CP conference call, best quotes Part I

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CP CEO E. Hunter Harrison
CALGARY, Alberta — Ears must be burning in Norfolk after Canadian Pacific's conference call this morning. 

In a whirlwind, 2-hour and 40-some minute session Tuesday morning, CP CEO E. Hunter Harrison, CP executives, and CP board member Bill Ackman presented their best arguments for buying or merging with Norfolk Southern, answering questions, and giving NS executives a dressing down you just don't hear high-profile executives say often.

Here is Part I of the best comments we've heard from the call that ended shortly before 11 a.m. Central time today.

Hunter Harrison, on why CP+NS makes sense:
“We are faced with an issue that we are a common carrier. We don’t have a choice in carrying these goods. At the same time, we have communities that would prefer not to have infrastructure added into their back yard. And, at the same time, people are opposing consolidations or merger actions. So the question becomes, what do we do? What do we do in the future? What do we do in the East? What do we do with additional growth if that infrastructure can not be added. So as we went through those issues, one of the things that quickly came up was potential consolidations. … We think we can, without adding infrastructure, we can add capacity, particularly east of the Mississippi River.”

James Clements, vice president, strategic planning and transportation services, on proposal for “modified terminal access:”
“In terminal areas, CP would allow another carrier to come onto its railway in order to serve CP-served shippers when we are not providing service or we’re not providing competitive rates. … This is not open access. We’re not allowing a second railway to just run all over our network. … It is simply an option where the second carrier can come in at the terminal area, go to that customer and provide that service to them, and take it back to their railway to haul it across their network.”

Keith Creel, president and CEO, on CP’s success:

“NS does not understand the facts of our transformational journey that we started mid-2012. … This team has taken, with this operating model, has taken this company from being an industry laggard to an industry leader, and it’s done by focusing on sustainable principles, not cut-to-the-bone principles.”

“Back in 2013, we cut a day off our key domestic routes, going from Toronto to Calgary to Vancouver, and our customers that have benefitted from this have awarded this company, and recognized this service improvement with over 20 percent growth since those operational service improvements were made.”

Creel, on Chicago:
“For any railroad to suggest that the industry would not benefit, that our customers would not benefit, that their customers would not benefit from rerouting and moving traffic away from that congested gateway, to me, is not fact-based, is not substantiated. … To suggest that you should take our suggestions that we can improve efficiency and create capacity with a grain of salt, as I’ve read from some [Surface Transportation Board] commissioners, to me, again, is reckless.”

Bill Ackman, Pershing Square Capital Management:
“Here we have proven management, and in the case of [NS president] Jim Squires, Jim is not a proven railroad operating executive. … It’s a real leap of faith to assume that all of a sudden, beginning a week or so after the CP offer, that the company now has a plan to get to a 65 [percent operating ratio].

“What’s interesting about Norfolk Southern is vast ownership of real estate in some of the most valuable real estate markets in the world, the Northeast, and certain parts of the south.”

“CP stock can go down from where it is today and it still is a better deal than the [NS] stand-alone plan.”

“Yes, [Squires] has worked at a railroad since 1992, but he’s worked on the legal and the administrative side and the finance side, and not the operating side. And the problems at NS are not legal, they’re not finance, and they’re not administration. They’re operations, and Jim does not really have an operating background. I guess his first exposure to operations would have been when he became president [in 2013] but from 2013 to the present, we have not seen an improvement in the operations of the company.”

“What happens in situations like this is that pride gets in the way. And perhaps in the case of Mr. Squires, he’s been at Norfolk Southern his entire career, he’s now made it to CEO, and unfortunately Hunter showed up six months after he became CEO. I’m sure Mr. Squires would prefer to keep his job. But this is not about Mr. Squires’ job, and it’s not about the prestige of being on the Norfolk Southern board. It’s about what’s in the best interest of the owners of the Norfolk Southern railroad. It’s about what’s in the public interest in terms of the railroad infrastructure of the country. And in those respects, this transaction makes enormous sense.”
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