CP Rail feels most provoked, but let me make a suggestion: act like the rest of the ag biz and go beyond mediocre expectations

“It’s VERY provoking,” Hunter Harrison said after a long silence, looking away from the Prairie farm economy as he spoke, “to be called a laggard. VERY!”

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This is how I imagine Canadian Pacific Rail’s CEO, Hunter Harrison, to be feeling as I read the Globe and Mail account of his comments yesterday about the federal action on lagging grain shipments by his company and by CN.

Something about Humpty Dumpty’s prideful, dismissive and condescending attitude towards Alice springs to mind. To my mind, anyway. Perhaps this is unfair, because all I have is secondhand knowledge, gleaned through the Globe story. I haven’t run into Hunter at the dozens of farm meetings, conferences and conventions where this has been a hot topic all winter, so haven’t had a chance to hear from the man himself about how he feels his quasi-monopoly is doing in serving the farmer-customers who provide his company with much of its earnings.

Harrison seems to be provoked and outraged by suggestions his railway has fallen short on grain shipments this fall and winter and should face penalties and new legislation to ensure a bare minimum of service. And he is offended that the federal government has belatedly used accusatory language about his company’s performance. As federal agriculture minister Gerry Ritz said at the Friday press conference I attended, “This will be get-to-work legislation,” comparing new regulations and penalties for bad rail service to back-to-work legislation for union-management disputes.

“The railways have dropped the ball.”

Harrison seems to think CP’s doing a pretty good job, given the fact that it’s been a cold winter. They’ve done a pretty good job with container traffic, anyway: “Because that’s one commodity we’re sensitive to,” he is reported as saying in the Globe piece.

“It’s not like grain or it’s not like coal, (in which) if you’re a little bit late you’re still going to haul it.”

Wow.

That’s exactly the attitude that’s driving grain elevator company executives crazy. They’ve been getting the sense that the railways think farmers and grain companies are over-reacting and should chill. The grain’s gonna get moved sometime, so just calm down.

I’m not an expert on this issue. Our grain transportation reporter, Brian Cross, has been doing a great series digging through this issue, so I’ll leave the complexities to him. But what I notice, as a fellow who gets out and about in the Prairie farm economy a lot, is that every other part of the Prairie grain value chain seems to be constantly pushing itself to new records, new peaks of efficiency and new potentials that were scarcely imaginable just a few years ago. Down in San Antonio two weeks ago, at the Canola Council of Canada convention, all the talk was about pushing Prairie canola production to 26 million tonnes by 2025 – something few believe is impossible, even though that’s a 40 percent boost in production from this year’s record crop. The canola council does this time and again: sets a bold target and drives itself to achieve it.

Remember seven million tonnes by 2007? I doubted they could hit that, but they got there early. Ditto 15 by 15. That’s how a high-functioning industry operates. Everyone in the value gets together and figures out what it’ll take to get there, and then knuckles down and does it.

The lingering worry under the new canola goal is the rail mess. If our national railways can’t get an 18 million tonne crop to market, why shoot for 26? Other commodities aren’t going to be sitting still. In crop ag we always talk about trend line yields, which is comparing everything to a rising baseline rather than a flat one, assuming there should be a relatively predictable rate of production growth.

Somehow I get the sense that the railways think they’re doing a good job if they just reach or come close to previous record levels. I have no doubt they’d like to haul more and more, because that’s how they make money, but when you hear that both CN and CP have laid off staff and gotten rid of locomotives in the last couple of years you really wonder how much they are committed to exceeding previous performance. Do they even want to reach new peaks of performance, or are they happy with “good enough for you” levels? That’s something we’d all like to hear a bit more about – from the railways.

I’ve just gotten done my busiest time of the year, which is covering dozens of meetings, conferences and conventions that occur from October until about now, when farmers get ready for seeding. Other than at the University of Manitoba’s Transport Institute conference, Fields on Wheels, the railways have played almost no role. Perhaps they are active behind the scenes, trying to get a sense of how they can play a dynamic role in pushing Prairie agriculture to the next level, but that’s not the sense I get from others in the industry.

The railways are virtual monopolies, so they don’t don’t need to beg and lobby for farmers’ business. Perhaps that’s why they’re not more active getting out there and communicating with the farmers they serve and to whom they have an obligation. It was certainly odd to see a big ad in the Globe and Mail last week from Harrison but no real attempt to communicate through the newspapers that serve farmers. But if railway potentates want to avoid the coming federal legislation from being truly punitive, perhaps they should get out there and talk to their customers.

At the moment, the railways have managed the near-impossible achievement of outraging and alienating both a non-interventionist federal Conservative government and right-of-centre farm groups that normally don’t like anyone monkeying with the marketplace or free market players.

“How they comply (with the government’s new penalty regime) will probably dictate the nature of the legislation,” Blair Rutter of the Western Canadian Wheat Growers Association speculated to me.

“If they don’t comply, you can expect that this legislation will be far more onerous than they would ever imagine.”

So maybe in the coming days Harrison will get over his irateness and hurt pride and join the rest of the Prairie agriculture business in trying to hit new peaks of efficiency and stop acting like OK-in-our-eyes service is acceptable. If he doesn’t, his legacy could be one of a railway business hamstrung by regulations he and his colleagues provoked. The railways are balanced on a thin wall right now. They should attempt to avoid being toppled.

(By the way, our editor, Joanne Paulson, has an excellent column on this subject on page 11 of the March 13 edition, perhaps in your mailbox right now. I just had to make a similar point, because I feel most provoked by Harrison’s recent comments after a winter of frustration for everybody else.)

About the author

Ed White — Ed White has specialized in markets coverage since 2001 and has achieved the Derivatives Market Specialist (DMS) designation with the Canadian Securities Institute.

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12 Responses

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  1. H-J Mueller on

    Not to worry, Harrison gets exactly what he had coming to him.
    He thought that “cut, cut, cut” would have no effect, he would just crack the whip a bit more and production would increase in the inverse proportion to his cuts.
    Perhaps that worked in his past jobs, but he forgot all about CP Rail being a mountain railway. With grades that are almost double those of his former employer CN Rail. In essence “The Hunter” overlooked some of the very basics and thought he knew railroading inside out. Welcome to the real world and the challenges of real mountain railroading.
    H-J Mueller aka The Old Railfan.

  2. Barclay Meinert on

    “I have no doubt they’d like to haul more and more, because that’s how they make money”

    I do…. There is a cap on grain revenues. Hauling more = diminishing unit margin.

    There is no cap on other products they move…. If you were responsible to shareholders,…. what would you do? I’d be doing what they are.

  3. Barclay Meinert on

    Further to the cap: 2012-2013 numbers:

    http://www.newswire.ca/en/story/1280605/cn-under-and-cp-over-western-grain-revenue-caps-for-crop-year-2012-2013

    CN was 1.1% under and CP was within 1/3 of a percent over. Go figure.

    Want to bet on whether they are going to be within 1-2% out this year gov regulation added or not??

  4. Dan Neuman on

    How bout you go out and talk to a railroader and not some CEO about what really happens on the ground? I can’t believe anyone would support a government that doesn’t allow a union to exercise their right to strike. Everyone is so concerned about moving grain that they don’t think about keeping the people responsible for it if not happy, at least with a slightly less terrible living situation. CP might be doing some stupid things by laying off a good chunk of it’s work force but the ones that are left deserve some rights as well. It’s all well and good for a farmer to get his grain moved as he sits at home and has supper with his family and sleeps in the same bed as his wife, but what about the conductor who’s going to be out in the pitch black, middle of the night picking up the grain and making sure it’s safe to move. The only thing he has to look forward to is a bologna sandwich and, if the heater works, a warm cab after being out in -50 temperatures for hours? What about the engineer that has to stay awake and operate the train safely all through the night just to be rewarded with a few hours in a bunkhouse, away from his wife and family, wondering if he’s going to come back to an empty house because she finally got sick of him being gone? What about their rights?
    I personally know several farmers and they are never at a lack of quality time or sleep with the ones they love. Most railroaders are lucky if they have 3 nights a week at home and the companies want to reduce that amount of time even further. Before spouting off about how terrible the railway is at helping the farmers, maybe take the time to talk to the people who actually do the job rather than the ones “in charge.” You might actually learn something and get a little respect for what they go through to move your precious grain from A to B.

  5. Jack Mehlsen on

    After reading your opinion piece on Humpty Dumpty I can’t help but wonder where our airfares, and the level of air flight service would be, if Canada had privatized airports and allowed Airlines to operate, in this country, with the same level of service as our railroads operate (given all the airports in the country to Air Canada)? Maybe what this Country needs is a system where our rail lines are publicly owned and operated (like airports and highways) and the movement of commodities are co-ordinated by an agency similar to Air Trafic Controllers. Lets also ponder allowing anyone the opportunity to start up a Locamotive Freight Hauling Business (like all the Airline Companies that fly in and out of Canada), to haul freight on those rail lines in all those Government owned rail cars.

  6. m montgomerie on

    Why on earth would they have a revenue cap? If it is to assure price control on the shipping, Why not just set a cap on the cost per car, then they would be able to haul more. The Gov. should have never had the back to work legislation because that gave Harrison the right to mistreat employees. Besides lay offs, how many have quit because of the horrible treatment. The guys do their job, and work in the -50, but they can only do so much. This man seems to want more from less employees. Maybe someone should speak to the employee representatives and hear their side. How many more injuries have there been and fatalities, since allowing Harrison to crack the whip? Americans have different views of running companies and have a totally different idea on how to treat employees. Someone really needs to look at the WHOLE situation. Less men, Less equipment, what can you expect but Less productivity! and who gave this man an award for business last year?

  7. Dave Hariniuk on

    I hate to tell you all this but CP is not in the AG sector. It’s in the transport sector and it’s a private company that should be able to haul whatever it wants to.

    This draconian interference by the government is truly a FACIST act.

    I am a teamster affected by Harrison’s shock and awe regime and I still think you are all ludicrous.

    Cp is it’s own business and they should be allowed to decide what business they conduct.

    Farmers are always looking for hand outs and rebates and cheaper services while you drive to town in your $70,000 pick ups.

    We work our asses off 90-120 hours per week hauling the nations crap and you whiners are always in my pocket.

    Why isn’t it when farmers have a great year and make tons of $$$ you don’t stroke a check for everyone who helped you get there… but in bad times your lined up at the door like lost puppies waiting for your alms????

    Go soak your heads.

    • Barcs45 on

      You work 17 hours a day 7 days a week? or 24 hours a day 5 days a week??

      I want pictures of your paystub, So does OH&S and the Labour standards board.

      Or maybe it’s sort of an “on call while you sleep” until the next stop… really rough that.

      As for stroking a cheque for you…. Based on the difference in basis in the past, The interest I am paying for grain that was contracted to be delivered (and cashed) 3 months ago, and depressed prices here because grain is being bought on the cheap because we are captive to a market that can’t ship it…

      I did stroke a cheque to somebody this year, I just don’t know who. For more than $300,000. If you didn’t get your cut,… well I am sorry.

      The train coming into my delivery point and the spot date has been changed 4 times in the last 2 days to different crops. How many other elevators a little smaller are having to “refuse” a train because they don’t have the space to keep 9000mT of 3 or 4 or more different crops?? Transportation isn’t your fault if they refuse… right?

      I’d love for the revenue cap to be removed so that grain can compete for movement. But it wasn’t this government that put it in 14 years ago.

      The rails are in fact private companies that should be allowed to drive their own businesses…. But they are also a Duopoly. And if they insist on trying to make you refuse cars, spotting cars where they can’t be loaded, etc etc. Maybe we need some corrective action in the form of regulations. And the more abusive crap that comes up, the more punitive they should be. If you weren’t as entitled as you accuse others of Dave, it wouldn’t be considered at all.

    • Dave, your response to the article wreaks of ignorance and disrespect. In your rant you have made it abundantly clear you have zero knowledge of the economic ramifications a delay in rail service has caused, and will continue to cause. While I agree the gov’ts tactics are heavy handed, what should the Fed’s do… allow billions of dollars of praire production be delayed/held hostage by two companies? Taking childish jabs at the nations farmers on this forum is not helping the situation, what do you think you are accomplishing anyway? do yourself a favour, log out and let the grown ups carry on the discussion. This is a farm forum, not the teamsters hall

  8. The revenue cap IS a cap on revenue per tonne/mile. NOT a cap on entire revenue. Hauling more equals more revenue and profit. People need to get their facts straight

    • Barcs45 on

      How is that not a cap on entire revenue.

      If they only hauled grain sure.

      But for every car of grain hauled you get $1 for every potash or oil car you get $1.25 Which would you do? Hauling more doesn’t = more when there is other more expensive cars to move….. Hauling more = less.

  9. Here is some math for you 49 000 000 Hunter’s wage last year roughly 134246.58 a day. Even if you fined him personally at 34 246.58 a day is still 12 500 00 a year remaining in his throne as highest paid CEO in canada. Hmmm

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