President and CEO E. Hunter Harrison of Canadian Pacific Railway outlined the company’s future plans to increase the railway’s efficiency, lower costs and increase business by 2016.
“We have initiated a rapid change agenda and have made tremendous progress in my first 160 days, and we are only getting started,” Harrison said in a written statement.
In the last five months, CP has put new management in place, including a senior operations team that has been directed to centralize planning and decentralize execution and eliminate bureaucracy; revamped intermodal and merchandise train service, resulting in faster transit times, using fewer locomotives and fewer leased rail cars; and closed hump-switching yards in Toronto, Winnipeg, Calgary and Chicago to save on operating costs.
“We already see the service and related bottom line benefits of our early actions,” Harrison said.
Looking forward, CP will cut 4,500 employee and contractor positions by 2016 through job reductions, natural attrition and use of fewer contractors. By the end of 2012, the company expects 1,700 positions to be eliminated.
CP will implement a longer sidings program to improve asset utilization and increase train length and velocity. The plan will allow CP to move the same or increased volumes with fewer trains. CP expects to eliminate more than 14,500, or 4%, crew starts.
The company also plans to explore option to dispose of surplus real estate holdings; relocate headquarters in downtown Calgary in Alberta to new office space at CP-owned Ogden yard by 2014; and review options for the Delaware & Hudson in the Northeast. It is already seeking expressions of interest on the 600-mile portion of the former Dakota, Minnesota & Eastern, west of Tracy, Minn., with an eye toward a possible sale.
Financial expectations include annual revenue growth of 4% to 7% off the 2012 base, and annual capital spending in the range $1.0 to $1.1 billion through 2016.
CP also expects to take a fourth quarter after-tax charge of $107 million to invest in the Powder River Basin in southeast Montana and northeast Wyoming, and anticipates investing in labor and other restructuring activities.