Canadian National tells customers: “We love you”

Posted by Fred Frailey
on Tuesday, April 20, 2010

Canadian National’s efficiency is the envy of the railroad world. Last year, in the middle of a bruising recession, CN once again posted the lowest operating ratio (67 percent) in the business, meaning that only 67 percent of its operating revenue was eaten up by operating expenses. This is a real tribute to the operations team assembled by president and CEO Hunter Harrison.
But as I wrote last August in a profile of the railroad (“Hunter’s Way or the Highway”), some of this efficiency came at the expense of customers. Specifically, CN in 2009 was hell-bent on making customers even out the pace of their business with the railroad. No more shutdowns on weekends, for instance. It’s all in the pursuit of balance — run the same-size trains to the same places every day of the week, to maximize the railroad’s efficiency. That the business world doesn’t always operate that way was an inconvenient truth to CN people.
Harrison retired at the end of last year. Soon thereafter CN’s chief marketing officer, Jim Foote, left as well. And sooner than I would have thought, CN is softening the message it is sending customers. As first reported by Today’, the company's assistant vice president of sales and marketing, Peter Ladouceur, earlier this month made an amazing speech to a shippers group in Toronto, in which he said Canadian National is turning over a new leaf. Reportedly, Ladouceur spoke extemporaneously, and here (thanks to Today’ are excerpts of what he said:

“You're going to see a new CN. We won't be driving our agenda only, all the time, as we have done in the past 10 years.

“Our bedside manners kind of suck. We know darn well that we push change pretty hard and in some cases it probably felt as though we were shoving it down your throats. I lived through that. You lived through that. My message tonight is that we're not going to abandon the principles of running a scheduled railroad, but we are going to be a lot more cognizant of the fact that there is this thing called a supply chain. That it's not just about CN.

“We have a new CEO [Claude Mongeau], a relatively new CFO [Luc Jobin], new CMO [Jean-Jacques Ruest], and these guys are different." Without specifically mentioning the hated seven-day-a-week pace CN was trying to force on shippers, Ladouceur said simply that the railroad will be easier to deal with in the future. And he concluded: “We're not going to change on a dime. But if you still have events like this and if you care to ask me back a year from now, I can tell this audience, or I can ask the audience, ‘Did we do it, or are we still a bunch of hard asses?’”

I asked Mark Hallman, CN’s dapper spokesman, what I should make of these remarks. “CN remains very focused on maintaining and enhancing its highly efficient operating performance, based on its industry-leading precision railroading model,” he replied. “At the same time, CN is very focused on strategic engagement with its customers and is taking steps to build an increasingly customer-centric organization. CN has recently deployed a new sales and marketing leadership team throughout CN's network so that the company is closer to and communicates better with its customer base.  CN believes that meeting its customers transportation needs — from the first mile to the last mile — with innovative transportation solutions will help their business as well as ours.”
In other words, believe what Peter Ladouceur said. I do, and I believe as well that the low opinion so many Canadian National customers have of the railroad will improve. And then will come the real test for CN’s operations chief, Keith Creel. Can Canadian National live with an unbalanced business world that slowly ramps up its carloadings as the week progresses? Can it run trains for the convenience of customers as well as its own need to balance crews and locomotives? If it can do these things and still keep its operating ratio below 70, this will be a railroad worthy of our utmost admiration. — Fred W. Frailey

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