Lowering rail operating cost

Some exports to the United States might make Canadian products more competitive, at least in the shorter term.

Exporting Hunter Harrison, former chief executive officer of Canadian National and Canadian Pacific railways, for instance, might be a good export for Canadian rail-transported products.

As the CEO of American railway CSX, the third largest in that country, which serves the eastern half of the U.S., Harrison has become the focus of shipper criticism. CSX is well-positioned to move agricultural products through river and ocean ports, including Montreal.

Harrison is using the same tactics at CSX that he was known for in Canada. Those include lengthening trains, pulling out track, reducing staff, as well as reducing rolling and fixed assets to improve operating ratios, the relationship between operating expenses and revenues.

CN posted an operating ratio of 59.4 percent in the first quarter of 2017. At CP, the ratio was 58.1 percent due, in part, to a $51 million recovery of compensation related to the early departure of Harrison as CEO. Without that, the operating ratio would have been 61.3, both very competitive in the railway world. CSX’s ratio was 67.4 for the second quarter.

A Rail Customer Coalition has been formed in the U.S. to deal with joint complaints about service in and has been focused on CSX since Harrison’s appointment in March.

The RCC wants Congress to investigate what it calls “chronic service failures.” The shippers group, which includes farm groups, agriculture companies, co-ops, beer makers and chemical producers, among others, has sided with trade unions and CSX employees in suggesting that recent moves to double train length, close rail yards, cut jobs and make rapid changes to operations are disrupting service, according to a letter to the STB last week.

The STB sent Harrison a letter saying it had “continued concerns over the widespread degradation of rail service” at CSX. Reuters reports that Harrison’s changes were causing rail cars to sit idle or be rerouted across multiple states.

The shippers group has asked American legislators for the ability for competing railways to operate on each other’s lines, potentially a step toward open running rights, and for improved complaints and resolution systems for customers.

It’s nice to see Canadian exports, including Harrison, are keeping Canada competitive.

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