Monday, June 25, 2012

CN's Mongeau warns of "intrusive regulation"

Written by  Luther S. Miller, Senior Consulting Editor

Canadian National President and CEO Claude Mongeau says the federal government's three-year Rail Freight Service Review (RFSR) "provided the impetus for CN and the rail industry to re-engage with customers to improve service from one end of the supply chain to the other." But he said powerful shipper interests prefer an "intrusive" regulatory approach.

"CN has achieved significant improvements in customer service in the past three years and has initiated—and continues to embrace—supply chain collaboration agreements and service-level agreements with a wide array of stakeholders and customers, both large and small," Mongeau said. "These agreements already cover a significant proportion of CN's revenue base, in forest products, grain, metals, coal, and intermodal traffic. The launch of the Service Review was a large factor in CN stepping up its game."

While CN "actively supported the facilitation process to produce a template for service-level agreements and enhanced commercial dispute resolution mechanisms," shipper participation was another story. Mongeau said.

"Shipper representatives, or the associations they represent, chose to advocate a regulatory agenda rather than work within the commercial approached encouraged by [facilitator Jim] Dinning to reach for the next level in supply chain collaboration and service agreements. They continually demanded new intrusive, regulatory intervention," the CEO said.

Mongeau asked the federal government, now that the facilitation process is complete, to carefully weigh the future regulatory environment for Canada's rail industry.

"Shippers' demands for greater government intervention in rail service are clearly misguided. This regulatory stance represents a missed opportunity to take supply chain collaboration to the next level." said Mongeau.

"Make no mistake—the intrusive, regulatory-based approach to service demanded by shippers would be unprecedented in a market-based economy. Such an approach would send mixed signals to customers and suppliers around the world about the government's approach to commercial markets for rail transportation in Canada," Mongeau said.