(The following article by Jane Roberts was posted on the Commercial Appeal website on February 3.)
MEMPHIS, Tenn. — Canadian National Railroad will invest $100 million in the next several years to beef up capacity in Memphis, easily its most important U.S. city behind Chicago.
In an announcement expected this spring, CN will outline plans for the investment at Johnston Yard in southwest Memphis, including track and other infrastructure to accommodate an influx of business it expects when it opens a terminal in Prince Rupert, British Columbia, in 2007.
CN, which would not say how many extra people it will hire, does not intend to apply for local tax breaks.
“Now Memphis will be a hub with CN like it is for Northwest Airlines,” said Pete Aviotti, special assistant to Mayor Willie Herenton.
Aviotti expects the expansion, which will begin this year, to double the number of trains from key cities, “giving industries the quick in-and-out distribution they need.”
“CN is the only Class 1 railroad with north-south, east-west connections. To me, this is as exciting as when Northwest announced it was coming here.”
In a bow to the city’s importance, CN will hold its annual meeting here April 21, the first time in company history the meeting has not been in Canada.
“Memphis is a key operating center for CN,” said spokesman Mark Hallman. “It is the only city outside Chicago where CN interchanges freight with four major Class 1 railroads — Union Pacific, BNSF, CSX Transportation and Norfolk Southern Railroad.”
It is also the gateway to CN’s Gulf division, including New Orleans and the petrochemical producing plants around Baton Rouge, La.
Memphis gives CN easy access to the East Coast, Southeast and its growing NAFTA markets in Mexico.
And an enlarged presence in Memphis enables CN to capitalize on increased automotive shipments coming from plants in the South.
“Because of CN’s Canadian route to Prince Rupert, it is sitting in the catbird seat to bring in Asian containers and bypass congestion on the West Coast,” said Robert Milner, transportation consultant. “Other U.S. railroads have alternative routes, but they don’t take a day out of the shipping time like CN can.”
CN, once the railroad of Canada, has steadily made north-south inroads into the United States, beginning with the purchase of the Illinois Central in 1999 and following with Wisconsin Central Transportation in 2001.
The railroad, which posted record high cash flows for 2005, now gets as much revenue from its U.S. operations as it does in Canada.
On Jan. 24, it announced a two-for-one stock split and posted quarterly earnings up 9 percent, with double-digit revenue gains in intermodal, metals and minerals and automotive commodity groups.
“Our business model continued to fire on all cylinders, creating substantial shareholder value,” said president and chief executive officer E. Hunter Harrison, a former Memphian.
The Memphis expansion also plays to CN’s growing warehouse business at 185 W. Industrial, where it stockpiles customer overloads — metal, paper, lumber and plastics — freeing up storage space for its customers and shaving time on the end when the orders are shipped.
Johnston Yard symbolizes the growth. Today the 345-acre yard at Horn Lake Road and Peebles accommodates 25 trains a day, with additional traffic during grain season.
To increase its efficiency, CN has moved both its transloading and intermodal operation out of Johnston Yard, freeing up at least 70 acres for expansion.
Last summer, CN opened a $35 million intermodal terminal — its second-largest in the United States — in Pidgeon Industrial Park, giving it capacity to unload five trains at time.
“The relocation … allows CN to effectively rebuild the Johnston Yard complex,” Hallman said.
The original yard was built in in the early 1900s. It was later named for Wayne A. Johnston, president of Illinois Central from 1945 to 1966. It includes locomotive servicing facilities and administrative offices.