‘IT WAS JUST TIME FOR ACTION’
How new CEO Jean-Jacques Ruest put CN’s turnaround on the fast track
After Jean-Jacques Ruest took over the reins at Canadian National Railway Co. in March — in the midst of a tumultuous period that saw the railway facing major capacity constraints and infuriated customers — he knew what his immediate priorities would be.
CN’s board had appointed the veteran railroader interim chief executive, replacing Luc Jobin, citing a need for “a sense of urgency.”
And that’s what Ruest planned to deliver, with a focus on the company’s employees.
“There’s a lot of talent here and a lot of people who have a lot to offer in terms of energy, experience and expertise,” Ruest said in an interview with the Financial Post earlier this summer.
“The sense of getting things done maybe got lost at the time …. It was just time for action.”
Since then, Ruest has taken a straightforward, no-nonsense approach as the company has moved to ease capacity pinch points, alleviate customer concerns and turn around its operations.
While he had the advantage of working through the summer season, as opposed to winter conditions which can often slow down and impede operations at railroads, the performance in the second quarter was above and beyond analyst expectations.
The railway boasted a 27 per cent jump in its second quarter net income — announced in July, just four months into Ruest’s tenure — and increased its end-of-year financial targets as a result of the success.
While part of his plan included a focus on revitalizing employee sentiment, Ruest also knew he had to focus on repairing relationships with some of his key customers.
CN’s capacity issues led to strained relationships among its customer base. Grain producers were calling on the government to issue an order that would force the railways to move more grain. U.S. oilfield service company Halliburton publicly blamed CN for frac and sand delivery delays and said the issues would negatively impacts its quarterly results by 10 per cent.
“I had a good sense of what was not working and what we needed to do to make it work in a way that was meaningful to the customers,” Ruest said, adding that his experience as CN’s chief marketing officer — a role that focuses on customer relations — was particularly beneficial.
“Rather than starting from a blank sheet, trying to get to know each other for the first time, we were able to quickly get back to it …. Rebuilding that trust was our game plan, and coming in knowing what to do and being able to act quickly was impactful.”
Ruest first arrived at CN in 1996, when he became vice president of petroleum and chemicals after a 16-year stint at a chemical company. He held several other roles within the company before he was appointed chief marketing officer in 2010, a role that strengthened his relationship with CN’s customers.
Robin Silvester, president and chief executive of the Vancouver Fraser Port Authority, has worked closely with Ruest and CN, which is a key partner for the Port. Silvester said that Ruest’s close relationships with CN’s customers, and thorough understanding of the supply chain, was a factor in the company’s ability to restore customer confidence and turn operations around.
“He’s a very strong choice to lead that company,” Silvester said.
“He’s an extremely smart individual, and he has a very good understanding of the supply chain …. I think the turnaround just shows that he had a clear understanding of what needed to be done, and a very good ability to rally the organization around that strategy.”
Now, Ruest says his focus is on deploying CN’s $3.6 billion capital investment plan, one that will focus heavily on relieving capacity pinch points in Western Canada. He said the aim is to have construction done by the fall of this year, before the winter season strikes again.
He’s also hoping that the government will be able to close a deal on NAFTA, while at the same time ratifying the Comprehensive and Progressive Agreement for TransPacific Partnership (CPP). Canada is expected to return to the negotiating table when it comes to NAFTA on Wednesday.
“We’re looking at different ‘what if ’ scenarios, but the more important scenario is to play offence,” Ruest said.
“Whatever the scenario with NAFTA is, we will always benefit from having more trade with Asia and more trade with Europe.”