Posts Tagged ‘CN CEO Luc Jobin’

Fund Wants CN to Delay Naming New CEO

December 28, 2021

A hedge fund seeking to take control of top management of Canadian National wants the Montreal-based Class 1 to delay naming a replacement for its retiring CEO until after a shareholder meeting next March.

TCI Fund Management has put forth a slate of four nominees for seats on the CN board of directors who will be voted upon during the March 22 meeting.

However, TCI’s preferred choice to become CEO, Jim Vena, recently withdrew his name from consideration.

Current CEO J.J. Ruest plans to retire in January after a new CEO is named.

TCI has been critical of CN management this year for its handling of an unsuccessful effort to acquire Kansas City Southern.

That bid collapsed in the face of opposition from the U.S. Transportation Board.

CN rival Canadian Pacific was subsequently able to reach agreement to acquire KCS.

The two expect to merge next year pending approval by the STB.

CN Service Issues Led to CEO Ouster

March 15, 2018

Like CSX, Canadian National encountered service issues last year. Unlike at CSX, the Montreal-based CN decided that it needed more capital spending and to hire additional employees to resolve the problems. It also decided it needed a new CEO.

Speaking on Wednesday at the J.P. Morgan Aviation, Transportation & Industrials Conference, CN’s interim president and CEO said the railroad’s board of directors had been considering for several months replacing CEO Luc Jobin before ousting him last week.

“The board has been thinking long and hard about the leadership at CN,” said Jean-Jacques Ruest, who replaced Jobin. “They decided it was a time to make a change in leadership,” in order to bring more energy and a sense of urgency to fixing the railroad’s service problems, Ruest said.

In fairness, the services issues that CN faced had different roots than those at CSX.

Nonetheless, in commenting about CN’s dismissal of Jobin, Trains magazine noted that it is uncommon for a railroad to get rid of its CEO when the carrier faces a severe service crisis.

The magazine noted that in the past 25 years railroads have stood by their CEOs amid such situations as Union Pacific’s meltdown after acquiring Southern Pacific, the problems that persisted after CSX and Norfolk Southern divided Conrail, and BNSF’s congestion issues in 2013 and 2014.

CN’s woes began last fall when traffic surged by more than 20 percent in western Canada. The result was congestion on main lines and yards that left CN short of operating crews and motive power.

Further aggravating the situation was hard winter weather, derailments, and related line shutdowns that prompted CN to shorten, delay and detour trains.

That increased costs, lowered average train speeds and increased the time that cars spent in yards.

Ruest said the worst of the cold weather has ended and CN has begun to lengthen its trains.

CN management also decided to acquire additional locomotives, hire additional crews and increase track capacity in western Canada.

The added motive power will include 130 leased units and 200 new engines. The latter will be built between 2018 and 2020 and include GE Transportation ET44AC and ES44AC models.

Ruest said it’s likely that CN will see how the network is performing later this year before determining how to proceed as new motive power arrives.

He also said CN is seeking to perfect its traffic volume forecasting and capital planning process so as to avoid service problems again.

Ruest said CN still expects 2018 volume traffic growth of 3 to 5 percent and will continue its long-term strategy to collaborate with customers and grow faster than the overall North American economy.

“We have not changed strategy even though we have changed the CEO of the company,” Ruest said.

In the meantime the CN board is seeking a permanent CEO and many financial analysts expect Ruest to get the nod.

Reading Between the Lines of How CSX Management Projects Itself to the World

March 7, 2018

CSX executives revealed last week at long last their vision for their company. They were supposed to have done it last fall, but three top-ranking vice presidents left during a management shakeup. Then CEO E. Hunter Harrison died.

But things have now stabilized. CEO James M. Foote and his management team put forth the most optimistic and rosy scenarios that they dared to spin.

Hovering over those presentations in New York City, though was Harrison.

A year ago Harrison and the hedge fund Mantle Ridge were closing in on their takeover of CSX, a feat they pulled off with a relatively small amount of money and in a short amount of time.

Harrison had great plans for the hidebound CSX. He brought the precision scheduled railroading model that he had implemented on the Illinois Central and then at Canadian National and Canadian Pacific.

Foote and his team went to great lengths to show that Harrison’s vision is their vision, too. Harrison received the reverence normally reserved for a company founder or elder statesman of much longer tenure.

Harrison had a lot of work to do. Independent railroad industry analyst Tony Hatch and Trains magazine columnist Fred Frailey have described CSX as long hindered by adherence to the practices of its  predecessor railroads, meaning it was  averse to change and rather bureaucratic.

Frailey said ormer CEO John Snow as uninspiring and his successor, Michael Ward, sought to move CSX forward but was bewildered as to how to get it out of its rut.

No wonder the CSX board of directors gave Harrison a chance even if, to quote his successor Foote, Harrison engaged in “carpet bombing” the railroad with fast-paced changes that led to widespread service failures that drew the ire of shippers and the attention of the U.S. Surface Transportation Board.

But all of that is behind CSX now, or so management wanted those attending or watching the presentations in New York to believe.

Some have bought it. Writing in Progressive Railroading, Hatch quoted an  investor as saying this was the best CSX meeting he had seen in a decade of watching the railroad.

The current management team laid out  goal of a 60 percent operating ratio by 2020, described a new intermodal business strategy, and pointed to the huge buckets of money it will fill from sales of unneeded real estate and rail lines.

Having a plan and making it work are not always, though, the same thing. Truth is every railroad company talks about growing traffic and all of them are facing challenges finding it.

Hatch said that if CSX is to increase its carload and intermodal business it will have to provide consistent and improving service.

Frailey didn’t comment directly on the New York conference, instead referring readers to articles written by the magazine’s writer covering the story, Bill Stephens.

Those articles, Frailey correctly observed, did well in showing how CSX seeks to project itself to the world.

Yet Frailey said some industry observers with whom he regularly corresponds have been debating the endgame that CSX management is seeking and it isn’t necessarily to grow traffic and become North America’s best railroad.

Those observers think CSX plans to eventually liquidate the company.

Frailey said the case for liquidation goes as follows: “The railroad borrows money to buy back an astounding $5 billion of stock, making every dollar of profit worth more to shareholders who stick around because the same amount of earnings is spread among many fewer shares . . . Freight rates are being jacked up to cover fully allocated costs, a direction I’m told only Union Pacific has gone up to now—milk the cow until it collapses, the saying goes. Its carload business has been steadily eroding since the turn of the century.”

The veteran journalist who has written about railroads since the 1960s said  he understands that CSX has reduced its marketing staff to a hard core operation.

That hardly sounds like a railroad that will be able to aggressively go to find new business. Perhaps CSX expects that by offering a superior product that shippers will come to it begging to do business.

The word “liquidate” that some of Frailey’s contacts used to describe CSX’s endgame is unfortunate because it conjures up selling assets and going away.

Perhaps a better description might have been to break up the railroad much as Illinois Central Gulf slimmed down in the 1970s and 1980s until it emerged as largely a Chicago-New Orleans core with a few arteries connecting to it.

Yes, some rail lines were abandoned, but most wound up in the hands of short line and regional railroads.

It was that railroad on which Harrison first implemented his precision scheduled railroading model.

Frailey isn’t sure what to make of what CSX is doing, but doesn’t believe Foote isn’t prepared to do the job thrust upon him following Harrison’s death.

Foote was in the right place at the right time and for now CSX and its shareholders will let him sit at the throttle and take the EHH train a little further down the line. But it is Harrison’s train orders that Foote is following and not those Foote wrote himself.

Shareholders can be a fickle lot. Just this week Canadian National, a railroad described in most circles as highly successful, pushed out CEO Luc Jobin after the company hit a rough patch.

What I see happening at CSX is that management is trying to walk a fine line between pleasing investors and shippers and keeping at bay a few interested bystanders who have the ability to make life easy or miserable for a company.

Cost cutting and asset sales will only take a company so far in that endeavor. Of course growing traffic makes everyone happy, but is CSX prepared to spend the time and money needed to make that happen. It is so much easier to sell property and lightly used rail routes.

In theory, a company exists to serve its customers because without them you don’t have a company. But theory also says that a company exists to make money for its shareholders.

The two objectives are not necessarily in opposition. Arguably, you can’t make money for shareholders unless you provide a product or service that someone is willing to buy.

But you can’t improve your product or seek to sell more of it without spending money on that, too.

Management has always existed to reconcile those sometimes opposing forces.

The history of the railroad industry is filled with tales of financiers milking companies and leaving them behind. There is reason to believe that CSX is tilting toward enabling the financiers to make a financial killing before moving on to something else.

To quote a line from the John Mellencamp song Peaceful World, “These are just words and words are OK. It’s what you do and not what you say, if you’re not part of the future then get out of the way.”

We will know in time what the future of CSX is but take with some healthy skepticism how CSX projects that to the world.

Jobin Abruptly Leaves as CN CEO

March 6, 2018

Canadian National CEO Luc Jobin has been ousted after two years in the position.

The Montreal-based Class 1 railroad did not give a specific reason why Jobin left other than to issue a statement that its board of directors “believes the company needs a leader who will energize the team, realize CN’s corporate vision and take the company forward with the speed and determination CN is known for.”

The board named Executive Vice President and Chief Marketing Officer Jean-Jacques Ruest as interim president and CEO “until a permanent replacement is in place.”

Railway Age magazine quoted Cowen & Company Managing Director Jason Seidl as saying that Jobin’s abrupt departure “will no doubt leave investors with more questions than answers in the short term.”

Seidl said CN has what he termed “a deep management bench.” He expects Ruest to be respected by investors and customers alike and to likely become CN’s permanent CEO. Ruest has been at CN for 22 years.

“Investors have already had to endure a nearly 9 percent drop in CN’s shares this year, making it the worst performing Class I railroad year to date,” Seidl said. “Today’s news is likely to exacerbate this gap somewhat. However, we remain confident in the company’s ability to recover and deliver value to its shareholders over the long term. Indeed, CN has a long history of being one of the best performing railroads in North America with a laser focus on its customers. We do not believe this will change, but this may be little solace for those with shorter investment time horizons.”

CN Net Income Falls 6% in 4th Quarter 2017

January 25, 2018

Canadian National said on Wednesday that its fourth quarter adjusted net income fell 6 percent to CA$897 million and adjusted diluted earnings per share fell by 2 percent to CA$1.20.

The financial figures include the effect of the Tax Cuts and Jobs Act approved in the United States in December.

Including the tax benefit, CN reported that quarterly net income rose 156 percent to CA$2.6 billion and diluted EPS jumped 164 percent to CA$3.48 compared with the fourth quarter of 2016.

Operating income for the quarter fell 7 percent to CA$1.3 billion, but revenue climbed 2 percent to CA$3.3 billion compared with a year ago.

Quarterly operating expenses increased 9 percent to CA$1.98 billion compared with 2016. The operating ratio was 60.4 percent, an increase of 3.8 points over 2016.

For all of 2017, CN’s adjusted net income increased 6 percent to CA$3.78 million and adjusted diluted EPS rose 9 percent to CA$4.99. Operating income increased 5 percent to CA$5.6 billion compared with the previous year.

CN’s revenue rose 8 percent year over year to CA$13 billion. Operating expenses for 2017 jumped 11 percent to CA$7.5 billion.

The operating ratio in 2017 was 57.4 percent, an increase of 1.5 points over 2016.

“Our growth continues to outpace the strengthening economy and I am pleased with the results our dedicated team generated in 2017,” said CN CEO Luc Jobin in a statement.

“Throughout the year we faced rapidly changing market demands and in the fourth quarter dealt with challenging operating conditions, including harsh early winter weather across the network, impacting our performance.”

Jobin said CN will add this year additional train crews and increase capital spending to a record CA$3.2 billion, which includes the acquisition of 60 new locomotives, expanding track capacity and improving intermodal terminals.

Capital spending will include CA$1.6 billion for track infrastructure maintenance and CA$400 million for installation of positive train control in the United States.

CN Sees Profits, Revenue Fall in 2nd Quarter

July 27, 2016

Canadian National said that during the second quarter of 2016 it saw its profit slide 5 percent, its revenue drop by 9 percent and its traffic decline by 12 percent.

Canadian NationalThe operating ratio was 54.6 percent, which was 1.9 points lower than the second quarter of 2015, helped by a 12 percent cut in operating expenses.

“CN continued to face a very challenging volume environment in the second quarter and maintained strong discipline in realigning resources to keep them in line with reduced freight demand,” President and CEO Luc Jobin said during an investor’s call.

At 4 percent, forest products was the only traffic category to show an increase. Coal, metals and minerals, petroleum and chemicals, and grain and fertilizers were all down by double-digits.

CN said it expects traffic volumes to improve for the rest of the year in lumber, automotive, refined petroleum products and Canadian grain.

It does not expect better traffic numbers in such areas as international intermodal traffic or in such energy-related traffic as crude oil, frac sand, and drilling pipes.

One bright spot that CN pointed out was an expectation of rising international intermodal business next year due to it having signed contracts with shippers in China.