yet what is ironic is that,yes they complain about the work they do,or cars that should be sent elsewhere,that are being returned back to the originating yard due to no capacity at the other yard.In some cases these rail cars sit in a siding for days on end.Then there are trains "Dead On the Law ",and in sidings due to NO qualified engineers,or conductors,to operate them,or in other cases,air lines frozen in long trains in winter,yard masters that have a hard time, where to put freight cars, in a congested yard,a locomotive running out of fuel,or a mechanical problem that was unavoidable.Then theres the locomotives that are generally not working properly themselves,or customers that cant or dont have room for the cars they need / or ordered to their plant, due to problems with their workforce, or other factors.It makes me sick when I hear people berating Mr.Harrison,CN,and everything that this railroad has tried to accomplished.If you dont like CN,then railfan at another railroad.If you work for CN and dont like what your doing....then quit.There is at least someone else out there, that wouldn't mind doing your job and get satisfaction from doing what they do best.....run a railroad....and thats what it should be after all.Yes there is going to be problems with a railroad.....always has been..always will.No railroad is perfect.You want to complain how this or any other railroad is running,then blame the government,blame everyone,not just one single individual.
cnwfan2 [snip] Have anyone of you ever read Mr.Harrison's book on the CN? Its called "How We Work and Why",the other is, "The Pig that Flew", by Harry Bruce. I recommend you read them both. [snipped]
Minor correction - The Pig That Flew has nothing to do with Mr. Harrison, as it pre-dates IC's and hence his appearance on CN by several years. Instead, it is mainly about CN CEO Paul Tellier and the mid-1990s privatization of CN.
I do believe that Mr. Harrison has written a 2nd book, with a similar title, but I'm having trouble finding that title or other reference quickly. It's probably in this month's Trains article, but that issue is at home today . . .
On the EJ&E, CN overcharged USS to the point where USS had enough with CN. USS now relies on IHB for switching instead of CN. They also stalled on the hill out of Joliet twice in a week because of underpowering trains and started brush fires in Crest Hill and Plainfield.
cnwfan2 Its interesting.........one single individual.
Its interesting.........one single individual.
I think we have the TRAINS magazine, and many other journals, to thank for the lack of respect for the period. Lots of white space around the border, and sometimes borders within borders, but no space after a period.
Being an amateur type setter, I always used an em quad at the end of a sentence and an en quard after a comma. Nowadays, with my eyesight on the wane, I have to read every other sentence twice as they seem to be run-ons, like many of the posts here. I think the paragraph should be re-instated.
But lack of respect is the essence of this epoch. Crossing gates, customers, you name it are in Rodney Dangerfield's camp: "I don't get no respect."
Art
I have a few comments to this thread:
RWM
Railway Man I have a few comments to this thread: Responsibility can't be parsed. The man at the top owns the successes and the failures equally. I have a lot more respect for the man who takes $1 and builds it into $1.1 million than the man who takes $1 million and builds it into $1.1 million. Before we giddily celebrate success of a man, I think we would want to carefully analyze what the man was given for bank when he started. Railways are a long-term business. The measure of a railway man may not be known even during his lifetime. Some leaders have seemed pretty good during their time but when we look back a decade or two later, we can see their success was impermanent and their policies petty. I can look back into my career and see lasting value created by men such as Kenefick, Holtman, Krebs, Jenks, Walsh, Crane, Claytor, and see value destroyed by some others. Some of our leaders we have good regard for today will still be remembered positively a quarter-century from now, some will have been forgotten, and some will be deeply regretted. Positive press during a railway man's career is a poor guide to true value. The example is Stuart Saunders, Railroader of the Year twice, whose irresponsibility and failure to make the tough choices nearly destroyed the industry. Contemporaneously, Downing Jenks, never a darling of the press, never a Railroader of the Year, did more to regenerate railroading than any man of his era through his insistence on management training and an iron-clad insistence that everyone was personally responsible for everything they touched. The Jenks culture was the framework on which the rebirth of railroading occurred after 1980. RWM
I have been associated with railroading as an employee and a still interested and involved retiree for 54 years. It was my privelege and duty to work closely with upper middle managers and two CEO's. My associates with whom I still visit and communicate can recite both the good and bad. We take pride about the significant things we participated in, and also talk about the boondogles. You, RWM, are RIGHT ON with your submission.
Los Angeles Rams Guy For the most part, I like what CN has been able to do with the former IC/ICG Iowa Division and making it look like something again although I am disappointed that they haven't pushed for a paired track arrangement with UP between Denison and Council Bluffs AND pushed the Council Bluffs/Omaha gateway harder; particularly for auto and auto parts traffic.
I agree with you LA Rams Guy. Two reasons I can only speculate on why auto traffic is not seen on the Iowa line is:
A. Long haul revenues may not be sufficient to make it worth shipping from Michigan to Council Bluffs or
B. There may be tunnel clearance issues at East Dubuque, IL that won't allow Auto racks and stacks to pass through.
However, I am no expert on railroading, just a fan.
Jeff
Well having served in the military. It is not unusual that 30-40% of the people under a strong leader will dislike the leader in one way or another. It's very rare that you have broad popular support across the board. Popularity is NOT how you measure Leadership in the military or the civilian business world. You measure effective leadership by how many subordinates follow you and help you meet your goals. You never measure it on public complaining. subordinates will complain BUT they will still follow you if your a good leader and they respect you. So the complaining is really not a measure of anything. Thats probably why Hunter Harrison, if he is smart, disregards the complaining. If the complaining is serious then a good leader will spot it via the Organization starting to miss some goals and/or a legitimate morale problem developing.
On the complaining topic:
I rode the VIA Rail Skeena about 5 years ago and the entire crew was ripping on Hunter Harrison. They alleged.....He was ripping up their good rail so that it could be shipped South and used in the United States, he was making work rule changes that imperiled safety, he wasn't listening to long-time "Canadian" employees, etc. Most of the crew was from points in Eastern Canada. Not sure why they were so far West.
Anyhow, I pointed out to them that the CN was a basket case financially before Hunter Harrison took over. Also, said that if Canadians were so great at running any business why were there Americans in or very near the top spot of most of their transportation companies, Airlines and Otherwise (silence). CN had the opportunity to hire a Canadian for the top spot but choose an American South of the Border for a reason. The reason had to do with a particular skill or leadership quality they could not find anywhere North of the border. Let's face it, it's easier to hire domestically if you can.
Anyhow the train crew had no rebuttal but then switched the subject to how President Bush was running the Iraq war at the time, which apparently they have not been in contact with a lot of Americans and they wanted an opinion. They didn't like my opinion on that subject either. Despite their political discussions the VIA Rail Crew was professional and treated us respectfully and friendly regardless of the discussions. One could argue they never should have breached either subject BUT Canadians are friendly people and like to talk exploratively about a whole range of issues, it's part of their culture. None of it bothered me and I told them when they asked permission to breech the subjects it was OK by me.
EJE818 On the EJ&E, CN overcharged USS to the point where USS had enough with CN. USS now relies on IHB for switching instead of CN. They also stalled on the hill out of Joliet twice in a week because of underpowering trains and started brush fires in Crest Hill and Plainfield.
The brush fires have nothing to do with the CN taking over the J. They were started with ex J SD38s, and the J was know for doing the same thing along that strech. Also as an employee for a class one in Chicago, I can tell you that all of our traffic for USS gets handed off to the CN, and not the Harbor.
An "expensive model collector"
diningcar Railway Man I have a few comments to this thread: Responsibility can't be parsed. The man at the top owns the successes and the failures equally. I have a lot more respect for the man who takes $1 and builds it into $1.1 million than the man who takes $1 million and builds it into $1.1 million. Before we giddily celebrate success of a man, I think we would want to carefully analyze what the man was given for bank when he started. Railways are a long-term business. The measure of a railway man may not be known even during his lifetime. Some leaders have seemed pretty good during their time but when we look back a decade or two later, we can see their success was impermanent and their policies petty. I can look back into my career and see lasting value created by men such as Kenefick, Holtman, Krebs, Jenks, Walsh, Crane, Claytor, and see value destroyed by some others. Some of our leaders we have good regard for today will still be remembered positively a quarter-century from now, some will have been forgotten, and some will be deeply regretted. Positive press during a railway man's career is a poor guide to true value. The example is Stuart Saunders, Railroader of the Year twice, whose irresponsibility and failure to make the tough choices nearly destroyed the industry. Contemporaneously, Downing Jenks, never a darling of the press, never a Railroader of the Year, did more to regenerate railroading than any man of his era through his insistence on management training and an iron-clad insistence that everyone was personally responsible for everything they touched. The Jenks culture was the framework on which the rebirth of railroading occurred after 1980. RWM Thanks RWM, we needed to hear (see) that. I have been associated with railroading as an employee and a still interested and involved retiree for 54 years. It was my privelege and duty to work closely with upper middle managers and two CEO's. My associates with whom I still visit and communicate can recite both the good and bad. We take pride about the significant things we participated in, and also talk about the boondogles. You, RWM, are RIGHT ON with your submission.
Business owners and/or manage very seldom create anything of lasting value that transcends the businesses we run. You may be a great leader and a great manager...but none of that will matter to anyone once the business is gone. Look at some of the great business leaders of the 50s and 60s...Langdon of B&O is a great example. He was a apparently a great leader at B&O...a great innovator at B&O..and did great things...for B&O shareholders, employees, and other stakeholders. However B&O has been gone for years and I really doubt if anything that Langdon did 40 years ago can be recognized and identifed as uniquely his at CSX today. Same with Hunter..and all the rest of us who are employed as managers today... if we're good we create value TODAY for the businesses we run and hopefully hand off the business to the next generation in better shape than we found it.. but that's it... Want to create lasting value? Then write a great book that people will still want to read in hundreds of years from now..or invent something.
Ulrich [Business owners and/or manage very seldom create anything of lasting value that transcends the businesses we run. You may be a great leader and a great manager...but none of that will matter to anyone once the business is gone....
[Business owners and/or manage very seldom create anything of lasting value that transcends the businesses we run. You may be a great leader and a great manager...but none of that will matter to anyone once the business is gone....
Long before the business itself is gone, as soon as there is a leadership change everything changes. Many businesses or thier products rarely last a generation if that long. At least not in the same form as when first started.
I think Hunter's success is living off of Telier's, the CEO prior to H. And Thornton from as long ago as the 1920's still has a strong effect on CN today. Just look at the connecting line from Longlac to Nakina. This conection makes the CN physicaly a cost effective railroad to run over a long time.
Oh there's no doubt that legacy goes a long way. Especially if you did everything totally right or totally wrong! If it is right, then the next leader can just manage and build on and off of what you did. If it is wrong, then what you did has to be eliminated or drastically change. OR maybe you were a good operations person and now the joint needs some acquisitions or be merged or sold off and so one expert in that field is brought in. In this case, meeting the age limit, it is a forced change and depending upon the disposition of the selection of the new leader, there might be a caretaker of the status quo, a fighter to continue the legacy, or a fighter that goes in a completely different direction with our without the board and stockholders wonts. Then there are factors such as the market place, the economy, the competition or competitors, and politics, to name a few things that can change things anyway!
Really, IMO this story is more about Nationalism and Protectionism more then it is about Hunter Harrisons ability to manage. This is all very political. The VIA Rail Crew was French Canadian as well. Normally, not very pro-American.
Not really a proponent of Hunter Harrison but I think more perspective is needed here.
Ulrich Business owners and/or manage very seldom create anything of lasting value that transcends the businesses we run. You may be a great leader and a great manager...but none of that will matter to anyone once the business is gone. Look at some of the great business leaders of the 50s and 60s...Langdon of B&O is a great example. He was a apparently a great leader at B&O...a great innovator at B&O..and did great things...for B&O shareholders, employees, and other stakeholders. However B&O has been gone for years and I really doubt if anything that Langdon did 40 years ago can be recognized and identifed as uniquely his at CSX today. Same with Hunter..and all the rest of us who are employed as managers today... if we're good we create value TODAY for the businesses we run and hopefully hand off the business to the next generation in better shape than we found it.. but that's it... Want to create lasting value? Then write a great book that people will still want to read in hundreds of years from now..or invent something.
You seem very certain of this. I have no interest in disputing you. If you'd like to know why I feel comfortable that every senior officer at a railway today would disagree with you, I'd be happy to explain.
Please do... I welcome (and don't take offence to) alternative views.
Ulrich Please do... I welcome (and don't take offence to) alternative views.
And so forth.
NS is running a new train nightly to Van Loon, the 324. I took a look at the train last week and it consisted of 60 EJE coil cars, plus a few misc cars. Has there been a new traffic pattern established with the CN takeover of the EJE? The 323 appears to run daily (picking up EJE coil cars at Van Loon). This appears to be a second type dedicated train.
ed
General Motors, Ford, and Chrysler made decisions at various times in their history that have completely gutted and changed the course of the domestic auto makers.
Mistakes in business history are often as interesting as successes. Iridium was a satellite phone service which Motorola launched (66 satellites, hence the name after the 66th on the chemical chart). Rapid advancements in cellular service rendered it a complete failure.
Recently the rapid investment in energy, first ethanol and now possibly wind power, is following a similar course. T. Boone Pickens has pulled the plug on his giant wind farm in Texas....wanna purchase a wind turbine cheap? Meanwhile Exxon Mobile has discovered a HUGE natural gas field in BC.
You better be correct when you bet the farm, particularly if you have skin in the game.
Is it prudent that CP seems to be pulling back on expanding into PRB coal fields? Or will we in 10 years ago be questioning their lack of aggressiveness in that project? So many factors can go into the outcome.
No doubt the heavy investment in the Transcon by BNSF and the Sunset Route by UP will be rewarded....but it might take a bit longer than projected.
It has been said that any manager in baseball will win 60 games and lose 60 games, it is those 42 other games which determine greatness from average and mediocracy. Isnt that the same with railroad managers these days? A certain level of success is guaranteed, but a few correct (or incorrect) decisions affects results for many years.
CMStPnPTellier was a former government employee that was appointed by the Canadian Government to run CN Rail he was not hired. Of course the change to CN Rail was also controversial because it removed the name "Canadian" from the business and many in Canada thought that was done to appease the U.S. because of Canadian opposition to the Iraq war in 2003. The allegations of a "culture of fear" at CN started from the Canadian governement after Hunter Harrison took over. It was a classic elevator whisper campaign, started for political reasons. Really, IMO this story is more about Nationalism and Protectionism more then it is about Hunter Harrisons ability to manage. This is all very political. The VIA Rail Crew was French Canadian as well. Normally, not very pro-American. Not really a proponent of Hunter Harrison but I think more perspective is needed here.
You are correct re: Mr Tellier. He was the Clerk of the Privy Council Initally under Mr Trudeau and letterly under Mr Chretien (in Canada the Clerk is the head of the Civil Service in effect and works in close relationship with the Prime Minister and Cabinet (Privy Council) of the day) and upon retirement from that position was appointed to the CN as its CEO. He has since gone to Bombardier. He may still be there. He had much to do with the initial downsizing of the Canadian Civil Service in the 1990's IIRC and went on to do much the same thing at CN. He was hired by Bombardier for the same reasons. He has a track record in this area.
Regarding your 'Culture of Fear' comments. As a Canadian, I was not aware of this particular assessment of CN until the Transport Canada report issued two years ago under the aegis of Lawrence Cannon, federal Minister of Transport. At that point this particular description of CN corporate culture surfaced. To the best of my knowledge this occasion was the first substantive use of the term in public discourse. About the 'elevator whisper campaign' of which you speak, I cannot comment. That happens everywhere as I'm sure you are aware.
Regarding the politicization of the name change. That had been evolving over a period of years IIRC. The final change was not political, that was made from a business point of view, I believe. At the time you cite, 2003, there was little appeasement of the US and its policy in Iraq coming from the Government of Canada. Jean Chrietien, Prime Minister of the day, refused to send troops to Iraq (preferring to concentrate Canadian Armed Forces strength in Afghanistan, which had been, and continues to be, Canadian Government policy) and in fact followed anything but an appeasement policy vis a vis this particular request of Mr Bush. His Chief of Staff, Francine Ducros, was heard to describe Mr Bush as an 'idiot' and Mr Chrietien did little to dispel the effect of her comments. His relationship with Mr Bush was 'correct' as we say here and little else. To suggest the name change was appeasement is egregious in my view.
Also....nationalism and protectionism is not the province of the Canadian federal government alone. US history is full of such activity beginning with the Monroe Doctrine and followed through by various US presidents of whom Theodore Roosevelt was one of the more notable. I again suggest it is egregious to state that this thread and many of the comments made here are being made for political and nationalistic reasons. As I have understood this thread, much of the comment has had to do precisely with Mr Harrison's managerial abilities pro and con. To divert it in this way is inaccurate and unnecessary in my view. More like a red herring....
I also need to say that your assessment of the VIA crew in question is a bit questionable. Labelling Quebecois as antiAmerican is somewhat inaccurate. In the history (recent or otherwise) of Quebec sovereignty, more than once Quebec, as a province, has considered some form of relationship with the US. Personal views were being expressed by the crew as I read the original reference. To label them as a broad based Quebecois attitude is little much and I believe does the crew's nationality a disservice. I was not there to assess what went on of course but this kind of remark has a way of fanning flames of the wrong kind. Individual views yes. To categorize them in the way you did is unfair and perhaps quite unjustified. Perhaps trying to 'tar everyone with the same brush'....
I agree, perspective is needed here...just not this kind.
Chilliwack BC
CMStPnP [snip] Of course the change to CN Rail was also controversial because it removed the name "Canadian" from the business and many in Canada thought that was done to appease the U.S. because of Canadian opposition to the Iraq war in 2003. [snip]
Unless I'm really missing some deep corporate name change nuance here . . .
The name change to CN/ CN Rail and dropping of ''Canadian'' effectively happened long before 2003 - even before the mid-1990s privatization. Canadian/ Canadien National became the CN 'wet noodle' logo in the mid-1960s or 1970s, and has continued in one form or another since then. Certainly it was known and marketed as ''CN'' or ''CN Rail'' by Paul Tellier's time. Later, there was the ''CN North America'' paint scheme with the map outline on the sides of the units in the mid- or late-1990s, if I recall correctly. I don't have my references with me at the moment to thoroughly document and detail all this - but I could - or maybe someone else here could, if it matters that much.
beaulieu Paul_D_North_Jr <snipped> As a result, a full-size main-line locomotive could not successfully hold back a single loaded lumber car on a 2.2 per cent grade. Doesn't that seem odd to you [Q] Even back in the day of the steam locomotives and hand brakes, they did better than that. Sure, the dynamic brakes would have prevented this, but that misses the key question of, 'What else went wrong here [Q]' <snipped> Paul, that train is a dangerous combination due to the fact that there was only one freight car to one locomotive, and worse that one freight car exceeded 100 tons per operative brake system. Look at BNSF or UP's ETT covering operation of such a train on a similar grade like Cima Hill on the UP or Cajon on BNSF. There is no margin for error in the train handling, the safe course would have been to bring along 4 or 5 empty freight cars for extra braking effort. As for being safely done in the Steam Era, no trains in that era had freight cars approaching that weight on four axles, retainers would have been used without question, and the rules would have specifed that the train had to have added empty freight cars for additional braking effort.
Paul_D_North_Jr <snipped> As a result, a full-size main-line locomotive could not successfully hold back a single loaded lumber car on a 2.2 per cent grade. Doesn't that seem odd to you [Q] Even back in the day of the steam locomotives and hand brakes, they did better than that. Sure, the dynamic brakes would have prevented this, but that misses the key question of, 'What else went wrong here [Q]' <snipped>
beaulieu, I'm remiss in taking so long to thank you for pointing this out and adding that ''real-world operations'' insight. Although I'm not qualified in such things, it makes sense to me - now. Superficially, of course - ''Who'd a thunk it ?'' Curiously, I don't recall that was ever mentioned in the TSB investigation and report that I referenced above - which raises some questions there, too.
More to the point, though, that just leaves us with even more questions about the quality of the supervision and management at the time and place of that incident. For example - Since the train was as dangerous as you say, why did the crew attempt that run anyway ? Why did they think they could - or had to - 'get away' with it ? Was the operating supervision [trainmaster] aware of the daily 'work list', and the end-of-the-day result that the crew would be coming down that grade with a single loaded car like that ? If so, why weren't they stopped ? If not, why not ? You get the picture - this might have been a ''one-of'' situation, but I kind of doubt it. As I've said before, the quote from Railway Gazette in the late 1800s bears repeating here, to the effect of - ''All negligence that causes disaster will be found to have been more or less habitual''. [I gotta retrieve the source so that I can quote and cite it properly.]
Paul_D_North_JrUnless I'm really missing some deep corporate name change nuance here
There is a difference between a legal name and what a company may be marketed as. Unless I am very mistaken, up to and including after privatization the legal name was always Canadian National Railway (after 1923). The CN wet noodle was introduced in 1960.
I had heard that the current Conservative government had a problem with the word National as it smacked of government ownership which was at variance with their rabid free enterprise philosophies My apologies, I lost my head and became political. Until I read this thread I hadn't realized there had ever been a problem on either side of the border with the word Canadian.
I better cut back on the caffeine for breakfast.
Railway Man Ulrich Please do... I welcome (and don't take offence to) alternative views. Because the railway route structure for practical purposes is permanent. Few businesses are as equally tied to geography. If you are in the auto assembly business, and you realize your factory is obsolete, built in the wrong place, or inefficient, at worst case you can wait 30 years for the investment to amortize, tear it down, and rebuild in an entirely different country. Route structure decisions made in the 1830s -- some good, some not so good -- still matter today. Because the railway alignment is also nearly permanent. While line changes can be made, there's an economic limit on how far offset from the existing alignment they can be. A century ago it was feasible to offset by 100 miles (e.g., the Leamington Cutoff, Tennessee Pass). Fifty years ago, it was possible to offset by 30 miles (e.g., the Lucin Cutoff, the Crookton Cutoff, or the Harriman Cutoff). Today it is virtually impossible to offset by 500 feet. I could take you on a tour of several Class 1s and show you all sorts of alignment decisions made circa 1900 that were good ideas or bad ideas, and decisions made in the 1950s, and decisions made in the 1970s. Because I don't know of too many other private industries that build infrastructure with 100-year lifespan expectations. In fact, I am having trouble thinking of one that does that as a regular practice, as railways do. Because the transportation service gambles are very long term. When a railway decides to build something like a second main track for 1000 miles, or a new hump yard, it is betting the company for the next century. It is literally looking that far into the future when it makes its decisions. And so forth. RWM
No doubt about it..the BUILDERS' accomplishments are long lasting. These accomplishments are probably equal in value and importance to inventions and discoveries in other areas of human endeavour...and probably just as long lasting because as you say the best routes are fixed by geography. However I was talking about managers..the folks who run the businesses...like many of us today including Hunter. Our accomplishments and value added are in the "here and now" almost exclusively... it is very unlikely that our efforts will have any long lasting implications because what comes after us will very likely greatly alter or eliminate what we've done. Thus..Hunters accomplishments can be rightly asssessed in the light of today...In 50 or 100 years from now CN may very well be gone completely..absorbed into one of the other systems...and any efforts aimed at making CN a viable entity in 2009 will then be no more that historically interesting. That's not to diminish his contributions or the contributions of any manager...we contribute in the here and now...(like the captain of an Exxon supertanker or a 747 jet) ... there's not much long lasting about what we do.
I read the article and all I can say is "Some people love him and some people hate him, but he sure does run an efficient railroad".
Strictly my opinion: There has been a very nonchalant attitude toward business decorum, responsibilities, organization, and authority over the past several decades; and today its coming home to roost. White shirts and ties in offices and by officials has gone by the way side, everybody is called by their first name, titles are given in place of financial rewards and mean little, the boss may or may not have come through the ranks. If the latter, if not up through the ranks, the boss may not receive the respect or may not command the authority as one who did; everyone is on a first name basis, there is no "Mr., Miss, Mrs. or even Mz" anymore. I visit many car dealers in my job as a radio salesman. In most salesmen are dressed casually, sometimes with a "uniform" golf shirt witht he dealer's and his name on it. If more than two get together is looks like they are goofing off. One dealer I went to the other day was different. All the salesfloor people wore white shirts and ties! There was a sense of decorum and professionalism I sensed here not sensed in any other dealers's showroom. My bosses are often in golf shirts and jeans but the managers here were in shirts and ties! Impressive? You bet! Authortative? You bet! Professional and reassuring? You bet! Oh, I usually wear shirt and tie except for days I probably won't be seeing clients, and then I am wearing a station logo golf shirt, but never jeans.
What I am trying to say is that some of that old line pride and professionalism has been pushed aside by a relaxed, casual management style and allows for "labor" to become just as relaxed, just as casual, and often not as "professional" as we used to be. There is no need for it if management does not care..."do as I do, why not!". Professionalism, pride, and care for the business at hand and the customer will return when discipline and chain of command respect do and respect for the order is returned. Harrison is suffering as much from today's business culture as anything.
Paul_D_North_Jr cnwfan2 [snip] Have anyone of you ever read Mr.Harrison's book on the CN? Its called "How We Work and Why",the other is, "The Pig that Flew", by Harry Bruce. I recommend you read them both. [snipped] Minor correction - The Pig That Flew has nothing to do with Mr. Harrison, as it pre-dates IC's and hence his appearance on CN by several years. Instead, it is mainly about CN CEO Paul Tellier and the mid-1990s privatization of CN. I do believe that Mr. Harrison has written a 2nd book, with a similar title, but I'm having trouble finding that title or other reference quickly. It's probably in this month's Trains article, but that issue is at home today . . .
OK, here they are - from page 36 [left. col.] of the August 2009 [Vol. 69, No. 8] issue of Trains, article on Mr. Harrison;
- ''How We Work and Why'', 2005 - apparently privately published by CN.
- ''Change, Leadership, Mud and Why [How We Work and Why, Vol. 2]'', 2008, published by Canadian National [privately [Q] - doesn't seem to be available in or on the general marketplace yet]
- The Pig That Flew: The Battle to Privatize Canadian National,by Harry Bruce, 1997, Douglas & McIntyre, ISBN 1550546090 (1-55054-609-0)
Finally, in running these down I also found a reference to a more available book -
Henry:
Good point about the relaxing of standards, particularly dress. In the 1990's I wore a suit daily, it was mandated by the "suits" at work. It didnt matter if I called on a CEO or a mechanic in the garage, I wore a suit (left the suit jacket in the car often). The very first time I heard "casual Friday" was in 1993 when calling on ACF Industries in St. Louis. I was told to "dress down". I didnt.
About five years ago I went to a major petroleum (MAJOR, think top 3) attired in a suit. I was the only one in the building with a tie on, let alone a suit.
Our "suits" still require we wear ties on sales calls or when we are in the office. It can be stretched a bit, but the law has been written.
I am not sure if this relaxation in dress code has affected other aspects of discipline and respect or not. There has been a rewriting of word rules and conduct over the last couple of decades. So many of us now work out of our homes (shorts and tee shirt as I write this). Yet my productivity has never been higher (other than recessionary factors). While there has been a drop in formality, I do believe there is a considerably higher level of responsibility and effort. Gone are the days of 8-5. One is now connected via Blackberry, laptop, cell phone, and occassionally by fax machine. My customers call me at 630am, 9pm, Saturday evenings, Sunday afternoons. I email them at anytime.
Cradle to grave employment is a thing of the past. I have had two employers in my 32 years working. Only two. There is little loyalty (either direction) at this time in most companies. Give me results now or headcount will be reduced.
Things have changed, for sure.
Same here...last time I wore a suit was on my wedding day. I usually wear jeans and a T shirt to work. When I visit customers I don't do anything differently...jeans and a T shirt all the way.
Paul
The change to the CN noodle logo occurred under the leadership of Donald Gordon, a former chairman of the CNR as it was then known, about 1964. It was an image rebranding that worked really well IMHO. Mr Gordon was responsible for many changes in the railway operating structure. My late father in law who worked for the CNR until 1979 at Pointe St Charles Shops in Montreal as millwrighting/maintenance gang general foreman saw him as quite an innovator and a bit of a character.
Among other things:
He did introduce Red, White and Blue passenger fares to encourage increased ridership, in much the same way Mr Harrison has done with freight pricing. He was responsible for the upgrading of equipment and right of way and buildings. Local stations became a wild mixture of red white and blue colours. Made stations quite eyecatching. He also did much to make the CNR a more efficient federal Crown Corporation (as publically owned entities were and are known in Canada). In my view he was one of the more innovative leaders of the company and his long tenure really began the later significant corporate changes that Mr Tellier and Mr Harrison inherited. There are some good books out there about the early and later history of CN. I'll try to dig them up and post titles.
The CN North America logo came in the late 90's I think, as part of a legal name change process.
Further legal changes IIRC occurred later in Mr Tellier's time and in Mr Harrison's time I believe and were business decisions as I have understood them.
FWIW
Again, the Lillooet TSB report at Section 2.5 (Safety Management Practice) I believe provides some insight. Corporate Safety Management practices were deficient and did not take account of the extreme mountainous terrain in which CN was now operating, not only with this wreck but a number of others on the Squamish/Lillooet Subs. The report makes reference to the fact that following of these wrecks CN did not follow proper safety management protocols by instituting formal Risk Assessment procedures. One can only speculate why this was so, However, as the report also points out CN had no other similar territory in its system and failed to take into account previous BCR operating practices as these applied to the Exeter Switcher.The result was a series of wrecks which then occasioned the Transport Canada Report I referenced earlier into CN operating practices and mandated a number of changes in order to prevent further extension of this string of wrecks on the BCR. Goes back to what Tyler said earlier about workplace culture.
To use Charlie's from Chilliwack expression I looked at Wikipedia, FWIW, to check on a few points.
The legal name from 1978 to the present is Canadian National Railway. From 1918 to 1978 it was Canadian National Railways. US lines are incorporated under Grand Trunk Corporation.
The wet noodle was introduced in 1960. The CN North America logo was in use from 1993 to 1995 when the wet noodle was put back into use.
The whole article is very long and I intend to devote some time to reading it all, it just won't be today.
Charlie -
Thanks for the details on the CN name evolution - that pretty much squares with what I recalled.
The ''workplace culture'' aspect is significant, I also believe. The really interesting thing is that in my research to previously post the titles of the 3 recent books [above], it seemed to me that CN's emphasis on ''culture'' and change of same virtually oozed from every reference. For one example, see the interview with Peter Edwards, the HR VP, at -
http://irc.queensu.ca/gallery/1/dps-switchpoints-culture-change.pdf
Now, the question becomes - Is culture and culture change only a ''from-the-top-down'' or 'one-way street' thing that is forced on the rank-and-file - or is there room for a 2-way dialogue for the rank-and-file to legitimately 'inform' / educate/ enlighten the management, esp. about unique local circumstances such as this. And does the management have an obligation - and is it perceptive enough - to listen to what is communicated back to them. Clearly the management is / should be in charge, but nowhere is it written in stone that management has a monopoly on wisdom or knowledge of the actual facts and real world, and esp. not in a far-flung railroad enterprise such as CN.
I need to re-read those TSB reports. If they didn't expicity mention the TPOB = Tons Per Operable Brake criteria / standards and issue - as at least something to be looked at further - then it seems to me that problem was 'white-washed' 'swept under the rug' and buried under the more general heading of ''Risk Assessment'', instead of 'naming' it front and center. But I could have a mis-guided 'take' on this, too - anybody else have any thoughts or comments [Q]
I believe Mr Harrison has a profound impact on the workplace culture of CN.
For instance:
1. Hunter Camps: I didn't realize how many of these he actually appears to conduct himself. He appears to have extensive operating experience in very particular areas of railroading, especially in Train and Yard operation. He was described as being an intimidating presence...to put it kindly.
2. He appears to have a very hands on style of management. From the Trains article: I can only imagine how the Yazoo Sub dispatcher felt on that night shift. Might have been greatly enriched by the experience or scared out of his tree....take your pick. Imagine also the 'lowly trainmaster in Saskatoon with the car sitting three days' also quoted in the article.
3. I haven't seen anywhere that he has extensive mountain railroading experience.
4. I got the impression that he relies on himself and his knowledge base, which to be fair is considerable. He appears to be very much his own man as a leader. I can't imagine him being very consultative. I don't know how well he would listen, especially to those underneath him.
However:
In my thirty years of experience in supervision and management ( I hasten to add not on the rails) such characteristics tend to lead to a top down style of management which coupled with a 'paramilitary' style can lead to some disastrous consequences for the following reasons:
1. You know if you are at a lower level on the workplace totem pole that you are subject to considerable scrutiny.
2. You know that if you 'cross the line' discipline can be retributive and definitely harsh.
3. You know also that the orders come from high and that there likely is little opportunity to express an opinion about these orders...apart from 'Yes, Sir!'
4. You know in an employee downsizing corporation as CN has been that you could be next...for a variety of reasons.
I'm sure you know the fable about "The Emperor who had No Clothes.'....remember how the populace responded except for the little child who pointed out the obvious.
In a way I believe that is what has happened at CN. The information flow has been top down. As has been the decision making process.
For example: 1. I am amazed that non db power was placed on the Exeter switcher when MANY years of previous BCR operating experience dicated otherwise. 2. I am likewise amazed that after a series of wrecks on the Squamish and Lillooet Subs that management didn't do some significant head-scratching and initiate some formal Risk Assessments. No instead they continued to operate overlength trains (120 cars or so) in territory which for years had run trains no longer than 70-80 cars. Ask Tyler. I'm sure he'd tell you. I remember it that way too and I'm a lowly trainwatcher. No wonder the federal Transport Department ordered them to shorten trains and restore db equipped locomotives to the BCR.
Who at the higher levels was listening, either to the experienced operating crews. Remember the TSB report and the Transport Canada report refer to crew concerns being ignored. What trainman after being ignored continually is going to stick his/her neck out in an OSH cttee. All it could get you is black marks and worse from higher ups....especially in a top down culture.
Regarding the TSB report regarding TPOB there is considerable analysis done leading to the recommendations regarding quality of brakeshoes, wheels and inspection practices, especially in mountainous territory in Canada.
I think Mr Harrison has led CN into some new and perhaps dangerous territory. I can imagine a bean-counter slavering over a 60% operating ratio, but in an enterprise such as railroading I expect this ratio would come with a high degree of risk. In the power engineering field, in which I used to work, we used to talk of 'factors of safety' in different magnitudes for pressure vessels, piping and controls, depending on the operating conditions one faced. One tampered with those degrees of magnitude at their peril. The result could be material or other operating failure with disastrous consequences. CN and Mr Harrison is experiencing the result of such 'pushing of the envelope'
Perhaps it is time he retired.
AgentKidUntil I read this thread I hadn't realized there had ever been a problem on either side of the border with the word Canadian.
Until I read this thread I hadn't realized there had ever been a problem on either side of the border with the word Canadian.
Seriously though, I wasn't taking political sides it was inferred because I used the term "French Canadian" which is apparently sensitive to Canadians, there are French Americans within driving distance of where I live in Texas.....not sensitive to call them French Americans. I honestly don't have an opinion one way or another with Quebec or what Politics take place North of the Border for the most part. That was all inferred because I mentioned a lot of this seemed to be politics driven. Americans as a whole (me included) really do not care what goes on up there nor do most of us think it is relevant to our daily lives.
Anyhow, I was just expressing a viewpoint based on what I observed.
CGW Los Angeles Rams Guy For the most part, I like what CN has been able to do with the former IC/ICG Iowa Division and making it look like something again although I am disappointed that they haven't pushed for a paired track arrangement with UP between Denison and Council Bluffs AND pushed the Council Bluffs/Omaha gateway harder; particularly for auto and auto parts traffic. I agree with you LA Rams Guy. Two reasons I can only speculate on why auto traffic is not seen on the Iowa line is: A. Long haul revenues may not be sufficient to make it worth shipping from Michigan to Council Bluffs or B. There may be tunnel clearance issues at East Dubuque, IL that won't allow Auto racks and stacks to pass through. However, I am no expert on railroading, just a fan. Jeff
Jeff,
I'm not aware of any clearance issues with the tunnel at East Dubuque that would prohibit the movement of either autoracks or doublestacks through there although I could be wrong. You may have a good point about the revenue considerations wrt auto traffic and pushing the Council Bluffs/Omaha gateway, though.
I still think, though, that both CN and UP are missing the boat wrt the paired track arrangement possibilities between Denison and Council Bluffs. Given the agreements that CN currently has in place with my employer, Canadian Pacific, this one seems like a no-brainer.
Charlie, there's a lot of 'meat' in your post above, but I can only take the time now to respond to one portion of it, as follows:
lenzfamily [snipped; emphasis added - PD]] 3. I haven't seen anywhere that he has extensive mountain railroading experience. 4. I got the impression that he relies on himself and his knowledge base, which to be fair is considerable. He appears to be very much his own man as a leader. I can't imagine him being very consultative. I don't know how well he would listen, especially to those underneath him. [snips] In a way I believe that is what has happened at CN. The information flow has been top down. As has been the decision making process. For example: 1. I am amazed that non db power was placed on the Exeter switcher when MANY years of previous BCR operating experience dicated otherwise. 2. I am likewise amazed that after a series of wrecks on the Squamish and Lillooet Subs that management didn't do some significant head-scratching and initiate some formal Risk Assessments. No instead they continued to operate overlength trains (120 cars or so) in territory which for years had run trains no longer than 70-80 cars. Ask Tyler. I'm sure he'd tell you. I remember it that way too and I'm a lowly trainwatcher. No wonder the federal Transport Department ordered them to shorten trains and restore db equipped locomotives to the BCR. Who at the higher levels was listening, either to the experienced operating crews. Remember the TSB report and the Transport Canada report refer to crew concerns being ignored. What trainman after being ignored continually is going to stick his/her neck out in an OSH cttee. All it could get you is black marks and worse from higher ups....especially in a top down culture. [snip] I think Mr Harrison has led CN into some new and perhaps dangerous territory. I can imagine a bean-counter slavering over a 60% operating ratio, but in an enterprise such as railroading I expect this ratio would come with a high degree of risk. . . . . The result could be material or other operating failure with disastrous consequences. CN and Mr Harrison is experiencing the result of such 'pushing of the envelope' [snip]
[snips] In a way I believe that is what has happened at CN. The information flow has been top down. As has been the decision making process.
[snip] I think Mr Harrison has led CN into some new and perhaps dangerous territory. I can imagine a bean-counter slavering over a 60% operating ratio, but in an enterprise such as railroading I expect this ratio would come with a high degree of risk. . . . . The result could be material or other operating failure with disastrous consequences. CN and Mr Harrison is experiencing the result of such 'pushing of the envelope' [snip]
An objective point of reference here my be helpful: Al Krug's ''Major Railroad Grades'' page on his ''Railroad Facts and Figures'' website at - http://www.alkrug.vcn.com/rrfacts/grades.htm - lists the following:
At the bottom of the tabulation, Mr. Krug notes: ''Because of the many grades in the 1% range please limit your additions to 1.2% or greater unless it is unusually long, famous, or otherwise special.'' Clearly, the listed CN grades don't meet those criteria - so I surmise that they are shown likely simply because they are the maximum that CN has.
Further, the total fall on BC Rail's Kelly Lake Hill at 2.2% = 116 ft. per mile x 24 miles = 2,784 ft. In comparison, the total fall on CN's Yellowhead Pass at 0.4% = 21 ft. per mile x 17 = 357 ft. - only about 13 % or 1/8 as much. More importantly in this context, the drop over a mere 1 mile on the 2.2 % grade will theoretically accelerate an unbraked, uncontrolled, frictionless train to almost 60 MPH; on the CN's 0.4 %, that train would be moving only at about 25 MPH - this can be demonstrated and confirmed easily enough within the 1st minute of a ride on most amusement park's roller-coasters. And to perhaps state the obvious - the CN's grades aren't even in the same league with BCR's - or anyone else's, for that matter.
I agree that it is likely - but not absolutely certain - that Mr. Harrison's admittedly extensive experience is all on ''flatland'' railroads, and that he has no personal extensive mountain railroading background. Mr. Harrison's former employers per the Trains article, Illinois Central and St. Louis-San Francisco [''Frisco''] are nowhere on Krug's list, nor are any of the grades within the Chicago Region of BN that he was in charge of. However, when he was the No. 2 of BN's Seattle Region, it is quite likely that the former NP's Stampede Pass / Tunnel route, and the former GN's Stevens Pass / Cascade Tunnel route - both of which are also on Krug's list, each with 2.2 % grades, both WB and EB, which are significant grades in anybody's book - were within his territory. But we've not been told that he ever had anything to do with either of those grades on a day-to-day, in-the-field, on-the-train operating basis - in other words, it does not appear that he ever 'got his hands dirty' with those operations.
So the question I have to ask now: Is the CN management smart enough to 'know what they don't know' - or, in the words of the Serenity Prayer, do they have ''The wisdom to know the difference''. These events indicate that they do not.
Only a few days around a mountain railroad are enough to teach that 2 major different challenges are involved there, and the most difficult one - which also affects safety - is keeping the train under control during the descent. And that's not news or rocket science - it's been an inherent part of the business for almost 150 years now. To not know or respect that displays a stunning ignorance of some fundamental principles - ''Railroading 101'', as someone else in the Trains article said. Mountain railroaders are indeed a different breed, and - in order to survive, literally - have developed extremely different and specialized train-handling knowledge, techniques, and skills. That's not insulated small-group arrogance, that's a practical real-world fact - conversely, the mountain crews would probably be terrible at handling a high-speed freight train across a hog-back profile, or braking a 90 MPH passenger train.
Recently I've been reading several articles about the 1-mile long 2.3 % ''Slide'' at the top of the otherwise 1.8 % 12-mile EB descent from Gallitzin summit towards Horseshoe Curve and Altoona, PA. For decades now the rule there has been 12 MPH max. [only 8 MPH for 'mineral' trains'] approaching the Slide - any more than that and Klaxon horns go off, the signals go to stop, and the train is supposed to stop - or a penalty brake application will occur - and be inspected until the problem is ascertained and corrected. More important in this context Helpers are often assigned to EB downgrade trains simply to add their dynamic braking capability. Interestingly, the January 1985 Trains article on that operation was authored by the same Fred Frailey, who quotes a RFE saying '' If you don't have your train fully under control when you start down The Slide, you may already have eaten your last meal'' [pg. 31], and the Superintendent saying ''Our people have to be aware that under no circumstances are they to deviate from instructions. You just cannot play around with this mountain. The rules are time-proven and they are law as far as I am concerned.'' Notably, that Allegheny Division was the first ConRail division to go 1 million hours of work without a reportable injury. [pp. 31 - 33; emphasis added - PDN]
So what part of this hard-earned [in the blood of our predecesor trainmen, as is often said], long-standing - and far from secret - institutional knowledge and laws of physics were the CN officials unaware of, or think they were exempt or immune from [Q]
That 60's % Operating Ratio looks great - but that may be obtainable and sustainable only in a 'flatlands' railroad environment. In mountain territory, there are inherently going to be slower speeds and added costs - that just comes with the territory. A much higher OR and lower productivity than for the rest of the system are inevitable - but these are differing 'apples vs. oranges' situations, so should not be directly compared. To ignore or dismiss those kinds of fundamental differences may be symptomatic of an unwillingness to accept the reality that there are indeed some things that cannot be changed by sheer force of will or the 'culture', and that there are actual limits to one's personal power, no matter how forcefully expressed. Even BNSF's Rob Krebs figured that out.
cmstpnpI really don't want to get into an argument with you.
Hopefully both of us have more sense than that....
To clarify: I was quoting your remarks about the French Canadian VIA crew, more specifically your observation that they were not particularly proAmerican. IMHO you then made a generalization about the naming process being politics driven. This flowed from your further observations based on the crew's remarks. I disagreed and gave my reasons why.
I'm no expert. I'm an observer who happens to love railroading. It's literally in my genes from my mother's side of the family.
I know the BCR country. I have friends who worked for the old BCR and they definitely lived and worked in their own world, especially in the Squamish and Lillooet Subs. They had to, or as your quoted superintendent said, they could well have eaten their last meal many more times than once. the railway is famous for its sharp curves and its amazing grades in both of those subs. Even the roads in the area are something else. When CN took over most of these experienced people were either let go or retired or transferred as I understand things.
Their inspection procedures were rigorous. IIRC track inspectors preceded every train in the area...due to numerous rockslides, avalanches and the like. I believe that CN just wasn't prepared nor did they understand the need for that kind of operational rigour and the expense it entailed. As far as lengthening trains and the resulting stringlining and then repeating the exercise on a variety of other occasions....I can only conclude that management just didn't get it and that the 'one size fits all' approach they employed was finally ended by federal and provincial government mandate. Surprising, but there it is and its all a matter of public record. The McBride wreck includes a litany of other deficienies in corporate culture. TSB reports as I read them are like 'canaries in the mineshaft'.
CN's 'mineshaft' is getting dangerous.
lenzfamily [snip] I believe that CN just wasn't prepared nor did they understand the need for that kind of operational rigour and the expense it entailed. [snip]
That thesis / conclusion is gaining traction in my mind. Thank you for the additional background detail - typical for mountain railroads, but utterly foreign and incomprehensible to the 'flat-lander' operations. Perhaps nothing that Mr. Harrison and his cohorts had encountered before quite prepared them for this - it just didn't fit in or resonate with their 'mind-set'. If their overriding goal was to force it into the mold of a 60 per cent operating ratio - well, that just wasn't going to happen. But who among them was going to be the bearer of that bad news to Stalin - er, Harrison - and then get shot for failing to report total success [Q]
In the interview with Peter Edwards that I referenced in one of my posts yesterday, he claims [pg. 3] that there was an ''openness to trial and error'', and that ''it worked because ultimately we knew where we wanted to go. In reality, we always kept saying - 'There are many roads to Rome, but we know we're going to Rome.' '' That's all well and good - but what happened here when the locals essentially told them that the road they had chosen leads not to Rome, but instead over a cliff [Q] [literally, too, here] Again, I question whether management's obsession with 'making the numbers' blinded them to recognizing the unavoidable facts here. Not until after that series of wrecks and the TSB reports did the federal and provincal governmental orders step forward much like referees in a boxing ring and essentially declare that the match was over, and that further, futile struggle must now cease.
lenzfamilyI am likewise amazed that after a series of wrecks on the Squamish and Lillooet Subs that management didn't do some significant head-scratching and initiate some formal Risk Assessments. No instead they continued to operate overlength trains (120 cars or so) in territory which for years had run trains no longer than 70-80 cars. Ask Tyler. I'm sure he'd tell you. I remember it that way too and I'm a lowly trainwatcher. No wonder the federal Transport Department ordered them to shorten trains and restore db equipped locomotives to the BCR.
zardoz lenzfamilyI am likewise amazed that after a series of wrecks on the Squamish and Lillooet Subs that management didn't do some significant head-scratching and initiate some formal Risk Assessments. No instead they continued to operate overlength trains (120 cars or so) in territory which for years had run trains no longer than 70-80 cars. Ask Tyler. I'm sure he'd tell you. I remember it that way too and I'm a lowly trainwatcher. No wonder the federal Transport Department ordered them to shorten trains and restore db equipped locomotives to the BCR. [emphasis added - PDN] This alone should give you an idea of how the CN operates: even after multiple incidents, it still took government directives to change the way they operated over that district. Perhaps the ego of certain high-ranking officials got in the way of logical thinking, or did they think they were such hot stuff that they could circumvent the laws of physics? [emphasis added - PDN]
lenzfamilyI am likewise amazed that after a series of wrecks on the Squamish and Lillooet Subs that management didn't do some significant head-scratching and initiate some formal Risk Assessments. No instead they continued to operate overlength trains (120 cars or so) in territory which for years had run trains no longer than 70-80 cars. Ask Tyler. I'm sure he'd tell you. I remember it that way too and I'm a lowly trainwatcher. No wonder the federal Transport Department ordered them to shorten trains and restore db equipped locomotives to the BCR. [emphasis added - PDN]
This alone should give you an idea of how the CN operates: even after multiple incidents, it still took government directives to change the way they operated over that district. Perhaps the ego of certain high-ranking officials got in the way of logical thinking, or did they think they were such hot stuff that they could circumvent the laws of physics? [emphasis added - PDN]
Which reminds me of that old joke -
Sometimes, to get the mule's attention, first you have to hit him over the head with a 2 x 4 . . .
As Professor Henry Higgins said in My Fair Lady, 'I think you've got it.'
I really wonder if the apparently rigid (despite the VP's comments) top down, 'one style fits all' culture is serving them well.
I'm just reading too much negative comment, based on what I consider to be quite an objective viewpoint, from operating people far more experienced than I regarding current CN operations and management style. It's on this forum, it's from BCR friends and from friends locally who have either worked for CN or have encountered CN crews in the course of trainwatching.
For example:
A local friend connected with a through crew recently while they were sitting on a passing track waiting for overtaking traffic. He stated the motive power looked like **** oil and **** dripping everywhere and the crew's comments about the condition of same generally weren't much better. Sends me a message.
Another friend, now retired from signals like our friend Clique of One, commented to me some time ago that CN had basically enlarged the signal maintainer crews territory from Fort Langley, just east of Vancouver, to somewhere east of Hope, IIRC as far as Boston Bar in the Fraser Canyon. That drive, on a good day, takes at least three hours from end to end, never mind the work a person has to do to keep the plant running adequately. He worked for CN all his life and when the time came to 'pull the pin' he was more than ready to do so.
This sounds like a potential trainwreck (excuse the pun) when you start adding up the pieces.
Paul_D_North_Jr Sometimes, to get the mule's attention, first you have to hit him over the head with a 2 x 4 . . .
Johnny
Paul_D_North_Jr [many snips] Recently I've been reading several articles about the 1-mile long 2.3 % ''Slide'' at the top of the otherwise 1.8 % 12-mile EB descent from Gallitzin summit towards Horseshoe Curve and Altoona, PA. For decades now the rule there has been 12 MPH max. [only 8 MPH for 'mineral' trains'] approaching the Slide - any more than that and Klaxon horns go off, the signals go to stop, and the train is supposed to stop - or a penalty brake application will occur - and be inspected until the problem is ascertained and corrected. More important in this context Helpers are often assigned to EB downgrade trains simply to add their dynamic braking capability. Interestingly, the January 1985 Trains article on that operation was authored by the same Fred Frailey, who quotes a RFE saying '' If you don't have your train fully under control when you start down The Slide, you may already have eaten your last meal'' [pg. 31], and the Superintendent saying ''Our people have to be aware that under no circumstances are they to deviate from instructions. You just cannot play around with this mountain. The rules are time-proven and they are law as far as I am concerned.'' Notably, that Allegheny Division was the first ConRail division to go 1 million hours of work without a reportable injury. [pp. 31 - 33; emphasis added - PDN]
Alright - For those of you who might want to see what this operation looks like in real life from within the past couple of days, see the following thread with a link to a video by David J. Williams - ''NS 44G grain train at South Fork and Gallitzin, Pennsylvania.'' at - http://cs.trains.com/trccs/forums/p/156922/1731175.aspx#1731175 - and specifically the 2nd video that's linked there. I also added a post with the details of the grade per centages and summit vertical curve that is shown in the video - before ''The Slide''.
Deggesty Paul_D_North_Jr Sometimes, to get the mule's attention, first you have to hit him over the head with a 2 x 4 . . . Or else build a fire under him to get him to move. One family's mule was too smart for this--when he felt the heat of the fire, he moved far enough to get the wagon over the fire and, before anybody could do anything. the wagon began burning and could not be saved. Be careful; there may be unintended consequences of your program. Johnny
Or else build a fire under him to get him to move. One family's mule was too smart for this--when he felt the heat of the fire, he moved far enough to get the wagon over the fire and, before anybody could do anything. the wagon began burning and could not be saved. Be careful; there may be unintended consequences of your program.
Good one, Johnny ! Of course, that leads us to the operational prerequisite that applies here - as explained to me once by a good friend who legitimately calls himself a 'Tennessee hillbilly' - while we were both trying to cope with a track foreman who was as helpless as that conductor 'Pops' in our now-'famous' story about the carload of mules who kicked some boards off the car they were in -
"First off, Paul - you gotta be smarter than the mule !" [Thanks for that one, Wally !]
clarkfork [edited for brevity here - PDN] When BCR ran this railroad only units equipped with dynamic brakes were used on this run. When CNR took over the DB units were pulled and a non-DB unit was assigned. DB is great; however, railroads have succesfully operated mountain grade without DB for years. In any event I really doubt it was Harrison who actually pulled the DB units off the mountain.
One more thing I'd like to ask -
So what did CN want with those dynamic-brake equipped units elsewhere, anyway [Q]
CN is a notably 'flat' railroad otherwise [per Al Krug's ''Major Railroad Grades'' tabulation previously referenced above]. Sure, there are some significant grades and hills on the ex-WC that could benefit from DB locos, and I'm sure that there are others elsewhere on the CN system. But none of the rest of CN is like the former SP or the UP with several mountain ranges to cross, and plenty of opportunities to use that capability. If anything, it seems to me that a competent Motive Power management official would have left the DB locos where they were, so as to best fill that 'square hole' with a 'square peg', so to speak, and then looked at the rest of the system to assign the remaining locos. Does anyone know where they were sent instead, and why [Q]
Paul and RWM.
The overriding question coming to mind for me as a result of this thread has been the operating ratio and its relationship to the level of finance required to do effective maintenance of track and motive power assets and efficiently operate a railway as far flung and diverse as CN has now become.
I understand from an investor's point of view that the lower the operating ratio, the more profit is generated for the company and its shareholders. This is, in my view, cutting off one's nose to spite their face.'
The question I have is 'At what point does efforts to lowering the operating ratio become a barrier to effective maintenance and operation considerations for management?'
I'm not even sure if I've asked the question correctly or if it's too general to admit of a ready answer. All I'm trying to discern is at what point is lowering the ratio simply going to translate into an 'asset squeezing process' as opposed to being an efficient use of income for the ongoing effective maintenance and upgrade of track and the equipment and the efficient operation of trains over the long term as several people more knowledgeable than I have pointed out. Is there a 'rule of thumb' or does current practice give any indication of where this point is located.
I ask this because as others have said here, no other North American railroad has been able to approach such an operating ratio as has CN. I know from my own power plant operating experience that management has to put sufficient money into effective preventive maintenance and asset upgrades to maintain the plant as an efficient and effective entity over the long term. This of course impacts the bottom line.
Why is CN able to do this where others are not or has this thread already begun to address/answer this question?
That's a good question, and shareholders aren't necessarily looking for the lowest operating ratio. In my own case..I am looking for long term viability. I won't retire for another 24 years, and I would prefer a less profitable CN that reinvests profits in upgrading infrastructure. I really don't care about profits NOW..and I don't really look for the dividend payments. What I do care about is share value in 24 years from now. And in order for that value to be maximized I'm most interested in making sure the plant is in good condition...that the company has a profitable and diverse customer base..that the Company has a relatively good relationship with all stakeholders...including the employees..and that in all other respects my shares will be sought after by other investors when I do sell in 24 years from now. So much for the theory that shareholders only care about profit...profit is the furthest thing from my mind right now. As an investor I care greatly about the longterm welfare of the Company.
About trading off operating ratio for reinvestment in the Company...I trust the professional railroaders who run CN to strike the right balance. I don't know why CN's OR is so much better than everyone else's...better management..more favorable long distance routes and a relatively simple route structure might be reasons.
That is a great question, Charlie, and one that has answers that depend on what the leadership is aiming for...in railroading or anyother business for that matter. Some leaders are working for the stockholders and will work to get a high dividend paid while others will realize that the whole shebang is going down the tube unless some maintenance is done so that the whole thing doesn't just run off the tracks. A good leader will know how to maintain his business so that it operates as flawlessly as possible and yet give a decent return for investors, so good a return that the investors will understand and stand for a little less pocket change when some maintenance or new equipment must be purchased. Few leaders can achieve such a balance; so in bad times maintenance and new things get pushed aside in hopes of attracting enough investors by paying dividends instead so that money can be raised to do the necessary stuff. Those who go the route of fixing the plant and buying new engines often get booted.
Ulrich:
I would think that you would be concerned about the profitability of a company which you own. I know that is a big concern of mine. For it is with those profits that a company can then re-invest into projects (and other railroads) without tapping into the fickle credit markets.
You bring up an excellent subject....at what point does a company maximize profits instead of long term growth and other factors (safety is a major concern on this thread, rightfully so)? CN generates considerable free cash flow, which is in many analysts eyes far more important than net profit. Free cash flow is the difference between the cash generated by a company in the course of a period of time and the money invested in capital expenses. It takes into consideration cash generation rather than net income (which can easiliy be manipulated).
CN has typically used it's free cash flow to purchase it's own stock. For instance, CN has reduced it's outstanding shares from 603million to 499million over the past 10 years. Is this a wise use of cash? Mature companies must face the decision on what to do with their cash. If there are no investments available which give the rate of return desired, the prudent use is to return the funds to the shareholders. This tends to drive earnings per share (which can be manipulated) higher, but also is much more tax efficient than paying dividends.
Is CN slacking on safety and investment? I cannot answer that. Perhaps some statistical analysis can determine that, but the math would be fuzzy. Accidents happen unfortunately. I have been following a tragic accident in Bettendorf, Iowa which killed two young men. You really feel for their families. In an ideal world, there would be no accidents, no phone calls, no hurried trips to the hospital, no funerals. We dont live in that world. I am not attempting to downplay this at all. One of the main goals of any company should be the safe working environment of their employees. Not only physical safety, but also emotional safety and the ability for growth.
This thread has caused me to rethink my attitude towards CN...and other companies which I own. How does one truly measure the value of those companies and whether or not management is working in the best interests of all concerned? I dont have the answer.
MP173You bring up an excellent subject....at what point does a company maximize profits instead of long term growth and other factors (safety is a major concern on this thread, rightfully so)?
This makes me think of the English hedge fund's stated desire that CSX spend less on maintenance and improvement and distribute more to the stockholders. It seems to me that if the company does not maintain its property, it will not be able to maintin its earnings, and it will then have to reduce the dividends it pays.
Paul_D_North_Jr Of course, that leads us to the operational prerequisite that applies here - as explained to me once by a good friend who legitimately calls himself a 'Tennessee hillbilly' - while we were both trying to cope with a track foreman who was as helpless as that conductor 'Pops' in our now-'famous' story about the carload of mules who kicked some boards off the car they were in - "First off, Paul - you gotta be smarter than the mule !"
Of course, that leads us to the operational prerequisite that applies here - as explained to me once by a good friend who legitimately calls himself a 'Tennessee hillbilly' - while we were both trying to cope with a track foreman who was as helpless as that conductor 'Pops' in our now-'famous' story about the carload of mules who kicked some boards off the car they were in -
"First off, Paul - you gotta be smarter than the mule !"
MP173
Like you I am an investor and for a number of years now I've been asking myself the same sorts of questions. In answer to your last question....
I have started in the past two years researching and investing in what are called ethical investments...those which are determined by the Jantzi Social Responsibility Scale (this may be a Canadian creature only) a tool that rates companies by the usual measures but also makes substantial enquiry into the company's corporate social responsibility practices (fair employment standards, nonuse of sweatshop produced, endangered source materials and the like)
My experience thus far is that many of them return at close to the same level as do the other investments I hold...a good sign which tells me they can generate a good return ethically and with a social conscience. At the moment CN would not make my list...high rate of return or not. Profit is important to me but by no means is it so at the expense of Public Social Responsibility. I realize it is yet another balancing act for corporate leadership to manage, but I see this trend only increasing over time given the global issues we face.
IMHO tax efficiency is an important issue (I do everything I can to legally manage my portfolio and reduce taxes paid too) but for me this is one objective among others and if a company such as CN is doing what it is doing solely in order to reduce its public exposure and benefit a lesser number of shareholders...sorry....I believe a company in the marketplace, especially in these times but at any time, has a responsibility to its employees, its shareholders, its plant and to its future as well as to its self in the present.
I wonder if CN is starting to mortgage (and perhaps compromise) its future in these areas. This thread is leading me to wonder if that is not in fact starting to happen.
MP173 This thread has caused me to rethink my attitude towards CN...and other companies which I own. How does one truly measure the value of those companies and whether or not management is working in the best interests of all concerned? I dont have the answer. ed
That's a very good question. I measure the value of my business (I own a freight business) by looking at it from my customers' standpoint. Any business exists and is viable to the extent that it creates value for the customers it serves. When people ask me about the value of my company I reply with the number I'm most proud of: my 100% customer retention rate. Followed by that number I offer some other numbers which closely correlate to performance..my on time pickup and delivery numbers...the time it takes my company to respond to customer concerns or rate quotes.. how accurate my invoices are etc. I don't think in terms of profit that much because my customers don't care about how profitable I am; and in any case profit is only one metric (and far from the most important one) by which a company's value can be assessed.
The importance of profit is also very much in the eye of the beholder. Look at my ownership in CN for example. I don't care much about the dividends that I receive...I care greatly about how valuable my shares will be in 24 years from now. Therefore I would be much happier to see lower profits and more investment in infrastructure. Someone else, on the other hand, might care more about dividends today and could care less about share value in 24 years from now.
So why the emphasis on OR? I believe it has alot to do with the dumbing down of our society in general. We live in a world where even seemingly intelligent people want everything presented in five or fewer items in a power point presentation. The OR works well because everyone understands $$$ profit $$$ and therefore frazzled executives throw out that number to the unwashed masses who expect short term results in a clear format that even a simpleton can understand in 30 seconds.
And further to that last point about the unwashed masses.. my next point. Looking at my own business again. If I were to sell shares to someone i..e if I were to sell part of my business to someone else.. would it be advisable to screen the people I would consider selling those shares to? Well of course it would be. After all..I wouldn't want to be in busines with a drunk or a criminal or someone who has no interest at all in the business or its success. Yet...anyone can buy shares in a publicly traded company like CN.. So what we end up with is a bunch of uneducated shareholders who for the most part wouldn't invest an hour of their time to gain an understanding of what they've invested in. This is why I believe some companies are so fixated on OR..it is a simple number that is thrown out like a bone to a stupid dog..but which in and of itself means very little.
If you want to gauge the true value of a company you really need to go its customer base..and that's as true of CN as it is of your local corner store. Does the company have repeat sales? Is customer turnover high? Do customers view the business as a commodity business or do they see it as a well branded entity that provides expertise? The answers to those questions and others along those lines ultimately define how the business is viewed through the customers' eyes and by extension the value of the business and its longterm viability.
Ulrich:The majority of CN stock held is by institutional investors. They are not concerned with OR, but rather ROE, ROIC, and FCF (free cash flow). The OR has always been used by railroaders to measure the efficiencies of a line. For a real interesting look at financials, take a look at old Moody's Transportation Guides at the local university library. I have several on my bookshelves and they give really detailed (but dry) analysis of railroads in the past.
Railroads are just beginning to have decent returns on invested capital. It has taken years for this to occur. Capital and investment will flow to those companies which will provide high (and safe returns) to the owners. As much as you might love trucking, you are probably in it for the investment. I sell to the trucking industry, including a very large Canadian company and owners often are very frustrated by their returns. It is a difficult business, as is railroading.
Earlier in the thread, there was much discussion on the culture of CN moving from a nationalized company to private. There were thousands of jobs eliminated. This caused a high level of conflict. No doubt there are vast differences here in the states between the US Postal Service and UPS or FedEX.
I live less than a mile from the CN mainline to Chicago from Toronto (ex GTW). I can tell you they run a pretty good operation (I listen on scanner daily). They have problems, particularly near Chicago. The tracks and signals are pretty good, they do seem to have problems with their motive power from time to time. Perhaps that is due to integrating IC, WC, and other units into their system.
This line sees very few intermodal trains (2 daily). The majority of the 30+ trains daily are merchandise, auto, and coal (from BNSF and UP). They handle high paying freight (as opposed to intermodal). Much of the freight is chemical from the former IC and from the UP. Their trains are long, often 100 - 150 cars in length.
During this recession, they have tweaked their operations. Old symbols are gone, replaced with new. I dont know what their origin/destinations are, but the trains are still pretty big. They figured out a manner in which to maximize revenue on these trains and still maintain schedules.
Ulrich, I appreciate your standing as a business owner. You understand the difficulties of running a business and depending on others to perform, while establishing your own high standards. I am not sure how much CN could invest in their business at this time, based on it being a mature company with slow growth. Nor am I inclined to believe they should be running smaller trains, unless there are compelling reasons.
The safety issues do concern me. Each railroad deals with it. A couple of years ago NS experienced a terrible accident in SC in which a switch was left open, killing a number of people. This is from a company which preaches safety to the point many Conrail employees refused to work for NS. It is a fine line which must be walked.
I do hand it to CN, they are addressing the Chicago issue on their own dime. The EJE buyout was bitter and contentious. It will be interesting to see how they handle it.
Charles...what would be your determining factors for deeming CN unethical? Not for the point of argument, but for discussion.
Charlie:Ethical investing is not just limited to Canada. There are a number of mutual funds in the US which also are socially responsible.
But, the lines always are blurred. Take gun manufactures for example....socially irresponsible?
The Canadian Neil Young (also a railfan of sorts) addressed the issue of guns brilliantly in his song Powderfinger over 30 years ago. Which is it? The powder (gunpowder) or the finger (trigger finger) which causes the damage done? In the case of the violated, does it matter?
Mp173
I rather thought that ethical investment existed in the US as well. What I was not sure about was whether the Jantzi Index was used or not by US institutions. Glad to hear it is.
I don't think the blurring is quite as confusing as you suggest....
From an ethical point of view, the trigger finger is the primary issue as far as I'm concerned. However, the problem also remains that the production of gunpowder, guns etc is, whether you like it or not, equally an ethical issue. Think of the concerns the First Amendment (the right to bear arms) has raised over the last ten years in your country for instance. You cannot separate these two issues, however much you and Mr Young might wish to do so. That is what Public Social Responsibility points of view entail. They are rarely easy to discern and yet they are fundamental to the quality of our existence as North American countries. That's where concern for the violated, at its deepest level exists and is addressed.
Similarly the question for the investor surfaces. Just switch the context. Plug in CN. Do the thinking. Welcome to my world.
I didn't mean to get into an ethics discussion; however your question to me didn't leave much other option for response.
Gentlemen:
When you have a sample size of only seven (the 7 Class 1s), and you want to compare a dependent variable (operating ratio) that is presumably related to an independent variable (management quality), moreover an independent variable to which you are assigning scores that are qualitative instead of quantitative, the chance that the relationship between management quality and operating ratio that you think you see, is actually due only to random chance is pretty good. In other words, you have to know a great deal of information about a given Class 1, much of which is not very transparent to outsiders, and have to do a lot of independent financial modeling, to have any rational, scientific confidence that one Class 1 is any better of an investment than any other Class 1. Moreover, because railroading is a network business with intertwined traffic, marketing, pricing, market basis, customers, shippers, receivers, union contracts, suppliers, ad nauseum, the fortunes of each are rather closely harnessed to the fortunes of all the others.
I do not understand the obsession with operating ratios as an investment guide. I think the operating ratio is at best only the vaguest of guides to management quality and long-term outlook. Railway infrastructure and railway traffic patterns are too long-lived to punish the management team that decides to starve the plant to make the operating ratio look good, or conversely to reward the management team that chooses to build up the plant. It is not at all difficult to chisel in all sorts of areas that the outsider can not easily see, and make no outwardly visible impact on the apparent long-term viability of the plant for 25 years. Some people know enough to ask about rail and tie replacement rates, but very few are knowledgable enough to also observe a railway's real reinvestment in bridge rehabilitation, tunnel rehab, signal system replacement, ditching, undercutting, ballast cleaning, subgrade improvement, etc. But physical plant is just one place to stiff. The railway that does not also meticulously understand its traffic, build mutually beneficial partnerships with its customers, develop close and cordial relationships with the communities, politicians, and governments in its territory, and nurture the development of its employees, will burn through its traffic base and its internal resources, and find its territory sterile and its cupboards bare. Eventually the devil will collect his due, and the railway will fall off a cliff, but the team that did the dirty deed will be long gone by then. Similarly, a management team can make some boneheaded investment and staffing decisions and no one will be the wiser for 25 years. D.J. Russell, for example, looked like a genius in 1960 but 25 years later the SP was a dead man walking, and you can trace every bit of it back to Russell.
I notice that many people here are enamored by tough guys and superhero leaders. I am not. The world is a big place and while one person can throw his weight around for a little while, the people that are squashed or squeezed take note and look long and hard for payback. I am sometimes dumbstruck by the tone-deafness of a railway as I watch it flick away a century of good-will and civic stewardship in one arrogant fit of pique, and create a lasting legacy of bitterness it will never undo. As example, in a recent negotiation with a state government, I was told by a cabinet official in that government that "we don't like or trust your railway ever since you did "X" to us." I replied, "You know, "X" occured more than 100 years ago." "And we're still mad about it!" replied this secretary sharply. At my story you can scoff, you can badmouth polititicians, you can get on your high horse, you can stick your head in the sand, be my guest. The fact is, the state WAS still mad at the railway, and standing behind that secretary were most of the state legislators and most of the voters, and as a result of that distrust, a deal that would have been of great benefit to the state was not consummated.
With respect to your remarks in para 7 cited above. If you are looking at the long term of a business either as an owner or an investor, I would suggest that even in these times if your ROI is 30-40% expressed as an operating ratio, then you do have significant and varied options as far as dealing with your net cash position is concerned. I don't happen to know what the CN's net is...however that is calculated...however I do expect that they are in a profitable enough position to address employee and infrastructure issues rather better than they are doing..
See Ulrich and other's posts above. I believe they outline at least some of the specifics.
With reference to your para 3 above...
That's why I used the mortgage metaphor with reference to CN. There is too much short term thinking going on within the company and its investors IMHO. This is a scenario which will play out in the long term as you said in your para 2 above. Payback can and, I expect, will come. Yes...memories and associated responses are long....as you illustrate.
Charlie -- thank you for reading my little monograph. I want to be clear that nothing I write should be inferred as commentary about any specific modern-day railway company. I of course have opinions (I am human) but my opinions are of no value. I do not claim to be knowledgable enough about the internal workings of any railway to have certititude about its investment quality, its management quality, or its long-term prospects (in fact the opposite, there are so many obvious differences pertinent to each railway that I find it difficult to even know how to score each attribute, much less add them all up).
Most of what I see of comparisons among specific, modern-day railways in this forum is far too strident for my taste. I don't think most of the assessments that pronounce Railway A better than Railway B have much basis in fact. My goal instead is to encourage people to learn more about railways as an industry and as individual companies, but the only tools I have to offer are some analysis pathways.
Returning to operating ratios for a moment, all I am saying is that whether it's low or high this year or that year might not mean very much. I think you really have to take a very long-range point of view with this particular industry.
Thank you for your response. I appreciate its generosity. Your 'little' monographs...although they really aren't quite long enough to qualify as such in the technical sense...I have always found valuable. IMHO you stick to the facts and you obviously have a significant and well placed background within the railway industry. Not everybody has the benefit of your perspective.....and yes, I agree...a long range viewpoint with regard to railroading is essential.
I hope I'm not strident...learning long ago that it's a whole lot better 'to get more flies with honey than with vinegar' as the saying goes. Commentary, as you describe it, has a particular status and defiinition, and I do not construe your input as commentary. You'd be sticking your neck out unprofessionally I'd think and what I've seen of you doesn't lend itself to being unprofessional.
I believe what we do here, when we do it well, is to share opinions based on our experience. I'm no expert as I've said before, but I have enough years of real life experience in several different professional/trade areas, along with a lifetime love of railroading, genetic or otherwise, to be able to comment with what I hope is some thoughtfulness and also with respect for the viewpoint and opinion of others.
If I was looking for investment advice, I'd say so. I'd not do so here, although I would consider carefully some of what I read in these threads as I did so.
Excellent, thoughtful discussion, which covers a lot of territory. I don't have anything to add at the moment - no numbers to 'crunch' that I can see here - but the insights are great, and the mutual respect is palpable. Thanks to all who have participated and contributed. I'll see if I can think of and find some analysis and conclusions that I can add from my perspective sometime. Meanwhile, thanks again.
This is turning into quite a discussion.
RWM, I view OR as a very quick look at a company. Very quick. Other information is much more important.
One thing that is becoming very obvious is that I dont have the ability to make a strong statement about CN at this time. The resources are not there for me to make the decision, such as access to shippers, employees, etc. All that can be analyzed is the financial records, and those are a bit different as it is a Canadian company rather than a US based company.
Got a lot here to digest. The point about Southern Pacific is very interesting. There was an excellent article on SP's problems several years ago in Trains, which I need to dust off and re-read.
Charlie, you are much closer to the situation in BC than I am. Perhaps CN made the same mistake that UP made with buying out SP...and that is not retaining the local management.
One thing I find interesting is Harrison's attempt to change shipper's method of business...charging for weekend demurrage. That is a real ballsey move. Not sure about that.
Gotta run the boy to basketball...let me think about some of this.
MP173 One thing I find interesting is Harrison's attempt to change shipper's method of business...charging for weekend demurrage. That is a real ballsey move. Not sure about that.
I like it...and his attempt to do that shows great leadership. My only concern is with how its done. If it is done properly his customers will have bought into WHY CN needs to recover those costs, and shippers will be more receptive to changing how they do business to minimize demurrage. I say it's about time..
MP173 Charlie, you are much closer to the situation in BC than I am. Perhaps CN made the same mistake that UP made with buying out SP...and that is not retaining the local management.
That was a mistake?
MP173 The point about Southern Pacific is very interesting. There was an excellent article on SP's problems several years ago in Trains, which I need to dust off and re-read. ed
The point about Southern Pacific is very interesting. There was an excellent article on SP's problems several years ago in Trains, which I need to dust off and re-read.
Best Trains article I have ever read. I actually bought two books because of that article to learn more about it. If the recession goes on for much longer, my schedule might loosen up enough to read it.
Railway Man MP173 Charlie, you are much closer to the situation in BC than I am. Perhaps CN made the same mistake that UP made with buying out SP...and that is not retaining the local management. That was a mistake?
In this context - what's 'local' ? Not system-wide top management, sure - but what about regional - divisional level - terminal / yard levels ?
Also, I believe there's a perception that it wasn't so much that UP got rid of the local management, as that UP didn't listen to what they had to say about how their local operations were run. Not having been there or otherwise involved at the time, all that is 'hearsay' to me, and so I don't vouch for its accuracy. However, with the operational 'meltdown' occurring shortly afterwards, clearly something went wrong . . . the question is, what ?
Illustrated here too is the 'tightrope act' that most acquiring railroads have to perform: the balance between retaining the operations that work for it; changing the ones that don't - at least for the different, larger new system [even though the operation may have worked just fine for the older, smaller system] - including the 'culture' and often the personnel, too; and then - most importantly - having the wisdom to know the difference.
Since the Operation Ratio has always been the financial bellweather for ROI for railroads, why and how should it be ignored or changed now? Just changing the name to ROI does nothing but change the spelling and pronounciation and anything else throws the whole financial guage out the window and you are left with nothing an investor wants and needs to know. How much money is left at the end of the day after all reciepts are in and all bills paid is the only way. Or am I missing something?
While there is something to say about new ideas, thinking outside the box, fresh apporach, outsiders being bringing a different perspective, all that is no good unless one knows the present workings in both history and application. If you don't understand the whys and the wherefores of a situation or practice, then how can you throw it away or ignore it out of hand. Here is where Harrison's concept of having managers do real railroad work before managing and changing makes one thousand percent sense. Too often outsiders come into management positions at all levels with lots of book learnen'n but no practice; theory and practice very often don't go hand in hand. In railroading or in a lot of other applications. For instance in radio engineering, the old FCC tests were based on a lot of theories which did not work as is but had to be adapted and changed to specific situations: if the engineer didn't understand that his license was virtually worthless because he could not realistically perform. Likewise in railorading, just because there is a theory or formula that says something gets done "this way" when in reality one must make adjustments here and there to make it work: which works best on grade X, six four axel units rated at 2000 hp each or four six axel units at 3000 hp each or three six axel units at 4000 hp each? If you're supervising that grade, those trains, those unit combinations, you better know how and why each combination is a different 12,000 hp and what can and cannot be done in making changes and why. Know your theories but also know how they apply and how they have to be altered to be applied. Knowing the job at hand, no matter how much book learning you've had, or other "experience" you've had, is the way the job gets done best. Harrison is right on that matter.
That's so true...managers who understand the business from the ground up are in short supply in almost every industry. I understand that most railroads have management trainee programs, but I don't know how much practical experience trainees get. Also...can someone who starts as a conductor or carman today really aspire to a management position without also having the formal education like an MBA? I don't know.
With the virtual elimination of the Libera Arts programs we have lost sight of what a college education is really supposed to be and to do. I never thought of it as an actual vocational education as much as an opportunity to teach one to observe, learn, ask, and think about a given topic. But today we have colleges that turn out high school level vocational training in narrow subjects, practices, and disciplines at great expense to the student and dissapointment to the work place.
(And before I go any further, I do have a 1965 B.S. in Radio and TV which encompassed half the study in courses and disciplines outside of the industry. I have spoken and dealt with a lot of new graduates whose education has so finely honed them to one or two aspects of the industry and no history, drama, economics, english, psychology, sociology or political sciences to allow one to understand the whole picture of the business and how they can or cannot appy what is taught. With high hopes of becoming a top executive in the industry, they don't want or [ somewhat because of today's industry practices] cannot take the time to take menial, entry level jobs to learn how it really works. Specialties like degrees in radio programming are not effective unless one has been involved with radio programming: get a lot of drama, english, literature, political science, psycololgy, sociology, et al, then practice the application before becoming vice president of programming! )
I have seen and heard railroad managers who come fresh from college get dumped in the field by the rank and file not out of spite or anything untoward, but out of not understanding how the theories learned in the classroom get applied to real world railroading. I guess what I want to say most is that a college education should set you up to learn more when you get out in the field and not to know everything that might or might not be.
Everything I read was that UP's problems in Houston had to do with eliminating SP's local management, which lead to a big meltdown.
What led to the elimination of dynamic braking engines on the ex BC? Perhaps it was to do with eliminating local management.
That was my point.
When you buy a company you can insert management as you see fit. Sometimes the previous management understand the local conditions.
I drove for a company that was BOUGHT by a larger company. First thing they did was FIRE the VP of OPERATIONS. Well he was the only one that knew how the company ran and how to get in contact with the CUSTOMERS. 2 days later the BIGGEST CUSTOMER calls up and goes were are the trucks I NEED NOW. The NEW VP of Ops that only got the job because he was sleeping with the Bosses Daughter. Well he told the Customer I have no record of the order so I am not sending you any TRUCKS next thing he heard was YOU JUST LOST A 3 MILLION DOLLAR CONTRACT.
Both CN and CP require engineering or science degrees for people applying for management level operating positions. Maybe that's changed over the last 20 years.. I interviewed with both roads after completing college in 88, and although they had no positions available at the time, they made it clear they were looking for people with proven thinking ability and a high level of ability in mathematics. I'm not sure how someone who starts out as a conductor with no education beyond HS could therefore ever aspire to a management position. Maybe that's nolonger possible.
edbenton I drove for a company that was BOUGHT by a larger company. First thing they did was FIRE the VP of OPERATIONS. Well he was the only one that knew how the company ran and how to get in contact with the CUSTOMERS. 2 days later the BIGGEST CUSTOMER calls up and goes were are the trucks I NEED NOW. The NEW VP of Ops that only got the job because he was sleeping with the Bosses Daughter. Well he told the Customer I have no record of the order so I am not sending you any TRUCKS next thing he heard was YOU JUST LOST A 3 MILLION DOLLAR CONTRACT.
Yikes..I hope she was worth it.
Henry:There is a difference between OR (operating ratio) and ROE (return on equity). The operating ratio measures the operating expenses vs the operating revenue. Obviously, the lower the OR, the more efficient the railroad....or is it? This discussion seems to be implying that OR can be cut by elimination of needed services and employees. That is what is difficult to grasp from afar.
The ROE (return on equity) measures how efficiently a company uses shareholder equity. Without getting too detailed, one determines the net margin of a company (net income/sales) and multiply that by the asset turnover (sales/assets) to determine return on assets (ROA).
The ROE factors in the debt structure of a company by determining the financial leverage (assets/shareholders equity).
Then to finalize the ROE, one multiplies the ROA x Financial leverage.
ROE is different from ROA based on the amount of debt a company has. Highly leveraged companies with considerable debt will have high ROE, if their debt is adequately covered by their net margins. However, in slow economic times, highly leveraged companies experience (generally) difficulty.
A railroad could have a great OR and still have a lousy ROE, if they are leveraged too highly. CN typically has a 40% debt ratio, as do most railroads.
One of my contentions during the boom period of the decade has been why not pay down debt instead of buy back shares. It would allow a safety margin if debt freezes up or economic times get tough.
Fred Frailey mentioned in his article that CN has the advantage of the Canadian health care and other similar costs. Any tax costs would be incurred "below" the operating costs, thus the OR might be somewhat understated when compared to other railroads.
So, then, wouldn't a low operating ratio, say 50-60 percent, do a lot to turning dollars into bottom lines and stockholders or doing improvement and maintenance? Or is that the real question at hand?
That would be the 64000 dollar question..how to properly allocate those monies is where management comes in...ie.e. how much should go toward share repurchase..plant upgrade..dividends... I'm sure that's a fine balancing act to get it right.. and why those folks get paid the big bucks.
Agree with Ulrich. A 50-60% OR should return $$$ to owners, but remember, there is a considerable distance on the income statement between operating income and net income and how that relates to cash flow.
Numbers can and will be cooked. One would hope not so on the corporate level such as this, but plenty of folks put their $$$ into Bernie Madoff and look where he is now (prison in NC).
As Ulrich said, and he is probably much more of an expert than us, as he does run a transportation company...what do you do with the excess cash generated? Depending where you are in the business cycle, you could invest it or return it to the owners. Blend it with borrowed money, if you can get it and do a little of everything.
Ulrich Both CN and CP require engineering or science degrees for people applying for management level operating positions. Maybe that's changed over the last 20 years.. I interviewed with both roads after completing college in 88, and although they had no positions available at the time, they made it clear they were looking for people with proven thinking ability and a high level of ability in mathematics. I'm not sure how someone who starts out as a conductor with no education beyond HS could therefore ever aspire to a management position. Maybe that's nolonger possible.
I recall that many of the Fortune 500 had reversed the requirement for hard engineering and business and science degrees by the early 90's because they had concluded there was a deficit in communications skills. Seems the engineering and science faculties of the late 70's and early-mid 80's had eschewed any utile training in human sciences, and the MBA grads who were taken on board had begun to outshine the science and engineering grads in terms of contributing to public and staff relations. Before long, the Business and Industrial Psych faculties had closed the gap by offering graduates with extensive training in motivational psych, group dynamics, even adult education.
I suspect the pendulum is slowing as we post here.
MP173 Railway Man MP173 Charlie, you are much closer to the situation in BC than I am. Perhaps CN made the same mistake that UP made with buying out SP...and that is not retaining the local management. That was a mistake? Everything I read was that UP's problems in Houston had to do with eliminating SP's local management, which lead to a big meltdown. ed
That presumes the meltdown would not have occured if the local management had not changed. It's an inference chain with nothing behind it but some peoples' opinions, and obviously there was not a consensus in opinion at that time among the experts, else the decision would not have been made to fire local management (i.e., we will presume no CEO melts his railway down on purpose).
There are a lot of other possible causes of the meltdown. One is that the SP was so fragile by that point that it would have happened no matter what.
There is a counter-argument that few think about, that you might as well go ahead and take the plunge and reboot the SP, and get it over with, because it was so fragile it was going to melt down from some natural cause in the very near future anyway, and at least by initiating the reboot you could restart with the operations integrated the way they would eventually have to be. The more I look back, the more I think that reboot was probably the only action that was truly a good one. In my experience, there is no clean, simple, pain-free way to integrate two railways. You either don't do it and run two separate plants until one of them fades away through attrition, or do it and get it over with quickly. When one of the two railways is on the verge of collapse, the "don't touch" option is not very good. You try to run it as is, it will just suck up enormous funds with no end in sight.
Railway Man MP173 Railway Man MP173 Charlie, you are much closer to the situation in BC than I am. Perhaps CN made the same mistake that UP made with buying out SP...and that is not retaining the local management. That was a mistake? Everything I read was that UP's problems in Houston had to do with eliminating SP's local management, which lead to a big meltdown. ed That presumes the meltdown would not have occured if the local management had not changed. It's an inference chain with nothing behind it but some peoples' opinions, and obviously there was not a consensus in opinion at that time among the experts, else the decision would not have been made to fire local management (i.e., we will presume no CEO melts his railway down on purpose). There are a lot of other possible causes of the meltdown. One is that the SP was so fragile by that point that it would have happened no matter what. There is a counter-argument that few think about, that you might as well go ahead and take the plunge and reboot the SP, and get it over with, because it was so fragile it was going to melt down from some natural cause in the very near future anyway, and at least by initiating the reboot you could restart with the operations integrated the way they would eventually have to be. The more I look back, the more I think that reboot was probably the only action that was truly a good one. In my experience, there is no clean, simple, pain-free way to integrate two railways. You either don't do it and run two separate plants until one of them fades away through attrition, or do it and get it over with quickly. When one of the two railways is on the verge of collapse, the "don't touch" option is not very good. You try to run it as is, it will just suck up enormous funds with no end in sight. RWM
I gather rebooting/integrating one line at a time is/was not a pragmatic option?
Maybe a one-train a day branch line. But not easy to do with a division. Too many interactions and contingent operations and sharing of resources with every other division.
Is it me, or did the UP reboots seemed to be more exciting than either BN/SF or CN/IC?
Obviously the Conrail disconnect/reboot was a problem.
RWM, I can see your point about the reboot being necessary. Also, back at the time of the SP merger, we were in a big economic boom. But,shouldnt it have gone just a little better than it did?
The question to be addressed here IMHO, as far as BCR goes, is this: With a reboot of the kind you reference at SP I can see the point. It was a tired company whose time had come if I recall the condition of track and motive power. Absorption leading a reboot appears to have been UP's position with regard to SP. As others have pointed out, their wholesale removal of the SP T&E management created major road and yard problems for a period of a year or more, was it not? I understand the counterintuitive argument you advance but is that approach worth the cost in the long run? Perhaps it is to experienced people like yourself but to an observer such as myself a reboot of that sort seems counterproductive to say the least for at least the medium term.
In the BCR's case, the physical plant and other assets, as I and others saw them, and I expect Tyler would tell you, were in good shape. The provincial government chose to sell off the railway to the private sector because the government of the day didn't believe the public needed to be running a railway. That had been an ongoing debate in BC ever since its predecessor the PGE was established at first as a privately held company. Construction costs were prohibitive and more than the private secotor could finanace. The Provincial government took it over and gradually improved the quality of the ROW and equipment to the point that by the time of sale in about 2003-4 the BCR was, to the onlooker, and provincial owner/taxpayer (which I am) a good property. It never made a pile of money but it wasn't a 'dog' financially either, just a smaller railway (in comparison to others) intended to open up the Cariboo, Central Interior logging and timber trade as well as mining further north.
My point in saying all this is to say this acquisition is in my view a significantly different acquisition than the UP effected with SP. I also recognize that no two acquisitions are exactly the same but the BCR, I submit, as railways go, was and is a unique property, requiring highly specialized and unique maintenance and operating practices. When CN acquired BCR the vast majority of the experienced leadership at many levels of the company was let go and the media reported at the time that CN essentially considered them unnecessary. Friends of mine ( who had worked for BCR for thirty or more years) lost their jobs and went on to do other work very well, as well they would. They had contributed to the building of the railway in many areas for most of their working lives. The result for the BCR was an appalling loss of the specialized breed of people at many levels, many of whom had helped develop the railway's unique operating practices so necessary to survive in this very mountainous part of British Columbia.
Given the events that have occurred on the BCR since CN took over, it is painfully evident to me that in this case at least, CN managment clearly underestimated/ignored the expertise necessary to run this railway on a day to day basis. Again, I am not an expert but what I have seen in the last 5 or more years of CN operation of the BCR admits of no other reasonable conclusion.
BTW as I have pointed out on this forum at other times, the sale of BCR to CN remains a political and legal hot potato provincially. Court cases are still pending....
To evaluate the quality of a railroad's management and what it does for the shareholders, shippers, employees, and the public, let's consider 'qualitatively' - not 'quantitatively' [yet] - what the railroad does with it's Free Cash Flow - and otherwise - to re-invest in the enterprise for the long term - or not, as the case may be.
Essentially only 4 things can be done with the FCF, as I understand it - in no particular order:
1. Pay it out and distribute it to the stockholders, as either in the form of dividends or share repurchases or 'buy-backs' [depending on the desired tax treatment and other considerations]. This is essentially what The Children's Fund hedge fund ['TCI'] wanted CSX to start doing more of a couple years ago. Notably, Warren Buffett, the 'Oracle of Omaha' / Berkshire Hathaway, has never done either of these - BH shares have never paid a dividend. Instead, Buffett has let them grow in value through capital appreciation only, to the point where the Class A shares were valued - and bought and sold on the stock exchanges - for close to 140,000 dollars per share. With the recent market slump, I believe BH Class A shares had dropped to the 80,000 range, and may have rebounded since;
2. Invest it in some other unrelated outside business or investment, for diversification, better returns, etc. This could be anything from buying shares in another company to their bonds to Treasury bonds, gold, etc. Essentially it's an admission that we can't do any better with the money within the enterprise's operations - so we have to look elsewhere. This is also exactly how Buffett makes his money, but it's a little different because his core business is investing, not making or selling things, etc. Notably, Buffett has invested in several railroads for this purpose - he owns around 20 per cent of BNSF, and also has large holdings in NS, and UP too, I believe;
3. Re-invest it in the present business through major capital expenditures for physical expansions and upgrades - not mere maintenance replacements. This is essentially what BNSF and UP have been doing recently with their multi-tracking capacity expansions, what CN did in the 1990s with the Sarnia tunnel, what CP did in the 1980s with its Rogers Pass new line, what CR did with its double-stack clearance program in 1995, what KCS is doing in the Texas-Mexico areas, and what NS is now doing with its 'Heartland Corridor' and other projects;
4. Use it to acquire/ buy/ merge with something to add to the business - like another railroad, or a major operation, to add to the core enterprise. Essentially, this is the 'Instead of building it ourselves, let's buy somebody else's instead' route. Notably, CN has been doing this for about the last 10 years - everything from IC, WC, TransStar, BCR, re-acquiring prior spin-offs in various parts of Canada, and now the EJE. KCS has also done a little bit of this, and CP moved in an unusual way when it bought DME.
NS - and to a limited extent, CP, CN, and KCS - have also engaged in non-cash expansions, through various cooperation agreements and trackage rights in several corridors. Examples include the New Enlgland Patriot Corridor with Pan-Am / Guilford, the 'Speedway' through like Meridian [with UP ?] across the lower South, and the recent Mid-South Corridor with CN.
So there's more than one way to add value to and build the enterprise. CN may well believe that it has no need for additional tracks or relocations or internal improvements of its existing system - but that its best moves are instead to expand its network into new territory through acqusitions. In contrast, BNSF, UP, and NS are clearly building things and improving themselves.
Now ask yourself: Which railroads are doing some, or a combination, or all of these things, and thereby evidencing faith in themselves and a commitment to the industry ? And which are doing only a few, or none at all, perhaps fulfilling their legal obligations to the shareholders to extract the maximum value, but potentially leaving behind a sucked-dry carcass ? And which railroad is doing more of one or another, and/ or may have changed methods over the past few years - and why ?
I'm not saying this little analysis will lead to clear or decisive answers or conclusions, or a definitive 'who's-on-top' ranking, or identifying the 'white knights' or the 'black villains', etc. But it may provide a framework for thought and reference to put this kind of concern into better perspective.
As always, additional, contrary, supplemental, and supporting comments and thoughts are encouraged and welcomed.
MP173 Is it me, or did the UP reboots seemed to be more exciting than either BN/SF or CN/IC? Obviously the Conrail disconnect/reboot was a problem. RWM, I can see your point about the reboot being necessary. Also, back at the time of the SP merger, we were in a big economic boom. But,shouldnt it have gone just a little better than it did? ed
Ed, good questions. Answer is that railways are not interchangable units like 1/2" machine bolts and hex nuts.
Sure, it would have been nice of these mergers that did not go well had gone better. But I do not believe people who say that it "could have" gone better. Just who did they have in mind that was going to get it so wonderfully right? It's not like there is a wealth of railroad superheros sitting around unemployed waiting for the phone to ring to leap into action.
I know personally many of the people involved, and I know something of their strengths and weaknesses, and like any group of railroaders, they had some of both. But if I step back and look at all the other possible groups of railroaders we are suggesting as the alternative that "would have" done better, and I don't buy that they are significantly smarter. Maybe another group would have done 5% better. Or 10% better. Which is not enough to notice. I truly do not believe you or I could have identified, hired, emplaced, and expected 50% better results out of any other possible group of railroaders. Nor do I believe now, with the advantage of hindsight and another 15 years experience in railways, that there was really any better way to do it.
I think there is another misapprehension that matters a lot, and that is a misapprehension about the manner in which railways function. Railways consist of a deeply integrated set of chained, contingent actions. Each action is required to function in order for every other action to function, and when one stops they all stop. Almost every decision impacts almost everyone and every customer. Contrast to a Wal-Mart. Unless one of the customers decides to slug one of the other customers, no one customer at a Wal-Mart interacts with any other customer except in a sort of vague traffic avoidance sort of way in the aisles and the parking lot. But at a railroad, any one customer's car often affects every other customer's car. Pricing, maintenance standard, lading security, service needs, service lane, origin-destination pair -- all are intertwined with every other customer. This is one reason why railways are not so easy to change or merge.
Paul:The interesting thing about Buffett is that he uses OPM for the vast majority of his investments. The float generated by being an insurance company is better than a loan and better than using your own money. It is someone else's money which you will have to give back later.
If you havent, invest a couple of weeks in reading The Snowball by Alice Schroeder. It is the biography (authorized by WB) of his life. It is about 900 pages and provides considerable insite.
I look at CN as doing all four of your FCF uses:
1. Dividends/share repurchase - decent dividend and aggressive share buyback for several years. The number of shares have decreased by 17% since 2002.
2. Outside business - CN has started a trucking and logistics company.
3. Capex - At some point I will compare their capex as a % of revenue vs other carriers....not tonight
4. Merger to other business - yes.
Most other carriers have not made mergers since the late 90's. Conrail/NS+CSX was a big chunk and was all they needed for awhile. Plus...what else is there in the east? CP recently purchased DME but will they pull the trigger for PRB coal? I dont think so.
UP and BNSF digested SP and consumated the BN/SF merger over 10 years ago. Who else is out there for them?
RWM:One of the great educational aspects of this forum has been the realization of how this industry truly works. It is a seriously complex network. You and others have done an excellent job making those of us interested in the true business side of the industry aware. Also, the Conrail Commodities book did the same, particularly with the description of the intermodal schedules.
Airlines and railroads have a number of similarities in their systems/networks. Literally one customer (actually about 20) on September 11, 2001 had profound affects on the system for years.
Ok, I will buy in to the SP merger and the Conrail/NS+CSX would have been a nightmare to unscramble...but what about UP/CNW? If there is a merger that should have been a slam dunk, that was it. Or am I missing something?
edit: Further what happened in 12 short years between the UP/MoPac/WP takeovers and the UP/CNW merger that caused the problems? It seems the MoPac merger would have been a little tough to digest. Jenks had a heck of a railroad, with considerable information systems in place which UP integrated, but were there problems in 1982/83?
lenzfamilyIn the BCR's case, the physical plant and other assets, as I and others saw them, and I expect Tyler would tell you, were in good shape.
In the BCR's case, the physical plant and other assets, as I and others saw them, and I expect Tyler would tell you, were in good shape.
MP173 2. Outside business - CN has started a trucking and logistics company.
This, I believe, is one of the biggest and most under rated decisions the Company has made in recent years. Not so much about the trucking/logistics aspect...more so about getting into the transportation RETAIL end of the business.
Over the last ten years Canadian trucking carriers...especially some of the large LTL carriers have downsized their fleets in favour of outsourcing the linehaul to CN and CP . The above quote indicates that CN is now interested in going after this business directly, thereby competing directly with those large trucking LTL carriers it now services and partners with. It basically puts these trucking carriers/partners on notice..."we're going after your business".
Frankly, I have to wonder what's taken them so long. The real money is in the retail end of the business...those carriers who charge LTL rates and then consolidate these shipments into container lots really have been making good returns.. And if I was one of those large LTLs I would now be very concerned, and I would be looking for business that does not involve partnering with CN or CP. In retrospect one also has to respect those few trucking outfits who resisted outsourcing their linehaul to rail...they've still got their fleets..their premium service levels..and a client base and rates that support over the road transportation. The other guys, on the other hand, have cut each others' throats rate wise...and are now at the mercy of CN and CP. Lesson learned maybe: Do not outsource your core function!
One last point about how CN should allocate its profit...well.. they might consider buying one of the large carrier partners/freight forwarders that have come to rely on CN for the linehaul. If I were a betting man I would bet that we will see some transactions along those lines in the not so distant future.
Hmm - this thread has now gone to some perhaps unexpected places . . .
Ulrich, I'd argue that the core function for the LTLs is the retail end - that's where the client base / customer contact and rate-setting functions are, and the pick-up and drop-off/ 'drayage'-type operations that are the absolutely indispensable, irreplaceable, 'first-mile' and 'last-mile' components of the service. You know how rail shippers complain that they're 'captive' to their serving railroad - well, now it's the LTL in control of that instead, and can choose who gets the line-haul. The LTLs can still also perform and take advantage of the 'consolidation' function and the resulting 'bulk rates' that you mention. The middle line-haul portion - that's a commodity, anyone can do it, and it can be 'shopped around'/ out-sourced/ sub-contracted to the lowest bidder [except for the premium time service level aspect]. There's no need to have a direct connection from shipper to any carrier - rail or otherwise - because the LTL can then fill that gap, wherever it might go or lead to. The ones who have partnered with CN or CP have been able to shrink their operations to those key portions - they don't have to maintain a huge rolling infrastructure of trucks and drivers to cover the line-haul, and the line-haulers who do are now vulnerable to being undercut by both the other LTLs and CN. The only advantage that the full-service guys had left is that they are a '1-stop shop', and it's all under their direct control - but now it's them that CN has directly in its sights with its new operations, because it's a single-source that also has the advantage of the lower line-haul costs.
How quickly we forget.
I recall not that many years ago (perhaps 20?, maybe even less) that a number of companies, such as (CN IIRC and) CP did in fact have ( I believe they were LTL) trucking divisions associated with their rail operations. This was certainly true in Ontario where I grew up and in BC where I now live. They spun these entities off and now I guess have decided to begin to reactivate this end of their business.
Similarly and in the shorter term they spun off some of their 'underperforming at the time' trackage to regionals who boosted the business quite successfully in some cases, as illustrated IIRC in last month's Trains, and are now in some cases starting to regain operating ownership of these same lines.
I guess there is nothing new under the sun and that what comes around, goes around....
Yes...anyone can do the linehaul... but very few can do it as efficiently as rail..and those LTL carriers who have repositioned themselves as freight forwarders for the railroad have tailored their operations to rail. It would be difficult for them to now reinvent themselves as an entity which is once again independent from the railroads. They are therefore sitting ducks and pretty much at the mercy of what there larger rail suppliers want to do. Personally I would be nervous about depending on one large supplier for my transportation needs..especially as a transportation company myself. And now it looks as if that concern may have come home to roost....
I don't think CN has the "full service guys" in their sights...their aren't enough of them around anymore and the few who are small and compete at service levels that CN can't touch. After all..why would a shipper pay higher rates for truck? He/she would only do so if the service levels are better and to points that aren't on the railroads' network of service points. For the most part the over the road guys focus on time sensitive high value freight...very few skids of cement move cross country by truck anymore.
I
lenzfamily How quickly we forget. I recall not that many years ago (perhaps 20?, maybe even less) that a number of companies, such as (CN IIRC and) CP did in fact have ( I believe they were LTL) trucking divisions associated with their rail operations. This was certainly true in Ontario where I grew up and in BC where I now live. They spun these entities off and now I guess have decided to begin to reactivate this end of their business. Similarly and in the shorter term they spun off some of their 'underperforming at the time' trackage to regionals who boosted the business quite successfully in some cases, as illustrated IIRC in last month's Trains, and are now in some cases starting to regain operating ownership of these same lines. I guess there is nothing new under the sun and that what comes around, goes around.... Charlie Chilliwack, BC
Yes..the regulatory framework was different back then..I believe the trucking divisions were unionized as well and for alot of reasons became uncompetitive with others in the market as deregulation took hold. Also..so much else has changed since then.. TOFC was more important back then.. there was no double stack.. free trade was in its infancy and traffic was still primarily east-west and not north south as it is today.
CN is probably also realizing that as a transportation company (as opposed to just a railroad) they are leaving alot of business on the table. Most loads...75% of all loads...move 500 miles or less from origin to destination. That's business that CN as a railroad can't touch...but that CN as a multimodal carrier can handle via a logistics/trucking division. All in all a smart move and in my opinion long overdue.
Here's an interesting read.
http://www.cnron.blogspot.com/
http://cnron.blogspot.com/2009/07/hunter-harrison.html
Yes, very interesting read: heavy on accusations and innuendo, heresay, and broad generalizations but lacking in substantiation. No quotes, just someone saids. No facts and figures, just projected thoughts and ideas based on...on....what? based on trying to tear down what is written about without atttempting to justify, clearify, or back up the statements. It is what give real liars a bad name!
Ulrich Yes..the regulatory framework was different back then..I believe the trucking divisions were unionized as well and for alot of reasons became uncompetitive with others in the market as deregulation took hold. Also..so much else has changed since then.. TOFC was more important back then.. there was no double stack.. free trade was in its infancy and traffic was still primarily east-west and not north south as it is today. CN is probably also realizing that as a transportation company (as opposed to just a railroad) they are leaving alot of business on the table. Most loads...75% of all loads...move 500 miles or less from origin to destination. That's business that CN as a railroad can't touch...but that CN as a multimodal carrier can handle via a logistics/trucking division. All in all a smart move and in my opinion long overdue.
Well, I'm going to disagree with Ulrich again. But first,
It wasn't that long ago that the UP bought a rather large LTL trucker, Overnight. It was like they spent a lot of money for something, then they didn't know what to do with it. When they bought it I thought they were really on their way, but they did literally nothing with this wonderful asset. Eventually, they sold it off for about half of what they paid for it. Overnight is now part of UPS.
Rail ownership of trucking operations was greatly restricted under regulation. For no good reason except that the regulators didn't know what they were doing. When partial deregulation occured the rail owned truck lines, such as Santa Fe Trail, were smaller regional carriers with no real future. They folded rapidly, as did many other regional truck lines. It was amazing to watch the carnage. Regional truck lines such as Gordons, System 99 and A.P.A. (one of the best in the business) died like flies when their regulatory protection was removed and they entered a competitive enviornment. (Even some of the larger truckers couldn't adapt to a competitive environment. Consolidated Freightways is gone, as are Carolina, P.I.E., Preston, etc.)
One of the great economic drivers of the late 20th Century boom was the logistics efficiencies produced by the dregulation of transportation. A truck line had to be one of the most efficient or die, and a lot of them died. It was good for the nation, good for the people, but very hard on regional motor carriers.
Back to my disagreement with Ulrich.
Rail intermodal can compete with trucking at 500 miles. I've done it. At the ICG we didn't have long hauls for intermodal. Chicago-New Orleans is 900 miles, but the volume on that lane was about 10 loads per day. We had no choice but to get down and fight it out for Chicago-Memphis (500 mile) traffic, and we did. We were even successful marketing (and profiting from) Memphis-New Orleans business, which is only a 400 mile line haul. There is no magic number of miles where rail intermodal does or does not have the ability to compete with over the road trucking.
The difference between the ICG and a railroad like the UP or BNSF is that they have had little incentive to go after 500 mile freight. Until the current economic unpleasantness developed they had much bigger fish to fry. Niether one was going to waste terminal or track capacity on Chicago-Twin Cities freight when they needed that capacity to handle the containers flooding in through the west coast ports.
One current question is: How long will this slump last? If it ends relatively soon, the rail carriers will not change. There will be no incentive for them to do so. If it drags out, as I think it will, they'll eventually get hungry and look to develop business in the less than 500 mile range, such as Chicago-Twin Cities. The UP has a lot of locomotives stored. Putting them to work earning some cash hauling intermodal between Chicago and the Twin Cities might not seem like such a bad idea after all.
That's enough for now. CN's entry into the trucking business, under the guidance of E. Hunter Harrison, can help make their intermodal service profitably competitive at much shorter distances. It will be interesting to see if they do it.
BTW, I commute to and from work on I-94 north of Chicago. I see a "whole lot" of CN containers pulled by CN tractors on that Interstate. Either the folks out in western Canada drink a whole lot of Ocean Spray Cranberry Juice or those containers are moving on relatively short hauls to places like Memphis, Toronto, etc. (Who knew Ocean Spray was produced in Kenosha, WI until Zardoz, IIRC, told us?)
greyhoundsthey'll eventually get hungry and look to develop business in the less than 500 mile range, such as Chicago-Twin Cities. The UP has a lot of locomotives stored. Putting them to work earning some cash hauling intermodal between Chicago and the Twin Cities might not seem like such a bad idea after all.
The line certainly has the capacity. I believe it hosts perhaps 4 to 6 trains per day.
greyhoundsBTW, I commute to and from work on I-94 north of Chicago. I see a "whole lot" of CN containers pulled by CN tractors on that Interstate. Either the folks out in western Canada drink a whole lot of Ocean Spray Cranberry Juice or those containers are moving on relatively short hauls to places like Memphis, Toronto, etc.
UlrichBusiness owners and/or manage very seldom create anything of lasting value that transcends the businesses we run. You may be a great leader and a great manager...but none of that will matter to anyone once the business is gone. Look at some of the great business leaders of the 50s and 60s...Langdon of B&O is a great example. He was a apparently a great leader at B&O...a great innovator at B&O..and did great things...for B&O shareholders, employees, and other stakeholders. However B&O has been gone for years and I really doubt if anything that Langdon did 40 years ago can be recognized and identifed as uniquely his at CSX today. Same with Hunter..and all the rest of us who are employed as managers today... if we're good we create value TODAY for the businesses we run and hopefully hand off the business to the next generation in better shape than we found it.. but that's it... Want to create lasting value? Then write a great book that people will still want to read in hundreds of years from now..or invent something.
I take it you disagree with my prior point about the durability of rail investment decisions. I could take you to any Class 1 with which I am familiar and walk you through the physical plant and the customer base, mile by mile, industrial spur by industrial spur, and show you decisions good and bad made by every CEO for the last 120 years, and the effects thereof.
Would those possibly be inbound loads of cranberries from the upper east coast? Arent cranberries grown in Maine?
Maybe I am all wrong on this one.
Greyhound, as you know, my 1980's were spent in the LTL industry. It was brutal watching the carriers drop. There was not a lot of job security. Terminal managers, salesmen, drivers, dockmen would jump from carrier to carrier.
One of the really interesting mergers that dropped flat was Smith and American in the mid 80's. Both were excellent regional carriers. Smith covered the Chicago - Southeast area like a blanket and American was really strong from Chicago - Midwestern states (Dakotas, Mn to Texas). Both carriers had well in excess of 5000 trailers.
So, their merger basically blanketed the nation from the Southeast to the Southwest, draw a line from the Atlantic to Denver. Within a year of the merger....GONE, bankrupt. That was repeated with hundreds of carriers. Now you have YRC that is hanging on....barely. Imagine if you will Roadway, no make that ROADWAY, the no debt, all cash carrier of the 1980's, the absolutely finest long haul LTL carrier, barely hanging on.
Operating authority was suddenly worthless and written down to $0.00. Union based carriers with strong networks found it difficult to compete with the Conways and Overnites that exploded on the scene.
Union Pacific made a huge error in purchasing Overnite. The logic was, load the trucks and run them to Chciago, then intermodal to the west coast. OOPS. Didnt work. I never saw an outside corporation come in and purchase an LTL carrier and make it work. Those carriers basically needed the ownership involved on a daily basis with all aspects of the business.
I am not so sure on the short haul aspect of intermodal. Perhaps the dynamics of the logistics industry, plus future cap/tax implications will take the trucks off of the highways and on the rails.
What is your opinion of the future of Triple Crown type service? That could possibly make a go of it, but wont service be limited to typically one departure daily due to limitations of the equipment with standard railcars?
MP173RWM:One of the great educational aspects of this forum has been the realization of how this industry truly works. It is a seriously complex network. You and others have done an excellent job making those of us interested in the true business side of the industry aware. Also, the Conrail Commodities book did the same, particularly with the description of the intermodal schedules. Airlines and railroads have a number of similarities in their systems/networks. Literally one customer (actually about 20) on September 11, 2001 had profound affects on the system for years. Ok, I will buy in to the SP merger and the Conrail/NS+CSX would have been a nightmare to unscramble...but what about UP/CNW? If there is a merger that should have been a slam dunk, that was it. Or am I missing something? edit: Further what happened in 12 short years between the UP/MoPac/WP takeovers and the UP/CNW merger that caused the problems? It seems the MoPac merger would have been a little tough to digest. Jenks had a heck of a railroad, with considerable information systems in place which UP integrated, but were there problems in 1982/83? ed
Among other things that happened was the implementation of massive information management systems to control billing, car distribution, car inventory management, crew calling, payroll, material management, etc., and the disappearance of the clerks and many mid-level and line-level managers. When we talk about "considerable information systems" of 1982-1983, they were very simple compared to what was in place 15 years later.
Integrating information systems is not fun.
I need to make sure you understand that I am providing a nuanced answer to your question. There is no black-and-white answer, i.e., one cannot answer the question by laying all the blame on management nor can one answer the question by laying all the blame on the situtation. What I'm trying to do is point out that if we look at mergers as a time series from 1950 to 1995, the later we get into the series the more difficult it becomes to execute any merger without having serious difficulty, and the difficulty level is greatly influenced by the physical condition of the partners, the amount of overlap, and the need for immediate efficiency gains, not just the quality of the management.
No...don't necessarily disagree...good point in fact.
greyhounds Ulrich Yes..the regulatory framework was different back then..I believe the trucking divisions were unionized as well and for alot of reasons became uncompetitive with others in the market as deregulation took hold. Also..so much else has changed since then.. TOFC was more important back then.. there was no double stack.. free trade was in its infancy and traffic was still primarily east-west and not north south as it is today. CN is probably also realizing that as a transportation company (as opposed to just a railroad) they are leaving alot of business on the table. Most loads...75% of all loads...move 500 miles or less from origin to destination. That's business that CN as a railroad can't touch...but that CN as a multimodal carrier can handle via a logistics/trucking division. All in all a smart move and in my opinion long overdue. Well, I'm going to disagree with Ulrich again. But first, It wasn't that long ago that the UP bought a rather large LTL trucker, Overnight. It was like they spent a lot of money for something, then they didn't know what to do with it. When they bought it I thought they were really on their way, but they did literally nothing with this wonderful asset. Eventually, they sold it off for about half of what they paid for it. Overnight is now part of UPS. Rail ownership of trucking operations was greatly restricted under regulation. For no good reason except that the regulators didn't know what they were doing. When partial deregulation occured the rail owned truck lines, such as Santa Fe Trail, were smaller regional carriers with no real future. They folded rapidly, as did many other regional truck lines. It was amazing to watch the carnage. Regional truck lines such as Gordons, System 99 and A.P.A. (one of the best in the business) died like flies when their regulatory protection was removed and they entered a competitive enviornment. (Even some of the larger truckers couldn't adapt to a competitive environment. Consolidated Freightways is gone, as are Carolina, P.I.E., Preston, etc.) One of the great economic drivers of the late 20th Century boom was the logistics efficiencies produced by the dregulation of transportation. A truck line had to be one of the most efficient or die, and a lot of them died. It was good for the nation, good for the people, but very hard on regional motor carriers. Back to my disagreement with Ulrich. Rail intermodal can compete with trucking at 500 miles. I've done it. At the ICG we didn't have long hauls for intermodal. Chicago-New Orleans is 900 miles, but the volume on that lane was about 10 loads per day. We had no choice but to get down and fight it out for Chicago-Memphis (500 mile) traffic, and we did. We were even successful marketing (and profiting from) Memphis-New Orleans business, which is only a 400 mile line haul. There is no magic number of miles where rail intermodal does or does not have the ability to compete with over the road trucking. The difference between the ICG and a railroad like the UP or BNSF is that they have had little incentive to go after 500 mile freight. Until the current economic unpleasantness developed they had much bigger fish to fry. Niether one was going to waste terminal or track capacity on Chicago-Twin Cities freight when they needed that capacity to handle the containers flooding in through the west coast ports. One current question is: How long will this slump last? If it ends relatively soon, the rail carriers will not change. There will be no incentive for them to do so. If it drags out, as I think it will, they'll eventually get hungry and look to develop business in the less than 500 mile range, such as Chicago-Twin Cities. The UP has a lot of locomotives stored. Putting them to work earning some cash hauling intermodal between Chicago and the Twin Cities might not seem like such a bad idea after all. That's enough for now. CN's entry into the trucking business, under the guidance of E. Hunter Harrison, can help make their intermodal service profitably competitive at much shorter distances. It will be interesting to see if they do it. BTW, I commute to and from work on I-94 north of Chicago. I see a "whole lot" of CN containers pulled by CN tractors on that Interstate. Either the folks out in western Canada drink a whole lot of Ocean Spray Cranberry Juice or those containers are moving on relatively short hauls to places like Memphis, Toronto, etc. (Who knew Ocean Spray was produced in Kenosha, WI until Zardoz, IIRC, told us?)
Good points...and you're right...short haul intermodal can work in some cases. I would think the limiting factor from a cost standpoint would be the cost of the trucking at each end. Here in Toronto the cost of picking up a container and bringing it to the rail could easily cost $250.00...and costs are probably of the same magnitude in other large cities. However, these drayage costs may be significantly less where large volumes are concerned and where shippers and receivers are located near rail facilities.
RWM:I see your point. One should not measure the success or difficulties in implementing a merger based on a 1983 perspective vs 1995 vs 1998, etc. That is what is difficult for one to understand without knowing the insides of an industry or an individual railroad.
Further, in addition to the time differences and the resulting complexities, there are the individual railroads, connections, rationalizations (if any), personalities, etc to deal with.
I cannot imagine the magnitude of details involved in a merger, even with considerable planning involved there is always the unforeseen factors that evolve.
A complex merger such as Conrail/NS+CSX seems almost impossible, when looked at 10 years gone. Perhaps there was more to the UP/CNW merger than met the eye.
MP173 Would those possibly be inbound loads of cranberries from the upper east coast? Arent cranberries grown in Maine? Maybe I am all wrong on this one.
I could be wrong too. But they grow a lot of cranberries in Wisconsin. Me thinks it's outbound juice.
http://www.wiscran.org/user_image/pdf_files/CranProduction08.pdf
MP173 I am not so sure on the short haul aspect of intermodal. Perhaps the dynamics of the logistics industry, plus future cap/tax implications will take the trucks off of the highways and on the rails. What is your opinion of the future of Triple Crown type service? That could possibly make a go of it, but wont service be limited to typically one departure daily due to limitations of the equipment with standard railcars? ed
The length of haul at which rail intermodal becomes truck competitive is dependant on the relationship of several cost factors. It's also dependant on volume. If there are only two truckloads a day on a given lane, rail is not a viable option.
But, if the volume is there, then:
Rail intermodal has cost elements not present in truckload over the road. For simplicity we'll limit these to drayage and the terminal costs. These are not presnet in truckoad OTR. Offsetting these added costs are the tremendous savings present in rail line haul. When the savings from rail line haul overcome the added costs of drayage and operating the terminal, rail intermoal is competitive. Heck fire, it can even be dominant such as on the Chicago-LA lane.
There are a couple ways to do this. First, simply have enough line haul miles to overcome the added costs. This is what has been done. Rail intermodal dominates on the Chicago-LA lane because the additional drayage and terminal handling costs are relatively insignificant on this 2,200 mile run.
The railroads have largely chosen this path of least resistance because there was no reason for them to do otherwise. If they can fill up their network with long haul freight they're happy. They used to be able to do that. Maybe they will be able to do that again. But I don't see a return to such a happy, carefree state anytime soon.
The other way to get truck competitive is to reduce the terminal and dray costs so that fewer line haul miles are needed to overcome them. This takes work. But it is possible. If the railroads need the business, they'll eventually do the work.
One great way to reduce the killer drayage costs is to get trucking authority (and acquire people who know how to run a truck company.) A dray from Moline, IL to Chicago on freight to Memphis will kill you, unless you can haul a load of freight from Chicago to Moline. This would spread the dray cost over two loads.
A second way is to put low cost intermodal terminals in places like Moline. This is where your reference to RoadRailer makes great sense. The problem with RoadRailers, and similar concepts, is that they have been envisioned as seperate, stand alone, intermodal systems. After some experiences trying to market RoadRailer services, it became very evident to me that the technology's niche was as an adjunct to the intermodal system. Not as a stand alone intermodal system.
A RoadRailer terminal costs very little to build (dump some white rock on an unused side track), and is inexpensive to operate. Putting them in places such as Moline will eliminate high dray costs. But, they have to be used as a feeder/distributor system to an intermodal network with limited OD pairs
It'll work. It won't work everywhere. But It'll work in enough places to make it worthwhile.
greyhounds MP173 Would those possibly be inbound loads of cranberries from the upper east coast? Arent cranberries grown in Maine? Maybe I am all wrong on this one. I could be wrong too. But they grow a lot of cranberries in Wisconsin. Me thinks it's outbound juice.
FYI: Cranberries are also grown in Maine, Massachusetts, Michigan, Minnesota, New Jersey, Oregon, Washington; additionally, some are grown in the Canadian provinces of British Columbia, New Brunswick, Ontario, Nova Scotia, Newfoundland and Quebec. However, Wisconsin production totals more than half of all U.S. production.
FYI RE: CRANBERRIES. Grown in Massachusetts, R.I., NJ, WI, and I think WA among places.
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