Wednesday, March 7, 2018

CN Rail dumps CEO, as Federal government expresses concerns over grain deliveries

Man on a hot seat! Interim CEO Jean Jacques Ruest has promised to
improve service issues for the railway, after range of complaints through the winter 

(photo from CN Twitter feed)

The ongoing difficulties for Canadian National Railway to get Canadian grain to world markets has seemingly cost their CEO his job and found the railway on the distribution list of a pair of letters from two Federal cabinet ministers, who have expressed the concern of the Federal government over the state of timely movement of Canadian grain.

The announcement of the departure of Luc Jobin came Monday morning with CN appointing Vice President, Jean Jacques Ruest as interim president while they launch a search for a new CEO.

The need to "energize" the company was cited in the statement from the board on Monday.

“The Board believes the company needs a leader who will energize the team, realize CN’s corporate vision and take the company forward with the speed and determination CN is known for,”  ...  “Mr. Ruest is well known to customers and investors, and is well positioned to focus the company and its very experienced and proven team of railroaders to rapidly address operational challenges during the transition.”

The Board acknowledged some of the concerns related to their current level of service, noting that insufficient network resiliency, along with severe winter weather conditions had been part of the recent challenges faced by the railway.

As we outlined on the blog last week, grain shippers on the prairies have been increasingly concerned with a significant slowness for delivery of their crops, suggesting that CN has been reallocating its resources from grain to other areas such as containers and oil in order to address backlogs in those elements of their service.

Such has been the outcry from farmers and grain terminal operators that Transportation Minister Marc Garneau and Agriculture Minister Lawrence MacAulay wrote this letter to both CN and CP CEO's, to express their serious concerns related to both the railway's failure to meet the expectations of shippers and customers over the course of the winter.

The key passages from that letter included:

Over the course of the winter, we have heard concerns from shippers in a variety of sectors who are experiencing severe challenges due to rail service and capacity issues. For example, forestry, energy and chemicals shippers have indicated that they have lost significant business and opportunities due to the inability to move their products in a timely and efficient way. Canada’s international reputation as a reliable supplier is at stake.

 Recent weeks have also witnessed growing concerns from grain farmers and shippers over the lack of rail cars, the slow turnaround time of trains, and the reduced pace of rail movements from grain elevators to ports. In particular, we are hearing that the backlog in rail service has meant that Prairie elevators are approaching capacity. All combined, this creates significant difficulties for our farmers who need to deliver their grain in order to secure cash flow to pay off past loans and purchase inputs for the upcoming crop year.

The correspondence outlined a request for further information on steps the railways plan to take to address the situation.

We understand that there have been challenges for the railways this year, including a larger than expected grain crop and adverse weather conditions, but it is imperative that everything be done to ensure the efficient movement of grain and other commodities. To these ends, we are requesting that you provide the following information: 

A clear description of how your companies intend to mitigate the immediate backlog in the coming weeks; and 

Your plans for maintaining fluidity for the remainder of the current crop season once the backlog is clear.

The most recent updates on the backlog for grain shipments had five vessels waiting for grain in Prince Rupert, while the situation in Vancouver is significantly more dire for shippers, with 35 vessels at dock or anchorage waiting for something to depart with.

A grain ship at anchorage last week in Prince Rupert harbour,
grain shipments are suffering a severe backlog owing to rail transportation
issues to grain terminals in Prince Rupert and Vancouver

The growing grain issues have reportedly been providing for serious cash flow issues for many farmers, with provincial premiers on the three prairie provinces raising the alarm about the impact on their provinces and the nation's reputation as a reliable shipper of grain.

To try to stem some of the growing concern over the level of service from the national railroad, CN's interim President Jean Jacques Ruest posted this letter to grain customers today, highlighting five steps the railway has put in motion immediately.

Offering incentives for key operating employees to delay retirement and postpone vacations, and for recently-retired operating employees to return to work 

Deploying qualified management employees to operate extra trains 

Adding train crews in Western Canada: about 250 conductors put in the field in last three months of 2017, with about 400 conductors coming into the field in the first three months of 2018, and an additional 375 from April to June 

Leased 130 locomotives to increase capacity in Western Canada, almost all of which are now online 

Investing over $250 million this year to build new track and yard capacity in Western Canada to boost supply chain fluidity and build in capacity resiliency for future grain crops

In his apology to customers he outlined that CN is focused on regaining the trust of their customers.

“We apologize for not meeting the expectations of our grain customers, nor our own high standards,” Ruest said. “The entire CN team has a sense of urgency and is fully focused on getting it right for farmers and our grain customers, regaining the confidence of Canadian businesses, and protecting Canada’s reputation as a stable trade partner in world markets. 

 “Moving the Canadian economy is in our DNA. We can and we will do much better, and that starts today – no excuses,” Ruest continued. “CN has taken immediate steps to mobilize our proud and dedicated team of railroaders – the best in the business – in order to move more grain faster.”

Some background on how things go to this state and notes on the departure of the CN CEO can be reviewed below:

CN Rail ousts CEO Luc Jobin
CN CEO Luc Jobin departs amid backlog of rail shipments
CN Rail abruptly replaces CEO amid 'poor operating performance'
CN Rail CEO steps down as board sees need to 'energize' company
CN replaces CEO Luc Jobin
Canadian National replaces its CEO amid Service delays
CN to replace top executive

For more items related to CN operations in Northern British Columbia see our archive page here.

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