Warns shippers' demands during RFSR facilitation process for intrusive regulation would stifle service innovation, damage Canada's rail system
MONTREAL, June 22, 2012 — Claude Mongeau, president and chief executive of CN (TSX: CNR) (NYSE:CNI), today commended the federal government's Rail Freight Services Review (RFSR), saying the process provided the impetus for CN and the rail industry to re-engage with customers to improve service from one end of the supply chain to the other.
Mongeau said: “CN has achieved significant improvements in customer service in the past three years and has initiated – and continues to embrace -- supply chain collaboration agreements and service-level agreements with a wide array of stakeholders and customers, both large and small. These agreements already cover a significant proportion of its revenue base, in forest products, grain, metals, coal and intermodal traffic. The launch of the RFSR process was a large factor in CN stepping up its game.”
CN also actively supported the facilitation process directed by James Dinning to produce a template for service-level agreements and enhanced commercial dispute resolution mechanisms.
However, shipper representatives, or the associations they represent, chose to advocate a regulatory agenda rather than work within the commercial approached encouraged by Mr. Dinning to reach for the next level in supply chain collaboration and service agreements. They continually demanded new intrusive, regulatory intervention.
Mongeau asked the federal government, now that the facilitation process is complete, to carefully weigh the future regulatory environment for Canada's rail industry.
“Shippers' demands for greater government intervention in rail service are clearly misguided. This regulatory stance represents a missed opportunity to take supply chain collaboration to the next level.
“Make no mistake – the intrusive, regulatory-based approach to service demanded by shippers would be unprecedented in a market-based economy. Indeed, such an approach would send mixed signals to customers and suppliers around the world about the government's approach to commercial markets for rail transportation in Canada.
“CN strongly urges the federal government to favor commercial solutions to rail services issues. Canadian railways are widely known internationally for their efficiency and reliability – which is a key asset for a trading nation like Canada. The nation should not put such an asset at risk through additional burdensome and unnecessary rail regulation.”
CN response to RFSR facilitator's recommendations
CN welcomes the key recommendations of the RSFR facilitator, James Dinning, principally his call for Canadian railways and their customers to embrace the Service Agreement Template as a guide to facilitate service-level agreement negotiations. Mr. Dinning also recommended that the railways publicize their commercial dispute resolution (CDR) policies. CN has a CDR process available on its website, and invites its customers to use the process to resolve disputes.
The objective of the facilitation process was to develop commercial measures to enhance the effectiveness, efficiency and reliability of the rail freight supply chain. During the facilitation process, however, shipper groups demanded, among other intrusive tools, that Ottawa:
- Legislate service parameters and outcomes;
- Give individual shippers effective veto power over service standards and to enforce service standards through financial penalties on railways, and
- Require the imposition of third-party service-level agreements if a railway and customers cannot agree on the terms of a service agreement.
Mongeau said: “The shippers' regulatory stance, would if legislated, deter railways' willingness to innovate and to work collaboratively with customers to develop more ambitious service standards. It would chill the current service improvement momentum and would damage the supply chains that CN serves in the Canadian economy.”
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CN – Canadian National Railway Company and its operating railway subsidiaries – spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, and Jackson, Miss., with connections to all points in North America.