Ask The Experts: June 19, 2019
Independent Transportation Analyst and Consultant
Q: What do you think the future holds for Canadian National (CN), and are they still a leader in Precision Scheduled Railroading (PSR)?
A: CN increased their anticipated earnings growth rate for the three year period 2020-22 to “low double digits” from the (accomplished) ~10% earnings growth of the prior 3-year period; more importantly they reiterated their ROIC range of 15-17% - the appropriate way to measure success in a an emerging PHR (Post-Hunter Railway) or SR/PSR 2.0 railway industry. CNI remains not only the “Mothership” but also the trend-setter and leader, with competition coming from Calgary to be sure (and perhaps the remaining rails?) in the intermediate future….CNI is also the best refutation of the still de facto misunderstanding of PSR as a cost-cutting, volume-shrinking, short-term orientated policy (see the current Trains magazine: “it is neither precision nor scheduled” and is anti-growth). CNI is all about growth and is willing – eager – to spend to achieve it given, as it always comes back to, the returns on investment.
Q: What decision did the Federal Railroad Administration (FRA) make regarding 2-man crew legislation?
A: Good news out of DC? Actually, yes – the rails scored a victory freeing them up to negotiate crew size reduction (to 1 from 2) by utilizing the safety benefits of the huge PTC investment. The FRA seemingly has put the ki-bosh on legislated 2-man crews in time for the fall section six notices that are the kickoff of (US) national rail labor negotiations – and on the very same day SMART Transportation Union (the former UTU, covering brakemen) national Legislative Director John Risch was telling the audience at the Wolfe Transportation Conference of his union’s to-date successful efforts to get state legislatures to produce laws mandating two man crews; the FRA’s notice of proposed rule-making (essentially withdrawing the proposal for national 2-man requirements from the last administration) preempts any state efforts.
Q: What was new in technology at the Canadian National Investor Conference?
A: Technology was the underlying trend, much as it was in 2017. In fact, some of the tech day (+) was a follow-up from that earlier conference , an update on two major projects we saw on the drawing board in Montreal in ’17 and in the fiend in Toronto this week – the Automatic Inspection Portal (AIP -a shed with cameras that can photo-inspect cars at running speed (up to 60mph) rather than over several hours in a yard – and after all 80 or so algorithms are included, at a much higher rate of accuracy. There are two deployed now, 6 more coming this year (including two in the US) with 8 coming in 2020 and another 8 in 2021.The other is the Automatic Track Inspection Program (ATIP), essentially a specialized boxcar that can do full track inspections also at speed in a revenue train, instead of in a hi-rail at ~10mph (Canadian). CN expects to get regulatory approval by 2021. The AIP sheds also capture real time information by car – which I believe could have commercial/visibility potential, as well. We saw new hand-held products (“Lynx”) replacing reams and reams of spec documents for car repairs, an intermodal “MobilePass” system built with GE, and perhaps most interestingly, the beginnings of a rail-centric Transportation Management System (TMS) with car-tracking visibility (including empties!) that can potentially be a real “game-changer”. In response to my question about the myriad of TMS products out there (a big part of the IT world since the first internet wave), CN responded that all of those were 3PL oriented – and a quick check of the “TMS Guide” in the latest “Inbound Logistics”, listing ~80 products, proved that to be the case. I look forward to re-visiting the TMS project in 2021….along with an update on their “Smart Network”, a “fully integrated network simulator” due to be functional by late ’21. CN is also on the verge of hiring its first Chief Digital Officer (stay tuned).
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