Railroader of the Yr: CN’s JJ Ruest

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Written by


William C. Vantuono
, Editor-in-Chief

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RAILWAY AGE JANUARY 2019 ISSUE: The 56th annual recipient of Railway Age’s Railroader of The Yr award is CN President and Chief Government Jean-Jacques “JJ” Ruest, chief of one among North America’s best-performing Class I railroads. From utilized chemistry to railroading, CN’s chief govt has all the time put the shopper first.

Ruest took a railroad plagued with service issues and critical community capability shortages and applied aggressive capital funding and repair high quality applications. These efforts have produced excellent outcomes, by way of visitors development and profitability. For instance, CN’s engineering crew accomplished greater than 80% of enlargement tasks whereas the community was beneath heavy visitors. And in Ruest’s first few months as chief govt, CN employed tons of of recent line staff in prepare and engine service, laying a robust basis for the railroad’s continued success. Ruest sees robust development alternatives forward, throughout a number of commodities and new provide chain providers.

Ruest was appointed CN President and CEO in July 2018, after having served as Interim President and CEO since March 2018. He was beforehand Government Vice President and Chief Advertising Officer since January 2010, with duty for offering strategic course and management for CN’s Gross sales, Advertising and CN Provide Chain Options teams. Ruest joined CN in 1996 as Vice President Petroleum and Chemical compounds. He was appointed Vice President Industrial Merchandise in 2003, Vice President Advertising in 2004, and Senior Vice President Advertising in June 2006. Previous to this, Ruest labored for 16 years at a serious worldwide chemical firm.

Ruest holds a Masters in Enterprise Administration in Advertising from HEC Montréal (Université de Montréal) and a Bachelor of Science diploma in Utilized Chemistry from Université de Sherbrooke. He additionally accomplished the chief program of the College of Michigan Enterprise College, and CN’s Railroad MBA program.

For this text, I spoke with Ruest at CN headquarters in Montréal.

RAILWAY AGE: I want to congratulate you on being chosen our 2019 Railroader of the Yr. This award goes again to 1964, and at CN after all you will have predecessors—John Cann, Paul Tellier and Hunter Harrison. So, congratulations.

RUEST: Thanks. I’m extraordinarily proud on behalf of the CN crew. I do know there’s lots there, as a result of I bear in mind when Paul Tellier was Railroader of the Yr after what have been my early days at CN at the moment, and I used to be fairly impressed that any person like Paul, who got here from outdoors of the business, might be the Railroader of the Yr, after which was much more proud when Hunter, shortly after we had the merger of 1998-1999, additionally turned Railroader of the Yr. It was an enormous endorsement at the moment of the transformation we have been going by way of. We’re once more going by way of a change. We had a problem final winter and we’re getting again on our ft, but in addition we’re on the verge of getting a change of what’s Precision Scheduled Railroading at CN. So for all these good causes, however particularly on behalf of the 25,000 staff at CN, I’m extraordinarily proud that I used to be chosen.

RA: I’d like to speak about your background a bit, your loved ones, the place you’re from, your pursuits rising up.

RUEST: I’m a Canadian from a small city known as Drummondville. Again within the day, it was an enormous industrial city with a couple of massive corporations. My father was a blue-collar employee. He was a union man too, very concerned within the union at the moment. It’s a city that has some railway historical past. It’s on the CN foremost line between Montréal and Quebec Metropolis. That is the place I used to be born, and raised for the primary 16 years of my life.

RA: You’ve got an intensive background in utilized chemistry.

RUEST: That’s proper. As a child, I used to be inspired to go to high school and do various things, and it was a toss-up between being an engineer or an architect. I then went towards the science aspect of engineering, however the love was actually about chemistry, so I earned a level in utilized chemistry, which acquired me into the chemical business. I labored for 2 chemical corporations, one among them for 2 years and one for 16 years. So my background is unquestionably heavy manufacturing, with merchandise that are usually hazardous, the place security is a excessive concern.

I labored in a manufacturing unit for 2 years, and after that customer support, gross sales, advertising and marketing, analysis and improvement, enterprise improvement, and beginning up product traces for companies towards the tip of the provision chain. I used to be doing buying of uncooked supplies, the logistics of the completed product, and all the planning of how a lot we made, how a lot we bought and who we bought it to. We have been utilizing all modes—water, truck, rail, with a variety of  trade. That is the place I acquired to know, throughout my final two years, the railroad business—Conrail fairly a bit, CN, and up to some extent the Illinois Central, as a result of my firm had a plant in Jap Canada, but in addition in Louisiana. It was a big chemical firm known as Imperial Chemical compounds Industries, ICI. In Canada, it was often known as CIL, and within the U.S., Geismar.

I joined CN due to Paul Tellier. Once you be part of an organization, you all the time have a look at who’s its chief, and also you have a look at the place it’s going. I used to be very impressed with Paul Tellier’s management at the moment, with who he was and what he was going to do with CN. I used to be a believer within the technique that CN had at the moment. Privatizing a Crown Company, in a single day, to be 100% non-public was very dangerous, however on the similar time it was very, very interesting. So, what some seen as a danger, I seen as an enormous potential upside.

These two causes are what introduced me to this, being a chemist within the chemical business to desirous to turn out to be a railroader at a time the corporate was going to go from totally governmental to non-public, and beneath the management of any person that had a really robust imaginative and prescient for the corporate at the moment, Paul Tellier.

RA: So that you labored within the latter a part of your time on the chemical firm fairly a bit with the railroads: Conrail, Illinois Central, CN?

RUEST: Sure, and CSX. We have been making merchandise that have been traded between Canada and the U.S., north to south. We weren’t transport very a lot west; we have been transport largely south, and alongside the East Coast by water. Vehicles went in a radius round these vegetation, after which rail went for lengthy distances all the best way north-south—principally from vegetation in japanese Canada all the best way right down to Louisiana, Florida and wherever in between, utilizing all of the modes.

I made a decision to be taught concerning the rail community. The complexity at the moment of doing enterprise with the rail business was large. Coming from the chemical business, I used to be fairly amazed how difficult it was from a buyer’s perspective—and I just like the phrase clients, not shippers—to make use of a railroad.

Once I joined the railroad, there have been a variety of issues we did beneath Hunter Harrison and Jim Foote that actually have been meant to simplify transactions. We eradicated rebates and mileage cost on railcars, and we went to a per-car charge, probably the most simplistic unit, in order that if you purchased the providers, you understood your value with out essentially having to undergo a sequence of add-ons and deductions.

As a railroad buyer again within the day, one among my frustrations was, OK, there are all these completely different components, so what actually are my prices? How was I to do the railroading aspect inside CN in a manner that we might be a greater service supplier in line with what my frustrations have been after I was a buyer? And beneath Hunter and Jim, we did a variety of these issues. Immediately, it’s frequent to have every part on a per car-basis, with no mileage funds for personal gear. Additionally, we’ve transformed the forex we used. It was neither Canadian funds nor U.S. funds; it was what I feel was known as “rail forex” at the moment. We eradicated that, so now we all the time do enterprise in actual forex versus rail forex. Once you have been transport within the U.S., you had a selection between a U.S. charge and a Canadian charge, or one other charge, which was a mix with a forex surcharge that was adjusted each two weeks. However why trouble with a forex surcharge when you may simply use the U.S. trade charge and make it easy?

RA: So, coping with being a railroad buyer on the time was somewhat intense? Would you say it was difficult, with forex surcharges and different financials?

RUEST: Sure. Even again in these days, and I’m going again to being with CN for 23 years, it was a lot simpler to do enterprise with a barge firm or an ocean-going firm or a trucking firm than it was doing enterprise with a railroad, particularly if it was going to be an interline motion. This was the case for a lot of producers, the place most of what you do is interline. For us, it was, how can we develop enterprise in a manner that we make it extra conducive to do enterprise with the railroads, CN specifically? Then, over time, we are able to preserve and develop shares and be worthwhile, and likewise current ourselves in a manner that you just don’t must be a railroad guru to grasp the railroad and do enterprise with it.

RA: Getting again to your coming to CN, who made the primary transfer? Did you method CN or did they method you?

RUEST: It was a mix of each. I’d say it was considerably CN, however the time was ripe.  At ICI, we have been going by way of main restructuring. A number of the enterprise had been bought. The administration crew and my mentor at the moment, Norm Torgunsen, made an try to purchase out the enterprise unit. We truly made a proposal to do a leveraged buyout of our enterprise unit, to take it non-public and run it ourselves. We believed in what we had, however the leveraged buyout didn’t proceed. Relatively than keep at ICI, I started seeking to do one thing else, someplace else, and on the similar time CN was being readied to be privatized. This was in November 1995.

I used to be in a discipline the place the shareholders have been dropping curiosity. As a administration crew, we tried to turned shareholders, however couldn’t get it accomplished. So I used to be on the lookout for an organization that had a imaginative and prescient of rising and getting issues accomplished, versus withdrawing from {the marketplace}. And CN at the moment was on the lookout for expertise from outdoors.

You need to do not forget that, in the present day, folks have a look at Precision Scheduled Railroading the best way it’s utilized on any of the railroads, and the way tough it’s. You may think about how tough it was to go from a Crown Company dropping cash to changing into 100% privatized in a single day, and be completely by yourself. We went from 33,000 folks to 22,000, 100% privatized, reducing the hyperlink between the corporate and the federal government. That was very difficult, and there have been lots of people at the moment who have been naysayers. My view was that the potential was large, and regardless that the danger was vital, it was most certainly to work, and that this was the place to be.

Two years later, when Hunter got here in by way of the merger, it was one other large success and studying expertise in my profession. Once you purchase an organization, it is best to have a look at the expertise in that firm as a lot because the property of the corporate. We have a tendency to have a look at an organization because the map, the territory, the gear it has, but in addition we must always look very intently on the expertise. Within the case of Illinois Central, all of the expertise stayed with CN.

There was one other a part of a reasonably main transformation that was additionally fairly tough at the moment, in hindsight. Immediately, folks have a look at Precision Scheduled Railroading as one thing that may be accomplished, however at the moment there have been a variety of naysayers who stated it was going to fail.

RA: So CN was actually the primary to do Precision Scheduled Railroading? It had been utilized on a smaller scale at Illinois Central, however now it’s a a lot bigger community, and it crosses a border.

RUEST: It was utilized on the Illinois Central, which was a smaller community, however once we did the merger there was one 12 months between the time the merger was introduced to the time it was permitted by the STB. Throughout that 12 months, we did a variety of outreach with our U.S. clients, with the IC enterprise prepare. I bear in mind a visit particularly between Jackson [Miss.] and New Orleans the place we stopped in each station and introduced clients on board, doing a presentation concerning the merger and explaining to them the advantages of the merger.

In between these conferences, I used to be with among the IC executives, and we have been studying about one another’s tradition. So, I’m coming from Canada they’re coming from the South. They perceive how Hunter works, and I perceive partially how CN works, as a result of I’ve been at CN for 2 years. So in between conferences the place we have been explaining the merger to clients, we have been explaining to one another how we have been doing enterprise. That is the place I acquired to find out about Hunter’s mannequin and what kind of scheduled railroading was on the IC, and the way they went by way of a section of some challenges on the operations aspect and on the shopper aspect.

Historical past has repeated itself a variety of instances, however I feel the primary time historical past was made was on the IC. These clients bear in mind the early days as a bit bit difficult for them on the time.

RA: Hunter has handed into historical past, and I suppose you may name him a legend. What was it like working with him? There are the tales—the exaggerated tales, the tall tales, the true tales. What was he actually like, out of your perspective?

RUEST: It trusted the day. You’re proper: There are tales, there are tales, and every part will get greater, particularly 5, 10, 15 years later. Tales are repeated  with extra humor or extra unhappiness. But it surely was a time of studying the fundamentals of railroading. The expertise we had with Paul Tellier we additionally had with Jim Foote about management, and the way you get lots of people to do the issues that have to get accomplished. Which will or is probably not simple, however it must be understood and it must be accomplished, in any other case we’re going to start out slipping and go backward. It’s all about management and resolve. And that’s what I’ve been attempting to do, particularly since final spring—creating a way of function, a way of urgency, after which making selections and transfer ahead, with out getting caught in forms.

Once you have a look at massive corporations like all of the very huge railroads in North America, there comes some extent the place, since you’re massive and also you assume you will have time, you begin to waste probably the most worthwhile half, which is time. You utilize extra time than what it is best to. And also you hesitate for longer than what it is best to, and you are able to do that for a time period simply since you’re huge and you’ll survive this stuff. However in the long term, these are among the large errors.

Getting back from the place we have been and what we realized the previous 20 years to what we needed to do final spring, is getting again to fundamentals. Don’t procrastinate. Get the forms out of the system. the enterprise, and you recognize what you could do. Make selections, transfer with a way of urgency and get folks to behave as one.

Everyone has his personal model. Hunter had his personal model; Paul Tellier had his personal model. Jim has his personal model. I’ve my very own model. However I imagine that, for any massive crew on a railroad, in case you don’t play as one, it doesn’t matter what number of property you will have, or how a lot capital you will have. You gained’t be as profitable. You need to get to the purpose the place there’s a standard trigger, a standard focus. For individuals who don’t need that, you need to get them off the prepare and exchange them with those who wish to be on the prepare. In the event that they don’t fairly know easy methods to do it, you need to train them how. When it’s not fairly clear the place we must always go, it is best to a minimum of ensure you give folks a standard course, and never depart them to creating selections as to what’s required.

RA: So what’s JJ Ruest’s model? How would you describe it?

RUEST: My model is to decide, to research, however no more than I’ve to. I ask my folks, for instance, when now we have conferences, to actually have a gathering. No matter doc you’re going to usher in, convey a smaller doc, in case you can put it in fewer phrases. Much less is best than extra. Go away time for dialogue, and when the dialogue is over, decide. We don’t depart the room saying we’re going to research this once more. Most conferences have to finish with a call, or an motion plan that may rapidly result in a call. If we go from determination to determination, we are able to transfer on to the subsequent factor. In any other case, we’re simply going to build up a bunch of points that finally will turn out to be extraordinarily heavy, like we ended up having final winter. Go together with what you recognize, be a scholar of {the marketplace}, be taught from others, be taught from leaders.

I do a variety of listening, however not as a result of I’m indecisive. I pay attention as a result of earlier than I make up my thoughts, I wish to hear from those that have one thing to say. When the dialogue is over, we determine, we transfer ahead, and that’s it. As soon as a call is made, there must be any person who’s in command of the result. There could also be a crew of individuals, however there’s just one chief for every undertaking or every determination, one individual accountable

One expression I exploit lots is baseball. I typically use examples of after I was a child, after I performed baseball.

RA: Montréal Expos fan?

RUEST: They didn’t keep in Montréal lengthy sufficient, however I used to be an Expos fan. I’m a fan of all crew sports activities. A number of what I do, and who I’m, has to do with that. It’s a lot extra enjoyable to do a crew sport versus a person sport, as a result of as a crew there’s motivation. Baseball is a kind of sports activities. I used to be by no means nice at baseball, however I like the truth that it’s a crew sport. You win collectively, and also you lose collectively. My instance of baseball: You’re on the plate—this goes again to my level about making a call—the ball is available in, and it’s both within the strike zone or it’s not. If it’s within the strike zone and also you don’t swing at it, that’s a mistake. If the ball retains coming within the strike zone and also you don’t swing at it, and strike out since you haven’t swung at it, that’s dangerous.

As a child, I felt dangerous if I struck out. I felt dangerous strolling again to the bench, as a result of I let my crew down. As an grownup I say the identical factor. When the ball of alternative or the ball of danger comes into the strike zone, you need to give it a minimum of a shot, to swing at it, to attempt to make one thing out of it—a single, a foul ball. Shield the plate, make one thing out of it, however don’t let it undergo and let your crew down and let your self down. Usually, in massive companies, typically folks have a look at the ball coming in, and so they understand it’s a strike. However they don’t swing at it. They hesitate and procrastinate. That’s the place forms is actually dangerous, and must be taken out of most massive corporations.

RA: You’re a Canadian. Do you will have any hockey analogies?

RUEST: Now we have an initiative proper now on expertise, and the place we wish to use it. We wish to exploit expertise the identical manner we exploit capital investments. How we deploy expertise is as essential as how we deploy capital. Expertise is like having a hockey crew. You may solely have so many gamers on the crew, identical to in baseball, and everyone that’s on the crew must earn a spot on the crew. Simply since you’ve been on the crew a few years doesn’t imply you’ll all the time be on it. Yearly you need to earn your spot. The start of a hockey season is in the summertime; baseball is within the spring. There’s a spring coaching camp not simply to heat you up, however principally to make the crew once more.

After we do a job discount or a restructuring, folks have to do not forget that you need to earn your spot on the crew. When you nonetheless have the expertise however you misplaced your drive, you may’t preserve your spot on the crew. When you look left and proper on the bench, you’ll notice finally that your crew gamers additionally resent the truth that you’re now not placing within the effort. Due to this fact, because the coach, I’ve an obligation to get your spirit again or get you off the crew. It’s not about how lengthy you’ve been with us. It’s about whether or not those that play with you’re feeling you’re contributing and never dragging them down. The coach’s job is ensuring the folks on the crew have earned the correct to be on that crew. That proper is earned. It’s not God-given.

RA: With hockey, there’s the notion that, oh, it’s guys banging into one another, checking and roughing up the opposite gamers. However hockey is mostly a finesse sport that requires a variety of precision, a variety of coordination—like offering good service.

RUEST: All this stuff mesh collectively. The problem of our business: Give attention to the working ratio, give attention to value, give attention to development, give attention to security, give attention to asset utilization. How can we try this in a manner that there’s finesse, and a steadiness amongst our goals, in order that we don’t fall into enjoying largely protection or largely offense? That now we have a steadiness such that we are able to win as a rule, and that we are able to final a complete season and go within the playoffs? As a result of it’s not about having one good quarterly end result. It’s about having an excellent stable 12 months, after which, even higher, making a dynasty 12 months after 12 months.

An instance that hyperlinks to hockey is the dressing room of the Montréal Canadiens. We had a city corridor assembly at CN again in June following our powerful winter the place we introduced all the highest 200 CN staff into one of many resorts right here in downtown Montréal. In one of many huge conference rooms, we had all 4 partitions adorned as if we have been sitting within the dressing room of an enormous sports activities crew. On the high of every wall we had a phrase that’s truly within the Montréal Canadiens’ dressing room, which is about constructing a dynasty and carrying the torch from one captain to a different captain, from one common supervisor to a different GM. I feel that is very a lot concerning the tradition of CN—we can’t fail and we are going to preserve it going, however in a manner that’s suited to what we’re proper now. Particularly, it’s a variety of give attention to customer support and on development, and likewise, up to some extent, on acquisitions outdoors of rail, so long as they feed into rail.

RA: Inform me about that powerful winter. What occurred, what led to the issues, and what did you do and your crew do to get issues again on monitor?

RUEST: In easy phrases, we entered the winter of 2017-2018 with not sufficient capability in Western Canada. Within the months resulting in winter, we have been already capacity-constrained on our Western community, largely from Edmonton to Winnipeg and Winnipeg to Chicago. Capability was already tight from the perspective of primary monitor capability, certified crews and locomotives. Winter all the time consumes energy capability due to harsh winter situations and low temperatures. So coming into the winter with tight capability made issues worse. It was very tough to get better as a result of we would have liked higher climate and extra capability. We had neither.

Because the winter wound down, issues have been a bit higher, however throughout that point it turned essential to have the crew act as one, to truly do the very best that we may with what we had at the moment. So the primary name to motion, again in March, was, how can we make the very best out of that and survive into the spring and early summer time? Let’s persuade the board to offer us the additional capital so we are able to make fast selections on investments. We didn’t want extra time to research or agonize; we knew what we would have liked to do.

We have been capable of persuade the board as to what we would have liked to do, and acquired the signoff to get the funds. Within the following two to a few weeks, we rapidly acted on our selections with distributors and engineering to get issues permitted. We put out buy orders for gear, and for building to be accomplished in the summertime. We had a shot of getting every part accomplished in the course of the summer time and fall, and be prepared for the winter. It was about appearing as one, rapidly, making selections when there was nonetheless time left to actually prepare for this winter. And if you have a look at our second-quarter outcomes, they have been largely about utilizing the property we had readily available. Our third-quarter began to indicate the outcomes of among the property we’ve been shopping for and deploying.

RA: The present capital program has been among the many largest chunks invested by CN, a minimum of lately?

RUEST: Sure. This 12 months we’re at 25% of our income reinvested again in capex. However you recognize, that’s a method to have a look at it. One other manner to have a look at it’s return on invested capital, and our ROI is above 15%. Now we have Precision Scheduled Railroading, and we’ve had an excellent working ratio for a very long time. Now, it’s time for us to additionally give attention to ROI and discuss to our shareholders and the folks that help us about ROI and the OR. In case you have an excellent ROI, why would you not make investments extra capital if there may be enterprise on the market?

The rail business is all the time speaking big-time about development, and for good purpose. We’re all the time saying that now we have a product that ought to have the ability to compete with the freeway as a result of we’re extra gas environment friendly, and we’re cheaper. However we’re nonetheless considerably tough to do enterprise with, and typically we don’t have the property or the capability required to truly meet demand, however the demand is there. We have to make investments in order that we develop organically with the enterprise, and tackle our pinch factors with capital. So this 12 months, we may even be spending in all probability within the vary of 25% of our income again into capex. A considerable amount of that will likely be in Western Canada, the place capability is beneath probably the most strain.

RA: You’ve stated that coal and crude oil are cyclical. The place are the expansion alternatives, outdoors of the majority commodities the railroad has historically hauled, like grain, which is closely regulated .

RUEST: There are actually three buckets: Pure sources, which is able to all the time be the world of rail and barges—grain, potash, coal, iron ore. Manufactured merchandise, the place I got here from within the chemical business—rail-friendly due to massive quantity, and huge rail-served amenities. Then there’s the actual development of the longer term, which has to do with customers: 70%-plus of North American GDP is tied to customers. The 70% will turn out to be 75% and 78%. I do know Mr. Trump and Mr. Trudeau are attempting to revive or defend the manufacturing sector, however development within the financial system comes from customers, who generate a variety of freight. That form of freight is in the present day totally on the highway. It requires higher and completely different service than for pure sources, the place we use largely unit trains, or manufacturing, the place we use largely carloads, origin to vacation spot. Most client items will not be rail-serviced at origin or vacation spot, and in lots of instances they don’t contain a full carload.

RA: Are we speaking intermodal or less-than-carload boxcar visitors? What concerning the “Amazon Financial system,” the place individuals are shopping for issues on-line that require transport—FedEx, UPS, native trucking corporations? The place do you see the railroads becoming in? How do you enhance that?

RUEST: Railroads undoubtedly slot in, and the product that makes the railroad probably the most related is the container, whether or not it’s the 40-foot ocean container or the 53-foot home container. So we principally must be the provision chain associate of option to do the long-haul half, however do it in a manner that the first-mile and last-mile service, which is over the highway, by way of a warehouse or by way of a FedEx, is ready to efficiently ship towards what’s promised. Most of what Amazon delivers to your door is a single field. What’s in that field in lots of instances isn’t manufactured in North America. So it does come a protracted distance, in bulk, most certainly in a container. The container will get cross-docked someplace, damaged up into small items which can be aggregated with different items that go to a different warehouse. For that, you want scheduled railroading, terminals centered on items, and a stage of buyer providers that’s extra modern than what now we have.

That’s why we purchased an organization known as Transec, which some folks say is a trucking agency. To us to, it’s not a trucking agency. It’s an organization nearer to the buyer finish market. It offers a variety of temperature-controlled providers. In order customers purchase a home or construct a home, and fill it with white items and furnishings, and eat properly year-round, these merchandise are container providers. It’s time for the rail business to create the provision chains or to be a part of a provide chain that all the time makes use of “the beast,” the rail community. We’re a participant in that offer chain, however we have to be related to those who in the end solely purchase small portions or have service expectations larger than your typical pure useful resource or manufactured-goods buyer.

RA: We’re actually speaking about data and infrastructure?

RUEST: Funding in ports, or in methods that make us play properly with the ports. Funding in intermodal yards. Funding in methods or companions to do the last-mile supply over the highway. Funding in or partnership with individuals who mixture and disaggregate in warehouses from full containers to a truck that goes to a retailer as its vacation spot. And doing this all the time in a manner that our energy is the facility of rail’s value. In each resolution, you wish to match within the rail resolution for the long-haul, the place you’re shifting a full load.

RA: How do quick traces slot in? Like all Class I’s, you interface with a variety of them.

RUEST: Brief traces match; listed here are two examples: The Indiana Rail Street, which has a container terminal in Indianapolis that to us is sort of a CN terminal. Consider it as a container terminal owned and operated by CN like a company retailer, or a container terminal on a brief line or a personal proprietor or a franchisee, however in each instances a part of the identical group. Most CN container terminals are company storefronts we personal and we function ourselves. However we even have container terminals I’ll name franchises. One is in Indianapolis on the INRD, and one in Regina (Saskatchewan) that can be a personal ramp. It’s owned by one other firm, however they promote it by way of us to abroad and home clients. This terminal has the identical discipline providers as our company shops or CN container terminals. But it surely permits the INRD to be linked to the West Coast. INRD can take part in world commerce by way of CN, and CN can take part in enterprise in and round Indianapolis. We will truly market to all CN clients.

Sometimes, quick traces have been seen as an extension of Class I’s, largely for carload merchandise service, however there are locations the place it has been confirmed which you can additionally try this with intermodal so long as there’s a willingness to truly be what I’d name the franchisee of a storefront in a Class I community. These items come collectively higher if it’s accomplished from a brownfield website, the place you are taking an current underutilized merchandise carload yard and, utilizing the identical tracks and land, convert half right into a container terminal.

We did that on CN once we purchased the Elgin, Joliet & Jap in Chicago. We had a yard in Joliet, Unwell., for manufacturing-related merchandise. A few of that enterprise was not rising as prior to now, so we took about one-third of that yard and turned it right into a container terminal. It’s now two-thirds container. A brief line can do the identical factor. It’s a query of partnering with a Class I, and being a part of its community as a franchisee retailer, with entry to the identical development potential of long-haul economics.

Between Edmonton and Calgary, seemingly outdoors Crimson Deer, Alberta, aerial view of freightTrain. Taken July 2 2013.

RA: The place is CN going with know-how?

RUEST: Beneath Precision Scheduled Railroading, we’ve accomplished a variety of the issues that individuals learn about—closing hump yards, promoting traces, lowering headcount, parking locomotives, parking automobiles, and many others. However there comes some extent the place you may solely achieve this a lot of that, except you determine you’re simply going to shrink and cease your development and simply drive the working ratio down. However principally, you’re going to hand over return on funding and potential worthwhile enterprise. I’d name this Precision Scheduled Railroading 2.0, the place you develop, making use of know-how in ways in which scale back working prices. What now we have proper now are a variety of initiatives that we’re deploying throughout the community in 2019. One instance of that’s automation of prepare inspection. We’re constructing portals—4 in Winnipeg, two in Memphis and one in Chicago—the place the prepare goes by way of the portal at monitor pace. It’s principally a roll-by inspection.

RA: Machine imaginative and prescient?

RUEST: That’s proper. As an alternative of getting an individual inspecting a prepare because it rolls by, it goes by way of the portal at regardless of the monitor pace is on that phase. Excessive definition cameras take photos of the prepare because it goes by, and all the pictures go to a software program program—synthetic intelligence—the place the software program “learns” from what it sees, finds a defect, attaches that defect to the automotive quantity and sends out a piece order for a carman to carry out an inspection and restore. Over time, we could have a greater automotive inspection program.

We’re doing the identical factor with monitor inspection. We will likely be equipping seven or eight boxcars with inner monitor inspection gear, put them on the merchandise community and provides them a schedule in order that they run across the community continuous on common trains, inspecting the rail mattress and the rails, sending data on what must be mounted. Over time, we’ll have extra preventive upkeep, much less last-minute upkeep, and doubtless a safer community. Ultimately we’ll use our expert labor to make things better versus inspecting them. All of that may even finally give us a greater, extra dependable product and higher service, as a result of we’ll have much less unplanned upkeep that must be handled. These are simply a few examples.

RA: What you’re speaking about is Huge Information: gathering huge quantities of information and placing it to good use.

RUEST: Huge Information, and software program that learns by this information and on the lookout for defects. Over time, all inspection could be accomplished by machine, so we are able to focus our expert labor on fixing issues versus on the lookout for defects.

RA: Repair it earlier than it breaks, proper?

RUEST: Now we have a brand new Vice President of Mechanical, Jim Sokol, who comes from the airways. After we merged with the IC, we had a big inflow of talent coming from one other railroad. Prior to now two years, we’ve had an inflow of expertise coming from different industries. Now we have a brand new chief of mechanical, a brand new chief of engineering, a brand new CIO, a brand new chief of security. Some come from BP Amoco, Southwest Airways, FedEx. We’re bringing in talent from different industries which can be considerably like us so we are able to be taught a few of their finest practices.

Within the airline world, the place Jim is from, preventive upkeep on an plane engine is sort of completely different than doing preventive upkeep on a locomotive. Plane engines can’t fail on line as a result of that may be fairly detrimental! Jim comes from an business the place it’s all about preventive upkeep. Within the rail business, it’s not fairly sufficient about preventive upkeep. When a locomotive comes into a store, what’s it that we’d like to take action that by the point it leaves the store it would truly be in service longer, and the possibility of an on line failure is decreased? A giant a part of that is remodeling our mechanical program in such a manner that we’re growing the extent of locomotive predictability and reliability, on the similar time lowering the numbers of on line failures, that are very detrimental to service and value and asset utilization.

Proper now, some railroads are speaking about what number of locomotives they’re parking. Now we have roughly 1,500 high-horsepower locomotives, and we’re not going to be parking 300 or 400 as a result of our fleet is already fairly slim. This can be very essential for us with a fleet of our measurement that the fleet is definitely in lively service and match for responsibility always.

RA: On the railroad, when you’ve got a catastrophic locomotive failure, you may clog up the whole system for hours, a minimum of, or days or no matter, and it has a cascading impact.

RUEST: That’s proper. We noticed a few of that final winter. Our community, say from Halifax to Chicago, has extra capability. In case you have a locomotive that fails on line, it in all probability won’t have an extreme quantity of impression on different enterprise as a result of among the community is double-track within the East. However if you go west and the community is already at capability and beneath stress, and you’ve got a failure on line, the price of that ripple impact is sort of vital. Once you’re working near capability like CN, and also you’re doing a capital program so as to add capability, the capability that you’ve got now could be very worthwhile. It’s essential that we make good use of that—specifically, the rarity of the asset. That a part of the community has to have a a lot larger up time, in any other case the price of unplanned failures is extra vital.

RA: So, a variety of work has been accomplished on the western a part of your community beneath heavy visitors. What’s left to do?

RUEST: Just about all of the [2018] work on the principle line is finished. We nonetheless have some yard work in Edmonton to finish earlier than the winter is over. There’s extra work developing this 12 months, which will likely be one other very busy 12 months of including capability out west—extra sections of double-track, in all probability extra sidings and perhaps some yard work. It’s just about the identical quantity of labor on the community as what we did final 12 months to construct capability for the enterprise we see coming at us, and likewise to construct resiliency so now we have the methods and means to take care of when the community is beneath stress, like in winter time or when enterprise is robust.

One instance of that’s crude by rail—from Edmonton going to the US, going east, going to Superior, Wisc., going to the Union Pacific, BNSF or by way of the CN all the best way to Louisiana, to Geismar and/or Baton Rouge. We weren’t anticipating that the pipeline business would have so many challenges to get issues accomplished, and proper now the one security valves it has left are reducing again manufacturing or transport as a lot as doable by rail, or each. With a purpose to use rail, you want the railcars, however you want the community. You want the double-track and sidings and the crews and the locomotives. The funding we’re doing out west could have an early, fast payback as a result of the enterprise in Western Canada is sort of robust.

RA: Many Canadians say, you don’t know what chilly is till you come to Canada. I don’t assume Canadians imagine that something larger than 20 levels under zero centigrade is chilly, however the final winter hit fairly exhausting. Has the winter climate been getting worse? Do you discover something like that?

RUEST: I feel it’s just like the southern U.S. You get the impression it’s not getting colder or hotter; it’s simply getting extra excessive. When you’re going to have a flood or a twister, it appears to be extra excessive. If it’s going to be sizzling, it might be sizzling for longer, and far hotter. The winter we might have in Canada this 12 months could be a standard winter, however once we get to those extremes, will probably be colder, and for longer. We deal fairly properly with snow, as a result of the grades now we have within the Canadian Rockies are pretty flat. Sometimes, snow isn’t an enormous difficulty for our community, however typically it’s even more durable in Wisconsin, Minnesota and Chicago than on the Canadian community.

However we’re extra inclined to very chilly temperatures and likewise to what number of days and typically weeks of chilly now we have, as a result of it has an impression on prepare size. Winter comes yearly, however it’s turn out to be an increasing number of unpredictable. Extra of our locomotives work as Distributed Energy as a result of they really permit us to have the ability to preserve working longer trains. We even have 60-foot boxcars we name “air repeater automobiles”—principally a boxcar with an air compressor we placed on the merchandise trains within the winter. Similar to a DP locomotive, they assist us preserve prepare size.

Individuals should still criticize our railroad for winter service issues, however what we do within the winter in the present day is a complete lot higher than what we did 10, 20, 30 years in the past. These trains are longer than they have been in prior winters, and we transfer a complete lot extra gross ton-miles than in another previous winter.

However let’s face it. Being a conductor at minus 35 levels centigrade isn’t a simple job. And in wintertime, there’s much less daylight and extra nighttime—two shifts out of three when it’s darkish. And when it’s darkish within the Prairies, it’s sometimes colder. The wind simply picks up and it’s a difficult setting, no query. Our staff had fairly a problem final winter working lengthy nights, and with re-crews, most hours and most extra time, it was nonetheless not fairly sufficient to get all of it accomplished.

RA: The longer term, by way of expertise, attracting younger folks to the business—not a lot attracting them however retaining them. How tough is that for CN?

RUEST: All of us compete for the expert labor drive, and we compete even tougher when unemployment is as little as in the present day—which we’re not complaining about as a result of it makes for good enterprise. The financial system is sweet, unemployment is low, so the labor pool is smaller. However on the similar time, now we have the nice fortune to have extra freight that wishes to come back to us, so it’s as much as us to make ourselves extra interesting to younger women and men to come back and work for the railroad, both in operations, mechanical, engineering or within the completely different features that now we have at headquarters.

It’s about getting out the message that rail is a good business, financially strong, with good advantages. We’re not going to go wherever. We’re not closing factories. What now we have is exclusive, so if you be part of the railroad you may truly make a profession of it, whether or not you be part of the blue collar drive or the white collar drive. We offer related providers, and as we work tougher on our inner product, they’re much more related. We’re constructed to final, and we are going to final into the subsequent century. It’s as much as us make that occur, and it’s doable.

Younger folks wish to have the identical know-how they’ve at house, and now we have to offer them with that know-how, not only for us to decrease our prices and be extra environment friendly, however to truly retain the youthful technology. I’ll provide you with two examples. Proper now, we’re deploying cellular units for our crews and carmen. So in case you’re a carman, you’re getting a pill pc the place, as you do your work, you report all of your work. You truly enter that work in your pad, and sooner or later you could be utilizing that pad to take photos of the stuff that you just’ve accomplished with the intention to archive it. That’s what we do our AAR billing from.

When you’re a crewperson, you’ll even be given a cellular gadget. It’s virtually like FedEx, the place you get your work order and report your work. Over time, we are going to use an increasing number of of those units by way of our “digital manufacturing unit.” We are going to create extra functions for these units.

We provide you with a $three million locomotive, after which we provide you with a bit of paper and a pencil? That doesn’t work anymore. Now we have to deploy know-how and digitize processes in a manner that not solely helps us convey down the working ratio and makes the railroad extra dependable, but in addition is extra interesting for the employees of in the present day and to how they wish to work, versus being caught within the 1970s and 1980s.

RA: You give folks a paper type and a pencil, and so they assume, what’s this? The mindset is smartphones, tablets, computer systems, wi-fi, connectivity, data, and accuracy, too.

RUEST: Sure, accuracy. For carmen, now we have it deployed in 4 yards. You simply talked about, for instance wi-fi. Now we have to deploy sufficient wi-fi sign in every yard or store so there may be wi-fi wherever they could be doing their work. That turns into highly effective. You allow folks to do various things wherever they’re. Ultimately, we must always have the ability to create extra functions that may make work extra attention-grabbing. That’s the subsequent frontier of Precision Scheduled Railroading: making use of know-how that provides the brand new technology a working setting extra like what they need, and a greater likelihood of us retaining that expertise.

RA: Passenger rail: CN interfaces lots with Metrolinx, AMT and VIA Rail, and Amtrak within the U.S. How would you describe your relationship with passenger carriers?

RUEST: It’s a problem to have freight co-exist with passenger service as a result of, particularly in commuter service, it consumes a variety of capability in a really quick time, particularly throughout peak hours within the morning and at evening. It’s tough to co-exist, and it’s one thing that we have to get higher at. However we personal the rail traces; our first mandate is freight, and the capability we deploy is for freight. There must be a recognition that capability for passenger service must be created by the person, with the funding required. Don’t drive it. The folks utilizing freight service are residents identical to these utilizing service. They’re folks that work in factories attempting to get their merchandise to market, or in warehouses to which we ship their product. I’d describe every freight railcar that goes by as jobs or providers in manufacturing or pure sources, and a passenger prepare as folks attempting to get to their jobs. There must be a recognition that each have to exist. There should be some concessions every now and then, however it does require capability, and an understanding that as you give capability to passenger service, you are taking it away from the freight sector. You need to try this in a manner the place everyone will get what they want, however it’s not first-come, first-served.

RA: This is a chance so that you can communicate on to your distributors. Do you will have a message for them?

RUEST: My message to them is, please assist us to enhance as an business so we are able to acquire extra enterprise. I’m not saying, “Give us your lowest worth.” I’m saying, “Assist us to decrease our prices.” Once I was Chief Advertising Officer at CN, I used to be all the time speaking to my clients by way of, “What we do can assist you will have decrease prices and higher service, however don’t all the time ask us to do it at a lowest worth. Similar factor with our distributors who help us: How are you going to assist us acquire extra enterprise and be extra related to the world of transportation, such that, because of this, you acquire extra enterprise from us, and we proceed to purchase providers and deploy capital?

Promote to us in a manner that we could be decrease value, and supply service that’s dependable and protected. Each time you try this, you create extra enterprise for your self. You improve the scale of the pie wherein all distributors can take part. It’s very true on the planet of non-traditional suppliers to the rail business from the know-how aspect. So in case you’re a more moderen provider to the rail business, and also you’ve been a provider to, say, the mining business and taught it easy methods to do preventive upkeep on these huge vehicles, how would a few of these issues apply to a locomotive or an enormous rail community? What are these applied sciences that we may apply to our business in order that we are able to meet up with the instances? My sense is that, from a know-how deployment perspective, as an business we’re barely behind different industries. It’s not too late for us to catch up, however time is of the essence for us to determine easy methods to use know-how neatly. Suppliers can assist us to try this. We all the time like lowest worth, however we’re actually enthusiastic about decrease prices and options which can be progressive in additional methods than one.

RA: You’ve been within the CEO function now for a comparatively quick time, however you’ve been with the corporate a very long time. What was it like being thrust into the function?

RUEST: Coming from the industrial aspect, I perceive among the regulatory area, the shopper aspect, the logistics aspect, the provision chain inside and out of doors North America. I’m now discovering new stakeholders, that means a variety of involvement with regulators and politicians, and much more engagement on the subject of security. How we use know-how is one thing I actually take pleasure in.

We’re a really massive firm in North America. CN has a a lot greater function within the financial system than one may assume. In Canada, now we have the fourth-largest market cap—$80 billion-plus—with three Canadian banks in entrance of us. We matter to the Canadian financial system, and when that financial system has points, typically we get dragged proper into the center, whether or not it’s points with the lumber commerce into the US, with NAFTA, or crude by rail and pipelines, or grain. We’re a company citizen that issues. We’re both central to or a big a part of these points. That’s the half I’m discovering, and I’m having fun with it. However on the similar time, we can’t all the time have the options individuals are on the lookout for instantly. We aren’t all the time on stand-by with all the products and providers to step in and repair one thing that ought to have been mounted a very long time in the past.

I wish to thank all of our staff at CN for his or her fixed help, particularly final spring and final winter. We had a very powerful winter to get by way of. We got here out once more as a crew. The message to the crew: Dangle in there. We’re investing. We’re giving ourselves the instruments to achieve success, and we will likely be profitable. That’s the dedication now we have to our clients, our shareholders, authorities regulators, and extra essential, to ourselves. We’ve earned the correct to achieve success. Thanks everyone to your help to maintain on happening that path. And thanks to Railway Age to offer this recognition to CN and to me. I wish to thank my mentors from the previous—Paul Tellier, Hunter Harrison, Jim Foote, Claude Mongeau, and Norm Torgunsen from my days within the chemical business, and to my father, for all of the educating they offered over time. Now it’s as much as me to offer that very same educating and training again to the folks that work for me and round me.

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