Reorganization Redux. Internal affairs

If employees don’t understand what our values are, it makes it a little hard for them to make decisions.

CPR's Eastern net Chicago and the U.S. Northeast.

Meanwhile, railroad consolidation south of the United States-Canadian border was making it increasingly difficult for CPR to compete.

REORGANIZATION REDUX

Recognizing that more than 80 percent of CPR's business originates in Western Canada in the forms of grain, coal, sulfur, fertilizers and potash, Ritchie moved the railway's headquarters from Montreal to Calgary in 1996 and reorganized the company. Departments were jostled and rearranged.

When the dust settled, up to 70 percent of the 1,500 employees who relocated with the company were reassigned.

Another 2,000 employees remain in Montreal today, running the heavily truck-competitive Eastern network, which was created after the Calgary move. About 600 staffers work for CPR's Delaware & Hudson Railway, which CPR officials hope will serve as the vital link to success in the U.S. Northeast.

The reorganizing and rearranging paid off. By 1998, CPR had scored its third-consecutive year posting record operating income with $720.7 million, although revenue fell slightly, to $3.5 million. But by the second quarter of FY 1999, which ended June 30, of $343 million.

The result: more reorganization. No CPR department was spared during the July round of job cuts: Permanent positions will be reduced in all parts of the organization, including management, administration, maintenance shops, train operations and track maintenance.

"We are into a more broadly based phase of our ongoing program to drive greater efficiency into our railway. Ritchie said in a prepared statement. "The company is quickly becoming leaner and enhancing its North American competitiveness.... We are now in a position to substantially increase asset utilization and related labor productivity

CPR also is ready to expand its growth horizons. Ritchie believes the railway must continue to look beyond North America for business.

"We are going to have to provide a seamless [inter-modal] system from the interior of China to Canada and

he United States," he says. "I have the same goal for Europe. It'll be the next evolution of customer demands."

For example, a team of middle managers from China's Ministry of Railways is scheduled to visit CPR's Calgary headquarters this summer to explore opportunities for intermodal — the segment Ritchie thinks holds the most potential, at least for now — and to learn a little bit more about railroading, North American style.

Meanwhile, CPR continues to strengthen its trans-Pacific position by priming its Vancouver-Chicago corridor for increased trans-Pacific container traffic. The railroad expanded track capacity, modernized its Chicago-area yard and bought a fleet of 346 AC locomotives to increase train speed.

The result? A pair of deals inked in May that officially establishes CPR as the only rail carrier that can move freight from Vancouver to Chicago on its own line. The Swiss container shipper Norasia Line now uses the Port of Vancouver as its North American gateway and CPR as its land carrier, moving Asia-originated containers on double-stack trains to Chicago.

The partnerships keep on coming. CPR recently signed a contract with China Ocean Shipping Co. (COSCO) to transport the shipper's containers into the United States. Previously, CPR partnered with COSCO on Canadian traffic only.

CPR's global gaze also is fixed on Mexico. Since last fall, as many as a dozen CPR staffers have helped Ferrocarril del Sureste S.A. de C.V. (Ferrosur) make the privatization transition. But CPR's interest in the Mexican transportation market extends beyond Ferrosur.

Earlier this year, CPR teamed with Transportacion Ferroviaria Mexicana S.A. de C.V. (TFM) and Union Pacific to offer trailer-on-flatcar services linking Canada and Minneapolis St. Paul to Mexico. UP and TFM are handling switching services in Mexico; UP alone is handling services north of there.

CLASS I ACTIONS

But CPR's growth plans aren't based solely on long-distance relationships. To Ritchie, it's crucial for CPR to foster stronger partnerships with other U.S. Class I railroads. CPR officials are in different stages of discussions with leaders at Burlington Northern Santa Fe, CSX Transportation Inc., Norfolk Southern Railway and Union Pacific Railroad. CPR's goal: to become the Class Is' preferred railroad partner.