Canadian National Chairman David G. A. McLean announced Tuesday that Claude Mongeau has been selected by CN’s board of directors to succeed E. Hunter Harrison as president and chief executive officer at the end of 2009. Mongeau, 47, is CN's executive vice-president and chief financial officer; he joined the company in 1994.
In 1997, the Financial Post magazine named Mongeau one of Canada's top 40 executives under 40 years of age. In 2005, he was selected Canada's CFO of the Year by an independent committee of prominent Canadian business leaders.
"Claude is an exceptional executive and leader,” McLean said in a statement. “He is one of the architects of CN's industry-leading financial performance and the key strategist behind the highly successful rail acquisitions that have grown CN's reach throughout North America and made it a key industry player. He has a keen appreciation of the power of CN's unique business model--Precision Railroading-- and will be supported by an outstanding team of railroaders."
Said Mongeau (far left, accepting congratulations from Harrison), "I deeply appreciate the board's confidence and I look forward to leading CN. I am excited about the company's future and firmly believe market trends strongly favor the growth of rail transportation. CN is superbly positioned for the future, thanks to the work of Hunter Harrison and our executive team, and I am committed to fulfilling that potential by continuing to drive innovation, greater efficiency and better service for our customers."
Harrison, 64, has served as CN’s chief executive since Jan. 1, 2003. Prior to that he served as CN's executive vice-president and chief operating officer. He was named Railway Age’s Railroader of the Year in 2002; he also was named Canada's CEO of the Year by Report on Business magazine.
In a statement, Harrison said, “Claude is a key member of my management team at CN, and I have the greatest confidence in his abilities. I've worked very closely with him on every aspect of the business. Over the next few months Claude and I will work very closely together to ensure a seamless transition at year-end."
Canadian National late Monday reported its first-quarter results, with net income of C$424 million, or 90 Canadian cents per diluted share, compared with C$311 million, or 64 Canadian cents per diluted share, reported in the first quarter of 2008.
Excluding one-time items, CN recorded earnings of C$302 million, or 64 Canadian cents per share, but even those results beat Wall Street analyst expectations of 60 Canadian cents per share.
CN revenue fell 4% for the quarter compared with the 2008 quarter, while freightcar loadings fell 16%. Operating expenses fell 2%, assisted in part by falling fuel prices. Operating income declined 8%, and the railroad’s operating ratio rose 1.2 points to 74.1%.
The railroad noted special circumstances included a gain of C$157 million, or C$135 million after-tax (C$0.29 per diluted share), from the sale of a railway route to Toronto’s GO Transit, and the C$46 million expense related to CN's acquisition of the Elgin, Joliet and Eastern Railway Co. in the U.S. in late January, among other items.
The strengthening of the U.S. dollar affected the conversion of the CN's U.S. dollar-denominated revenue and expenses, increasing first-quarter 2009 net income by approximately C$30 million, or C$0.06 per diluted share.
In a statement, E. Hunter Harrison, president and chief executive officer, said, "Economic conditions during the first quarter of 2009 were challenging. Our traffic declined sharply as production cuts andreduced imports and exports coursed through the North American and global economies. But we responded quickly to the downturn, using the discipline of our Precision Railroading model to reduce expenses while maintaining quality service. Among other measures, we reduced train starts and cut discretionary expenditures.
"Amid these challenges, the weakening of the Canadian dollar vis a vis the U.S. dollar was a shock absorber, and we remained focused on generating increased shareholder value through the sale of our Weston subdivision in Toronto,” Harrison said.
Harrison also noted, “I am particularly proud that we completed the acquisition of the EJ&E during the quarter. The route-around-Chicago represented by the EJ&E, and the upgrades we plan for the line in the next three years, will pay dividends to CN in the years ahead through faster transit times, improved productivity, and better service to customers."
At the request of two U.S. Senators who hold key committee posts on transportation, the Surface Transportation Board has agreed to indefinitely postpone hearings on rail competitive-access issues that it had scheduled for May 18-19 in Washington.
Sen. John D. Rockefeller (D-W.Va.), chairman of the Committee on Commerce, Science and Transportation, and Senator Frank R. Lautenberg (D-N.J.), chairman of the Subcommittee on Surface Transportation, Marine Infrastructure, Safety, and Security, asked the STB in a letter dated April 17 to "refrain from holding hearings to examine policies related to competitive access or bottleneck rates before the Commerce Committee has had an opportunity to conduct its legislative reviews" of issues related to Surface Transportation Board reauthorization.
The STB said its hearing had been planned as "as public forum to allow interested parties to comment on the current issues stemming from the agency's bottleneck and competitive issues decisions, the effect on rates and services these decisions have had, and the possible implications of changing these policies."
Acceding to the Senators' request, the board said in a decision late Friday that interested parties "should withhold written testimony until a new schedule is issued."
The Railway Supply Institute, joined by the OneRail Coalition and Women in Government Relations, will present a one-day symposium entitled Selling to America’s Railroads: Freight, Intercity and High Speed Rail Development–How Stimulus Funds Will Be Spent on Rail. The symposium is Thursday, May 7, 2009, 8:00 a.m. to 3:00 p.m., Phoenix Park Hotel Ballroom, 520 North Capitol Street, NW, Washington, DC 20001.
Participants will hear from government authorities regarding the availability of stimulus money for rail. Along with flexible spending money available for freight rail projects, some $9.3 billion has been committed toward intercity and high-speed passenger rail development. The U.S. Department of Transportation has issued a strategic plan on how to use those funds to improve/deploy high speed rail, outlined by President Obama April 16. Discussion will focus on what this means for rail and rail suppliers. The cost to RSI and WGR members is $150 per person and includes breakfast and lunch ($200 for non-members).
Speakers on the agenda include: Karen Rae, deputy administrator, Federal Railroad Administration; Stephen Flippin, director of Federal Affairs, CSX Corp.; Mike Rock, vice president of External Relations, Union Pacific; Darrell Wilson, Norfolk Southern assistant vice president, Government Relations; Frank Busalacchi, secretary of transportation for the state of Wisconsin’s Department of Transportation and also chair, States For Passenger Rail; and Donald Itzkoff, partner, Nossaman LLP, and also former FRA deputy administrator.
Contact RSI’s Nicole Brewin at (202) 347-4664, or email her at firstname.lastname@example.org. Agenda information and registration forms are available at www.railwaysupply.org/convention/Selling2009.aspx.
Huron Central Railway could shut down by year's end if the Ontario provincial government doesn’t provide capital infrastructure assistance, railway President Mario Brault said. Huron Central has sought funding since 2006.
Canadian Parliament member Tony Martin says a strong case can be madefor infrastructure investment to aid the line. "This is a project that is shovel ready and will contribute to the profitability of rolling stock operators in our area," Martin said. "If we lose Huron Central, then we lose the potential for passenger service to be there and it will have adetrimental impact on our Northern Ontario industries."
Huron Central Railway, roughly 190 miles in length, links Ontario’s Sudbury with Sault Ste. Marie, the latter bordering its U.S. namesake city in Michigan. Prior to 1997, Canadian Pacific operated the line; Grenwich, Conn.-based Genessee & Wyoming, Inc., is the current parent of the short line.
Huron Central estimates that approximately C$33 million (US$26.7 million) is required to rehabilitate the route. The federal government has said it will contribute its share of infrastructure funding if the province matches the funding.
But so far Ontario hasn’t made any commitment to Huron Central or to the province’s short line industry in general. "Huron Central is just one of the many short lines that will disappear if infrastructure investment isn't made very, very soon," Brault said. "That's the fate we're facing if we don't get some help."
Brault said that Quebec, partnering with the federal government, last year agreed to provide C$75 million (about US$61 million) in short line rail assistance within that province.
The Surface Transportation Board Friday noted Florida’s Department of Transportation has filed a “verified notice of exception” to acquire 61.5 miles of rail right-of-way owned by CSX Transportation located in five central Florida counties. FDOT seeks to acquire the route to establish "SunRail" regional rail service on the line centered in Orlando; CSX would remain active as a freight operator on the route.
The filing comes even as Florida legislators continue to debate the merits of FDOT’s intent, with many expressing concerns over liability issues and some still convinced central Florida does not require regional or commuter rail service. A key state legislative committee hearing was delayed until this weekend, one industry source tells Railway Age; rail proponents fear the delay threaten legislative approval.
Despite such uncertainty, FDOT’s submission asserts, “The transaction is scheduled to take place on June 30, 2009 (after the May 3, 2009 effective date of the exemption).”
Besides FDOT and CSX, Amtrak and a short line, Florida Central Railroad Co., operate over portions of the route to be purchased; FDOT’s submission to STB affirms that those tenants will continue to operate on the route.
The Good Friday holiday, added to ongoing bad weather in the Midwest and a struggling economy, pushed rail freight traffic numbers down for the week ended April 11, compared to the comparable week in 2008, the Association of American Railroads said.
U.S. freight carload traffic fell 24.5% from the comparable week last year, with loadings down 22.5% in the West and 27.3%. Intermodal volume fell 21.6% from last year. Volume of an estimated 26.4 billion ton-miles was off 23.7% from the 2008 level.
Canadian freight carload traffic fell 28.3% for the week compared with the year-ago period, while intermodal declined 24.6%. Mexico’s two major railroads reported freight railcar volume down 29.6%, while intermodal plunged 39.3%.
Combined North American rail volume for the first 14 weeks of 2009 on 14 reporting U.S., Canadian, and Mexican railroads was down 17.7% from last year’s first 14 weeks; combined intermodal was down 15.6%.
Short line Indiana Rail Road has been granted approval by the Surface Transportation Board to begin construction on a five-mail rail extension to serve Bear Run coal mine, located in Indiana’s Sullivan County. STB ruled that the proposed extension is a spur, exempting Indiana Rail Road from a more lengthy review process.
"The issue presented here is whether INRD's proposed track construction involves the construction of a 'spur' or, alternatively, a 'line of railroad,'” STB said. "The board does not exercise licensing authority 'over construction, acquisition, operation, abandonment, or discontinuance of spur tracks.' The determination of whether a particular track segment is a 'railroad line' requiring board authorization or an exempt spur turns on the intended use of the track segment. Exempt spurs are 'commonly constructed either to improve the facilities required by shippers already served by the carrier or to supply the facilities to others, who, being within the same territory and similarly situated, are entitled to like service from the carrier,'" the board quoted from federal statute.
"The intent of the proposed track is to improve the facilities required by Peabody, an existing shipper whose Farmersburg mine is already being served by INRD," STB continued. "The track will not invade the territory of another railroad because the closest track already in service is a CSXT main line 6.2 miles west of Bear Run pit. Furthermore, INRD has historically served the area that the proposed track will occupy, and the track will serve only Peabody."
Peabody last month that it had lined up long-term supply contracts for 90 million tons of coal from Bear Run. Peabody said that it will begin production in the second half of 2009 and increase production thereafter.
Indiana Rail Road will invest $17 million initially to construct the line, with an additional $5 million to be invested during the next two years.
Last month, Indiana Rail Road President and CEO Thomas G. Hoback stated, “Peabody’s investment is one of the most significant industrial developments in Indiana in this decade, and it is the largest single new business opportunity ever awarded to the Indiana Rail Road Company. We project that it will increase our current coal transportation volumes by more than 30%. We value the confidence shown by Peabody, a global leader, in our ability to provide world-class service.”
The regional railroad, based in Indianapolis, operates a 500-mile route system based primarily in Indiana and Illinois, with terminals in Chicago, Indianapolis, Terre Haute, Ind., and Louisville, Ky.
A federal judge in Washington has upheld efforts by the ports of Los Angeles and Long Beach, the nation’s two largest ports, to pursue its clean-truck program designed to reduce emissions in the Los Angeles basin.
U.S. District Judge Richard Leon denied a preliminary injunction sought by the Federal Maritime Commission, saying regulators held "weak" arguments that the program threatens to cause irreparable harm or to unreasonablyincrease shipping costs. FMC filed suit last fall, alleging that small trucking firms and independent drivers will be driven out of the market by the new rules.
Last month, key provisions of the clean-trucks program were declared unconstitutional by the U.S. 9th Circuit Court of Appeals in San Francisco, backing contentions of unfairness submitted by the American Trucking Associations. A ruling is expected April 27 in that case.
"This is a clear victory for our clean-truck program and the idea that you can both green and grow the Port of Los Angeles at the same time," Mayor Antonio Villaraigosa said, referring to Judge Leon’s ruling.
The twin ports, which handle roughly two out of every five international containers moving to and from the U.S., have on-dock ship-to-rail capabilities, but considerable “near-dock” traffic remains, with trucks shuttling containers or trailers between ships and rail facilities.
The clean-truck program charges a $35-per-container fee to generate funds for dealing with environmental and health impacts attributed to truck diesel emissions, offering a sliding scale of reductions and exemptions for trucks that meet clean-air standards.
President Obama on Thursday, April 16, released an unprecedented long-term strategic plan to advance U.S. high speed rail development, beginning with the $8 billion “down payment” provided through the Administration’s recent American Recovery and Reinvestment Act, augmented by $1 billion per year for five years in budget appropriations.
"Make no little plans," the President said at a nationally televised news conference as he presented a plan—centered on rail—for the future of U.S. transportation. It would begin with upgrading existing rail lines—a foundation, so to speak—and then progress to building dedicated high speed corridors, as has been done elsewhere in the world. In great detail and with an almost startling breadth of knowledge about the high speed industry, he talked about the many benefits of high speed rail, among them the convenience of center city to center city travel and relief from highway and air travel congestion.
“If we want to move from recovery to prosperity, then we have to do alittle bit more,” Obama said. “We have to build a new foundation for our future growth.” Citing congested highways and air routes, as well as being “at the mercy of fluctuating gas prices,” he noted that high speed rail wasn’t “some fanciful pie-in-the-sky vision of the future; it is now. It is happening right now; it’s been happening for decades. The problem is, it’s been happening elsewhere, not here.”
Joined by Vice President Joe Biden (who would not have been able to conceal his enthusiasm, even if he tried) and Secretary of Transportation Ray LaHood, the President pointed to the 10 rail routes identified for high speed rail development, defined (in U.S. terms) as capable of 110 mph speeds (see map, below). The 10 include:
1. California Corridor (Bay Area, Sacramento, Los Angeles, San Diego)
2. Pacific Northwest Corridor (Eugene, Portland, Tacoma, Seattle, Vancouver BC)
3. South Central Corridor (Tulsa, Oklahoma City, Dallas/Fort Worth, Austin, San Antonio, Little Rock)
4. Gulf Coast Corridor (Houston, New Orleans, Mobile, Birmingham, Atlanta)
5. Chicago Hub Network (Chicago, Milwaukee, Twin Cities, St. Louis, Kansas City, Detroit, Toledo, Cleveland, Columbus, Cincinnati, Indianapolis, Louisville)
6. Florida Corridor (Orlando, Tampa, Miami)
7. Southeast Corridor (Washington, Richmond, Raleigh, Charlotte, Atlanta, Macon, Columbia, Savannah, Jacksonville)
8. Keystone Corridor (Philadelphia, Harrisburg, Pittsburgh)
9. Empire Corridor (New York City, Albany, Buffalo)
10. Northern New England Corridor (Boston, Montreal, Portland, Springfield, New Haven, Albany).
Amtrak’s Northeast Corridor, which operates at top speeds of 150 mph, isn’t identified as one of the 10, but the Department of Transportation did note “opportunities for the Northeast Corridor from Washington to Boston to compete for funds to improve the nation’s only existing high speed rail service.”
Administration officials said they will take a collaborative approach to formulate HSR programs, including working with stakeholders to gather feedback to advance given routes.
The program divides projects eligible for funding into “first round” candidates “that can be completed quickly and yield measurable, near-term job creation and other public benefits, and “next round” items “to include proposals for comprehensive high speed programs covering entire corridors or sections of corridors.”
Within the latter group, California’s proposed $44 billion, 700-mile HSR system is deemed likely to receive significant federal support, since the Golden State has committed almost $10 billion of its own funds to advance the project.
Observers pointed out that Obama’s support for U.S. passenger rail development has exceeded that of any other U.S. president in recent times. Some had expected the President to allow Vice President Biden, a frequent Amtrak traveler and longtime passenger rail supporter, to handle any such program by himself, but Obama has continued to give direct input into U.S. HSR efforts.
The freight railroad response to the President's announcement was positive but cautious. "The high speed rail plan . . . iswelcome news for all Americans," AAR said in a statement. "We applaud the President's leadershipin recognizing the importance of rail to the future of our nation'stransportation network. As members of the OneRail Coalition, we support expanded use of bothfreight and passenger rail in this country. Luckily, those goals arenot mutually exclusive as many of the tracks over which our passengertrains operate are owned by the freight railroads. However, it isessential that improvements aimed at developing high speed passengerroutes do not ignore freight rail’s need to move our nation’s goods. . . . America has the best freight railroad system inthe world; there is no reason why we can't have the best passenger railsystem as well. We look forward to working with the Administration,Congress, and the states to see that the promise of expanded freight andhigh speed passenger rail is realized."
Testifying before the House Appropriations Subcommittee on Transportation on April 2, BNSF chief executive Matt Rose (lower right), a supporter of the OneRail Coaltion, said that, with significant upgrades, "it is possible toincrease speeds from 79 mph to 90 mph on tracks that both freight andpassenger trains use. At sustained speeds in excess of 90mph, passenger train operations will need to be segregated from freightoperations on a separate track."
To see the President's televised press conference, CLICK HERE. Vice President Biden, a long-time staunch passenger rail supporter and daily rider on Amtrak's Northeast Corridor during his entire Senate career, provided opening remarks. To see Biden's remarks, CLICK HERE.
—Douglas John Bowen, Managing Editor, with William C. Vantuono, Editor