(The following column by Gary Lamphier appeared on The Edmonton Journal website on June 14.)
EDMONTON — His preferred persona is that of a good ol’ southern boy from Memphis, who began his railroad career as a fuzzy cheeked, 17-year-old high school kid, oiling boxcars for the Frisco (St. Louis-San Francisco) Railroad.
Now 62, and in his fifth year as CEO of Canadian National Railway — North America’s most profitable railway operator — Hunter Harrison hasn’t lost his distinctive Tennessee drawl, his “aw’ shucks” demeanour, or his obvious relish for storytelling.
If it’s just a schtick, it’s a schtick that works. He may be one of Canada’s best-paid CEOs, but he’s no stuffed shirt. Harrison comes across as everyone’s new best buddy.
I swear, the man could sell cars to General Motors.
During an hour-long session with several Journal scribblers, the veteran rail boss snaps off declarative one-liners and recites stats with the easygoing authority of a CEO at the top of his game. It also helps that he has a great story to tell.
Despite CN Rail’s widely publicized labour troubles and the costly string of high-profile derailments that have tarnished its public image — including a 2005 rail disaster at Wabamun Lake, west of Edmonton, that has cost CN $110 million thus far — Canada’s largest railway remains a profit-producing juggernaut.
After posting record earnings of $2.1 million or nearly $4 a share on revenues of more than $7.7 billion for 2006, CN followed up with a profit of $324 million or 63 cents on revenues of $1.91 billion during the first quarter of 2007.
Although first-quarter earnings were down a hair from the prior-year period, CN’s performance was more than respectable.
After all, it took a $35 million hit in February, thanks to a 15-day strike by members of the United Transportation Union.
A string of avalanches and mudslides in the West also hurt the bottom line, prompting CN to issue a rare profit warning.
Tack on a slowing U.S. economy and a painful downturn in Central Canada’s manufacturing sector, and it’s clear that CN’s boss has had more than a few headwinds to fight in the first half of 2007.
Still, when Harrison blew through town this week — to attend a board meeting, address a Chamber of Commerce luncheon, and accept an honorary law degree at the U of A’s spring convocation — he was in a decidedly sunny mood.
The reason?
CN sees huge growth potential ahead in Edmonton and throughout Western Canada, where it’s spending more money expanding capacity and upgrading its system than anywhere in North America.
“Western Canada is the poster child of the portfolio right now, and will be for some time to come,” he says. “And Edmonton will be the one gateway that will exceed the growth of any other gateway in the system.”
For a railway whose network extends from coast to coast, and all the way down to the Gulf of Mexico, that’s no small statement. Edmonton, welcome to the transportation industry big leagues.
With the $160 million first phase of the new container port at Prince Rupert set to open this fall, and financing for a $600 million second phase already in place, Prince Rupert’s containter-handling capacity will exceed current capacity at the Port of Vancouver by 2011.
As a result, Harrison expects a tidal wave of Chinese imports to start flowing down CN’s lines, through Edmonton and on to key U.S. markets, in just a few months. That will mean more jobs, more investment, and expansion of its yard and office here in Edmonton.
CN is already spending $32 million on a new oil and gas distribution centre in Fort Saskatchewan; $1.6 million on a facility in Edmonton for train-to-truck transfer of liquid like methanol; and $20 million on an intermodal facility in Prince George that will handle wood and other export products. Watch for more to come.
CN is accustomed to thinking big. Since the former federal crown corporation was spun off in a $2.2 billion IPO in 1995, it has pushed hard — too hard, some critics would say — to become the leanest, most efficient railway in North America.
It accomplished that goal long ago. Today, CN’s operating ratio — a key measure of efficiency and profit-generating capacity — is easily the best in the industry.
Thanks to $7 billion worth of acquisitions — each of which added to the bottom line “from day one,” says Harrison — CN has rapidly extended its reach, and its clout. Record profits have followed.
Not surprisingly, CN’s share price has also skyrocketed. At Wednesday’s closing price of nearly $56 on the TSX, the stock has nearly tripled in value over the past five years. CN’s market cap is now more than $28 billion.
So, with just two and one half years to go before his tenure as CEO is up, what new goal has CN set for itself? Harrison doesn’t mince words. He envisions a CN that is more than just a railway.
He sees a company that controls all aspects of the logistics chain, from start to finish. “Our goal is to become the best transportation company — maybe in the world,” he says.
Coming from the CEO with the best track record in the railway business, that’s a statement the competition can’t afford to ignore.