1. Railway Restructuring: The Canadian Experience
Allan Pozniak
Canadian National:
Lecturer, McGill University:
Consultant to The World Bank: !
*Note: Slides Courtesy of Canadian National and Other Sources
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2. The Canadian Railway Environment
Vertically Integrated Private Freight Railways:
Canadian National
Canadian Pacific
Short Lines
U.S. Railways
Freight Railways own the Infrastructure
High Degree of Competition 2
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3. The Canadian Railway Environment
State Owned Passenger and Commuter Services
VIA Rail
Toronto GO Transit
Montreal Commuter Service
Vancouver West Coast Express
Passenger and Commuter Railways pay the Access Fee to Freight Railways
Passenger Services Subsidized by Federal and Provincial Governments
Some Private Operators 3
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4. Canadian Railways - Last 10 Years
% Change
Track Kilometres 56, ,
Employees 62, ,
Freight Cars (000)
Locomotives
RTKM (Billions)
Revenue per Tonne
Revenue per TKM C$
RTKM/Employee (000) 3,940 8,
Operating Income (Million) ,
Consumer Price Index
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5. The Restructuring of the Canadian National Railway
A State Railway
A Commercial Railway:
An Investor Owned Railway: 1996….. 5
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6. 6 CN- A State Railway Monolithic Organization
Deficits Financed by Government
Mix of Commercial and Social Services
Many Departments and Services:
Hotels
Express
Trucking
Marine Services
Passenger
Real Estate
Oil and Exploration
Communications 6
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7. CN - Transition to a Commercial Railway- Stage 1
Mandate: Commercial Business, Self Financing, Freedom to Manage
Creation of Via Rail and Public Service Obligations
Creation of 8 Subsidiaries with P/L discipline
Creation of internal Cost centers and Charge back systems
Focus on Bottom line 5
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8. CN - Transition to a Commercial Railway- Stage 2
Focus on Core Business
Sell Subsidiaries
Close Branch lines
Customer Driven
Change Culture
Lower Cost Base 8
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9. Customer Driven External and Internal Customers
Build World Class Marketing Organization
“Everyone Works for Marketing”
Extending Market Reach
Global Business
Strategic Alliances
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10. Culture Change Extensive Training Programs Leadership Program
Top 200
Union Leaders
“Managing Our Business”
Top 1000
Supervisory Training
Technical Training
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11. Lower the Cost Base Investments in Technology Network Rationalization
Right Sizing the Work Force
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12. Investments in Technology
Information Systems- Enabling Technology
Communication Network Upgrades
Intermodal Terminals
Track Maintenance Automation
Wagon and Locomotive Control Systems
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13. Results of Investments
ONE:
Customer Service Center
Operations Management Center
Locomotive Control Center
Wagon Management Center
Accounting Center
Main Shop
Streamline Infrastructure Maintenance
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14. Restructuring Results
Business Volume Increased
Significant Reduction in Resources
Fewer Employees
Fewer Wagons
Fewer Locomotives
Less Infrastructure
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15. Getting Ready to Privatize:
Benchmarking CN - US Railroads
Adopt World’s Best Practices
Massive increase in Productivity:
Eliminate Regional Structure
Sale of Remaining Subsidiaries
Key Executives from the Private Sector 15
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16. 16 The Final Step: The IPO Agreement with Government
Hiring of Banking and Investment Advisors
Evaluation of Assets
Government Legislation
Making the Case: The Road Show
Initial Public Offering
New Board of Directors 16
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17. 17 The Results: Continued increase in Productivity
Sale of Low Density Lines=Growth of Short Lines
Acquired Illinois Central and Wisconsin Central to strengthen North-South Routes
Increased Shareholder Value: > C$ 17
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18. Questions - ? ?
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