Canadian Pacific
Railroad plans to begin to invest in its hopper fleet to modernize.
Photo courtesy of CP.
 
DANA POINT, CALIFORNIA, U.S. — Canadian Pacific Railway Ltd. (CP) is “a very strategic railroad” when it comes to grain, Keith E. Creel, president and chief executive officer, told analysts at the Morgan Stanley Laguna Conference held Sept. 13 in Dana Point, California.

Keith Creel CEO of CP
Keith E. Creel, president and chief executive officer.

“We looked at the horsepowers we were running on our grain trains versus the size of the grain train,” Creel explained. “We have four locomotives pulling 112 cars. I’ve got additional capacity to hire more tonnage. So why am I running a 112-car train? I can add additional 20 cars and not add a locomotive, so that’s simple. Well, then you have to get the supply chain to match it. So now we’ve got a 134-car train model. We’re working with our customers to be able to load the 134 through investment. We’re working with our customers to be able to offload through investment.”

Taking the above steps would set up CP to operate “a powerful supply chain,” Creel said. He noted that while CP doesn’t necessarily operate a best-in-class fleet, the opportunity is there to generate a 20% uptick in productivity.

“You can have 20% fewer crew starts, moving 20% more grain,” he said. “It’s good for the customer, it’s good for our cost. It’s good for additional business because it creates additional velocity for everything else.”

With the assurance that CP will be able to get an ample return on its investment, the railroad will begin to invest in its hopper fleet to modernize, Creel said.

“A large percentage of our fleet at CP is unique,” he said. “It’s low capacity cars, and they’re old. They are high cost to operate, they’re not reliable as we need them to be, and they haul less grain. With an investment in high-capacity cars, we’re going to get an uptick in the amount of grain we can haul. They’re shorter cars. So that 134-car train can become a 148-car train, right? It’s an additional synergy, it’s an additional jump in productivity. More grain, fewer train starts, more capacity. So, if you think about the investments, and as long as Bill C-49 comes out in a law the way the government has indicated, we think it will, you’ll see us look at our capital spend, you’ll see us strategically invest in hopper cars that will give us a best-in-class product to offer to our customer but also give us significant and meaningful operational synergies.

“As we move grain, think about grain, it’s 25% of our revenue. If I can improve the operating cost from 25% of my revenue, by 25% to 30%, it’s pretty compelling. So with that investment, that’s what gives me great confidence, that there’s still so much more on the operational productivity side that this railroad has in mind yet, but still there is left to do. Some of this investment, some of this process, but we’ve got line of sight to all that, and we’ve got the team and the talent and the tenacity and the drive and the reputation, if we say we’re going to do, we’re going to do it.”