CPKC CEO touts merger’s cross-border performance, impact on automotive supply chain

LOMBARD, Ill. — The man behind the rail industry’s burst of cooperative competition (or, if you prefer, competitive cooperation) came to the Midwest Association of Rail Shippers Winter Meeting — an event focusing a lot of attention on such alliances — and said it was all good.

Understandably, CPKC CEO Keith Creel said his company’s products were better than those of the other guys.

Creel, in a wide-ranging assessment of the first nine months of the Canadian Pacific-Kansas City Southern union, also addressed other ways that the merger has helped the supply chain, among them its impact on the automobile industry.

Exhibit A in the railroad’s ability to offer cross-border service are MMX (Mexico Midwest Express) intermodal trains 180 and 181, launched last May between the Bensenville terminal outside Chicago and key markets in Mexico — about 2,300 miles to Monterrey, and another 400 to Mexico City.

“That train is running truck-like reliable — 94%, 95%” Creel said. “I look at it every day. It’s running like clockwork. We said it was going to get there in 98 hours. We are consistently, reliably getting it there 94, 92, 93, 94, both ways. Reliable service to grow with our customers, to create a backbone for new supply chains to take trucks off the road for the environmental benefits. So again, we’re doing what we said we would do. We’re extremely pleased with and look forward to continue to grow with partners on that train.”

And, he noted, CPKC is not alone in serving this market, with advent of the Canadian National-Union Pacific-Ferromex Falcon Premium service.

“Imitation is the greatest form of flattery,” Creel said. “That Falcon train that they advertised, not long after we put our train into play — there’s a lot of trucks in the world. There’s an opportunity for that service. It’s a different service experience. We have the most reliable route, we have the seamless border, we’re the only single line. … When you interject two or three different handoffs and interchanges, you lose reliability, you lose efficiency, you lose velocity. So they’ve got a great product. Not as good as ours, still a great product.”

And, he noted, that competition relies on the Eagle Pass, Texas, border gateway. “And I think we’ve all seen, watching the news, some of the challenges that are associated with immigration — macro challenges that obviously would impact some of the service of that corridor.”

On that score, Creel said he now appreciates at least one aspect of the operation he inherited from KCS de Mexico even more.

“I never understood why and how we justified the kind of money that KCS spent on security in Mexico,” Creel said. “… It’s a lot to digest. It took me a lot of meetings. But I’ll tell you, over the last nine months, and specifically the last three or four, thank gosh they did. Because we have created the most secure border crossing between the two nations, at a time it’s never been needed more. It’s a different outcome. The challenges that I talked about before that Eagle Pass has experienced, and they’re having to work through … we don’t have the same situations in Laredo.”

The key difference, he says, was KCS’ work to develop international crews qualified to bring trains from Mexico into the Laredo terminal, while trains must stop and change crews on the international bridge at other gateways. While UP emphasizes that the current migrant issue at the border does not involve entry via freight trains, Creel notes the difference the ability to keep the trains moving creates when “you think about fluidity, you think about security, you think about different customer experience.”

A ‘closed loop’ for auto business

Creel also said the merger has allowed him to fulfill a longstanding dream to be part of a “closed-loop supply chain” for finished vehicle dating to “my prior life when I worked in Michigan, serving General Motors … and got yelled at a lot about having enough railcars.”

The problem, he said, was that his railroad would load the cars, hand them off in Chicago, and then be dependent on another railroad to deliver the loads and return the empty auto racks.

“But if you’re shutting down manufacturing lines, they don’t care about your reasons or excuses. Never comfortable,” Creel said, saying he had said at the time, some 27 years ago, he would like a situation where he could create his own supply of empties — “where I could load ’em like a conveyor belt, take them to market, offload them, reload them on the other end, and come back the other way.

“Well, guess what? That’s what CPKC is. It’s unique. We can load ’em in Canada; we can load ’em in the U.S., we can bring them to Midwest markets. We can invest more. We can build an automotive unloading facility.” The company opened one in Bensenville, Ill., last year and is about to open one outside of Dallas (“Guess what? It’s already sold out,” he said.)

“So you take the empties out of Texas, you take them down to Mexico, you reload ’em again. We created this virtuous loop. That’s a powerful opportunity. And if you think about the way this industry works, and the way automotive works, it’s not just the finished vehicles, it’s the parts that make the vehicles. It’s the parts that get made in Mexico to make the vehicles that are produced in the Midwest or in Ontario. It’s the parts that get made in and around Chicago and the Midwest that need to go to Mexico to make the vehicles in Mexico. Again, the virtuous supply chain. …

“You’ve got the bookends for the automotive supply chain. You’ve got automotive parts. You’ve got partnerships we have like [trucking company] Schneider, that we’re connecting with as a strategic partner on that train for first mile, last mile, to work with the GMs of the world, the Stellantises of the world, the Fords of the world, to get their parts to the railhead. …

“It would never have been possible before without this merger being approved.”