Rob Reilly, vice president of BNSF’s Southern Region, will lead CN’s operations beginning July 1. He will succeed Mike Cory, who spent 38 years at CN and indicated his desire to retire about a year ago.
“Let that sink in for a moment. Just as every U.S.-based PSR railroad … has gone big-game hunting for a Canadian railroader (or at least one with CN or CP experience), the PSR Mothership, CN, goes and finds someone without direct PSR experience nor a predilection for Tim Hortons,” says independent rail analyst Anthony Hatch, referring to the iconic Canadian coffee shop chain.
Former CN officials — all disciples of the late CEO E. Hunter Harrison — hold key leadership positions at Canadian Pacific, CSX Transportation, Kansas City Southern, Norfolk Southern, and Union Pacific.
While CN has an up-and-coming operating team, no one was viewed as ready to step into Cory’s shoes. So CN looked elsewhere for a chief operating officer with experience running an intermodal network that provides reliable, consistent service in a high-growth environment, according to a person familiar with the matter.
CN’s intermodal volumes have grown rapidly over the past decade using the ports of Vancouver and Prince Rupert, British Columbia, to deliver international containers to the U.S. Midwest, a strategy it now aims to replicate at the Port of Halifax on Canada’s Atlantic Coast.
Reilly, 54, began his career with the Santa Fe and held key positions in BNSF’s crown jewel, the Southern Transcon intermodal artery linking California and Chicago. At BNSF, Reilly gained experience designing and operating intermodal service that could consistently meet the needs of three tiers of intermodal shippers, including premium customers such as UPS.
Reilly doesn’t know PSR, a colleague says, but he will bring to CN the BNSF philosophy of putting profitable growth ahead of a specific operating ratio target.
CN in recent years has kept a lid on costs while reducing the PSR focus on the operating ratio. Executives have said that CN would rather have $20 billion in revenue and a 62% operating ratio than generate $12 billion in revenue and an operating ratio of 58.
CN also aims to grow its merchandise and bulk networks. As general manager of the Chicago and Los Angeles divisions, Reilly oversaw operations at BNSF’s three largest carload terminals.
On the capacity front, Reilly has a knack for anticipating constraint points and makes sure they are not in the way of the growth that the railroad has targeted, a colleague says. For the past two years CN has been playing catch-up in Western Canada, where traffic spiked more than expected in 2017.
CN spent record amounts last year and is spending at the same level this year to add sections of double-track, extend sidings, expand yards, add locomotives, and to hire crews to handle traffic on its main corridor linking Edmonton, Alberta with Winnipeg, Manitoba, and Chicago.
Reilly also brings a wealth of knowledge of the broader U.S. rail network, which CN views as somewhat of a blind spot in the company as most of the former Illinois Central officials who came aboard in CN’s 1998 acquisition have left the railway.
This is not the first time CN has reached outside the company to fill key positions.
Chief Technology Officer Michael Foster, whose promotion to executive vice president was announced this week, joined CN just last year from FedEx. The railway’s chief mechanical officer, Jim Sokol, came to CN from Southwest Airlines.
“Rob Reilly and Michael Foster will work closely with CN’s strong bench of very experienced scheduled railroaders to deliver operational excellence and implement technology as a driver for safety, customer and shareholder value,” CN CEO JJ Ruest said in a statement. “CN pioneered scheduled railroading and our vision is to be the first railroad to take it to the next level, using advanced information technology. These appointments are part of our strategy to enhance our scheduled railroading model.”
With CNs plans on the east coast to I wonder how screwed Via rail in the Montreal Toronto corridor will become. CN has not shown much interest with onetime performance out west with a couple of passengers trains. What will PTC make the corridor look like a train every 5,10 minutes?
The share holders don’t work any harder. Just the employees.
Hmmm, I’m kinda ignorant on math. Does that mean CN would rather have 7.6 billion in net income(20 billion in revenue times 62% costs result being 7.6 billion) as opposed to working less and having 5 billion in net income (12 billion in revenue times 58% costs results being 5 billion).
What it sounds like to get the former you just have to work harder.
Don’t forget! The real way EHH made money after the IC-GM&O merger was to pull up 4000 miles of track!
Railroads are still having their collective lunches eaten by trucks and their inherent reliability and customer service will most of the railroads focus on filling their collective pockets. Will CN break the cycle, who knows. Too, watch what the BNSF does. Buffet is a hound for money. PSR is like communism/socialism, looks good on paper but in practice it proves to create fundamental problems in practice.
Is the shine finally off the PSR apple?
I had an interesting conversation with an employee of an international logistics company in the course of which I inquired about the use of railroads. The response was emphatic and illustrated with several examples. She said the co. rarely used rail because of reliability issues. Over the past year, a number of shipments had been consigned to rail with strict emphasis on need for timely delivery. In several cases, shipped material had not even been loaded let alone delivered by stipulated time. In others, time sensitive material promised for particular date was en route with no possibility of timely arrival. The customers ordered it removed from the train and truck transloaded for belated delivery. If this is acceptable performance under PSR, the railroads are in for a rude awakening. Performing like PennCentral will ultimately yield PC results as the world passes rails by. To add insult to injury, rail employees in contact with the logistics firm tended to be rude and unhelpful. Some posters have suggested shippers and rails sort out their problems without gov’t interference. Ain’t gonna happen bubba . Is referral to STB or FRA desirable? In an ideal world, no. In the world we live in, populated by fast buck artists in high places, gov’t is a necessary evil. Hopefully, the agencies will operate rationally and constructively.
I wonder if Mr. Reilly’s decision to leave BNSF was influenced by Matt Rose’s departure and what seems to be a drift of emphasis from growth to operating ratio. I think it’s time to consider buying some CN stock.
One more thing.. These talent acquisitions sound as if CN is developing nextgen RTC software that combines AI, PTC, and real time car tracking/scheduling. I’m excited about the prospects of such RTC software! Now throw ECP in the mix the results will be even greater.
CN is realizing a weakness in PSR… This will be interesting to watch as CN builds out their intermodal network.. Will they make a go again at the intermodal rampcar? I would like to see that happen