CP's Creel applauds industry's move toward Precision Scheduled Railroading

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Canadian Pacific CEO Keith Creel
Canadian Pacific
MIAMI — Canadian Pacific CEO Keith Creel is cheering the industry’s embrace of the Precision Scheduled Railroad operating model touted by his mentor, the late E. Hunter Harrison.

“I want them all to do it … I think it's the right way to run the business,” Creel told an investor conference last week. “I think it's the healthy way to run the business. And inevitably as they succeed, we’re going to benefit from it. So I'm their greatest fan. I'm cheering them on and I'll give them any insight I can give them.”

Creel was as surprised as anyone about how quickly Precision Scheduled Railroading has moved from the Canadian railroads to the U.S.

“I never would have guessed a year and a half ago that PSR, which was the thing to stay away from, would be the new topic of the day,” he says.

Creel was asked if BNSF Railway could remain the lone PSR holdout as the rest of the industry changes.

“The simple answer is, I think, no,” Creel says.

It will be increasingly difficult to compete for business against a rival that has a cost and service advantage, he contends.

“I truly think it's a matter of time. I think it's inevitable. It eventually has to happen,” Creel says.

BNSF, a unit of Berkshire Hathaway, is not publicly traded like the other big systems. And its outgoing executive chairman, Matt Rose, has been critical of PSR this year.

“There's been a lot of naysayers. There's been a lot of spin,” Creel says. “You talk about some of the people who were most vocal against it that are doing it now. Some of the things they believed at the time, and I've got to just assume that they believed it to be true that it couldn't be done. They're believers now.”

Norfolk Southern dismissed PSR as a “short-term, cut-to-the-bone strategy” while CP was pursuing an unfriendly merger in 2015-16. Now NS says it’s adopting PSR because it works.

It’s too early to judge the operational changes that are under way at Union Pacific, NS, and Kansas City Southern, all of which began adopting their own versions of PSR late last year.

“I think it’s early to talk about progress,” Creel says. “They’re saying the right things and they’re focused on the right buckets.”

But Creel, who praised UP and NS for involving customers in service changes, says the railroads will have to make “tough decisions.”

“Because at the end of the day, to do PSR, you've got to right-size assets,” Creel says. “That means not just locomotives and cars — the men and the women that work on them, the terminals that are required to support that work that's being done. There are a lot of tough decisions that have to be made that short-term can create some angst and some pain and some broken eggs, for lack of a better term. But long-term it's what you have to do. It's what's necessary to run the business in a healthy way.”

Creel says PSR will create capacity in the industry as railroads haul the same tonnage using fewer trains, locomotives, and freight cars. And that will help relieve congestion in Chicago, which 25 percent of North American rail traffic touches in some fashion.

The PSR railroads are also more likely to work together to create new interline service that improves Chicago or avoids it altogether by using alternative routes, Creel says.

Creel also spoke about CP’s operating ratio, which was the industry’s second-lowest in 2018. “To us, the O.R. story is an outcome. It's not really where the focus is,” he says.

Creel, who worked with Harrison at Illinois Central and Canadian National before joining him at CP and succeeding him as chief executive in 2017, spoke last week at the Citi 2019 Global Industrials Conference.

NEWSWIRETrains News Wire

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