StL&H to Remain Part of CPR and Provide Strong Competition in East New Deals and Turnaround Key to Decision
TORONTO, Dec. 5 1997 /PRNewswire/ --
Due to substantial financial improvement and new opportunities in the U.S. Northeast, Montreal-based St. Lawrence & Hudson Railway (StL&H) will remain a part of the Canadian Pacific Railway (CPR) and will be fully supported in its efforts to build its market franchise in the East. "Legal niceties aside, the CPR will operate as one railway," says CPR President and Chief Executive Officer, Rob Ritchie, in an address to the Toronto Railway Club here tonight. "The StL&H will continue to ensure the presence of the CPR in the East. I hope that with that clear statement, we can bring to an end the rumor and speculation about the sale or breakup of the StL&H." Since its creation in 1995, the StL&H had been under strong pressure to dramatically improve its performance and reduce its costs. Mr. Ritchie says creation of the StL&H was the culmination of more than 1O years of frustrated efforts to attack woefully inadequate returns and skyrocketing costs in the East.
He explains the StL&H was created as a separate company for two reasons: to give a strong dedicated management team freedom to deal with the highly competitive eastern market; and to provide the CPR with options if the turnaround didn't make the grade. Financial Turnaround Mr. Ritchie says that by year-end the StL&H will have dramatically reduced its operating ratio to 90 or lower and that new agreements with the Norfolk Southern and CSX railroads in the U.S. will give the StL&H's Northeast U.S. subsidiary, the Delaware and Hudson Railway (D&H), new business opportunities in the Northeast market. "CPR management is extremely pleased with the progress shown in the East," he says.
"The StL&H is no longer a financial drain on its owner and there is every reason to believe the StL&H can reach its four-year goal of having a competitive operating ratio and an operating income of US $70 million." Mr. Ritchie says he is counting on organized labor to help make this happen.
The CPR continues to believe that there should be different approaches to labor on the StL&H and Mr. Ritchie was pleased that unions had agreed to a dialogue. 4th Corridor Mr. Ritchie describes the StL&H's Montreal/Chicago corridor as integral to the CPR's long-term strategy as a transcontinental carrier, particularly for intermodal and automotive traffic. "CPR has determined that it will remain a transcontinental carrier and it will maintain a strong competitive presence in the East," he says. However, he is somewhat less categorical about the U.S. Northeast corridor. "For the first time since we have owned it, the D&H has the potential for long-term viability," he says. "It is not there today and will take a couple of years following the Conrail change of control, but our market access agreements are solid and our haulage agreements place us in a good position for improving our business results." "In short, Montreal to Chicago is 'the fourth corridor' of our network and the D&H is potentially an extremely valuable network feeder," he says.
The CPR's other three corridors are Moose Jaw to Vancouver, Moose Jaw to Toronto and Moose Jaw to Chicago.
Record Investment In his speech, Mr. Ritchie also says the railway was currently spending record amounts for capital investments including US $500 million for 261 new high horsepower AC traction locomotives, about US $110 million for service improvement programs and about US $145 million for new information systems. But he says he is frustrated by a public policy bias that penalizes railways for their investments while publicly funding an ever increasing highway system used by the railways' main competitor, the trucking industry. Calgary-based CPR has assets of US $5.5 billion and annual revenues of about US $2.7 billion. CPR Website is http://www.cpr.ca
SOURCE Canadian Pacific Railway