AgentKid Now for my take on the announcements. Centralized Decision Making - Decentralized Execution It is the correct policy, but over a century of operating practice means it will be a difficult thing to do. It will mean a radical shift in attitudes on both sides of the equation. Eliminate vertical top down micromanaging, and horizontal buck passing. In the pdf slide show on the CPR website they talk of the War on Bureaucracy, let's hope it can finally be won. Layoffs The local media have quoted EHH as saying that at present the company is experiencing about 5,700 retirements/resignations a year, so the 4,500 announced job cuts should be able to be dealt with through natural attrition. However, there is the one chokepoint of 1,700 job cuts in the next month, let's hope cptrainmen makes it through. EHH isn't the first CPR CEO to talk this talk - let's hope his management team can walk the walk. Bruce
Now for my take on the announcements.
Centralized Decision Making - Decentralized Execution
It is the correct policy, but over a century of operating practice means it will be a difficult thing to do. It will mean a radical shift in attitudes on both sides of the equation. Eliminate vertical top down micromanaging, and horizontal buck passing. In the pdf slide show on the CPR website they talk of the War on Bureaucracy, let's hope it can finally be won.
Layoffs
The local media have quoted EHH as saying that at present the company is experiencing about 5,700 retirements/resignations a year, so the 4,500 announced job cuts should be able to be dealt with through natural attrition. However, there is the one chokepoint of 1,700 job cuts in the next month, let's hope cptrainmen makes it through.
EHH isn't the first CPR CEO to talk this talk - let's hope his management team can walk the walk.
Bruce
Bruce thank you for your concern about my future employment. I have enough seniority that I have very little to worry about. What I am worried about is whether I will hold an engine or not. Small beans, really, compared to other's who are worried about their employment.
My work attitude has always been pretty good so I am not worried about being fired for being non-productive. The Trainmasters here know I get the job done, and I do what I can to keep the wheels turning. If my reputation was noted as being lazy or argumentative, then I would be worried about my job. They are going after those guys as we speak.
I am sure you noticed the change at Alyth? At least 65 people have lost their jobs due to the closing of the hump and the redistribution of work. Calgary is just a run through terminal now.
CPTRAINMAN - Thanks for your candor and forthrightness in sharing your thoughts on this, unpleasant or uncomfotable as they may be.
Since you're able to separate yourself from the events, may i suggest that your keep good notes of all this. it might make for a good book or article along the lines of "An Operating Employee's Observations of Change at CP" (clever titles are not my forte, I readily acknowledge, but hopefully you get the idea). In a few years it might be a valuable resource for rail historians, business school case studies, "Railroad Reading" articles in Trains magazine, etc.
- Paul North.
Its been a couple of months since I felt the need to spew or get something off my chest.
The changes here at CP are touching everybody and every functional group of the business. Many jobs have been eliminated and many talented people have been laid off, given severance, or bridged to pension. Even the titles of functional groups within the company have changed. There is no stone left unturned in EHH's CP.
Now it seems EHH is simplifying the structure of the business and putting everybody on equal ground. The expectations are being laid out for all to see. I can work here or anywhere else and the expectations and labor agreements will be the same. Previously, with all the local agreements, it was very confusing for me as to what was allowed and what was not and it must have been a administrative nightmare for the company trying to figure out what was legal and what was not legal in each city.
Most senior T&E (train and engine personnel as we are now called) have had to absorb large pay decreases. Some of the older guys working the sweet assignments have had their pay cut by 20%. This was possible because of the way union contracts have evolved over the years. The last few years CP avoided the general contract and created many local agreements. Hunter came in an cancelled all the local agreements, thus, we were all subject to the provisions of the general contract which is not as generous as the local agreements.
Our pensions have been cut and a cap put in place that is nearly $20,000 less than the old cap. However, an employee who has his pension time already accumulated will not be affected. I am affected with this new cap and I am grandfathered with this cap. A new employee will have even a lower cap than mine.
As the way things in general are, one action has a equal but opposite reaction. Employees such as myself and younger will see either an increase in gross pay or no change at all. I find myself in a position now of being able to hold jobs that I could not before. The hourly rate is less than before, but I am able to work more hours. Previously, I was mostly able to hold yard assignments but now I am able to hold road switchers.
In the end I am working more hours and getting more gross pay, but each hour pays less than before. Strange indeed. I don't know if I should be happy or mad?
The changes at CP have had a huge impact on people. So many people have lost their jobs and I am sure more will lose their jobs as time passes.
However, a loss of work at one place has become an increase of work at another.
The amount of work that needs to be done as a whole is still the same as before EHH, but with the restructuring of operations, it appears that my terminal has become very, very busy. The work that was previously humped in Calgary and Winnipeg has been spread to other cities. Where some cities are seeing huge layoffs, my city hasn't laid off a single person (yet).
Strange indeed the way people and work are now being distributed.
When I started this post I was worried about the changes. I have to say so far, other than the pay and pension issues, I don't feel much different than before. This is my experience but I know there are others whose lives have been changed for the worse because of EHH, For me, so far so good.
There is no doubt as to the success of EHH so far, CPs stock has gone from about $70 a year ago to about $115. I remember when it was around $40.
The company is healthier.
CP:Your observations and writing skills are outstanding. You have given a very good review of the changes at CP. Thanks for reporting.
The key is your last sentence "The company is healthier". Change such as this hurts individuals. There is no doubt about it. It sounds like these changes were needed.
Perhaps you can touch on all of these "local contracts" and why these were established. Did these "locals" apply only to certain districts, or specifically to certain jobs within the district? What avenue gave EHH the ability to cancel these locals? I always thought that collective bargaining meant both sides were required to negotiate and agree. Did these locals have an escape for CP?
Hopefully you have company stock and will take advantage of these changes.
Ed
cptrainman - Thanks for this update - I was wondering about it all just a few days ago, so this is very timely. It is a very forthright, candid, and honest assessment of how you see it - good, bad, and/ or indifferent. As such, it's far more valuable than anything put forth by the 'spin doctors' for either side or anyone with an axe to grind.
Any word, insights, or speculation on the future of the Expressway service ? See: http://www.cpr.ca/en/ship-with-cp/what-you-can-ship/expressway/Pages/default.aspx
http://www.cpr.ca/en/customer-centre/shipping-guides/Pages/expressway.aspx
http://www.cpr.ca/en/contact-cp/specialized-services/Pages/expressway.aspx
The "Properties" info (meta-data) for the brochure on it at this link: http://www.cpr.ca/en/customer-centre/shipping-guides/Documents/expressway-operating-procedures.pdf - says that the brochure was recently created on Jan. 23, 2013, so perhaps its position is secure ?
Thanks again !
Ed:
Now, before I get into why CP decided to implement local agreements, we must understand what are the two most costly items on the books at any railroad: first is labor and second is fuel.
It was about the time of the last recession that we saw a proliferation of local agreements across the system (I can only speak about Canada. I don't know what happens down south.). A bean counter in Calgary had figured out that if they could implement 12 hour road switchers in a yard, we could save labour and fuel. Instead of 3 shifts in the yard during a 24 hour period, they could implement just 2 shifts at 12 hours. This translates into a saving of 3 people and a locomotive consist. Such a change to the collective agreement would have required a “material change” in working conditions which in-turn would have required a lot of red tape to cut through and payouts to employees so affected by the change. A way around this was “local agreements” which were already provided for in the collective agreements.
The company was so eager to implement these road switchers in the yard that they were giving just about anything to get them through quickly. The locals asked for the world and they got it. However, each local agreement had an escape clause that could be utilized by the company or the union whenever they felt the need to get out of the agreement.
Even before EHH arrived the company started to utilize the escape clause to get out of these local agreements. The local agreements had the company's hands tied. They were not flexible. Even if there was no work to be done, the crews would be paid the same rate. As long as they did not book rest or leave the property, they were paid for 12 hours of work. The company must have looked at the collective agreement again and realized the definition of a road switcher is much more flexible and pays at a much lower rate than these road switchers from the “local agreements”. The collective agreements already allowed for road switchers to work the yard. There is a clause in the agreement that states, “if a road switcher does not leave the terminal area, they will be paid at yard rates.”
Today, with EHH, he is obviously attempting to simplify the business and get everybody on equal ground. All local agreements are gone. Everybody works from the collective agreement.
The company saves money because the collective agreement rates are lower and the definition of a road switcher is more flexible. For example, I am now paid 175 miles at road switcher rates for 12 hours on the job. The local agreement would have paid me 200 miles at yard rates for the same job. Simple math shows a 12.5% decrease in miles paid, and factor in that road switcher rates are lower than yard rates, then I am reaching the 20% reduction in pay for the same work. In addition, there is a guarantee of 8 hours of pay a day rather than 12. If I finish my work in 10 hours, the company has the choice to send me home with 10 hours pay or keep me for more work up to 12 hours. However, the cost to the company is I have the option to book rest after 10 hours work.
This is the way I see it. I might be wrong about my assumptions of the company's views as I am not a HQ employee.
For me, when we had the local agreements, I could not hold these road switchers. Just the last 3 months before they were cancelled I was able to hold a couple of them on vacancies. They paid very well. Now, because the local agreements are gone and the company is fully utilizing road switchers everywhere, I am able to hold a pretty good road switcher. Like I said before, my hourly rate of pay is lower than what I am used to working in the yard, but my gross pay is higher because I am getting more hours.
Do you know what's ironic about all these changes? We went full circle! We went from working the collective agreement to working the local agreement back to working the collective agreement. Yes, we needed management change at CP. It is as clear as a blue sky.
Paul:
I know about the same as you about expressway. I am in the west and this initiative is in the east. I guess EHH likes it or at least see potential in it as it would have been chopped by now.
I would have thought that Expressway would have been one of the first things he'd eliminate.
He pulled off the Montreal-Toronto RoadRailer at CN and shut down the Chicago-Twin Cities intermodal train on the CP. Maybe he sees some potential in the Expressway service/equipment. Maybe he just hasn't gotten around to it yet.
I've always thought the Expressway concept had some good potential for shorter haul/lower volume intermodal markets. But it hasn't been adopted outside this one lane on the CP.
I am hearing reports that when the current generation of Roadrailer trailers reaches their age limit that Triple Crown Services will merge with Thoroughbred Direct, and NS will no longer use Roadrailers. This surprised me.
cptrainmanI guess EHH likes it or at least see potential in it as it would have been chopped by now.
Continuing Expressway service has raised eyebrows on Canadian forums too. I guess EHH is looking at it from the point that because previous CP administrations have pretty much bollixed up loose car and manifest loadings, he has to generate business somewhere. It is not like there is bulk commodity unit train business in central Canada, and as BaltACD has observed on another thread this past week, intermodal is one of the major rising stars of the railway business.
A day or two after EHH announced Keith Creel was going to be his successor, he gave a pretty good interview on Canada's Business News Network(BNN). It is broken up in to three parts:
Given the number of threads generated around here on the second topic, I think you will find the second part very interesting. It is very clear EHH has been paying attention to the oil company bosses over lunches at the Petroleum Club and Chamber of Commerce, here in town. Very interesting observations.
Without further ado, here is the link:
http://watch.bnn.ca/#clip859595
On a personal note I was none to sure EHH was a good thing for CP in the beginning, but I am starting to give him some respect. He has that reputation of trying anything new simply because it can be tried(which Fred Frailey seems to like, as noted in his monthly column in the March TRAINS), but he does seem to give more thought than I expected before he makes his moves.
So shovel the coal, let this rattler roll.
"A Train is a Place Going Somewhere" CP Rail Public Timetable
"O. S. Irricana"
. . . __ . ______
Bruce thanks for the link. I finally had the time to look at the full story. Family and work keep me pretty busy these days.
I finally had a chance to watch the BNN interview with EHH. For me it was interesting because I have never seen or heard so much of him. Everything I knew of EHH until then was from photos or gossip or words from the employee website.
At the end of part two I was almost falling off my chair when the interviewer asked EHH if he wished he had a track to Louisiana like he did at CN. I waited for a big morsel to come out but all I got was a smile and a standard answer from EHH, “You are locked into your franchise.” I am still a firm believer of a CP/KCS merger and I think that such a merger would be the icing on the cake for this part of CP's history.
Nobody knows what will happen with crude-by-rail. Pipeline is more efficient than rail; therefore, pipeline will prevail wherever it is built. On the other hand, rail is already there and is more flexible. Rail can satisfy the short term demands of crude-by-rail so there will always be demand for it. I think a lot of what will happen in the future will depend on the Keystone XL project. Most people think it will be approved and that will signal a change in the demand for crude-by-rail. Demand will eventually decrease as pipelines are built from Bakkan to the Keystone trunk and down to the gulf. A simple google on Bakken will show that pipelines are already being proposed from that region. Environmentalist's are great at delaying the inevitable. Rarely do they win a permanent solution. The crude-by-rail is here now and will be for the short term. Long term?
Some people here had doubts about EHH at the beginning. I obviously did not. I knew we needed change. We were dying. Interesting, EHH mentioned that he never met a bunch of people so eager to accept change. Without these people EHH would not have been able to turnaround CP so fast. I think even he is surprised. He hasn't been in command for a year yet and already he is mentioning an OR of 71%. This number is actually going to continue downward in the next couple of years as some people close to retirement that were let go were actually bridged. They are still collecting salary until their pension comes. Once they are all off the payroll, OR will drop again.
Again a CP/KCS merger would make CP stock go through the roof. Like a rocket.
What is next? There will be more people laid off once the trains are able to run longer. Fewer locomotives will be needed too and that translates into lower lease, maintenance and fuel costs. CP/CN directional running in the west has given us a bunch of sidings that are no longer used. The rail and ties are being ripped up and relocated to other sidings to extend them. This is obviously a 1 or 2 year project, but once fully implemented it will result in lower OR.
I don't know what else can be done. Everything that has been done should have been done long ago. The costs appear to be under control and the railroad is running more efficient. Either EHH is not tipping his hat but I am starting to wonder where the future growth is going to come from. Sure we can steal back some customers from CN as we are able to offer a better product than before, but that is not new business. I have seen the business between CN and CP shift back and forth over the years. Now some will shift back to CP. In a few years it will shift back to CN again. Where is the new business? Where is the growth in the industry? Bakken? Merger?
Everything so far has been to strip CP down to the bare bones to make the company run efficiently, but I am not seeing anything new at this point in time. This is cookie cutter work EHH is doing: IC, CN, CP. It works. He knows the industry. He knows how to get the most out of his franchise, but once he is gone, then what?
cptrainman Bruce thanks for the link. . . I finally had a chance to watch the BNN interview with EHH. For me it was interesting because I have never seen or heard so much of him. Everything I knew of EHH until then was from photos or gossip or words from the employee website.
Bruce thanks for the link. . .
You're welcome. Truthfully I was exactly the same way. I never had sat down and listened to a full interview with him before.
As to future business for the company, the question for the whole country is where is the future business going to be. Until we can get our energy resources exported to the US and/or overseas, it seems like Alberta and the rest of Canada is starting to go into a state of suspended animation. And Potash, my personal bet for future growth, is in the same boat. There were several recent stories in the business sections about how all of the major producers have suspended, but not cancelled, their planned mine expansions. The biggest customers for Potash are India and China, where purchases are government controlled. China just installed a new leader, and there have been various political issues in India. On a positive note however, Potash Corp. of Saskatchewan did say that their expected sales for 2012 would (should?) now occur in 2013.
There is a lot to be written yet on the future of the CPR.
Future business growth may come from going after the smaller shippers again. Most manufacturers are small businesses who employ fewer than 100 people. Presently companies like Maritime-Ontario, Day & Ross, TransX, and YRC make a nice margin by consolidating smaller shipments and using the railroads for the linehaul portion....there's no reason why the railroads couldn't improve their own margins on that biz by 15% to 30% by doing that themselves.
Other business might involve taking more control of the sales function in Asia and Europe. It looks to me as if the steamship lines are in control of that, and they are the ones who decide which port (and which railroad) to use. Maybe the railroads could turn that around by going after shippers overseas and then hiring the steamship companies for the ocean voyage. The golden rule of business...he who owns the relationship with the customer makes the most money. Railroads should quit being just a conduit for others and take charge and ownership of the sales process. There's still lots of low hanging fruit out there to be had.
i thought schiller park was cn rr property now ? if cp closes bensenville intermodal yard where does cp load unload intermodal at ? not too smart to have no intermodal term. in chicago. would be the only class 1 rr not to have any in chicago. and with diesel approaching 5-6 dollars or more a gallon, more trucks will go to rrs to haul cargo. ihb yard has no intermodal services.
CP is closing the Bensenville *hump* in order to expand intermodal there. It's in the right place, on CP-owned property with no backup move necessary as it was at Schiller Park.
I may be repeating something but I don't know if this question has been addressed: Has EHH established his reputation as a turnaround artist or as a long-term CEO?
It would seem the answer is "Yes". Here is the relevant part of his bio from Wikipedia:
E. Hunter Harrison (born 1944), is a railroad executive who has served as the President and Chief Executive Officer of Canadian Pacific Railway (CPR) since June 29, 2012.
Born in Memphis, Tennessee, Harrison began his railroad career in 1964 while attending university in Memphis when he worked as a carman-oiler for the St. Louis-San Francisco Railway.[1] Harrison was later promoted to an operator position with the "Frisco" and, later, with Burlington Northern Railroad (BN) following that company's acquisition of the Frisco in 1980. Harrison was consistently promoted at BN, eventually being appointed Vice-President - Transportation as well as Vice-President - Service Design.[2]
Harrison left BN in 1989 to join the executive team at the Illinois Central Railroad (IC), first as Vice-President and Chief Operating Officer, culminating with his appointment as President and Chief Executive Officer from 1993 to 1998. Following the acquisition of IC by Canadian National Railway (CN) in 1998, Harrison was appointed Vice-President and Chief Operating Officer by CN. Upon the retirement of Paul Tellier, Harrison was appointed President and Chief Executive Officer of CN on January 1, 2003, serving in that position until his retirement on December 31, 2009.
He had the impact of a turnaround artist at both IC and CN as head of operations, then served as CEO for 6 and 7 years respectively. He is rapidly turning CP around, and has already found his successor in Keith Creel, and will probably re-retire in two to four years, per a recent interview (linked to in a post above) after a remarkable career, including 15+ years as CEO of major roads.
Clearly EHH knows cost-cutting. But does he know anything about - or have any interest in - growing the revenue and hence the profit lines, such as through new business, marketing, innovation, new routes and services (other than via merger), more nuanced pricing, etc. ?
CNSFJust a quick observation regarding Expressway/Roadrailer. Yes, Hunter cancelled CN's Toronto-Montreal Roadrailer service, but only after he forced CN's intermodal department to launch it in the first place. Seriously! The RoadRailers were actually Hunter's idea, and the plan was for a network extending all the way from Montreal down through Chicago to Memphis. That idea died a horrible death due to a massive failure by Hunter and other senior managers outside of the intermodal group to understand the subtleties of marketing/sales channel strategies. The only leg that ever got up and running was Toronto-Montreal, which CN's Canadian-based "retail" sales force (which Hunter wanted to sell the network; he had no interest in relying on the US-based intermodal brokers) had always covered. That it ran at all, and for as long as it did, was due to the fact that Hunter had bought a bunch of equipment and the sales force had made commitments to WalMart, the major customer.
Well, that's interesting.
I wonder what potential he saw in using RoadRailers in a Montreal-Toronto-Chicago-Memphis market. I'd think they'd limit the opportunities more than they expanded opportunities. I don't know what freight he would think they could get in RoadRailers that they couldn't get in convential containers or trailers. On the down side the railroad couldn't handle sea containers or Chicago interchange business on the RoadRailer trains. I don't see much of an upside to the RoadRailer service.
I'd think they'd be expensive additional trains for pretty limited market potential.
I'm of the opinion that Hunter is a great operating guy with the knowledge and courage to understand what needs to be done and actually do it. But I think he needs some marketing people who he will listen to. People who can tell him he's wrong, explain it to him, and not get fired doing it.
No one is strong in all areas. A good manager will recognize his/her weaknesses and seek input from people who are strong in those areas. And listen to them.
Paul_D_North_Jr But does he know anything about - or have any interest in - growing the revenue and hence the profit lines, such as through new business, marketing, innovation, new routes and services (other than via merger), more nuanced pricing, etc. ?
Apparently EHH has made it abundantly clear to his marketing staff in central Canada that they have to both get back business they have lost to CN over the last quarter century, and also to find new business opportunities. Or find new employment.
I guess those folks are working on a pretty tight deadline.
You may have trouble merging CP/KCS.Doesn't Norfolk Southern have a 30% stake in the Meridian Speedway?
AgentKid Apparently EHH has made it abundantly clear to his marketing staff in central Canada that they have to both get back business they have lost to CN over the last quarter century, and also to find new business opportunities. Or find new employment.
The irony here is that when he was CEO of CN his opponents claimed his insistence on running a tightly scheduled operation was driving customers away. If that had been true, there should be very little rail business to get back.
There is a difference between "good" and "bad" business.
Low margin, short haul, asset consuming business is often not desireable for a Class 1 carrier. I believe that was the case with the CN's takeover of Wisconsin Central. There was certain business that fit into WC's business plan which didnt work for CN. For example, there was a daily intermodal train from the Green Bay area to Chicago. Good for WC...not so good for CN.
My guess is that business that was lost to CN across the great Canadian landscape would be highly desireable and worth going after.
MP173 There is a difference between "good" and "bad" business. Low margin, short haul, asset consuming business is often not desireable for a Class 1 carrier. I believe that was the case with the CN's takeover of Wisconsin Central. There was certain business that fit into WC's business plan which didnt work for CN. For example, there was a daily intermodal train from the Green Bay area to Chicago. Good for WC...not so good for CN. My guess is that business that was lost to CN across the great Canadian landscape would be highly desireable and worth going after. Ed
I'm sure there is business moving CN that the CP would benefit from handling.
But even Hunter can't "command" a sale. Simply ordering his marketing/sales people to get the business may will motivate them. But if the customer wants to stay on the CN there's nothing they can do about it. The CN isn't just going to sit back and watch the CP take its traffic.
He can order hump yards closed, but he can't boss the customers around. I ran in to several railroad operating types that didn't understand that.
I've come to the conclusion that EHH is a pretty good operations man, with all of the strengths and limitations that come with that. He can run a railroad quite efficiently, as long as he doesn't have to deal with the customers' needs. Fred Frailey observed that he did not care for high-speed premium rate intermodal operations since they were not an "efficient" use of the railroad's assets. It should be interesting to see where CP goes after EHH finally retires.
While efficient operations is the 800 pound gorilla in the running of a successful railroad, it is not the only gorilla in the room. There are business aspects, that while not 100% operationally efficient, are 100% bottom line efficient.
The key to running a financially successful operation is to understand when each aspect is the overall better path for the carrier.
However, if there is not a basic level of operational efficiency none of the 'counter intuitive' business aspects can be successful. You have to have a solid operational base to build from.
Never too old to have a happy childhood!
I agree, sometimes one has to fire the customer or cherry pick the work available. Customers are people, and people aren't always right. For example, I know of some shippers who flog their loads out to 500 different carriers, truck and rail, in hopes of finding one in the bunch who is too dumb or desperate to know any better. Marketing isn't about finding customers...its about finding GOOD customers. The word "good" is key...you can be a great carrier but if the customers you're serving are bottom feeders you haven't got a chance. Conversely, you can be only an average carrier in terms of ability, but if you have great customers you're golden.
As previously mentioned "volume is vanity, profit is sanity".
I am a career salesman and proud of it. At age 57, I am not changing my career. Absolutely love it. There are customers which are not worth it. But, what I have learned, thanks to a very good VP Sales, is to make absolutely certain that the business is NOT worth retaining. There are times during the economic cycle that volume comes in really handy.
What is tough is no margin business with high levels of service that are required with extremely slow payment of bills. That is almost always a no win situation.
Our community is FREE to join. To participate you must either login or register for an account.