“Right now there’s pushback with PSR because customers don’t understand it. Change is always scary. Some railroads have done it very aggressively, and I’ve been part of those aggressive marches myself in my career,” Creel told an investor conference on Tuesday.
Creel worked at Illinois Central, Canadian National, and CP, where E. Hunter Harrison implemented PSR. Harrison went on to become chief executive of CSX Transportation in 2017, where his quick operational changes initially led to disruption, shipper complaints, and increased regulatory scrutiny.
But after CSX righted its ship and reaped the financial rewards of PSR, the industry took notice. Union Pacific, Norfolk Southern, and Kansas City Southern last year began adopting their own versions of PSR but are treading carefully as federal regulators are watching closely.
Eventually, shippers come around and realize they can cut the size of their private car fleets and save money in the process, Creel says.
“I’ve been with customers that would have fought me tooth and nail three years ago,” he explains. “Customers that left us three years ago because they didn’t want to go through the pain and suffering of PSR on the railroad, that now are coming back and they’re trusted partners.”
CP has regained some market share in intermodal, automotive, and merchandise traffic over the past two years.
“And they’re like, you know, ‘We just didn’t want to be here for the fallout. And now that you’ve got the capacity, we want the service, we want the reliability,’ ” Creel says. “We can grow in the market because we’re more reliable for our customers. You can grow together. That’s a beautiful thing … It’s an evolution. It does not happen overnight.”
With the backing of shippers, Creel says two Class I railroads could at some point approach the U.S. Surface Transportation Board with a merger application that meets the tougher standards that require any combination to boost competition and improve service.
“Once customers understand they can trust it, and they experience the value in it, then you get to the point down the line where I think two like-minded railroads will see the customer value in creating a longer network that has more capacity, less handoffs, better service offering,” Creel says. “And then you get to a discussion where you can talk about pro-competition. You can talk about pro-service. You can go to the STB with a compelling value proposition and I think you come to a world … where customers will be proponents, not opponents.”
Creel, who spoke at the Bank of America Merrill Lynch 2019 Transportation Conference, says it’s unlikely railroads would look to merge anytime in the next five years.
I feel like this is a warning to everyone but done to not offend the company.
This is one of the scariest articles I have ever read…
1) H.H. admitted to the sole reason for PSR and that was on can now almost gut their rail line and have the same revenue with lower over head sounds great right? But we live in the real world and there is always a cost for everything and you can’t just magic money to the share holders. The cost of PSR is service and reliability and H.H. realized that all of the Class 1s are Duopolies at best but for significant swaths of both the US and Canada Monopolies. So with this once we got to the current railroad landscape almost every shipper that could switch from railroads has and the only ones left are those that have no other choice (Also the reason for the resurgence of cargo boats on the Mississippi). Which is why the shipper came back not that they had a renewed faith but that they are in cable of outlasting these out right over sized lines and in some cases that are illegal, which takes us to point number two.
2). The merger can happen again and there are provisions for it. During the 70s and 80s a lot of anti-trust laws were blatantly over look or repealed giving us the competitionless network we have today. This was done to “save the companies” but in all honesty wasn’t necessary. The Sherman Anti-Trust act of 1890 very specifically was designed to prevent the creation of what would become BN by banning the GN, NP and Q from merging which is the core of the BN. This would be fought several times most notably in 1902 when the order was given to break up the Northern Securities Company (Holdings company of the GN, NP &, the Q) and in 1904 with Northern Securities Co v. United States. The UP and Harriman would also lose their suit putting it on the book the UP and SP are not to merge. The Eastern and Canadian roads got a loophole with Conrail and the CN nationalization and re-privatization but something about spirit vs letter of the laws should have applied. This is not to say lines should not have merged they just should have had different partners to keep competition and make more complete systems instead of Du/Monopolies and definitely should not have been allowed to remove the infrastructure (yards, shops, entire lines) that would have been needed to undo this mess. So going back to future mergers after the UP-SP merger and melt down to put a halt to mergers the STB issued a rule if any two Class one that operate in the US are going to merge (This includes CP and CN) and if it is approved after merging they must hold to and meet or exceed the same level of service and price for perpetuity, upon failure to meet this requirement the STB reserves the right to take over operations of the company until a the service is meets or exceeds previous standards or is decided it is incapable of doing so and breaks up the merger. The only exception to this ruling is the KCS due to it’s small size at the time.
TL;DR: This article should beconsidered a warning not a herald of good news. Creel is a very dangerous and should be considered as dangerous if not worse than H.H.
WHY would TRAINS magazine allow this noob to push his private promotion of a “Class 1 merger” when it is an established fact the STB said in 2001 that there WILL BE NO MORE MERGERS ALLOWED per their revised merger rules after the UP-CNW-SP meltdowns ?
TRAINS magazine is slipping into the “irrelevant because of LIES” category so common in today’s media !
Creel is nuts if he thinks the US Gov’t will allow 2 big railroads to merge. The main reason his business is up is the the port traffic increase from Prince George which came as a total surprise to CN pushed many customers over to CP. It wasn’t long ago Creel was begging customers they had insulted during Harrison’s tenure to come back. I’d like to know what per cent of run offs have returned because of CN’s poor performance
,not that they love CP. You can bet they have LONG memories of CP under Harrison..
Creel will be just like CN and have to re-install track removed by Harrison to handle increased business.
need to bring back HUNTER to houseclean from the top down…….
Creel pushes the idea of mergers because executives like him get HUGE bonuses with change of control plus it juices their share price.
This is entirely self-serving.
Not sure why News Wire published these PR department puff-pieces.
Creel sounds like Hunter when he says that PSR faults are a misunderstanding of how it works.
Tell the lumber yard owner that when he got a bill for $100k plus for demurrage charges that “he didn’t understand”.
It’s not the shippers responsibility to go figure out how CP wants to run trains, its CP’s responsibility to educate their customers how they would like to perform service.
Sounds like Creel needs to spend some time in a “know your customer” clinic. These comments come off a little tone deaf.
CP thinks customers exist to service them, when in fact its just the opposite.
Shippers who do not like PSR and mergers, or who are hurt by these things are always free to go out of business, or to ship by truck.
The above comments are general in nature and do not form the basis for an attorney/client relationship. They do not constitute legal advice. I am not your attorney. Find your own goddam mouthpiece.
Works great, until the weather gets bad and there are no resources to overcome teh severely reduced velocity and totally disrupted schedule.
That’s what Free-Enterprise is all about. (Lack of) Competition!!
CSX-CP merger coming soon…………
“Harrison went on to become chief executive of CSX Transportation in 2017, where his quick operational changes initially led to disruption, shipper complaints, and increased regulatory scrutiny.”
Wait you can’t mean the same guy that blamed everything and everyone BUT himself when the wheels fell off.
Meanwhile, an article was posted on here literally yesterday about how NS and CSX are running a customer out of business with their new operating model…
Creel needs to wake up,psr is not the ultimate answer
PSR and any such practices must be graded, not by intentions, but by results. If carloads do not increase, more traffic goes to trucking and that is a failure for railroading.
As a 40 year rail shipper who experienced the major melt downs associated with UP/SP and the Conrail split plus the lesser issues that occurred with UP/CNW and BN/Santa Fe; any rail shipper who would support a merger between two of the remaining Class 1 railroads should immediately undergo a psychiatric evaluation.
What an idiot! CP has steadily lost market share to CN., alienated customers and he says that everything is fine! He sounds like he should have been captain of the Titanic. CP needs new leadership and a better strategic plan.