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Canadian Pacific changing tracks to win customers

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Canadian Pacific Railway Ltd CEO Keith Creel is an operations specialist like his predecessor, but the new leader is taking a vastly different approach to steering the company known for its red locomotives emblazoned with "CP."

[MONTREAL] Canadian Pacific Railway Ltd CEO Keith Creel is an operations specialist like his predecessor, but the new leader is taking a vastly different approach to steering the company known for its red locomotives emblazoned with "CP." After nearly five years of cost-cutting to boost efficiency under former CEO Hunter Harrison, Creel is switching Canada's second-largest railroad company into growth mode as volumes improve. Mr Creel recently told analysts he is trying to heal "ruffled feathers" among his own employees, while meeting with existing and prospective customers in a bid to expand.

"As we go forward, my focus ... is top-line growth and that's exactly what my mandate is for my team," Mr Creel said during a recent quarterly call.

Within weeks of taking the helm of CP, Mr Creel appointed John Brooks as the railroad's first chief marketing officer since 2014, to help focus on customers and profitable growth.

Part of CP's strategy is to expand sales staff, even as overall headcount remains flat this year, Mr Brooks said. And CP also hired a former trucking executive to steer business off the highway and onto its rail cars.

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"A big part of our future is making sure that not only the marketing and sales people, but also that our senior leadership, our operating leadership, are out in front of the customers," Mr Brooks told Reuters in an interview.

The timing of the changes is significant. The Canadian government is planning new legislation that is expected to include penalty provisions for poor railway service, although its introduction has been delayed. Such penalties would give shippers, who often complain they are at the mercy of Canada's two big railroads, more clout in demanding adequate service.

Railway movement of commodities is especially crucial in Canada, one of the world's biggest wheat exporters, because they must be transported over vast distances to ocean ports.

"When you're trying to cut costs you need to have someone like Hunter Harrison," said a fund manager from one of CP's major institutional investors, who spoke on condition of anonymity because he was not authorized to talk to the media.

"But when you want to attract customers, you need a softer approach." CP's new direction is seeing some results, with CP's once heavily criticized grain-handling performance beginning to show signs of improvement this spring, said Wade Sobkowich, executive director of Western Grain Elevator Association, whose members include Cargill Ltd and Viterra Inc.

CP has become more regular with delivering cars to grain delivery points on time, according to data compiled by Ag Transport Coalition, which is made up of farm groups that monitor railway performance.

But CP still faces the challenge of fierce competition from rival Canadian National Railway Co, the country's largest railroad, which recently announced three major customers, and concerns from existing shippers that cutbacks reduced the availability of locomotives and workers.

"It just seems like they've starved their system so much ...

I really do get the sense that their employees are stretched right to the limit," said Kevin Price, senior trader in Canada for Singapore-based Agrocorp, which ships crops from the Pacific Coast.

As Harrison's protege at CP, workers often joked that Creel - a former US Army officer who served in the Persian Gulf War - ran Canada's No 2 railroad like the military, a union member said.

But Mr Creel, who had contact with customers as CP's former chief operating officer, is seen as more outgoing and collaborative than the blunt Tennessee native, Harrison, who was recruited by activist investors in 2012 to overhaul CP's once lacklustre operations.

"(Creel) is saying that he wants to change the labor relations at CP," said Doug Finnson of the Teamsters Canada Rail Conference, which represents locomotive engineers and conductors. "There's nowhere to go but up."

REUTERS

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