The Hunter Harrison interview - Date/Videographer unknown.

27 May 2013

CP Rail CEO Harrison
Fixing Permissive Culture

Toronto Ontario - Canadian Pacific Railway CEO Hunter Harrison shows no sign of backing down in his drive to overhaul the country's second largest railway.
 
Harrison has in recent weeks faced criticism that his hard-driving mentality running CP Rail, in which he took over less than a year ago, is creating a so-called "culture of fear."
 
"Sure there is validity to the culture of fear comments," he tells BNN. "It was a very permissive environment, people weren't held to high standards, they weren't held accountable. Life was good, they propped their feet up."
 
He adds that "75 to 80 percent-plus" of CP Rail was "dedicated, hard-working railroaders," but "some people weren't doing their jobs appropriately."
 
"Our culture is a culture of holding people accountable and applying consequences, both good and bad," he says.
 
Harrison has been on a charge over the past year to reform the rail company by cutting costs and improving efficiency.
 
In its recent quarterly earnings announcement, CP Rail listed "controlling and removing unnecessary costs from the organization, eliminating bureaucracy, and continuing to identify productivity enhancements" as keys to its success.
 
Part of that cost-cutting will come in the form of layoffs, with CP Rail management saying it plans to eliminate 4,500 jobs by 2016. As of 31 Mar 2013, CP Rail said it had already cut about 3,400 positions.
 
Harrison also says that headline figure of job cuts is not nearly as bad as they seem at first glance.
 
"A high percentage of the job cuts have been taken care of through attrition," he says. "There are very few people out there that don't have employment security, protection."
 
But those job cuts are being blamed for the rise in rail accidents at the company. CP Rail has in recent months experienced three derailments in rail cars carrying crude oil, and a total of six derailments in 2013.
 
In a recent media report Tom Murphy, president of the CAW Local 101, which represents about 1,900 CP skilled trade workers, said he believed there is a connection between the layoffs, which he said included hundreds of his members in charge of performing safety checks, and recent derailments.
 
CP Rail has also announced other cost-cutting measures, such as moving its headquarters from downtown Calgary to a building it already owns in a rail yard on the outskirts of town. The company also announced that it will be running longer trains and move more volume using fewer trains, among other changes. In its most recent quarterly earnings report, CP Rail said the average train length increased 9 percent compared to the same time last year.
 
The train accident rate, meanwhile, increased in the first quarter to 1.98 accidents per a million train miles compared with 1.58 in the same period of 2012.
 
But Harrison says that, while its accident rate has inched higher, it is still one of the industry's safest railroads and not a sign that his move to make CP Rail more efficient is part of backtracking on safety.
 
"Is this anything systemic we're not willing to deal with? No," he says. "We're still in the middle of the pack from a statistical standpoint."
 
He adds that "it's not good business for shareholders or any of us to not run a safe operation."
 
CP Rail's operating ratio, which is used to measure efficiency at rail companies, where the lower number is better, continues to decline under Harrison, falling to 75.8 percent in first quarter of 2013 from an industry high of 80.1 percent at the same time last year. Harrison expects CP Rail to have one of the best operating ratios among the major rail companies in "about 18 months."
 
"We're going to cross and be below all of the railroads on operating ratio," he says.
 
Harrison is also facing criticism about recent CP Rail derailments of trains carrying crude, particularly as its happening at a time when shipping oil on the railways has become more common due to limited space on pipelines.
 
CP Rail has recently reported a number of oil spills related to moving crude by rail. Last week CP said a derailment near Jansen, Saskatchewan, spilled 575 barrels of crude oil. The accident follows a CP derailment in western Minnesota that spilled 360 barrels of Canadian crude in late March. Less than a week later, a 400-barrel spill occurred in a derailment in northern Ontario.
 
At the end of 2012 CP Rail said it was moving about 70,000 carloads of crude by rail, but expects that number to increase dramatically in the next couple of years amid growing uncertainty surrounding pipelines projects that will ship crude from Alberta. CP Rail recently told investors that shipping crude oil by rail was its "single largest opportunity."
 
Prime Minister Stephen Harper, a strong support of the Keystone XL pipeline that would ship crude from Alberta to refineries on the U.S. Gulf Coast, also recently highlighted the environmental risks associated with moving crude by rail, saying it is "far more environmentally challenging."
 
But Harrison says the industry has largely tried to "take the high road" and avoid the contentious political debate about shipping crude. He's confident that company can do so safely.
 
"This is not a question of safety. Can pipelines carry crude safely? Yes. Can railways carry crude safely? Yes," he says.
 
Brady Yauch.

Vancouver Island
British Columbia
Canada