Evidence of meeting #62 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 customers.
A recording is available from Parliament.
4:55 p.m.
Voices
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4:55 p.m.
President and Chief Executing Officer, Cando Contracting Limited
I didn't like it for 30 years when I was going into it, but now that we're there and are part of the team, we can work on it.
So if there's a patchwork and a question of whether or not it applies to you, in this case it's federally regulated, and there are provincially regulated railways. We are all just a bit different in how we operate under these regulations, and when there's a little bit of difference, we always get into an argument about who's right and who's wrong.
4:55 p.m.
NDP
Philip Toone NDP Gaspésie—Îles-de-la-Madeleine, QC
Maybe I could ask for a better understanding of how there is coordination between your bodies. Do you solicit the governments to try to have coherence within the regulatory structure? When provinces come up with their own regulations for their provincially regulated railways, do you solicit them to try to be coherent among the provinces?
4:55 p.m.
President and Chief Executing Officer, Cando Contracting Limited
We're trying more and more, but for the railway association, the reality is that it went from ground zero 10 years ago, or a little longer than that now. Many provinces didn't have any regulations at all relating to rail, so when it came to provincially regulated lines, they said, we don't know. Many of them just defaulted to the federal examples to try to do it. We find that some provinces are a little stronger than others. If we take some communities—Barrie, Collingwood, Orangeville—they step up to the plate.
To talk about the cost of infrastructure and so on, they have to pay us to operate those railroads every year, and these communities don't take in what they pay out for that; it costs them money to keep the railroad open. They've chosen to do it because they think it's important for their community, just as they do with their roads: they keep their roads open because they think it's a good deal.
But that is two communities out of, how many communities do we have in Canada that do it? I can name you literally 10 or 20 communities, examples in which we have tried to work for them and have said, if you'll support this, we'll operate the railroad; we'll buy it from Mr. Finn and we'll run it. But do you know what? They say no, not only will we not support it, but we're going to tax you on your railroad also.
I'll give you an example. On our railroad in Winnipeg we pay $400 a mile in taxes in the rural areas, outside the city of Winnipeg; we pay $10,000 a mile within the city of Winnipeg. It's a $150,000-per-year tax grab by the City of Winnipeg from our little short line for a couple of miles of tracks, because of some historical red tape years ago concerning how they figure out the tax system. We've been for seven or eight years trying to unravel it.
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Some hon. members
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Conservative
The Chair Conservative Larry Miller
—and again I was very generous.
Mr. Adler, you have five minutes.
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Conservative
Mark Adler Conservative York Centre, ON
Thank you, Mr. Chair, and I want to thank all of the panellists for being here today. I have a couple of questions.
Ms. Paul, you mentioned earlier that until about 2007-08 the conditions were not great in terms of railway performance, on-time delivery, all that that sort of thing.
What were the conditions, what environment led to the change happening in 2007-08?
5 p.m.
General Manager, Service Delivery, Canadian National Railway Company
It was really before 2007-08. We implemented what we call our scheduled or our precision railway. So we had a lot of insular focus on ourselves in managing our traffic patterns, how we were going to move and block and marshal the traffic from our hub-to-hub. I think what came out of the rail freight service review was that we were very good from hub to hub; it was just, as we've been talking about, the first mile, last mile, and the intricate connection to our customers, that needed work.
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Conservative
Mark Adler Conservative York Centre, ON
Can you talk about why you responded in the way you did? What led you to make that decision?
5 p.m.
General Manager, Service Delivery, Canadian National Railway Company
You can only cost-cut so much; we really needed to grow the business. Our strategic agenda is to grow our business and our revenues and to help our customers succeed in the markets.
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Conservative
5 p.m.
General Manager, Service Delivery, Canadian National Railway Company
No, it was our transformation; it was our process. I guess I could link it to having a beautiful, shiny car: if the engine doesn't turn over, it doesn't matter that the windows roll down and that you have air conditioning and all those other things. We needed to get the engine of the car right first, and that's why we spent so much time.... As I said, it's a very complex supply chain type of business. So we got the car running, got the engine looking good, and now we can work on the other parts of it.
5 p.m.
Conservative
Mark Adler Conservative York Centre, ON
Okay. So say from the period of 2007-08 to now, there's been a steady increase in productivity, technology, and performance. Was it those market conditions that led you to that better performance? Was it just the discipline of the market?
5 p.m.
General Manager, Service Delivery, Canadian National Railway Company
Are you asking if it was because we had a downturn that we were able to do all of these things?
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Conservative
Mark Adler Conservative York Centre, ON
Well, from the downturn to where you are now, was it the discipline of the market that made you more competitive and productive?
5 p.m.
General Manager, Service Delivery, Canadian National Railway Company
I would say that we fight every day for traffic and to compete with CP, to compete with trucking, and to compete with pipelines. Our discipline in our operating model and how we deliver every day has certainly helped us in terms of the product we're delivering, but it's all of the other things as well—all of these customer connections and the ease of doing business with us. Those are all decisions people make when they come on our lines and move traffic with us.
5 p.m.
Conservative
Mark Adler Conservative York Centre, ON
Earlier, Mr. Bourque was dispelling one of the myths about the marketplace not being a true marketplace, but more of a skewed marketplace. In your opinion, has it been a true marketplace for the last, say, half dozen years?
Mr. Bourque, do you want to...?
5 p.m.
President and Chief Executive Officer, Railway Association of Canada
The way I look at it is that there was an evolution. It was only 18 years ago that CN was privatized from a crown corporation. We forget that. That's a tremendous transformation in less than 20 years.
As Shauny was saying, the focus on precision railroading was a focus on cutting costs and productivity, but you can only cut costs so long and then you have to start focusing. You guys heard all the customers scream and you started some processes. I think you deserve credit, because that focused our collective attention on the customer and then we started to have to invest more in the customer. By then, the trains were running pretty efficiently, and they continue to do so.
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Conservative
Mark Adler Conservative York Centre, ON
As a government-run operation, then, CN.... I mean, you inherited what was this government-run operation, this big, lumbering, overweight beast.
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President and Chief Executive Officer, Railway Association of Canada
Well, I love the term “precision railroading” because—
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President and Chief Executing Officer, Cando Contracting Limited
It's called the pig that flew.
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Voices
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Executive Vice-President, Corporate Services and Chief Legal Officer, Canadian National
A good example of an operating market would be grain. As I said before, up until 2010 we would measure our on-time grain performance to the week. For a grain elevator, we would say “We'll get you a car between Monday and Friday, give or take a couple of days.” But because of market forces, with the Wheat Board being transformed and with CN and CP becoming a lot more efficient—we were fighting for every grain car we could get our hands on—in the case of CN, we started to measure our performance to the day, give or take hours of delivery. What did that do? It innovated the whole industry. Because the market played its role, with the business going to who was performing best, all of a sudden the whole industry—us, CP, the grain elevators—started to realize that this was a supply chain approach and the market was demanding that we get better at it, which we did.
The best example is that the market share moved a bit. CP then decided that they too thought it was important to have a scheduled railway approach for grain cars, which is a perfect example of the market forces playing out.