Distributed power in use on this empty unit coal train following the Thompson River - 8 Jun 1991 Jerry Albertie.

8 February 2012

Not So Fast Pershing Square!

New York New York USA - Re:  the Pershing Square Capital proposed ouster of Canadian Pacific CEO Fred Green, I have to say, "Not so fast."
 
The data points in Pershing's hour-long 90-slide presentation for the 6 Feb 2012 "Town Hall Meeting" are a litany of lapses over the past six or so years, and they can't be denied.
 
But back in June 2010, Green and his staff spent two days telling the financial community what they had in mind to make the railroad run faster and smarter.
 
And what they spoke about seems to have stuck.
 
The occasion was the annual Investors' Day gathering and the highlight of the session was a business car trip over Alberta's Stephens Pass.
 
Those who were paying attention had a chance to see how to railroad in some of the most challenging Class I territory in North America, and the on-board presentations showed how the technology and innovations were being applied.
 
Distributed Power was one of the examples.
 
As I reviewed my notes from the 6 Feb 2012 webcast, I pulled together some recent CP operating and commercial performance data and found myself saying, "Not so fast".
 
What we saw and heard about in June 2010 really is working, and the numbers prove it.
 
For the five quarters ending 31 Dec 2011, CP has increased average train speed by 7 percent, cut average terminal dwell 20 percent, reduced the average daily car count by 14 percent, and increased car-miles per day 20 percent, all this while increasing revenue ton-miles by 2 percent.
 
My one quibble is the rate of revenue growth, only 4 percent in 2011 and only a 2 percent gain in revenue per revenue ton-mile.
 
This in an era when all the Class I's are talking about "inflation-plus" pricing, 4 to 6 percent or more in practice.
 
Customers will gladly pay more for a product they think is worth more, and the improved CP product is certainly that.
 
Increasing revenues and decreasing operating expense is a double-edged sword that takes points out of the operating ratio double-quick.
 
Roy Blanchard.