Canadian National reaches outside of PSR world for next chief operating officer

Hiring of BNSF official signals emphasis on intermodal growth
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New Canadian National Chief Operating Officer Rob Reilly speaks at his alma mater, Washburn University, in 2017. Reilly was a starting guard on Washburn’s 1987 NAIA men’s basketball national championship team.
Washburn University
CN Chief Operating Officer Mike Cory
CN Chief Operating Officer Mike Cory will retire at the end of June after 38 years with the railway.
Canadian National
MONTREAL — Canadian National’s evolution toward PSR 2.0 — with a greater emphasis on growth and technology — took another step this week with the hiring of a chief operating officer from BNSF Railway, the lone Class I railroad not adopting the Precision Scheduled Railroading operating model.

Rob Reilly, vice president of BNSF’s Southern Region, will lead CN’s operations beginning July 1. He will succeed Mike Cory, who spent 38 years at CN and indicated his desire to retire about a year ago.

“Let that sink in for a moment. Just as every U.S.-based PSR railroad … has gone big-game hunting for a Canadian railroader (or at least one with CN or CP experience), the PSR Mothership, CN, goes and finds someone without direct PSR experience nor a predilection for Tim Hortons,” says independent rail analyst Anthony Hatch, referring to the iconic Canadian coffee shop chain.

Former CN officials — all disciples of the late CEO E. Hunter Harrison — hold key leadership positions at Canadian Pacific, CSX Transportation, Kansas City Southern, Norfolk Southern, and Union Pacific.

While CN has an up-and-coming operating team, no one was viewed as ready to step into Cory’s shoes. So CN looked elsewhere for a chief operating officer with experience running an intermodal network that provides reliable, consistent service in a high-growth environment, according to a person familiar with the matter.

CN’s intermodal volumes have grown rapidly over the past decade using the ports of Vancouver and Prince Rupert, British Columbia, to deliver international containers to the U.S. Midwest, a strategy it now aims to replicate at the Port of Halifax on Canada’s Atlantic Coast.

Reilly, 54, began his career with the Santa Fe and held key positions in BNSF’s crown jewel, the Southern Transcon intermodal artery linking California and Chicago. At BNSF, Reilly gained experience designing and operating intermodal service that could consistently meet the needs of three tiers of intermodal shippers, including premium customers such as UPS.

Reilly doesn’t know PSR, a colleague says, but he will bring to CN the BNSF philosophy of putting profitable growth ahead of a specific operating ratio target.

CN in recent years has kept a lid on costs while reducing the PSR focus on the operating ratio. Executives have said that CN would rather have $20 billion in revenue and a 62% operating ratio than generate $12 billion in revenue and an operating ratio of 58.

CN also aims to grow its merchandise and bulk networks. As general manager of the Chicago and Los Angeles divisions, Reilly oversaw operations at BNSF’s three largest carload terminals.

On the capacity front, Reilly has a knack for anticipating constraint points and makes sure they are not in the way of the growth that the railroad has targeted, a colleague says. For the past two years CN has been playing catch-up in Western Canada, where traffic spiked more than expected in 2017.

CN spent record amounts last year and is spending at the same level this year to add sections of double-track, extend sidings, expand yards, add locomotives, and to hire crews to handle traffic on its main corridor linking Edmonton, Alberta with Winnipeg, Manitoba, and Chicago.

Reilly also brings a wealth of knowledge of the broader U.S. rail network, which CN views as somewhat of a blind spot in the company as most of the former Illinois Central officials who came aboard in CN’s 1998 acquisition have left the railway.

This is not the first time CN has reached outside the company to fill key positions.

Chief Technology Officer Michael Foster, whose promotion to executive vice president was announced this week, joined CN just last year from FedEx. The railway’s chief mechanical officer, Jim Sokol, came to CN from Southwest Airlines.

“Rob Reilly and Michael Foster will work closely with CN’s strong bench of very experienced scheduled railroaders to deliver operational excellence and implement technology as a driver for safety, customer and shareholder value,” CN CEO JJ Ruest said in a statement. “CN pioneered scheduled railroading and our vision is to be the first railroad to take it to the next level, using advanced information technology. These appointments are part of our strategy to enhance our scheduled railroading model.”

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