‘Step back’ from rail sector, CN chief urges government
CEO calls for ‘fact-based approach’ as Liberals review recommendations
The CEO of Canadian National Railway Co. made an impassioned plea for less government involvement in the rail sector Tuesday, saying he hopes Ottawa “will have the courage to step back,” particularly when it comes to grain-shipping rules.
“I have a raspy voice, it’s not as strong as it used to be, but I believe I’m right,” Claude Mongeau said at the company’s annual meeting in Montreal, referring to the surgery he had last fall to treat a tumour in his larynx. Mongeau had his voice box removed and replaced with a prosthesis.
“Please don’t take us for granted. Reflect on what’s required, what’s right, and maintain the right policy framework on a go-forward basis. There will be many opportunities over the next year on both sides of the border to reflect on those words; I hope my voice carries loud enough.”
The Liberals announced last week that they intend to extend the Fair Rail for Grain Farmers Act, which was implemented by the previous Conservative government in 2014 following a record harvest and a brutal winter that resulted in a huge backlog of grain.
The act mandated minimum grain shipments for CN and Canadian Pacific Railway Ltd., and imposed fines for failure to comply. It also gave farmers access to a broader variety of railways through extended interswitching distances.
Transport Minister Marc Garneau said he wants to extend the act for one year while the government examines the recommendations made in a recent review of the Canada Transportation Act.
The review, conducted by former MP David Emerson, recommended the government end the extended interswitching rules and also advocated for the elimination of the grain-revenue cap, which determines the maximum amount the railways can earn each year from hauling grain, no matter how big the harvest.
Mongeau said he supports the Emerson recommendations and hopes the government adopts a “fact-based approach” as it reviews them.
“I am hopeful that the new Liberal government ... will have the courage to step back,” he said.
“I hope they listen a bit to my speech and what we have to say; I hope they focus on innovation; I hope they continue the trieda-nd-tested approach of driving commercial decisions, because this is the premise for continued innovation. I believe in the bottom of my heart and with everything I know that this is what the country requires.”
CN’s annual shareholder meeting emphasized the significant progress the railway has made since it was privatized 20 years ago.
CN is the most efficient railway in North America as measured by its operating ratio, which calculates operating expenses as a percentage of revenue.
However, CP is quickly catching up due to the efforts of its CEO, Hunter Harrison, who also preceded Mongeau as head of CN.
“We can see them in the rearview mirror very close,” Mongeau said. “We’re not going to make it easy for them to catch us.”
He lauded the “natural rivalry” between the two railroads as an incentive for both to continuously improve, and said that is far more motivating than government regulation.
“This is what the market is for ... natural rivalry, a drive to perform for all stakeholders, leads to outcomes that are not possible to arrive at in an adjudication process or regulatory body,” he said. “That’s just reality. It happens on the ground, not in Ottawa.”
Reflect on what’s required, what’s right, and maintain the right policy framework on a go-forward basis.