The board of directors of Canadian National Railroad (CN), Montreal, announced on March 5 that CEO Luc Jobin was immediately leaving the company. Jean-Jacques Ruest was appointed interim president and CEO. He has some 22 years with the company, the last eight as executive vice president and chief marketing officer.
“The board believes the company needs a leader who will energize the team, realize CN’s corporate vision, and take the company forward with the speed and determination CN is known for,” said Chairman Robert Pace. “Mr. Ruest is well known to customers and investors, and is well positioned to focus the company and its very experienced and proven team of railroaders to rapidly address operational challenges during the transition.”
The board added that in an increasingly competitive marketplace, CN must respond with speed and innovation to retain its leadership position. It also recognized immediate operational and customer service challenges faced since the fall of 2017, led by high demand and insufficient network resiliency, coupled with severe winter weather conditions.
“CN must accelerate execution of the innovation strategy articulated at our Investor Day last June,” said Pace. “The board is confident this remains the right course to restore and retain industry-leading metrics and best-in-class customer service.”
An international search for a new CEO is underway.
Ruest said CN will quickly improve the movement of Western Canadian grain, and is directing additional people and equipment to clear backlogs across its network.
“We apologize for not meeting the expectations of our grain customers, nor our own high standards,” he said. “The entire CN team has a sense of urgency and is fully focused on getting it right for farmers and our grain customers, regaining the confidence of Canadian businesses, and protecting Canada’s reputation as a stable trade partner in world markets.”
These steps include offering incentives for key operating employees to delay retirement and postpone vacations, and for recently-retired operating employees to return to work; deploying qualified management employees to operate extra trains; adding train crews in Western Canada, with about 250 conductors put in the field in fourth-quarter 2017, 400 conductors in first-quarter 2018, and 375 in second-quarter 2018; leasing 130 locomotives to increase capacity in Western Canada, almost all of which are now online; and investing over $250 million this year to build new track and yard capacity in Western Canada to boost supply chain fluidity and build in capacity resiliency for future grain crops.
CN said it delivered 4,577 empty hopper cars last week, up 35 percent from the February average of 3,400. All available hopper cars are in service, and CN expects to show sequential weekly improvements, progressing towards 5,000 per week by the end of March.
Despite these challenges, CN said it remains confident about its future prospects. CN reiterated its fiscal year 2018 guidance to deliver adjusted diluted earnings per share in the range of C$5.25-C$5.40 this year.