Canadian National is wasting no time in transforming itself into a lighter, more profitable rail company following its failed bid to acquire US rail carrier Kansas City Southern.
According to sources, CN has begun a process to downsize or end freight forwarding services offered by CN Worldwide, the company’s international freight management division.
CN Worldwide provides logistics coordination and freight management services to exporters and container shippers in Europe, Asia, North America and South America.
Here at home, this decision will affect an unknown number of western Canadian businesses that ship raw or value-added agricultural products to foreign buyers.
Sources who spoke with The Western Producer said existing containers that have already been packed with agricultural produce will be handled and loaded onto outgoing ocean-going vessels.
But the new service will not be offered and already registered unfilled container orders will be canceled, forcing shippers to find new service providers with little or no notice.
CN declined to comment on the service changes when contacted on September 24.
Affected shippers in Saskatchewan said they were surprised at the decision and disappointed that no explanation or notice was given.
“CN has shut down its freight forwarding operations and has not given customers any notice,” said a shipper contacted by email.
âThey’ve canceled container reservations for next week and beyond and left customers out so they (CN) can save some money. (It’s) a business that is profitable to the tune of $ 4 billion a year.
Garnet Ferguson, Managing Director of Can Pro Ingredients Ltd. (CPIL) in northeast Saskatchewan, said CN’s decision came out of nowhere.
âWhat I was told is that everything that happened inside CN Worldwide, which was the international freight forwarding service, is over,â Ferguson said.
“What they said was they are going toâ¦ make sure the loaded boxes are put on the shipsâ¦ but any existing reservations with a steamboat line that (has not yet been) loaded , they canceled outright without telling me.
âTo date, I don’t know where I’m going to load the containers. “
Can Pro, based in Arborfield, Saskatchewan, about three hours northeast of Saskatoon, produces and ships high quality food products including alfalfa and oat balls to overseas customers, primarily in Japan. .
The company packs and ships approximately 600 containers per year and has used CN freight forwarding services for the past three years.
Prior to 2018, Can Pro shipped pellets in bulk railcars and paid to have them packaged in containers on the West Coast.
But poor rail service prompted Can Pro to start packing its own containers in Arborfield and paying CN Worldwide to handle shipments.
Now this option has been removed from the table.
Ferguson said the railroad’s sudden decision to wipe existing container orders from the books will put its operation in a difficult position.
There are other companies that could provide freight forwarding services, but the companies Ferguson has spoken with so far say they are reserving seats on ocean-going vessels three months in advance.
CN Worldwide customer service representatives are no longer available and calls to the company’s toll-free customer service line in North America cannot be completed.
âWe average about 600 cans a year,â Ferguson said.
“It’s going to create extreme pain in the short term until we can find another freight forwarder who has room for us.”
In addition to creating unexpected logistics headaches, the move could also damage the reputation of Can Pro and other small agricultural shippers, Ferguson said.
Can Pro must now contact its overseas customers and explain why the product promised to them will not be delivered on time.
âCN makes economic decisions that affect communities across the country, and their only concern is their bottom line,â Ferguson said.
On September 17, CN unveiled a new strategic plan following the failure of its bid to acquire US railroad company Kansas City Southern.
The plan was seen by many as an effort to push back activist investors who are calling for the removal of CN CEO JJ Ruest and four members of the board of directors.
TCI Fund Management Ltd., one of CN’s largest shareholders, suggested CN’s failure to successfully execute the KCS takeover was the result of poor leadership and decision-making wrong.
In response, CN’s new strategic plan calls for reduced capital spending, lower operating costs, 20% earnings per share growth by 2022, new operating income of $ 700 million and an improved operating ratio of 57%, compared to 61% currently.
The plan also provides for a six-month review of non-core operations and the possible divestiture of assets or operations that do not meet the company’s financial expectations.
In a recent interview with BNN Bloomberg, Ruest said CN’s new plan aims to create shareholder value while continuing to meet the needs of CN customers.
âThe plan that we put in placeâ¦ creates a lot of shareholder value,â Ruest said.
CN’s non-rail operations will be reviewed, he added.
âWe have a few non-rail companies at CN that are profitable but don’t generate the same type of operating ratio (like bulk). We’re going to do a strategic review of those in six months and we’ll improve them or we may divest some of them.
âWe are going to work very hard on our costsâ¦ and push prices a little moreâ¦â, he added.
“We intend to approach 2022 in a very suitable form for the next few years.”