A typical Canadian Pacific diesel-electric locomotive pimped out as the Holiday Train.

13 June 2011

CP Rail Stresses Long-Term View After Weather Woes

New York New York USA - Canadian Pacific Railway will have to work to earn back customer confidence lost because of recent weather woes, but it expects any drop in market share is temporary, its chief executive said Monday.
 
Flooding and other weather disruptions on CP's network in Western Canada and the U.S. Midwest have hit earnings so far this year, but the carrier told analysts in New York that shipping volumes are recovering.
 
The railway held the investors day in part because it was concerned that market fears about its weather problems had overshadowed news about its long-term efforts to increase productivity and cut its operating ratio.
 
The line outages resulted in some grain and intermodal business shifting to other rail carriers or trucks, but CEO Fred Green said he is confident the company has the resources to ensure the loss is temporary.
 
"Whether it is our fault or not it doesn't matter. At the end of the day it is our job to deliver a consistent product and we clearly did not do that in the service-sensitive intermodal business over the last four or five months," Green said.
 
"We need to earn that (confidence) back. There is no such things as an entitlement here. We need to get that period of consistent, reliable, service," he said.
 
Grain loadings in Canada in the past eight weeks have returned to their five-year average, and over the past three weeks the railway has regained its normal market share, analysts were told.
 
Canadian Pacific has vowed to cuts its operating ratio, an industry measure of efficiency, into the low 70 percent range in the the next three to four years.
 
Its presentation in New York outlined ongoing efforts to increase train lengths, reduce the amount of time freight cars spend waiting in switch yards, and cut fuel costs by overhauling older diesel-guzzling locomotives.
 
But Green said the company has also recognized the need for upgrading its networks to ease train re-routing, and the capital spending planned for track in both the Canadian Prairies and upper U.S. Midwest should help with that.
 
CP's past network expansion efforts were aimed at simply increasing capacity, but the current program is designed to boost operating efficiency, which will help even if the economy slows down, he said.
 
Green said that the economic outlook for bulk export shipments of grain, coal, and potash remains strong. However, the intermodal and merchandise business, which includes shipments such as forest products, continues to depend on how well the U.S, and Canadian economies continue to recover.
 
Company executives appeared to acknowledge in their presentations to analysts that, in some cases, the economic recovery had occurred faster than CP was prepared for after it cut costs in the wake of the 2009 downturn.
 
Allan Dowd.