Rob Ritchie leads CPR down and independent path - Railroader of the Year - Canadian Pacific Railway Ltd - Cover Story

Railway Age, Jan, 2004 by William C. Vantuono

"The last spike in the construction of the Canadian Pacific Railway was unostentatiously driven near Eagle Pass, B.C., November 7, and a continuous line of rails under one management now stretches from Quebec to Port Moody, a distance of 3,067 miles--a railway line unequalled in length on the globe ... Its completion must be a great source of satisfaction to the able and enterprising men who have it specially in charge--president [George] Stephen, vice presidents [R. B.] Angus and [William C.] Van Horne, chief engineer [A. B.] Rogers, Mr. James Ross, C.E., manager of construction, who has lived at the constantly advancing front for years, and those intimately associated with them .... Whether or not the railway is profitable directly as an investment, its benefits to the country through which it passes will be inestimable and will endure and increase through the coming centuries." (Railway Age, Nov. 12, 1885, p. 709.)

Thanks to people like Robert J. Ritchie, Canadian Pacific Railway president and chief executive officer, the prediction Railway Age made nearly 120 years ago hasn't diminished in meaning.

Today's CPR is among the best-run of North America's nine largest carriers. While 2003 wasn't a stellar year for the industry as a whole--costs rising faster than revenues, service glitches, an economy that only began to see signs of life late in the year--there were a few bright spots. One of the brightest was the performance of the Ritchie-led CPR.

Rob Ritchie, the latest in a long line of CPR "able and enterprising men," is Railway Age's Railroader of the Year. In the award's 40 year history, he is the first recipient from CPR.

We selected Rob Ritchie for several reasons:

* He led CPR through an uncertain period to higher productivity and profits and an operating ratio in the mid-70's. In 2003, CPR revenue ton-miles grew by 5%, while train-miles rose only 1.6%.

* Under Ritchie's leadership, CPR was successfully spun off as a separate company from Canadian Pacific Ltd. in October 2001. An initial public offering of CPR stock was launched shortly thereafter, just three weeks after the 9/11 terrorist attacks. Since then, share price has increased by about 50%; CPR stock late last year was trading at or near a 52-week high.

* Ritchie instituted a major locomotive transition to a.c. traction. Today, CPR has the highest percentage of a.c. locomotives in service among North American Class I's and is now routinely moving trains that exceed 10,000 feet in length. Over the past five years, CPK has invested almost C$4 billion to improve its 14,358-route mile system. Last year's capital investments exceeded C$700 million, an amount that compares favorably with that spent by some other Class I's with much larger physical plants.

* Ritchie guided a successful shift from tonnage based operations to fully-scheduled operations. CPR's Integrated Operating Plan (RA, Sept. 2003, p. 43), developed with MultiModal Applied Systems, earned the Franz Edelman Award from INFORMS (Institute for Operations Research and Management), topping entries from such companies as UPS, Hewlett-Packard, and Menlo Worldwide. About C$250 million has been invested to support scheduled operations, most of it in information technology. A corporate-culture change from one in which "hard assets" like track and rolling stock were highly valued was part of this initiative. Ritchie brought in people with new operations research and management science skills, and entered into employee exchange programs with other railways around the world to help broaden CPR's knowledge base.

* CPR is growing its intermodal business through several new initiatives that are expected to reduce train-starts by 16% while increasing traffic and revenues. Intermodal service between Vancouver and Chicago is CPR's fastest-growing corridor. For service beginning this year, the railroad has leased 8,500 new doublestack cars (3,900 for 83-foot containers and 1,600 for 40-thor containers) from TTX, permitting a reduction in the overall intermodal fleet size of 1,300 cars, it has extended 18 sidings in northern Ontario to 7,300 feet, and has increased train lengths to 9,600 feet (westbound) and 7,200 fee (eastbound). Using GE's Locotrol technology, it has added midtrain locomotives during the cold months to maintain maximum train lengths while boosting air pressure to ensure sufficient braking power in freezing temperatures.

Other Ritchie-led initiatives include a "co location" program that places the regional warehousing and distribution facilities of major intermodal customers like Sears, Canadian Tire, West-fair Foods, and less-than-truckload carrier Consolidated Fast-Frate adjacent to CPR intermodal terminals. Customers have immediate cross-dock access to the terminals, and the trucks that pick up and drop offloads do not have to move over public roads. A similar program for carload customers called Connetix places truck/railcar transload facilities directly on the CPR main line. Connectix is described as a value-added service that offers climate-controlled storage facilities, bar coding, load consolidation, custom packaging and wrapping, and inventory management tied directly to the customer's production plant. "If you can't build into the customer's plant, you can bring the customer to the railhead," says Ritchie.