Evidence of meeting #43 for Transport, Infrastructure and Communities in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was rail.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Michael Bourque  President and Chief Executive Officer, Railway Association of Canada
  • Mike Roney  General Manager, Technical Standards, Canadian Pacific Railway
  • Dwight Tays  Chief, Engineering Technology, Canadian National Railway Company
  • Mike Lowenger  Vice-President, Railway Association of Canada
  • Gregory Aziz  Chairman and Chief Executive Officer, National Steel Car Limited
  • Michael Hugh Nicholson  Executive Vice-President, Marketing, Sales and Quality, National Steel Car Limited
  • Peter Leigh Scott  Regional Vice-President, Marketing and Sales, National Steel Car Limited

9:50 a.m.

Conservative

The Chair Merv Tweed

Thank you.

Mr. Watson, a final comment and question.

9:50 a.m.

Conservative

Jeff Watson Essex, ON

Thank you, Mr. Chair.

Thank you to our witnesses for appearing here.

Mr. Roney, you will probably appreciate a tragic, fatal collision that occurred at a crossing in Lakeshore, in Ontario, in my riding, very recently. Two young girls are dead, three were injured, two critically injured. I know that CP is cooperating with the OPP and TSB in an investigation. Our thoughts and prayers obviously go out to that family.

If I can switch tracks to the study at hand, which is about innovative technologies, there is a good news story out of Essex County. Born in Colchester in the mid-19th century, Elijah McCoy invented the automatic graphite lubricator for steam engines in a home-based machine shop, without a government program. This technology literally transformed the economy because it allowed for the on-time departure and arrival of trains. We get our expression “the real McCoy” from this, because there were many imitators of the graphite lubricator but there was only one real McCoy.

I tell this story because it's not only about rail innovation but it also points to a different time. This was a home-based shop; there was no government program around. It is about an inventor with an idea that transformed an industry.

Moving to the current scenario today, I want to ask how much CN and CP each invests privately in their research and development. What, if any, government programs do they use? If they don't, why? Let's start there, and I'll get a couple of others on the record because I may not have a lot of time.

How many technology patents do you have? You can provide this to the committee later if you don't have it now.

How would you characterize research and development in the rail sector? Is it incremental or transformational?

What drives your innovation, as a percentage? Is it business as usual or the regulatory environment?

I'll leave those questions for the record, but could you first talk about your investment in R and D and the government programs.

9:50 a.m.

Conservative

The Chair Merv Tweed

You have about 30 seconds. The rest we'll ask for in writing, please.

9:50 a.m.

General Manager, Technical Standards, Canadian Pacific Railway

Mike Roney

I can speak to that. The biggest investment we make in R and D really is in supporting the R and D done by our suppliers, by buying their new products. For example, when you spend $3 million on a locomotive to get a more fuel-efficient, lower-maintenance, more powerful locomotive, that is our biggest investment in the R and D, because we are of course supporting what our suppliers are doing. I think that's number one.

In terms of internal R and D, I can only speak for Canadian Pacific here. We contribute to a research program with the Association of American Railroads, and we are in that for about $1 million a year. We probably spend around $5 million to $10 million on other types of research projects. For example, Mr. Richards mentioned the $1 million a year on the bear research program. We support the University of Alberta Canadian Rail Research Lab. It's in that range.

It's a smaller bucket that we do collaboratively with the government, and that tends to be when we're aligned with Transport Canada on common goals. So through the Railway Research Advisory Board—that's about a $3 million program, and we're probably in that for $500,000. We support their railway ground hazard research program cooperatively with the government. It's a smaller contribution that is done collaboratively, and we'd like to see that grow. I'll use the example of Australia. They also have a collaborative research program in Australia, with suppliers with government and with industry, and they're spending $100 million over seven years—a seven-year commitment—and we're only paying, cooperatively, about 14% of that.

We have a good framework right now. There's an opportunity to develop that further through the framework of the Railway Research Advisory Board.

One of the things—

9:55 a.m.

Conservative

The Chair Merv Tweed

I'm going to stop it there.

Thank you for being here today. I think we gained some insight into our technology study.

We're going to take a two-minute recess. We'll invite our next guests to the table, and then we'll resume.

10 a.m.

Conservative

The Chair Merv Tweed

We're back for the second part of today's committee meeting.

Joining us today, from National Steel Car Limited, is Mr. Greg Aziz, chairman and chief executive officer; Michael Nicholson, executive vice-president of marketing, sales, and quality; and Peter Scott, regional vice-president of marketing and sales.

I know you've been brought up to date as to the presentation. Then we'll move right to questions.

I'm sorry for the delay. We did start a few minutes late, and I knew there were questions for the other group that members wanted to ask.

I'll ask you to please proceed.

10 a.m.

Gregory Aziz Chairman and Chief Executive Officer, National Steel Car Limited

Thank you.

Mr. Chairman and members of the committee, good morning. I'm Greg Aziz, chairman and CEO of National Steel Car.

I'll whip through this as quickly as I can.

National Steel Car—I have up here a picture of our factory, located in Hamilton, Ontario—is the last remaining railcar manufacturer in Canada. We're also one of the largest in North America. That factory you're looking at is over two million square feet on 75 acres.

National Steel Car was founded in 1912 in Hamilton. We're celebrating our 100th anniversary this year. We employ 2,000 people. We've hired over 1,200 people in the last 18 months. We are the largest single-site railcar manufacturer in the western hemisphere. We're the only Canadian car builder. We have five production lines at this factory. We've invested over $350 million over the last 15 years in plant automation and advanced manufacturing technologies.

We're here to talk about the renewal of the Canadian grain car fleet. As Canadian farmers sell their grains into a competitive global market, one of the biggest impediments to their success is the inefficiency of our current railcar fleet for carrying grains. We believe the most effective way to enhance Canadian grain farmers' competitive position in world markets is to replace this current Canadian grain car fleet, which is obsolete. It's past its useful life. It is inefficient from a variety of standpoints. The design is outdated. Most of these cars were built in the early 1970s. At the time, the gross rail load allowed on North American rails was 263,000 pounds. That was raised in 1995 to 286,000 pounds. The gross rail load is the combined weight of the empty piece of equipment and what it's carrying. Some 20,000 pounds of additional grain can be carried in new modern equipment.

So the design is outdated. The carrying capacity is much lower than what is currently available in the marketplace. There are loading and unloading inefficiencies in the old fleet compared to what's available today. The dimensional envelope is outdated. There is a high cost of repairs and maintenance due to obsolete replacement parts.

I couldn't help but notice that your previous fellow who was testifying on behalf of CP Rail.... The reason the bears are getting killed is that the grain is leaking out of these old cars. That's how inefficient they are.

What National Steel Car is proposing is the new car that you see up on the screen, which is far more efficient.

One of my colleagues here will go through and talk about the efficiencies of the new equipment we're proposing, which was designed and patented by National Steel Car.

June 12th, 2012 / 10:05 a.m.

Michael Hugh Nicholson Executive Vice-President, Marketing, Sales and Quality, National Steel Car Limited

Some of the key benefits to the grain producers are the efficiencies—again, a 23% increase in capacity. There is greater efficiency and performance across the entire supply chain. There's a lower carbon footprint for the sector.

As Mr. Aziz mentioned, the gross rail load is the maximum load that can be moved on rail, combining the empty weight of the railcar and the lading weight of the payload. Our next-generation fleet provides for a 9% increase in the gross rail load. The cars can be up to 4,000 pounds lighter than the existing fleet. That translates into a carrying capacity or load limit of the car that adds an additional 27,000 pounds more grain. There's an increase in cubic capacity of 15.5%. On a train-start basis, there will be nine additional cars in every train start.

These are significant improvements.

10:05 a.m.

Chairman and Chief Executive Officer, National Steel Car Limited

Gregory Aziz

The reason for this is that this car is shorter than the older cars. Thanks to modern design, we have the ability to build a car that is shorter than the older cars and lighter than the older cars. However, as you go through the figures there, you can see that it carries much more and has a shorter envelope, which allows in a normal train an additional nine cars.

You know, we talk about the carbon footprint being lower. Those nine cars basically travel for free once you get a train start.

10:05 a.m.

Executive Vice-President, Marketing, Sales and Quality, National Steel Car Limited

Michael Hugh Nicholson

Again, on a train-start basis, on an 8,000-foot train, we're looking at a 20% increase in capacity. So again, there is more loading efficiency. This is good news for all the stakeholders. As Greg mentioned, there are nine additional cars in that 8,000-foot train.

There are three discharge gates on the next-generation cars, which provides a 25% reduction in the handling of the cars. The current fleet is, on average, more than 35 years old. The newly constructed cars will be designed for a 50-year life, whereas their predecessors had a 40-year life. Again, there's a 25% increase in the design life of a modern and efficient fleet.

As the railroads continue to increase train length, these improvements will only improve. On a tonnage basis, there will be an additional 16,000-plus tonnes of grain per train start. There will be more than 145,000 cubic feet of additional grain, which is, again, a 23% increase. These are significant benefits.

Our summary of the economic assessment, assuming a replacement program over three years, shows that this would result in 2,600 direct jobs. That would translate, conservatively, into more than 10,000 induced jobs.

Steel tonnage would be 285,000 tonnes of steel. The Canadian content would be 75%.

The supply chain for this project reaches right across Canada. I won't read out the details, but these are suppliers who can provide components in the assembly of the rail cars.

10:10 a.m.

Chairman and Chief Executive Officer, National Steel Car Limited

Gregory Aziz

In summation, replacing the current obsolete and inefficient grain car fleet will increase the efficiency of grain delivery, enhance the performance of the entire supply chain, and lower the carbon footprint of the sector, because we're moving far more grain with far less equipment and far fewer train starts. It will create over 15 million hours of direct employment across Canada and will deliver innovation, yielding enhanced competitiveness for all stakeholders. It will elevate the supply chain performance to compete in the 2020 global marketplace, and it will provide Canada with the most modern grain car fleet in the world.

We'll take questions now.

10:10 a.m.

Conservative

The Chair Merv Tweed

Thank you.

Go ahead, Ms. Chow.

10:10 a.m.

NDP

Olivia Chow Trinity—Spadina, ON

What barriers are you experiencing in trying to upgrade your technologies or in getting the new cars onto the market?

10:10 a.m.

Chairman and Chief Executive Officer, National Steel Car Limited

Gregory Aziz

We're not experiencing any barriers in the United States. As a matter of fact, we've manufactured these cars for several of the American railroads. We'd like to see them in the existing Canadian fleet, which comprises approximately, I think, 11,000 cars now.

10:10 a.m.

A voice

They've been reduced from 16,000.