CALGARY, Alberta — Canadian Pacific and Kansas City Southern continue to test interline moves linking Canada, the U.S., and Mexico as a prelude to eventual single-line service once their proposed merger is approved.
The railroads have operated six or seven international intermodal trains from the Port of Lazaro Cardenas, on Mexico’s west coast, to Chicago, CEO Keith Creel told investors and analysts on the railway’s earnings call on Thursday morning.
The transit time from the dock at Lazaro to arrival at Bensenville Yard in Chicago was seven days, which Creel says is competitive with alternate routes from the U.S. West Coast.
CP and KCS also have teamed up for domestic intermodal service linking Chicago and Laredo, Texas, on the Mexican border. The trains have made the run in 90 hours, which is just an hour longer than the best currently published rail schedules between Chicago and Laredo, Creel says.
The transit times will be reduced to 80 hours, Creel says, once Canadian Pacific Kansas City boosts capacity with $275 million worth of expansion projects that will add and extend sidings on both railroads and install centralized traffic control on CP’s line north of Kansas City.
The railways also have operated several grain trains from Manitoba to destinations as far south as Mexico City with what Creel calls “super impressive cycle times.”
“We’re demonstrating with our customers what the art of the possible is,” he says. “And again, we’re just sticking our toe in the water. And this is not what we’ll be able to do — this is what we can do today on an interline basis.”
The existing joint CP-KCS moves of so-called DRUbit trains of heavy crude bitumen from Hardisty, Alberta, to Port Arthur, Texas, on 12-13 day cycle times are a proof of concept for commodities that the merged railroads could export via the Gulf of Mexico, including grain, coal, and fertilizer, Chief Marketing Officer John Brooks adds.
Creel also addressed one-person crews, problems other railroads are having implementing Precision Scheduled Railroading operating models, and national rail labor contract negotiations in the U.S.
Two-person crew rule is shortsighted
Creel says the Federal Administration’s proposed two-person crew rule, which was officially introduced on Wednesday, was disappointing. But he also seemed skeptical of one-person operation anytime soon given the problems trains can encounter on the main line.
Until pull-aparts and other mechanical issues become exceptionally rare, rather than normal occurrences, Creel says one-person operation doesn’t make much sense.
“When you put a train together there’s a lot of moving parts. And those moving parts historically have created some challenges. So If a train separates and it’s 10,000-foot long and you don’t have a man or a woman to assist the engineer, that can get complicated,” Creel says. “That’s something I’m very sensitive to.”
CP is working with suppliers to improve the reliability of freight car and locomotive components. Once technology and components allow safe, efficient, and reliable service, railroads should be allowed to operate trains with one person in the cab, Creel says.
Under a two-person crew mandate, railroads would be put at a disadvantage considering federal efforts to encourage the development of autonomous trucks. And that would mean that railroads would not be able to compete as effectively as possible to divert freight from road to rail as part of efforts to reduce carbon emissions. “To me, that’s troublesome,” Creel says.
Creel says he will continue to work with the FRA. “I just hope as the discussions evolve around this topic that we really think about the unintended consequences and think about the totality of what’s being suggested,” he says.
Precision Scheduled Railroading will succeed
Creel was asked whether ongoing service problems at the big U.S. railroads are a sign that the Precision Scheduled Railroading operating model is broken.
Railroads have to have the right number of crews, locomotives, and cars — along with the capacity to handle them, Creel says.
“Different railroads have had various levels of success,” Creel says, partly due to the impact of the pandemic and related crew shortages.
“If you don’t have people trains don’t move,” Creel says. “Some things have occurred in the middle of PSR implementation that quite frankly stack the deck against these other railroads.”
As the railroads return to full train crew staffing levels, they also will need to make sure their passing sidings and terminals can handle longer trains, Creel says.
“You don’t do a lot of good to run a 10,000-foot train and it’s got nowhere to land. If you’re sitting outside of a terminal, and you can’t get into the terminal because the train’s too large, there are unintended consequences,” Creel says, like depriving an outbound train of power or tying up a main line while doubling out of a yard.
The U.S. Class I systems are experiencing “growing pains” with PSR, Creel says, noting that CP, Canadian National, and Illinois Central didn’t get everything right under their operational changes under his mentor, the late E. Hunter Harrison.
But he says CP — which has grown faster than any other big system since 2017 — is proof that PSR works.
“And I think that eventually, the industry will get there as well. It’s just taking a little bit of time,” he says.
Stay away from national negotiations
As a Presidential Emergency Board aims to get stalled national contract negotiations moving toward a settlement, Creel was asked what he thought of the process. CP negotiates separately with its unions and does not participate in the national contract talks.
“I try to stay away from national bargaining … I think that [with] local bargaining, you come to the best solutions that fit your employment base,” Creel says. “On a national level, how do you get four railroads and multiple unions with multiple different sets of expectations to all get aligned in one common vision? I think that in and of itself it’s a challenge, so I wish them success.”
CP’s train crews in the U.S. operate under an hourly contract with the railroad, which pays them more in exchange for removing the distinction between yard and road crews. “Our employees are very productive, and they make a lot of money for that productivity,” Creel says.
What struck me was the admission that the argument about two person crews is largely theoretical and political rather than practical. A one person crew can not efficiently handle a long train if it breaks. You get no fluidity if such a train is stuck on a mainline.
One person crews may never make sense here because American standards of maintenance of track and equipment will likely never make it possible. You would have to work it the Japanese way (always on time, no excuses, top maintenace, not just enough to get by.)
You won’t see that as long as the tax code rewards short term gains.
The only way autonomous trucks can become a reality is for roads to be built that are completely separate from other traffic.
I wonder if Mr. Creel is aware of Walmart Canada introducing 60 foot semi trailers to their store delivery network for testing in Ontario, with of coarse special permission from the government to be on the roads.
Will prove interesting if these trailers make inroads and are the next looming threat to more rail business.
CP has been handling 60 foot Canadian Tire containers for several years, so this should not be any surprise.
I was totally unaware of that Donald.
There is a P&G warehouse near here where I’ve seen long intermodal boxes and I thought it was my eyes, learned something new today.
So I have to wonder how long it will be now before the next generation of over the road trucking moves away from 53 foot to 60 foot trailers.
That’s what my original comment was referring to, more potential lost business for the rails due to efficiency.
Mr. Salisbury, referring to Mr.Ottesen’s reply to your post below, are the Walmart Canada “60 foot semi-trailers” to be operated autonomously?
Mark, Walmart Canada is not using driverless trucks with these 60’ trailers. They are being driven with drivers in conventional tractors.
Here is the link to the article in Transport Topics;
https://www.ttnews.com/articles/walmart-canada-adds-60-foot-multizone-refrigerated-trailer
The dismal performance of the Union Pacific and it’s way of pissing away customers ever so swiftly should give ample room for the kcs and cp to compete with them and the bnsf for Mexican port container traffic to the states. Heck it takes the up and bnsf 90 hours to just get to the California border here out west so I can’t imagine they are handling anything any better in Texas.
“And that would mean that railroads would not be able to compete as effectively as possible to divert freight from road to rail as part of efforts to reduce carbon emissions. “To me, that’s troublesome,” Creel says.”
I have now heard it all! Two man crews are contributing to climate change so we need to go to one man!
As for warehousing in greater Chicago: Colliers International report that showed 16.4 million square feet of new warehouses sprouted in the third quarter, almost double a previous record set two years ago, as the vacancy rate for speculative space dropped to an eight-year low of 13.4 percent.
“Demand is through the roof,” said Craig Hurvitz, the firm’s vice president of market research. “We are not only seeing users consolidating and growing in the market, but we’re seeing new users come into the Chicago market that’s never had a presence before.”
Build-to-suit made up 68 percent of industrial space built during the three-month period. Of 24 projects, eight fit that category, totalling 11.2 million square feet. They include two five-story Amazon warehouses in suburban Markham and Matteson that contain 7.2 million square feet.
Some 24.6 million square feet was under construction in the third quarter. The largest building was a 1.2 million-square-foot facility for furniture e-commerce company Wayfair on Renwick Road in Romeoville. That project is expected to open in mid 2022.
However, the area just west of O’Hare & Bensenville are still the leaders in the Chicago metro for industrial development.
So eCommerce warehousing is showing the most growth on the southside since (I surmise) it is coming in on containers from the west coast.
However unfinished materials for production are still (for the most part) headed to the NE corner of DuPage County where Bensenville resides. I don’t know which is driving which. Does the presence of CP-Bensenville and UP-Proviso drive the placement, or vice versa?
Mr. Rice, I strongly beg to differ. O’Hare is a legacy market with many older buildings, generally classified as Class B and Class C. Recent development has been driven by air cargo growth at O’Hare (which includes e-commerce). In the O’Hare market the freight railroads are largely irrelevant. The one exception are the few legacy users remaining in the Centex Industrial Park which is now 50+ years old (served by UP and CPR).
By contrast most of the Will County market is Class A and driven by import intermodal. The fastest growing Chicago area intermodal terminal is in Joliet (Global IV) NOT Northlake (Proviso). The largest rail intermodal terminal by annual lifts is BNSF Logistics Park Chicago which is nowhere near O’Hare.
Mr. Giblin, I thought the same as you except I looked up the CMET report myself because I wanted to confirm the first paragraph made by the guy from Colliers and where that growth and activity was.
Please see that I making a distinction. Finished materials ready for sale and warehoused, and unfinished product awaiting final assembly.
Warehousing is growing in the south in and around Joliet but industrial production work is still quite active in the Bensenville area overall.
I wish I could post more links for this info but when I do the blog filter blocks my posts.
I agree that the O’Hare district is legacy and you won’t see any large scale build outs (like the 5 story Amazon building !).
Production work in Bensenville is just barely alive…
One of the largest industrial developments in the Chicago Region in recent memory is the new Lion Electric plant in Joliet. They will be the largest electric school bus plant in the US. They are literally just down the road from Weather Tech Premium Floor Mats in Bolingbrook which recently announced an expansion. LB Steel in south suburban Harvey fabricates parts for Amtrak. And the largest industrial parts facility in Chicago is still the Ford Motor Assembly Plant on South Torrance Avenue. (Logistics Park right next door on former steel mill site.)
How true. Creel can lay down the BS with best of them…
But don’t forget the trucking industry’s new HOS regulations. Drivers are now basically at 10 hours on, 10 hours off. Average case scenario for the trucker is a 40-hour transit, i.e., 20 hours of driving plus the 20 hours of rest time, assuming no required HOS re-set. If the rail rate is competitive then the railroad has a chance.
I of course don’t know much but 90 hours between Laredo and Chicago. If I do a google maps drive directions it is a 20 hour drive. Seems like 90 hours is pretty slow if you are trying to compete with trucks.
Mr. Creel is living in a fantasy world with his proposed Laredo to Chicago intermodal schedules. First, he will have to time the Chicago arrivals just right in order to miss the Metra morning and evening rush. CP will NEVER have the kind of track capacity BNSF and UP-West have.
Second, once he gets the containers to Bensenville or Schiller Park the BCO’s will still have to get them down to Will County, which is where most of the Chicago Region’s warehouse capacity is now. I-294 is the most heavily traveled (and most heavily congested) highway in the region and most of that traffic consists of commercial trucks. Bensenville to Elwood could easily take 6-8 hours of travel time one way or more depending on time of year. And Chicago continues to have a shortage of drayage drivers.
By contrast, UP’s Mexico intermodal business arrives at Yard Center in south suburban Dolton, only a few miles from Will County. UP also has the option of using Global Four, their own Joliet intermodal terminal.
Agreed. Also Lazaro Cardenas is a full week sailing longer than POLA/POLB. The CPKC routing is slow and curvy. No one is beating the ex-MP route from Laredo to Chciago..