Dive Brief:
- In light of a "challenging economic environment" for North American railroads, Canadian National is going back to the basics of precision scheduled railroading (PSR), CEO JJ Ruest said on the railroad's third-quarter earnings call Wednesday.
- CN will decrease its railcar fleet by 8% and up the speed at which it is adopting robotic process automation (RPA) to eventually decrease labor. The company will also operate eight autonomous track inspection cars by year's end.
- Revenue in the third quarter was up 4% as volumes stayed flat year-over-year, showing signs of weakness in line with the cooling industrial economy.
Dive Insight:
"PSR is in our DNA," Ruest said. The Canadian railroads converted to PSR much earlier than their U.S. competitors, but according to CN, there is always room to improve. Train speed improved 4% year-over-year, car velocity improved 7% and train productivity increased 2%.
The railroad reported a 57.9% operating ratio (160 basis points of quarterly improvement) in the third quarter — far below the 60% most U.S. Class I's are now striving for. Despite this mark of efficiency and profitability, CN lowered its guidance for the year as a result of lower overall volumes.
Ruest explained the combination of more cautious corporate investment, lower industrial productivity and trade uncertainty "suggest the North American rail industry volume, which was negative by 4.5% in Q3, will continue to underperform at GDP."
Automation, digitization, continued focus on fuel efficiency and reducing its fleet will all help to cut costs, Ruest said, as the railroad sticks to previously planned investments — such as growing intermodal capacity at Prince Rupert Port by 30% by 2022.
