20 October 2008
CPR Trims Expenses Reveals Efficiency Plan
Calgary Alberta - Fred Green, Canadian Pacific Railway
Ltd.'s chief executive officer, has unveiled an efficiency drive that he asserts will help insulate the freight carrier from the
global financial crisis.
To weather the economic storm, CPR plans to run longer trains, introduce locomotives that provide power at the rear, and recoup most
of its fuel costs from customers, Mr. Green said in an internal memo that seeks to calm the nerves of employees.
CPR has also instituted a hiring freeze, trimmed staff travel budgets, and restricted discretionary expenses as part of the campaign
titled Execution Excellence for Efficiency, or E3.
"During times like this, it's critical that we remain focused on our game plan," he said.
"There is nothing happening externally that should take your focus away from doing your job as well as you can. Arguably it is
more important than ever that we each perform our task as well as possible. It is also essential that we behave in a frugal manner on
every dollar and seek means to improve every process."
The softening economy is evident in Calgary-based CPR's lower third-quarter shipments of forest products and
automobiles, he said, but "the grain crop in both Canada and the U.S. is robust, and bodes well for rail shipments."
Mr. Green, who will release CPR's 2009 outlook to institutional investors in Toronto on 12 Nov 2008, said the company
needs to run leaner "in a highly volatile and evolving business environment."
CPR is striving to narrow the gap with larger rival Canadian National Railway Co., which has a better operating ratio - a key
indicator of productivity that measures operating costs as a percentage of revenue. CPR's second-quarter operating ratio
worsened to 79.4 percent. A lower number is better, and CPR trailed Montreal-based CN's operating ratio of 66.3
percent.
CN will release its third-quarter results tomorrow and CPR will follow suit on 28 Oct 2008.
"Much of the worry and concern that exists today is due to the possibility or reality that some companies may not be able to
secure refinancing of long-term debt or have access to shorter-term credit," Mr. Green said in his
memo. "CPR is very well-positioned in this regard. We issued $1-billion of debt in May, 2008, at rates
of approximately 6 percent and do not have an immediate need to go to the debt markets. In 2009, we have only
$200-million in long-term debt coming due."
In July, Mr. Green asked Brock Winter, CPR's senior vice-president of operations, to guide the efficiency drive alongside
Jane O'Hagan, vice-president of strategy and external affairs. Mr. Winter said longer trains with repositioned
locomotives will produce several benefits, including freeing up slots for other rail traffic, shaving unit costs by carrying more
cargo on each trip, and improving fuel consumption.
|
