I'm joking.
I run CN, which is the largest Canadian railroad, and I believe it is the true backbone of the Canadian economy. I believe the rail industry is absolutely essential to our country's prosperity. We have long distances in Canada to cover and rail is a very important part of the economic fabric of this country.
In fact, CN alone touches about $250 billion worth of goods every year. We helped Mr. Gratton this year hit a new record in terms of exports in the mining industry. Our potash movements are surging at 155%. As we speak, we are moving more propane to more markets than at any other time in our history.
If I look at 2012, every month in 2012 was a record in our history. We are well above any volume of shipping we've ever had in the history of the rail industry. That's because we are not only doing what we are supposed to do in terms of serving the Canadian economy, but we're also gaining market share against other modes of transportation at a very fast pace, which is indicative of pretty good service and a well-functioning rail industry.
It was not always like this. Twenty-five years ago, the railroad industry in North America was in dire straits. CN and CP were not different. We had two carriers in Canada that were heavily subsidized by taxpayers. We had railroads that were not profitable enough to reinvest in their equipment and infrastructure. We were lagging in safety and in innovation and service. In fact, CN was worse than CP in this regard at the time. We were a crown corporation, a heavy burden to the Canadian taxpayer, and not particularly innovative in any aspect of our operations. That was 25 years ago.
Fortunately, through successive good government policies, started under a Conservative government and continued with Liberal governments over many different leaders, we had a slow but gradual deregulation of the rail industry that allowed for a remarkable transformation of the industry, which leaves us in an enviable position today. I believe that Canada has one of the best rail systems in the world. We clearly have the lowest rates of any OECD country in terms of freight rail, which is important for Canadian shippers given the distances. We have, overall, very good service, and I will come back to that.
CP is the leader in the entire rail industry for safety. CN is the most profitable railroad of any rail carrier in North America. Both CN and CP are serving their customers and shareholders very well.
It took 25 years of good public policy and a lot of hard work by the two rail carriers, in partnership with their customers, to get to where we are. It would be very important for this government to give a lot of attention to maintaining the condition of that success and not turn the clock backward in the direction of re-regulation.
Personally, I believe that good public policy starts with evidence. I do regret that many of my colleagues and partners, customers and associations, are letting their advocacy get ahead of them and are not always following the facts.
I would ask you to turn to page 3 in the short document I submitted in both languages, and I will tell you a little about CN's service record.
We can measure this in many ways, but if you look at it in a few very important ways, perhaps the most important dimension of service in the rail industry is order fulfillment. I'm talking here about order fulfillment for merchandise traffic such as propane, chemicals, forest products, the concentrate or metal sector in the mining industry—things that move in one car. Our order fulfillment, which is measured in terms of unconstrained demand, has gone, over the last couple of years, from 88% to 95% on average.
The rail sector is not as flexible as trucking. To achieve 95% of unconstrained demand is world-scale performance. There is no question that we can always do better, but the hard facts, which I have for any of my customers in any one of the sectors in any one of the geographies, are that we achieve, on average, in excess of a 90% order fulfillment.
Meeting an order is one thing; bringing the car at the right time of the day is another important dimension, which is something we did not even measure three years ago. Today we actually measure it. We call it switch window performance or timely placement of cars. We were at 84% in placing the cars in the window we promised to customers last year.
Spotting, which is for the grain sector...in the countryside we are at 82% to the day. A few years ago, we were measuring ourselves to the week. Today, we have a scheduled grain plan and we actually have a fixed service every week. We come in every week at the same time during the day, and we meet that threshold within the day 82% of the time.
Some have said, and I heard some say yesterday in front of this committee, that our cars are not of good quality, that as much as 20% to 50%, depending on the day when they quote the statistics, of our cars are not functioning well. The reality is that our car reject last week was 2.1%. We had 64 cars in our entire network last week that were rejected by customers. We don't agree that every one of those cars needed to be rejected, but the total, if we take it at face value, is 2.1% of our cars that are rejected.
Mr. Chairman, the important point is that we have good service. It's not perfect. As we speak, we are going through a very difficult winter, and our service is very difficult. But service matters, because if we don't have good service we lose the business. The hard reality—and that's been another key element of the advocacy of the association, trying to portray railroads as monopolies or somehow that the market for rail services is not balanced. The reality does not at all follow those statements. Railroads in fact for decades have lost market share. I will give you one statistic. Forest products were a very prominent group advocating that railroads have an unfair advantage or abuse their position. More than half of forest products in this country don't even move by rail; 55% don't move by rail. Of the 45% that move by rail, about 40% are dual-served by two carriers. For the rest, which is less than 20% of all movement of forest products, you could argue whether it actually has a competitive option or not.
In fertilizer, close to 100% of potash shipments are served by two carriers. In chemicals, more than 65%, unlike in the U.S., actually have dual access, two railroads serving them. In coal, in distant mines where we are lucky to have one railroad, of course, there is one railroad, but it is a bit of an irony to say that when you're lucky to have a railroad serving your line, you are somehow becoming a captive shipper. We have mines all over this country at the moment that would like us to build rail lines to serve them. I sometimes tell them, how ironic would it be if I agreed to build a rail line and the next day you said “I am captive to you”?
The reality is, there are competitive options. When we serve Teck out of Quintette next year, or out of their mines in southern B.C., we're competing with Australia; we're competing with other countries. If we don't have a good mining product and a good service product with railroads, we simply don't ship the coal.
We are competing every day, Mr. Chairman. We have a well-functioning rail industry, and we have 25 years of gradual and slow deregulation that has made an industry in this country that should be the envy of the world.
You should beware of regulation, because it is a very fine balance. I would prefer that we protect the commercial framework. I would prefer that we avoid regulating and that we keep a watchful eye on the railroads and make sure they continue to improve. But if we are going to need a new regulation, I would ask you to be very wise, to follow the evidence, not the advocacy, to be mindful of unintended consequences, and to protect the network nature of the business.
I'll finish by saying that I was appalled yesterday to hear the Coalition of Rail Shippers say that we should exclude the word “network” from this legislation. Railroads are not a taxi service. We cannot switch every customer who is first on the rail line. If we don't take into account the operational and the network nature of our business, we might just create a very slippery slope that will not be good for Canada.
You should focus on those customers who actually have no choice. If a customer has no choice, maybe there's a need for regulation. If he or she already has choices, you should let the market play. You should start with mediation, and you should make sure that the arbitration is done by the CTA because they are the only ones who have the experience to do it right.
Thank you.
