By Pat Foran, Editor
In a perfect world, this would be Paul Tellier’s moment. After years of pushing, pulling and planning, Canadian National Railway Co. took control of Illinois Central Corp. on July 1, putting CN’s president and CEO at the helm of a transcontinental railroad — “North America’s Railroad,” as CN now touts itself.
But the rail world is anything but perfect. In early July, the industry’s gaze wasn’t fixed on the new CN. All eyes were on the new Norfolk Southern Railway and new CSX Transportation as they struggled to integrate their respective shares of Conrail. At press time, NS and CSXT were working to uncork bottlenecks and resolve a host of integration issues. Post-Conrail glitches were expected, but the severity of some of them caught many merger observers by surprise. When United Parcel Service diverts half its rail traffic to the highway, you’re beyond “glitch” status. You’ve also got some serious relationship repair work ahead of you.
How NS and CSXT resolve problems and rebuild relationships is crucial — to their own near-term success as well as the industry’s. As NS Chairman, CEO and President David Goode told Progressive Railroading late last year: “We’ve learned that there’s a fair amount of tolerance [from our customers] for failures. But there is no tolerance for not admitting them.”
Given the lengths to which NS and CSXT have gone to cover their integration bases — and the work they’ve done to nurture customer relationships — I don’t think they’ll fail the tolerance test. But the railroads must do more than admit mistakes. They’ll need to correct them. Quickly. If they don’t, they’ll do more than keep the CN-IC story off the front page. They’ll add fuel to the re-regulation fire.
A painful Achilles heel
So, of course, could the CN-IC deal, should it not go according to plan. Even though it’s working on an end-to-end merger, CN is facing the same service issues that NS, CSXT and all non-merging railroads are. That message was hammered home at the Fifth Annual Global Forum on Railroad Finance. Held June 3-4 in New York City, the event was sponsored by Information Management Network and Progressive Railroading.
Service — or the rail industry’s inability to provide it — was a clear (and painful) conference undercurrent. As one railroad advocate put it: “Service is the Achilles heel of the railroad industry. We all know that.”
Yes, everybody knows it. But it doesn’t make it any less chilling to hear, particularly now.
As for CN-IC: Tellier is a student of relationships as much as he is of railroading; he undoubtedly has been taking notes (and customer pulses) in recent weeks. He believes CN can go with the integration flow, however imperfect it may be, and continue to provide good service. At press time, CN still had a decent shot at becoming “North America’s Railroad” with little more than a whisper. The less we hear, the better.
Published in the July 1999 issue of Progressive Railroading
