Mongeau’s legacy looms large over CN Rail
Claude Mongeau’s tenure as CEO of Canadian National Railway Co. is often referred to as the postHunter Harrison era for the large shadow cast by his predecessor. But as Mongeau prepares to resign for health reasons, it’s clear he managed to step out of Harrison’s shadow and create a legacy of his own.
The railway announced Tuesday that Mongeau, 54, will step down at the end of June and will be replaced by CFO Luc Jobin, 57.
Mongeau had his larynx removed last fall and replaced with a prosthesis due to a rare type of noncancerous tumour. He was absent for about five months and returned to work in late January.
“I was filled with joy returning at the helm earlier this year, but I gradually came to realize that it is difficult to fulfil such a demanding role given my new condition as a laryngectomee,” Mongeau said.
“Facing up to a situation like this inevitably stirs a lot of emotions, but I step down from my role with a deep sense of pride and the firm conviction that CN remains in good hands and has a bright future.”
Mongeau has been at CN for 22 years, a tenure that started shortly before the railway was privatized in 1995. He spent 11 of those years as chief financial officer and replaced Harrison, who now leads rival Canadian Pacific Railway Ltd., as chief executive in 2010.
Harrison is a legendary railroader whose outsized personality tends to eclipse everyone else in the room. Mongeau, by contrast, comes across as soft-spoken and affable, which created the mistaken impression that he might not be able to fill Harrison’s shoes. But Mongeau took Harrison’s legacy and built on it, continuing CN’s transformation from an inefficient government entity into the most efficient railroad in North America.
“He really has been remarkable in an understated kind of way,” said Tony Hatch, principal at railway consulting firm ABH Consulting.
“For a long time we were calling it the post-Hunter era because Hunter Harrison takes up so much attention ... but we really have to reflect on this not as a post-anyone era, but his own era.”
Hatch, together with Progressive Railroading magazine, plans to present Mongeau with the Rail Innovator of the Year award at their Rail Trends conference in November.
While Harrison’s focus at CN, and now at CP, was largely on improving the railways’ operating performance, Mongeau took that to the next level and turned CN into “the truly modern railroad, which combines an operational discipline with a marketing focus,” Hatch said.
“This is a new kinder and gentler CN, more marketing- and customer-focused, more outwardlooking.”
From the first quarter of 2010, when Mongeau took the helm, CN’s operating ratio has fallen to 58.9 per cent from 69.3 per cent. (Operating ratio measures a railroad’s efficiency, and a lower number is better.) In the same period, revenue rose 51 per cent to $2.96 billion and the share price climbed 170 per cent.
“Investor concerns when (Mongeau) assumed the chief executive role six years ago proved unfounded,” Morningstar analyst Keith Schoonmaker said.
“Under Mongeau, CN not only maintained excellent operations, but also continued to improve its already best-in-class operating ratio.”
Analysts said they don’t expect any disruptions when Jobin takes over the corner office on July 1. Jobin joined CN in 2009 after holding senior executive roles at Imasco, Imperial Tobacco, British American Tobacco and Power Corp., and filled in for Mongeau while he was on medical leave last year.
BMO analyst Fadi Chamoun called Jobin a “highly respected and battle-tested executive.”
“We believe Mr. Jobin has played a key role in the development of CN’s industry-leading rail operations over the past seven years,” Chamoun wrote.
“While Mr. Mongeau leaves big shoes to fill, CN Rail’s management bench is extremely strong, its board of directors is well experienced, and Mr. Jobin is a proven leader.”