Railroaders place to shoot the shit.

(The following story by Mark Wilson appeared on the Traffic World website on December 11.)

WASHINGTON, D.C. Hunter Harrison, president and CEO of Canadian National, said the likely future for North American railways is that two über railways will replace Union Pacific, Burlington Northern Santa Fe, CN, Canadian Pacific, CSX Transportation and Norfolk Southern Railway.

During a keynote speech to the third annual Canada Maritime Conference, held in Vancouver on Sept. 30 and Oct. 1, Mr. Harrison, 63, promised to unveil his proposed design before he relinquishes control of the most efficient Class One railway on the continent.

He said the six will coalesce into two, but the result will be unlike past merger outcomes. "I have a different model but I am not prepared to unveil it yet. But before I retire I will put that model on the table," he said.

Mr. Harrison is proposing an end game to industry consolidation at a time when CN is having trouble winning regulatory approval to take over a 150-mile shortline skirting Chicago.

Suburbanites, with what Mr. Harrison termed a NIMBY (not in my backyard) mentality, are trying to block CN's $300-million bid to acquire a major portion of the Elgin, Joliet & Eastern rail line.

"There is unprecedented political pressure being exerted on this transaction," he said, while avoiding mentioning that then presidential candidate and now president-elect Barack Obama had sided with residents who don't want increased train traffic. Mr. Harrison said that maybe the issue would "settle down after the presidential election."

A final round of giant railway mergers would make it easier to implement accelerated freight services in North America as it would avoid problems in agreeing on high-speed rolling stock and the sharing of this equipment.

"The prediction is that rail freight will grow by 45 per cent," Mr. Harrison said. "That is quite a challenge, calling for better use of existing capacity and improvements in speed and velocity (turnaround times for equipment). How fast will we go? I see freight trains operating at 100 miles per hour."

After noting that CN hosts 100-mph Via Rail Canada trains in corridor service, he said track bed improvement to take 100-mph freight are affordable, but public-private partnerships will probably be needed to eliminate grade crossings by providing overpasses or underpasses.

As things stand, it would be difficult to win agreement among the Big Six railways (seven, if Kansas City Southern is included) on what design of high-speed freight equipment should be used and how cars should be interchanged.

Mr. Harrison said an interim solution, pending a spate of super mergers, is for railways to operate high-speed equipment in closed loops, not allowing it to stray on to other railways.

The railways need to carry more of North America's freight because they can do it efficiently and in a more environmentally friendly manner than the trucking industry can, Mr. Harrison said.

"If only 10 per cent of North America's (road) freight moved to the rails it would save $1 billion in fuel and give a big reduction in emissions," he said. "Fuel savings, fewer emissions and reduced highway congestion: we are on the right side environmentally."

Claiming that he didn't want to dump on truckers, Mr. Harrison said rail carriers can move one ton of freight 423 miles on one gallon of fuel. "Imagine your car giving you that kind of performance."

He said the railway industry is up to the task of moving larger volumes of freight and of being more accommodating to small consignments, reviving a business it largely lost to trucking.

Mr. Harrison then cautioned that this bright future may not come to pass if governments heed talk about re-regulating the railway industry.

He said that prior to the passage of the Staggers Act to deregulate U.S. carriers in 1980, major lines were going bankrupt and the state of disrepair was so severe that stationary freight cars were toppling from the tracks.

"Deregulation taught us that the old model didn't work," he said. "My advice is that you don't mess with a winning combination. The results of re-regulation could be devastating."

Mr. Harrison came to CN from Illinois Central, which was taken over in 1998. Under then CN president Paul Tellier he implemented the concept of precision railroading - running scheduled trains.

He told his Vancouver audience of a meeting he called of 100, or so, top operating officers at which he told them that change would be radical and total. "There were not a lot of amens," he recalled. "If you meet resistance to change, you need a winner, something to instill confidence that you know what you are doing."

Mr. Harrison's winner proved to be 35 per cent downsizing of the locomotive fleet. "It got people thinking that if we can do this with locomotives, maybe we can do it with freight cars," he said.

CN's stud of locomotives is now only half the fleet size when Mr. Harrison took charge. He said that making more effective use of motive power conformed with one of his key business objectives - controlling costs. "Not slash and burn."

He said the changes he helped bring about at CN were dramatic, perhaps overly so. Possibly management failed to communicate effectively what it was attempting and why. But today, CN has the lowest operating ratio (a measure of costs to revenues) of any Class One carrier.

"When we started in 1988 we set the lofty goal of building the best railroad in North America," Mr. Harrison said. "Our new objective, driven by investment needs, is to become one of the best transportation networks in the world."

Friday, December 12, 2008