Teamsters Canada Rail Conference

Hunter Harrison, president and chief executive of Canadian National, has a grand plan for North American railways. During a keynote speech to the third annual Canada Maritime Conference, held in Vancouver, British Columbia, earlier this year, Harrison, 63, promised to unveil his proposed design before he relinquishes control of the “most efficient” Class-1 railway on the continent.

He said the likely future is that two uber railways will replace Union Pacific, BNSF, CN, Canadian Pacific, CSX Transportation and Norfolk Southern Railway.

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.

A final round of giant railway mergers would make it easier to implement accelerated freight services in North America. 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 percent,” 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-mile-per-hour Via Rail Canada trains in corridor service, he said track-bed improvements 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.

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 onto 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, Harrison said.

“If only 10 percent 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, 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.”

According to Harrison, 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. He did caution 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,” Harrison said. “My advice is that you don’t mess with a winning combination. The results of re-regulation could be devastating.”

Harrison noted that CN is having trouble winning regulatory approval to take over a 150-mile shortline skirting Chicago. Suburbanites with what he 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.

Harrison came to CN from Illinois Central, which was taken over in 1998. Under CN’s president at the time, Paul Tellier, he implemented the concept of precision railroading — running scheduled trains.

Harrison told his Vancouver audience about a meeting he called of 100 or so top operating officers at which he said 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.”

His winning strategy proved to be a 35 percent 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 it was when Harrison took charge. He said that making more effective use of locomotive 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-1 carrier.

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

Canadian National connects directly to the ports of New Orleans and Mobile, Ala., and serves Gulfport, Miss., via a haulage agreement with Kansas City Southern. CN’s Gulf rail lines converge at Jackson, Miss., run north to Memphis, St. Louis, Chicago and the Great Lakes region, then branch in a ‘y’ shape west and east to ports at Vancouver and Prince Rupert, British Columbia, on the west coast of Canada, and ports at Quebec, Montreal and Halifax, Nova Scotia, on the east coast of the nation.

“They have been very interested in developing a three-coast approach to moving cargo,” said Port of New Orleans spokesperson Chris Bonura. Many regional transportation people believe that CN will be key to cargo growth in the mid-Gulf, particularly after the Panama Canal expansion is complete in 2014.

CN was the first railroad to take advantage of the Port of New Orleans’ new near-dock intermodal railyard, which is available to all railroads at the port, Bonura said. The railyard is on property once owned by Illinois Central. The property, close to the Napoleon Avenue Container terminal, now belongs to the port. “It’s directly connected to (CN’s) infrastructure,” Bonura said. “New Orleans is the terminus of their railroad.” From New Orleans, CN’s transit time is 12 hours to Memphis and 24 hours to Chicago.

CN also directly connects to the Alabama State Port Authority at Mobile, with a line that accesses a joint interchange near the main docks and another that goes directly to the McDuffie coal terminal and an area where the port plans to build an intermodal facility near the new Mobile Container Terminal.