CN announces major leadership change

Montreal-based Class I railroad carrier CN said yesterday that its Board of Directors formally announced that CEO Luc Jobin has left the company, effective immediately, and replaced him with Jean-Jacques Ruest.

Ruest, a 22-year CN veteran, will serve as interim president and CEO until a new, permanent replacement has been named, and he has served as executive vice president and chief marketing officer for the past eight years.  CN said an international search for a new CEO is now underway.

“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,” Board Chairman Robert Pace said in a statement. “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. CN must accelerate execution of the innovation strategy articulated at our Investor Day last June. The Board is confident this remains the right course to restore and retain industry-leading metrics and best in class customer service.” 

The CN board also noted that it believes in an increasingly competitive marketplace that  CN must respond with speed and innovation to retain its leadership position, adding that it also recognizes the immediate operational and customer service challenges the company has been facing since Fall 2017 - led by high demand and insufficient network resiliency, coupled with severe winter weather conditions.

A Globe and Mail report said that even though CN volumes increased 11% on the heels of new business wins and an improving economic outlook, parts of its network saw increased congestion, coupled with an unusually cold and snowy winter, which made it more difficult to keep trains moving and customers satisfied.

And the report also noted that CN responded to network bottlenecks by hiring hundreds of train crews and ordering 200 new locomotives, although new upgrades to the company’s rail lines cannot commence until winter ends.

Tony Hatch, president of New York-based ABH Consulting, said in a research note that Jobin’s ouster was unexpected, and noted that the service issue, CN began experiencing last fall, which he said were in the form of a shortage of capacity especially in the Canadian prairies, were overshadowed by Jacksonville, Fla.-based CSX at the time. And he wrote that these capacity shortages were exacerbated, and not caused by: extremely strong growth, capacity shortages at some key partners (notably British Columbia-based ports, and regulation in the form of revenue caps in the Canadian prairies that prevent sound financial planners to add capacity, including upgrading CN’s aging hopper fleet.

CSX, like CN, was previously led by the late E. Hunter Harrison, whom was widely known for his Precision Scheduled Railroading (PSR), which requires cargo to be ready when rail cars arrive for loading or risk being left behind, a practice that served both CP and CN well under his leadership, with both companies seeing multiple positive results in the form of lower operating ratios, improved service, record amounts of reinvestment into networks, as well as creating significant shareholder value.

Looking ahead, Hatch said that Ruest is an excellent fit to take CN to the next level.

“We all know him well, he’s …a true modern railroader, even if he doesn’t fit the obvious operations bill – ironically as his former CN boss Jim Foote is doing at the very same time at CSX,” Hatch wrote. “A true model, renaissance railway integrates operations, marketing and technology.  This makes sense.”