Cross the plains and rugged mountains

Canadian Pacific railroad (CP), as its name suggests, is well established in the west of Canada, where it has been increasing revenue for vehicle shipments by rail out of the Pacific coast port of Vancouver. In fact, its network stretches 13,000 miles (20,921 km) across Canada and into the US, and the company is now once again developing business on the Atlantic coast. CP is investing C$90m in track infrastructure, which will support finished vehicle traffic coming through Port Saint John , in the eastern province of New Brunswick. It is the first time the company has supported vehicle movements from a Canadian port on the Atlantic coast for 25 years.

That new business adds to CP’s four main areas of service for the automotive sector. The company moves vehicles manufactured in the province of Ontario destined for the US. It also moves vehicles within the US and those coming from the US and western Canada. In addition, it transports vehicles made in Mexico that ship to the US and Canada. And finally, it moves vehicles shipped from overseas that move through the port of Vancouver to eastern Canada. Here, CP is the primary provider of finished vehicle rail services for Glovis Canada and its customer base, including Hyundai and Kia, as well as for Toyota Canada.

Glovis Canada reports a good working relationship with CP and its national manager of vehicle operations, Arnold Kingu, the flexibility the rail company has shown as partner has eased Glovis Canada’s volume transition from its previous rail provider, something that bodes well for a bright future. 

“We are intent on working closely with CP in order to implement changes as part of Glovis Canada’s ongoing search for delivery network optimisations,” says Kingu. “We firmly believe some of the changes will turn out to be industry first and industry changing, which is a positive outcome for all parties involved, directly or indirectly. These changes will ultimately affect, in outmost positive manner, Glovis Canada’s pursuit of used vehicle shipments through rail network.” (Read more in the full interview with Arnold Kingu below).

Continued investment
CP deploys almost 4,000 bi-level and tri-level vehicle carrying railcars to move those vehicles, part of the TTX Reload pooling network in North America, of which it is a joint owner with the other major Class 1 railroads in the region.

In 2019, CP moved 114,400 railcar loads of finished vehicles, a 6% increase on the previous year (108,300), and 12% of its automotive revenue came from imported vehicles, compared to 9% in 2018.

That dropped in 2020 to just over 106,000 carloads as global deliveries were hit by manufacturing plant shutdowns in the second quarter of the year caused by Covid-19. Overall automotive freight revenue was down 8% on the previous year, according to the company’s annual report for 2020, and accounted for 4% of CP’s freight revenue in total, equal to C$324m.

However, the company had seen a 9% increase worth C$30m the previous year because of higher volumes shipping from the US to the Vancouver Auto Compound and its continued investment in services for OEM customers is expected to bring a fast recovery. In the first quarter of this year CP achieved record automotive revenue of C$108m, a 19.4% increase on the same quarter in 2020. 

In addition to new passenger vehicles, the rail provider transports used cars, machinery and automotive parts.

Compound interest 
CP has made a number of strategic investments in vehicle compound infrastructure for customers over the last two years that has put it in a very strong position for automotive trade both in Canada and the US. This in turn is thanks to the fact the company has significant existing property in markets that are key to the automotive industry.

One good example is the aforementioned Vancouver Auto Compound, opened in 2019. That facility has solved two challenges that were facing finished vehicle distribution in the western Canada.

The first problem was that there was limited capacity when it came to distributing finished vehicles to dealerships in the province of British Columbia. Vancouver is Canada’s third-largest city but also Canada’s primary gateway for the import of Asian vehicles for distribution to dealers in the country. 

“Capacity and congestion issues persisted as volumes grew and demand for short-sea shipping increased,” says Coby Bullard, vice-president of sales and marketing at CP. “In response, OEMs were metering finished vehicle flows from North American plants and had been asking for additional capacity for years without any solutions forthcoming until we built our compound.”

There was also a problem in the imbalance of finished vehicle railcars to and from Vancouver. Bullard says that in the past it had been impractical to reload the railcars arriving with US and Canada-made cars with imported vehicles for the return trip eastward.

To solve those problems, CP designed and built a 19-acre (7.5 hectare) vehicle compound in collaboration with its OEM customers Ford Motor Company and Stellantis to serve the Vancouver and northern Washington State markets. The company already owned the land on which the compound was to be built, adjacent to its intermodal yard.

“The new compound, which we were able to complete in six months, greatly expanded the region’s capacity for moving vehicles between rail and trucks,” says Bullard. “It also enabled us to operate loaded railcars in both directions, with domestic shipments moving west and imports moving east. This maximises asset utilisation of our rail corridor for the benefit of our network and our customers.”

The compound can handle 36 multi-level auto racks and has nearly 1,200 stalls for vehicles. CP has also deployed a yard logistics system that automates yard processes and supports real-time inventory reporting, to give customers better visibility of their shipments. The system strengthens the company’s damage prevention processes by enabling immediate uploading of inspection images. First introduced in Vancouver, this logistical solution is being rolled out to all CP automotive compounds.

Cross-border footprint 
More widely, CP serves 15 automotive compounds in Canada and the US (see table) and its land holdings are key in securing access to car buyers in North America’s major cities.

 

Its ability to develop a purpose-built vehicle yard in Vancouver was thanks to its historical ownership of property there and that goes for other cities in both Canada and the US. As well as the Vancouver compound, in 2019 CP opened a private vehicle compound for Glovis Canada in Wolverton, Ontario. Then in 2020, CP expanded its existing auto compound in Cottage Grove, Minneapolis to provide capacity for growing customer volumes in the twin cities of Minneapolis–Saint Paul, in the US state of Minnesota.

Again, exclusively for Glovis Canada, CP reopened an automotive compound in Cote St-Luc, in Quebec, near Montreal.

Glovis Canada’s Arnold Kingu says that since the implementation of the Wolverton and Cote St-Luc his company has seen a sustained overall increase of daily shipments of 15%.

“This is quite substantial when we look at the overall yearly numbers,” he says. “In addition, the daily over all shipment increase ensures that our customers dealer network in Ontario and Quebec are serviced with fluidity never matched before.” 

The Cote St-Luc opening was followed this year by the opening of another compound south of the border, adjacent to Chicago’s O’Hare Airport, at Schiller Park.

“The rental car centre at O’Hare is the single-biggest market for finished vehicles in North America,” says Bullard. He continues: “Those are examples of recent wins, but CP has similar land holdings in the Toronto and Montreal areas, for example. The story of CP leveraging its land holdings in and near major cities to serve the automotive industry is still in early innings.”

Links to Saint John 
As mentioned above, another significant development is the development of track infrastructure for moving finished vehicles out of Port Saint John on the east coast of Canada.

 

The rail company launched its service to Saint John last year when it bought Central Maine & Quebec Railway (CMQ) in June. That bought the company 480 miles of additional track bringing CP’s network up to 13,000 miles. The network now connects the Pacific and Atlantic coasts.

CP currently receives vehicles manufactured in North America bound for the Atlantic Canada market in Saint John and is preparing for additional capacity and services for imports from overseas.

“CP has invested in its track infrastructure east of Montreal, which is 270 miles shorter than our competitor’s route,” says Ricky Stover, assistant vice-president for sales and marketing, International Intermodal and Automotive at CP. “That’s great for import vehicles coming off the Atlantic, and it also enables us to serve markets in the maritime provinces.”

The C$90m ($74.5m) investment being made in the former CMQ property is part of a three-year commitment by CP to upgrade the rail lines serving the port and provide faster links to in land points in Canada and the US compared to what has been available in the past, said Stover. 

DP World operates a 25-acre general cargo terminal that is capable of handling finished vehicles but the CP line infrastructure is a separate development covering hundreds of miles of track on the Montreal-Saint John route , supported by New Brunswick Southern Railway.

Stover says the Saint John gateway is competitive with other ports on Canada’s Atlantic coast, including the port of Halifax.

While the rivalry with Canadian National for a partnership with Kansas City Southern may not have reached a clear conclusion as yet, Canadian Pacific is set to continue its strong recovery from last year’s disruption, adding to its track and compound infrastructure and securing new business both in Canada and south of the border.