Okay, just before we start here, I'm going to have to give you a summary of the fine print that you see behind me.
Feel me now.
The executive presentation today contains forward-looking statements, within the meaning of applicable securities law in both Canada and the US. There are, of course, a number of factors that could cause actual results to differ materially. Those are detailed in the investor day presentation, as well as in our management discussion and analysis that is regularly filed with the securities regulators in Canada and the US. With that being said, we have a very, very good lineup today. With that, so let me turn over the floor to our over the microphone to J.J. Ruest, our CN's President and CEO. J.J.
Thank you, Paul. Thank you, Paul. Thank you, Mitch, for the safety briefing. I'm sure you guys had a good night last night. Hopefully, you didn't go to bed too late. How's everybody this morning? Good morning.
Good morning.
We have about 150 people in this room. We're live from Toronto. We had a good group during the visit yesterday at Markham Yard and Brampton Yard. I also want to mention for those who are listening to us live on the webcast, we also have a third of the group is a CN team, because really one objective of this meeting is for you to interact with our team and discover more than just myself and Mike and Ghislain, but also the whole team. We do have a deep bench. I also want to say hello to those who are going to be listening to this event on their webcast replay. Without further ado, I just want to recap just briefly yesterday.
The whole purpose of yesterday's industrial visit was for you to really give you a chance to visualize what we mean by applying technology to the railroad, and give you a chance to see it and touch it, and also meet the people who are going to make this happening or making this happening already. Also, I'm hoping that, as of yesterday, and based on what you hear this morning from some of the railroaders, that you will become believers that technology is about to join the rail industry in what's going to be the next phase of Precision Scheduled Railroading. Also, because many of you tend to have pale skin because you work so hard on your spreadsheet, want to get a chance to get out in the open, because that's what railroad's all about.
Railroad is seven days a week, 24 hours a day, and it's an outdoor sport. It's not an office sport. So also you can meet the team, as I said, you know, the people, some of the up-and-comers, some of the carmen, actually, who are working this technology. So you can meet some of our union people. And, on that point, I just want to be sure that one of my favorite acts from last night was the laser guy. I thought it was pretty fantastic. I don't know what your choices were, but, you know, thank you for joining us yesterday, not only for the initial visit, but also for the dinner and some of the entertainment that we had. But this morning, there's going to be no laser show. This is going to be all work.
Without, you know, we have some keen keeners here in the front row, Tony, Ravi, Scott. We're going to start right away with the agenda of the day. First, I'd like to get us back to July of 2018, when the board had to make a decision whether they were going to be taking a CEO from inside the company or some of the strong candidates from outside that had been recruited by the headhunter. And at that time, really, the interview to finalize the choice that was before the earnings calls of the second quarter, the choice was also about the strategy. What is the vision that those candidates, including myself, would bring to CN? Where would we, where would I bring CN for the next couple of years, two to five years, and how would we do that from a strategic point of view?
That was really a choice as much about the CEO than what CN is about to become. And really, to that point, this is what, by and large, this is what today is, is all about. So today is about what CN has already embarked on since July of last year. Some of you may have noticed some of the change we've done. Some of you may not be fully familiar just with it yet. But at CN, we were, we had pioneered scheduled railroading 15 years ago. We've been at it for quite a while, and there's only so much we could do about, you know, short closing hump yard. We don't have that many left, right, Doug? And packing equipment. And we do pack equipment when the business goes down, business goes up.
But, you know, this we've done a whole lot of in the early days, especially Precision Scheduled Railroading. So what's going to be the next phase of PSR at CN was really the discussion back with the board in July 2018. So what we want to do with the company is really getting into, is really getting into how we evolve. How do we evolve the model that we have? How do we evolve this model that's produced so great results for CN and now for the whole industry? But having had the opportunity to be in at it for quite a while, how do we, how do we actually bring this to the next level, especially in an environment where everything else is also evolving around us?
So part of that, obviously, you saw yesterday, technology, talent, and we talked about acquisition, some of these we've seen already, so we can keep growing faster than the economy. But also part of the discussion last year with the board is what kind of team do we want to have? What kind of leaders do we want to have to lead CN? And at that time, I discussed with the board some of my own basic principles of how I think we should work and why, and how, you know, does a team work and how do we come together?
One of the main points, especially coming out of a fairly difficult winter in 2018, but also maybe a difficult transition from the prior CEO, Claude Mongeau, it was really key for us to come together and play as one. Because at CN, just like in any team sport, and I did a lot of team sport as a young man, never really fantastic at any of the sport, but I've done a lot of those, I find that team sport is a great place to learn how to win together, how to come together, how to lose together, get back on your feet, and win again. Playing as one is a key thing at CN. At CN, you can't be part of the team if you're going to be playing counter to the team.
At CN, you can't be part of the team if you're going to put your department ahead of the company. So at CN, the company has to win first. The team has to win first, not the department, not the individual. No peep, no cust, no, no player's ego should be bigger than the team. Also, another big principle that, you know, I, I explained to the board how, how I live my life and how I do this is the bias for action. There has to be a bias for action. With the size of a company, if we study, you know, we, we always study stuff. The bigger the company, the more you tend to be inclined to study and study and study, and that may not lead to action. You saw some yesterday is how we are inclined to action, namely how we deploy technology.
We want to be able to deploy. We want to get out of the lab. We want to get out of just studying stuff. We want to get out of just looking at a company and saying, "Should we buy it? Should we not? Should we buy it? And should we not?" And at some point, making this and having a bias for action. Another key point of how we work at CN, but also even, you know, how I, the discussion I had with the board and how I live my own life is financial discipline. So that little boy that you see on the pictures is actually myself when I was seven or eight years old in that time, and asking my mother for money to do whatever I wanted to do at that time.
And she explained it to me in a very simple way. Back in those days, you know, you're getting your paycheck on Thursday, the money would be spent quite a bit during the weekend, and whatever was left was put in cash into a jar, a mason jar, a glass jar, right? And very simply, that was the remaining money for the week. And that's the discipline of managing with money was based on it's not what you want to have, it's about what you can afford. So my mother just simply says, "Listen, J.J., just get on the chair, open the awkward cupboard, and you see how much there is." And then based on that, maybe you ask me, maybe you don't. Just don't ask me every week. Figure it out for yourself.
To figure it out for yourself is you spend within your means. You don't spend for what you think you need. Schedule railroading is the same thing. So working with Hunter, it is different, getting to the same thing with the same, same outcome. And in schedule railroading, it's not what you think you need. You don't spend based on what you think you need. You spend on what you think, on what you can afford to have an operating ratio that's a leading cost and, and leading operating ratio. So depending on the revenue coming in, more revenue, less revenue, you have to adapt your expense. And the, and discipline of schedule railroading when it comes to financial discipline is you have to unwind costs quickly once things slow down, and then you can actually afford more things when the business picks up.
Third, third point, and that's really more about adopting technology and doing merger and acquisition, is about taking calculated risk. So early days at CN, we did a lot of calculated risk. We did an IPO that nobody believed in it, or few people believed in it. Then we did a merger with the IC. You know, they said, "Well, this, this may work, this may not work." We kept all the measurement of the IC so they create a melting pot of skill so that we can actually become better, bigger and better than what we were. So at CN, we are not just inclined to study stuff or to look at deploying technology. We're inclined to, to taking action, taking calculated risk, playing hard, and playing to win. What does that mean, playing to win?
That means that when you enter a game, you don't, you don't play not to lose. You play offensively. You play to win. You don't play not to lose. You play offensively not to win. So, and you will see that or seen that in the last 12 months. So before we talk about today and what we intend to do with the company for the next three to five years, especially the next three, I think the whole morning is covered for 2020 to 2022, and that's what we'll give you in terms of our financial guidance. You know, what did we commit? What did we say in our last Investor Day of June 2017? Just to bring you back quickly to that. That's what we said. We talked about a 10% EPS CAGR.
We talked about an operating ratio of mid-50, and that was prior to the pension reclass, which came after that. We talked about finding ways to reduce our procurement costs by $100 million annualized. We talked about the desire to migrate our dividend closer to 35% payout ratio, and we talked about also doing share repurchase in line with some of the history. This is what we did since in 2018. The EPS target was achieved, 10%. We had an OR of 60% despite the pension reclass, but also a fairly challenging capacity in late 2017, early 2018 when we ran out of capacity. We couldn't quite meet all the demand that we had in front of us. We did exceed the procurement target of $100 million savings. We're probably running a little closer to $140 million, $150 million. We did increase also the dividend.
We did increase the dividend CAGR at a faster rate than the EPS CAGR. So we're increasing dividend faster than EPS so we can get closer to the dividend payout ratio. I think roughly we're running in around 33% now. And we did repurchase shares, which we've done since 2000, 2009, which was the only year that we didn't have any share repurchase. So all of this is based on, you know, what is it that are our strength and long-term strength and competitive advantage at CN so we can last, you know, make the story last so that we can grow from where we are and make further ground as a market cap. Just going back to basic, I think most of you know that very well, but we have a unique, really unique three-coast scenario, three-coast network, I'm sorry.
That three-corridor network was really put together by management. When we did the IPO, what we basically, the government privatized is a coast-to-coast railroad, east to west, with very limited infrastructure in the United States. So at that time of the IPO, and then you remember also when we did the IPO, Paul Tellier at that time did part of what we're doing today, which is he brought talent from outside. He brought talent from some of the railroads. He also brought talents from people who had no railroad background, including myself. I came from the chemical industry. At that time, you know, we took calculated risk as well. We weren't afraid of taking calculated risk. At that time, we were also action-biased and working as one team. We bought the first railroad that really changed CN, Illinois Central.
We kept all the management. At that time also, we embraced some talent from outside, namely the operating team of Illinois Central. That was the beginning of the, the schedule railroading at that time was called schedule railroading, and CN pioneered that for a number of years. After that, the next phase of that, part of our moat, you know, you have a unique, unique rail network coast to coast to coast that no other railroad can, can, can, can have. You have precision schedule railroading that now pretty much every other railroad wants to embrace or is embracing as we speak. Then we started to, you know, realize, you know, what do we do with this network? For instance, if you have, if you have a good cost and, and then you have a great network, you know, what, what do you do with it?
How do you leverage that? You leverage that by putting more business on it to the extent that this business is profitable. So we started to really early by 2008 and 2010, a big drive, a big focus on growth. How do we bring business to this, 60 feet wide, 25,000 kilometers long industrial plant so that we can actually get the best value possible, the best return on investment possible out of that plant by putting on it more profitable business on it so we can actually leverage that CN moat? And then we had basically the, the best track record in terms of growth from the Class I rail industries from, you know, around that time to, you know, from 2010. And then we, we had, we had a number of acquisitions.
You know, I think you all know that we bought basically the five railroads from Illinois Central to BC Rail to Great Lakes Transportation to EJ&E, but really you may also remember, some of you may remember, we also bought back nine short lines that we actually had sold early days in the time of schedule railroading, which I think it says something about the evolution of schedule railroading from the time when you park and you trim to later some of this stuff you actually buy back because now you can actually run it better and more profitably than a short line who may not have the cash to keep things going.
Another point before I lay down the strategy of CN for the next five years, which each chapter of it will be taken in more detail by the management team of CN. I want to bring, you know, also important because we have many, many long-term shareholders who do care a whole lot about what do we do as a citizen in terms of environment, in terms of safety, in terms of governance, in terms of diversity. Here's just a list of some of the things CN has done over the last 20 years and some of the endorsement that we're getting from outside. But definitely because we're major consumers of diesel, of fossil fuel, one of the very big focus in the rail industry at CN is how much fossil fuel we consume, in total and also per unit.
Over the last 25 years, we reduce our fossil, we reduce our emission by 40%. It's quite significant. It's, it's kind of, and, and that's really, it's like pricing is the power of compounding. Every year, if we can reduce our fossil fuel by 1, 1.5% per unit move, you know, ton mile move if you wish, that's really, that's really become powerful. So from that point of view, CN is the best railroad in North America when compared for the average. So in 2018, on average, we were 15% better than, than the industry average in terms of fuel consumption or fuel emission if you wish. Another item that's big, you know, in our government at CN, it's also something I discussed with the board last year and also this year is executive compensation.
That executive at CN, which is the top 200, you know, top 200 people, which a number of them you've met yesterday and your meeting today, we expect them to have, to have a higher ownership of the CN stock. So you've seen this in our proxy this year. We've actually increased the minimum amount of shares as, as a function of their base salary that our top 200 are expected to build up over time so that they feel more and more as shareholders and they feel really aligned with the people in this room who've been holding CN for a long time. Okay. So now let's get into the strategy of CN that we're currently moving and executing for the next couple of years.
So again, going back to July 2018, what did we discuss at that time and what did we agree with the board that what we were, what CN was going to be the next evolution? So the evolution is really to cover, to maintain the foundation of our success. The foundation of our success is how we operate, our operating costs, how we sweat asset, how we use asset, how we make sure that we have enough asset to meet demand and make sure we don't get re-regulated, but not excess, not carrying excess asset. So enough asset for this year and next year, but not carrying excess asset. But also have enough asset though that we don't get in trouble with our customers and regulators.
So schedule railroading is the foundation of everything we do, and schedule railroading is going to be the foundation of everything we're going to be doing for the next three to five years. No change on that. In fact, a reinforcement of that. Number two is a focus on talent. The company, the board wants us to really put more effort on talent. And some of these things means do we have the right talent for what we want to become? As we adopt technology, do we have enough talent inside the company to be able to do that? Or do we have the need to create some of these jobs? Or do we have the right talent into the right job? Has some of the job, important job the last five years, are they really going to be as critical for the next five years?
And therefore, you know, sort of the shifting, if you wish, of the relative weight of each of these roles in relation to our future and not to our past. An organization that looks forward, what we want to become two years from now, as opposed to an organizational structure that's based on what we were two years ago. To be, to be also industry-leading profitable growth railroad, meaning transportation company. And as much as we use the word railroad, you should really think of us as a service company. We're a service company, and the more our service is relevant, the more we're going to be successful at growing profitably.
So to have an industry-leading profitable growth profile, and we'll do this two ways, you know, the normal way, organic growth, which James and Keith are going to talk to you about some of our major initiatives as it relates to some of these bigger rock opportunities, which is growing with existing customers, existing market commodities, and probably existing geography that we have, the track network that we have today. But also adding to that, you know, an offensive play where we want to do merger and acquisition, which at CN we've done quite a bit after the IPO, and we did also quite, you know, quite a few after buying Illinois Central. And then we took a pause around 2008, 2009, and we want to re-enter that.
We want to re-energize the way that not only we can rely on growth coming from organic growth, but also that we have some sorts of inorganic growth built on over and above that. We want to turn scheduled railroading into not your scheduled railroading of your father, but your scheduled railroading of your son, right? Scheduled railroading that way you embrace technology. And hopefully yesterday, as you were able, you were able to get out and be outside and take some sun, but at the same time meet the team, the younger team, the up-and-comers and, and the more experienced team that you could see and touch what that means. And also hopefully you got the, the message that this is no longer a pilot. This is no longer something that we're trying things. You know, we, we're done with the trying.
We're now deploying and deploying in a way that scheduled railroading over time can actually use technology in a way that the rail industry has yet to do that. All of this for what? For driving shareholders' value creation. The last speaker this morning is going to be Ghislain, and he will give you the guidance that you're all waiting for as to how all these things add up. Ghislain's job is basically to translate into financial numbers what we're going to be talking today during the course of the morning. So, number one, Mike will introduce his team. He has a big team. We're going to fill up all of sports network here with our people from the function and our people in the Eastern region. He will talk to you about scheduled railroading.
They will talk to you about scheduled railroading, which is the foundation of everything we do. And precision scheduled railroading, hopefully as you know, is not just the three operating regions, but also the functions, how we do mechanical, how we do engineering, how we do safety, how we do procurement. And frankly, it's also how we do marketing. There's a lot of precision scheduled principles that when the marketing team, Keith and James are in the field, there's a bunch of things that they do, which are basically stuff that we've created in our model 15 years ago. Chargeable services, demurrage, no rebate, you know, pricing per car, removing all these mileage payments.
A lot of things that we've done to simplify the business, which are also a commercial tool to speed up how we actually make the operation in the field more seamless, right? That we can sweat these assets in a way that we don't have commercial deal or commercial practice in the way that hampers how we can run the scheduled railroading. Number two, people. So after the board meeting of July last year, we hired McKinsey. McKinsey is a little expensive, but they actually do some pretty good stuff.
So with McKinsey, we basically took our three-year vision, turned it into a financial result of what that three-year vision is all about, and basically to try to come up with what are some of the jobs at CN that are going to be the most impactful to generate that trading profit, operating profit the next three years out. Who's got the biggest lever of our next plan, of our three-year out plan on the operating profit? And who at these—these are key roles that we call the key role. Are some of these key roles actually missing at CN? And typically that was on technology side. Some of these roles did not exist and they need to be recruited and created.
Some of these other roles maybe were, you know, in the hands of people who are very capable, very seasoned, scheduled railroaders. Some of these roles maybe were too junior in the organization, typically in operations, internal operations. They need to be upgraded with, with more senior people. Maybe some of these incumbents of these roles may not be quite ready, the people on whom we can depend to create that pool of operating talent the next three years. So this, this whole thing exercise with McKinsey was about don't look back, look forward. What will you become? What kind of talent do you need to have to become? Do you have that talent? Do you have the right people in the right role? And if you don't, do something about it.
So this group of pictures here, and I think all of these people are here today, represent our strong bench strength on both sides. One side, which is I guess on my left side, is the proven market makers, the people whose job it is to grow the company faster than the industry, faster than the GDP, faster than the economy. And doing that two ways, as I said earlier, organic growth and acquisition. And the other side of the ledger is that people actually run this thing in the field day in, day out, 24/7. Even Christmas, we operate at New Year's. We never stop. You know, people sometimes forget that. They say, well, you're, you should make a bigger effort. I mean, we make an effort all the time. Railroad never stop. And it's a very demanding job.
People like Derek, Doug, and James do a fantastic job of running this railroad 24/7 from -35 degrees Celsius in the wintertime to +30 degrees Celsius in the summertime. And they are very, very much seasoned scheduled railroaders. All of them have been working under Mike Cory, Jim Vena , E. Hunter Harrison back in those days. So we, we're not new at scheduled railroading. We don't necessarily need to have another bunch of CN people coming back to CN. We have the CN bench. And what's most fantastic when you look at James and Derek, for example, are fairly young. We have, we really have the next generation of, of scheduled railroaders, people who really have done this, in, in for now for many, many, many years. Another group of our talent is to become what we want to be, to become the next evolution of scheduled railroaders.
We need to do like we did at the IPO. We need to do like we did when we merged with the IC. We need to embrace some external talent of people who will come with us, complement the team with some of the skill that we are maybe not as strong as. We're not talking thousands of people. We're not talking, you know, 100 people. We're talking basically this group, the people, executive that work in other companies who bring to us skill that maybe is missing or right now places in our succession plan where we could use somebody who's already ready to step up to the plate. So people also who are going to be activate how we will transform function or activate how we will deploy technology.
So one group, you know, from Mohit to Michael Foster, Nayan, we're looking for a chief digital officer. He will probably start this month of July. This group will help us activate and accelerate how we deploy technology, you know, with the support of people like Michael Farquhar, who's got a great background on how things happen in the field. So we get sort of the technical guys working with the people who have their hands on the operation to basically accelerate how we deploy technology. And I think hopefully from what you saw yesterday, you start to get a good sense of what this might become. The other group is to help us transform function. So how do we do car maintenance at CN? How do we do locomotive maintenance at CN? How do we do maintenance of the track?
How do we manage our capital, not just the growth capital, but also how do we manage the maintenance capital? How do we do domestic intermodal? TransX. Now, why did we buy TransX? We bought TransX not just for the book of business and the asset and the customer's contract. We bought TransX for the team. We want to make sure, like when we bought the IC, that we keep all the team and all these people are staying with us and they will teach us tricks that we think we know. But I think maybe the reality is we can probably still learn a few things from how domestic intermodal is done from those who've been in this, those who've been doing just 100% of their time for the last 25 years.
The same way that we can learn from software supply chain as to how we maintain an engine, in that case, a locomotive engine, not a jet engine, so that this thing lasts on us and doesn't die on the mainline, you know, because it's not quite reliable at us, because it's not quite depending enough, and it has a huge impact on capacity, cost, and service. So a team of people who are coming in to help us transform the function, including how we manage our pension plans. We don't have to put more money into it. Or people come in to help us how we implement technology in a big way so that we can become a better scheduled railroader. Redefining the art of the possible. Redefining the art of the possible.
We can evolve from what we were; we're coming from in the last 10 years. Growth, I think we've already covered that a bit, but when James and Keith talk about this later, they'll give you a sense of some of the potentially bigger opportunity that there is in front of us before we increase our physical reach or before we increase our commercial reach. There's a number of things that we can do with the existing network that we have, unique three-coast network as to how we exploit that better. So in some cases, it's really about investing, co-investing with our customers, especially in Western Canada.
We have a lot of customers in Western Canada who are investing on our track or near our track, grain elevators, petrochemical plant, crude loading stations, you know, loading stations for shipping out fracs and, and whatnot. And, and these are big opportunities that we can go and exploit in the energy space, natural resource space, manufacturing, mostly manufacturing our own energy. And when you get to the big city, the consumer, the consumer freight, the freight that's derived from consumer consumption. The other aspect, as I said, is, Janet will later, will discuss that we use acquisition. So, when we sat with the board last year, all of these things had one thing in common. They have to be profitable on their own, but you don't buy a company because it's profitable. You buy a company because it's profitable and it brings more business to the network.
Profitable on its own, on the loan. And then because of the synergies with bringing more business on the railroad, now it's even more profitable in our hand. So these acquisition, Janet will give you a sense of how we, how we come about analyzing a, a potential and, and how we go from A to Z. So we did buy TransX. We actually had a discussion with TransX the month after the board meeting of July last year. We started to have discussion with them in August of 2018. And then we had some discussion with H&R. H&R, we have an agreement with them to buy asset, not the, not the stock of the company. In the case of TransX, we bought the company. In the case of H&R, we bought selective assets, including people and contract and systems.
and then they sold the other piece to a trucking firm. And that one obviously is waiting for government approval. And the JV is basically saying, in some cases where we would hope that there would be the Rupert of the East, the Rupert of the East may not happen by itself. And the Rupert of the East , if it happened by itself, fantastic. Like, you know, we worked very hard to recreate to do that, Keith, especially keeping myself and Rupert 10 years ago. But in some cases, the reality is if nobody built the Rupert of the East, we need to find a way to get involved to see if we can enable that, if we can get these things over the hump.
And that's why we're looking at joint venture, where we partner with world scale operator, people who really know this space extremely well. Hutchison Ports is one of them. And invest some capital money as minority shareholders so that we have a shot eventually having the Rupert of the East. And the reason for that is looking at a map. So when you look at the map, and please emphasize especially your attention to the mainline. And on the mainline, where the line is very thick is where we have the biggest volume. This is where the, the plant is the busiest. And when the line is very thin, which is typically Halifax to Montreal, Halifax to Chicago, or Chicago South, the line is not as busy. So the CapEx that we've deployed last year, and we're deploying this year, is really a catch-up CapEx.
It is very obvious way that catch-up CapEx needs to go. It needs to go Chicago to Toronto, all the way to the West Coast, especially Winnipeg to Edmonton. That's where the, that's where the biggest growth of CN has been. So when CN has, say, 5%-6% gross ton-mile, revenue ton-mile growth, it's probably mean double-digit revenue ton-mile growth in the western, in the western network, and maybe only 2%-3% growth in the eastern network. What eventually that does, it requires a need to really invest CapEx in the west. But then where's the opportunity? You know, that's, so we, we this year, we're going to be caught up with a catch-up CapEx. And next year we will normalize our CapEx again.
But we have this fantastic network in the east and also in the southern region, which is underutilized. And really one of the best ways to get a better return on investment in capital, which we'll give you guidance later this morning, is to use some of the assets, the asset that we have. So how do we make better use? How do we create an environment where the eastern network, and by the way, our network between Montréal and Toronto is double track? We wish we would have a double track between Winnipeg and Edmonton. We don't. But 25 years, 40 years ago, when the east was a big industrial segment, CN did double track Montréal to Toronto. So how do we use this network and make it relevant to the world of consumer freight? Because manufacturing in the east is not growing anymore.
What's growing is population and people consume. And that's the world of intermodal. So how do we make a network in the east that eventually will become relevant and compete with U.S. East Coast ports and compete with those who bring in big ships? And I have terminal operators on the East Coast and the St. Lawrence River that can do big ship, big train. And what's the big train? It's the same as what we have in Rupert. It's 10,000, 12,000, 13,000 feet. It's 98% double stack. When you load it, you go to maximum two cities and you compete and you compete hard. And that's what the vision is for the eastern network, is to try to convert that network into an integral network that can compete hard for the market of the consumers in Southern Ontario, U.S.
Midwest, and beyond if we can. Modernize, you know, modernize, bringing technology to scheduled railroading. So hopefully I think feedback from yesterday was that a number of you were impressed, especially with the portal where the train goes through the portal. You have all these high resolution cameras taking pictures after pictures after pictures, goes to the software, software look at these pictures and looking for defect. And eventually when the smart software is as smart as can be, they call this machine learning, then the machine eventually will just generate work orders for what needs to be fixed. And the same principle for track inspection, you know, digitized track inspection. So we take an older boxcar that still, you know, has another 20 years in its life.
We load it with as much equipment as we can, and we have this boxcar run with a regular train. So rather than taking track time, especially in the busy corridor of Winnipeg to Edmonton, rather than take track time to put, to put an inspector and give them a slot, which could be a slot for an extra train, we want these boxcars to be on the regular train. And as we're on the regular train, we don't consume capacity, and we'll probably get over time a whole lot more data as to what needs to be fixed, a whole lot more data as to where the defect might be. And then we ask our Carmen and our people in maintenance to spend much more time fixing stuff and the whole less, less time inspecting for stuff.
I think, as you probably saw yesterday, eventually this technology will be able to, to be better than the human eye. We will be able to see things that the human eye may not see because the human eye sometimes is tired. We inspect in wintertime, summertime, daytime, nighttime, and, you know, you have all these variations at some point make those jobs, to, to be quite challenging. The reason really why we do technology is for the financial bottom line result. I mean, it will improve capacity, improve service, it will reduce cost over time. Questions often asked, well, what would that do? Well, Michael Farquhar and, Mike Foster, as well as, as Ghislain, will give you a sense of what we think this will do between 2020, 2021, 2022, and beyond 2022, where we think the potential is, is huge.
Also, I don't know how much you got yesterday, but also, you know, it's time for us to give mobile equipment, mobile devices to all of our crews and carmen, and bring them up to the time. So all this, scheduled railroading, leveraging talent, including some internal talent, external talent, growing faster in the economy, including acquisition, making use of technology to get to the next evolution of scheduled railroading, all this to create shareholders' value, to keep the story going as to what kind of shareholders' value CN can create. Ghislain will give you a sense of what those EPS guidance are going to be for CN for the next few years. Just maybe a touch, we're going to be also putting a bigger focus on return on invested capital. We'll not lose the focus on operating ratio.
We'll talk about how much cash we should generate, hope, expect to generate. But in terms of the cash, how we're going to be allocating that cash to give you guidance on how we make decision, how we have this discussion with the board a number of times a year is. Number one is to invest in the business. So number one call on the cash that we generate at CN is the CapEx.
Maybe not at 25% like this year and last year, but number one job is as long as we can find profitable projects that provide a return on invested capital in the range of the band that Ghislain is going to talk about, we will have the first call on cash to invest in the CapEx because we're in the long-term business and we think that's the best way to, the first, that's the first use of, of cash as long as we have these return on invested capital in the range that we are going to share with you in a, in an hour or so. Number two is the dividend, right? So we invest, after that we have dividend, we said we'd increase the dividend payout to 35%. So right now we're about 33%.
So that means probably over time we will look for ways if we can increase the dividend slightly faster than the EPS so that we can get up to the 35%. Number four is M&A. Doesn't mean we're going to be doing M&A all the time, but if we find projects or if we find partners that can give us a return on invested capital and put more business in the railroad, especially the eastern network and especially the southern region from Chicago South, it would be a wise thing to do because we have the network. All we need is something to feed more into this network, east and south.
Buyback, obviously any capital that we don't need for acquisition and/or dividend and/or investment in the business, we will return back to the shareholders probably in the range, probably similar to what we've done here over the last many, many, many years. So here it is. That's basically, you know, in a simple term, the what we discussed with the board last year. So we, you know, the board endorsed me at that time, you know, they had a number of choices, not of candidate, but number of choices about the strategies and the vision and where the company was going to be going forward. And what we discussed and in the end what they decided to support is what I just described.
So the board made a commitment to me and I'm making the commitment to you because the board is making a commitment on behalf of shareholders. They want you to continue to have good reason to invest in CN. They want the board also, they want, they want to be sure that our employees have good reason to work at CN. They want to be sure that also in the communities where we work, and Sean Finn just spent the last weekend in Halifax with over, I think it's 200 municipalities. We're very active with any municipalities that run along our network. We want to be a good neighbor to all the municipalities that, that we work. And also the board wants us to have a very good relationship, positive, constructive relationship with regulators in the U.S.
So that's why, you know, you see us, you know, we, we balance these different things. We don't want to be re-regulated. We want to be safe. We want to be a good neighbor in a community where we're at. We want to be employers of choice where people come in and they really, they really embrace what we do. We've been in business for 100 years and we intend to be in business for a long time. And we want shareholders who renew their commitment to CN day in, day out, by keeping their stock and/or adding to their, adding to their position.
So my commitment to the board is the same as my commitment is making to you today is CN wants to be a long-term investment that you will all be comfortable that the money you manage on behalf of your investors is going to be in good place. Thank you. I'll take on that point. I'd like to introduce the next team. You'll see the first chapter, which is a foundation of what we do, scheduled railroading. And Mike Corey will introduce his team, which is soon to be Rob's team. And Mike, if you want to come to the podium and take it away from here. Thank you. JJ.
Thank you. Clicker. I don't need a clicker. Thank you, JJ. Hello, everybody. I'm going to try to keep my comments brief. Where's Butcher? There he is.
Butcher gets very anxious the longer I'm up here. So, I'm really here to pass the torch and my time is up, end of the month. I'm going to hang around and do a few things, but really it's Rob and the team you're about to meet. And I'm not, for all you hockey people, I'm not a Montréal Canadiens fan, but I am a hockey player. And in their dressing room, they have a banner. I asked Paul to have it here, but he somehow couldn't make that happen. And it's a banner that really says to you, from falling hands, we throw the torch, be yours to hold it high.
It's really a saying that comes from a poem that was written about 100 years ago, just when CN was starting out about Flanders Field, about, I think it was World War I. Here at CN, what it really means to us is that our belief in our forward journey will always hold dear to our past. The torch was passed to me, and now I'm passing it to Rob and this fine team you're going to meet. I'm really proud to have led. Let's talk. JJ walked you through a lot of things, but he talked about precision railroading. It's foreign to us. It's scheduled railroading is what we called it. Got the precision moniker, I think a little later when Hunter was doing some spin. That's not really what it's about.
You know, I spent a lot of time with Mr. Harrison, and at times they were a dog year. So I have 38 years in my career at CN, but really it's about 62 when you count the amount of time I had to spend with him. He wrote books. You know, people have created YouTube videos with his mantras, and everyone wants to share a famous quote. But I was one of the few, and there's others in the room, and there's others in other railways that were lucky enough to be taught the fundamentals by him. So he passed, you know, in one way he passed the torch to me and to others. And what he passed really wasn't scientific, but it was strategic, and it was extremely powerful.
Really, in essence, it's about having a principal game plan and a game plan that's understood, but more importantly, followed by everyone. I'll give you a little small taste of his teaching that I've really tried hard to pass on to our team. A few things I'll, you know, add from my own experience. First of all, you need to understand we're very, very capital intensive. We have one of the largest outdoor factories in the world, and we're susceptible to so many factors out of our control. So any control you have owning your own destiny, you must use it efficiently. It's very, very important to make sure you have control of where you want to go. And JJ mentioned it earlier, have a bias for action. You must act always. Never stand still.
Set lofty goals, reach for them, and if you don't succeed, find another way to achieve the result. It's usually more than one input or one method or one path that can and will get you the desired result. Respect the job. It might not be there. There's no priorities greater than those of the team and achieving the goal of the team. That was really boring to my head very early. For those that didn't agree, they didn't last too long. Lastly, just know your business. You're the only one that will take care of it, and you're the only one that will care as much as you do. When it came to railroading, it's pretty simple. Have one less asset than you need. Reduce the risk by being aware of it before it bites you. Control your costs. You have a duty to pay back those that support you.
Do what you say you're going to do and deliver the level of service that's expected. Last, but most importantly, don't forget the people around you that make you succeed or fail. It's your job to develop and lead them. One more last thing, and this is more me than him as a hockey player, go to where the puck is going, not where it's been. That's really, to JJ's point, that's our evolution. We're not going to stand still. We're going to where the puck will be. You know, I spoke to Hunter quite a bit when he went to CSX. Just before he passed on, he, you know, he said to me, "Oh, Mike, it's just like diamond mining over here." And he just couldn't understand why people didn't see that.
And it really bothered him because you're taught as an operating officer that you're given the keys to the store, and you should act as though it's yours. You're the first one in, you're the last one out, and you lock it up. So this team of scheduled railroaders you're about to meet, they live by that creed, and they leave their teams with that belief. You know, we're still continuing to evolve, but scheduled railroading will always be at our base. It gives us the ability to grow and expand our service offering, but at the same time, keep our costs in check. And JJ laid out the future plan. It's really starting to come to fruition, and it's taking us to where that puck is. So Butcher's looking at me. I better start introducing people, but just one last point.
We've always believed in ensuring we continuously develop our people, especially in our operating ranks. With that, we've worked hard to bring in different skill sets, as we evolve to a better way of railroading. And that's really to get us that service and operations excellence that we've talked about for a long time. Everything we do revolves around what we're going to do as a group, as a team, and the plan we have in front of us. We, in essence, always ensure the torch is passed. Okay. Mouth's getting dry. Without further ado, I want to introduce James Thompson. James has a good 15-year history in scheduled railroading, and I first met him in Windsor, Ontario, about 15 years ago. I was a general manager. I wasn't going to tell the story, but I'm doing okay on the time. Kind of.
I was. Hunter was creating a strike in Canada with the locomotive engineers. And of course, Hunter didn't care if you were qualified. I shouldn't say that. Let me take that back. I was a qualified locomotive engineer. I hadn't run one in 15 years, but as he told me, you can do anything at 15 miles an hour. So I went over to Windsor, Ontario, where young James was a train master. And from that point on, I've promoted him extremely, extremely amount, or I've promoted him many, many times over his career. Plus, more importantly, James, I've given him the store to my, or the keys to my old store, Western Canada. He's really in the fire. It's our biggest region. It's some of the tough, toughest operating conditions.
And he's taken over from Doug Ryhorchuk who did a tremendous job, and we'll talk about Doug a little later. James has really worked all across Canada in a variety of roles. Started as a young engineering employee, but he's, he's here for a long, long haul. So James, come on up.
All right. Thank you, Mike. Good morning, everyone. As Mike highlighted, I've got a long track ahead of me here at CN. I've been with the company for 20 years. I'm happy to be here today representing the Western region. I'm a fourth generation with CN, or fourth generation railroader with CN, and I began my career in the engineering department, transferring to the transportation department, and then moved progressively from the front line, entering CN's top 200 as a superintendent in 2010 in Winnipeg, Manitoba.
From there, I spent time in leadership roles in the Network Operations Center, Rail Traffic Control Center, and my last position prior to being afforded the opportunity to lead the West as the general manager in Alberta. I'm excited about the future I see on the table for CN in Western Canada. Western Canada is at times a challenging region, but always rewarding and full of opportunity. We see over 50% of CN's volume move on our region, and almost every commodity we haul runs into, out of, or through Western Canada. Over the last two years, we've seen rapid growth in key locations across the West. At times, this outpaced our demand, our ability to ramp up for the demand.
This was driven in late 2016 and early 2017 as a result of a period of investment by our customers, which led to growth on a scale we'd not previously seen in the rail industry. For the railroad, this was coming out of a period of contraction in certain market segments, specifically across our Western Canadian network. For us, this created a mountain to climb in terms of moving our customers' goods as quickly as we could while responding to customer demand, hiring, and building capacity. We overcame these hurdles by being one team, by being aligned in what we needed to do to handle the growth and support our customers. Our engineering team in 2018 completed all our capital capacity projects prior to winter hitting in Q4.
We began to see the benefit of this capacity improvement in the latter part of Q4 2018 and the early part of 2019 before a severe cold weather event set in through the month of February. Coming out of this weather event, we recovered quickly, this being a direct reflection of the newly built capacity, infrastructure, and the hiring of new employees. We began producing record-setting GTMs for the company in the latter part of March and early April. By mid-April, we'd hit our stride and were current with customer traffic, and we were beginning to refine our performance. We're focused on cost takeout with the benefit of the new capacity and a more fluid operating environment. Our metrics have come more in line with our expectations and are producing results that allowed us to increase capacity through velocity in addition to the capital spend.
We have a fluid operating environment in Western Canada, and we're focusing on sweating the new assets, infrastructure, and locomotives to maintain the performance gains we're seeing. We've come out of winter 2019 miles down the track from where we came out of winter 2018, and we're running at a pace to continue to pull away from our previous performance. Our car velocity in the West has improved by 10% year-to-date. Our network train speed has increased by 9% year-to-date. All this while running at 5% higher volumes through the same period of time. What this translates to is a better experience for our customers. Take our partners at DP World at the Port of Prince Rupert as an example. They've also reinvested in their business for today and tomorrow.
Together, we've seen a marked improvement in the movement of goods into, out of, into and out of the port. We only run 3 more trains this year versus the same period in 2018. However, they're moving more consistently and are better utilized. This has allowed the port to better utilize their labor and dock space, creating terminal efficiencies for our partners. And the CN network has seen a benefit in the number of loaded TEUs per train, allowing the trains to run further and farther without handling events. The on-dock dwell at the Port of Prince Rupert for import containers this year is half of what it was last year. We're clearing traffic out of Rupert as quickly as it's coming in. In the West, we understand the expense of the capital outlay over the last 18 months, and we appreciate it.
We're thankful that we have the opportunity to work these new assets and leverage value for our shareholders and for our customers. We continue to focus on cost takeout as we move through 2019, leveraging these assets that will continue to come online through the balance of the year. Right now, the future is very bright in the West. There's a lot of opportunity. There's a lot of, a lot of growth and a lot of good people out there. It's an exciting time for CN, our customers, our partners, our employees, and our investors. We'll continue to make 2019 a positive year through the power of our people, their knowledge, and ability to drive results as one team. Thank you for this morning.
Sorry. Okay. Next up is another fine young gentleman that, I've known for quite a few years.
I first met Derek Taylor; he was a young train master in Chicago. This is pre-J, so it was an absolute cluster. I was a control center officer in Edmonton, about 2,000 miles away, quite seasoned. Poor Derek was fighting the good fight. He was all full of vinegar, and you could see at that point, almost 20 years ago, Derek had a bright future at CN. Since then, I've had the, you know, how can I put this? I've had the opportunity to work with Derek, when he came out to Western Canada when I was there as a senior vice president, ran our operations in Vancouver. He left there and went to our Wisconsin division, which is not only our franchise for frac sand, but also the biggest bridge, or the bridge we have from Western Canada to Chicago.
Then from there, he went and ran our Southern Region's Control Center in Chicago. Within the last year or so, he's been the operating chief in the Southern Region. Derek is a seasoned scheduled railroader, a developer of talent, and an all-round good rail. So Derek, with that, come on up.
Yeah. Good morning, good morning, everyone. Thanks, Mr. Corey. As Mike stated, my name is Derek Taylor. I'm the vice president of the Southern Region. I've been with CN 19 years now, all in operations. The Southern Region is a hybrid of both the Western Region and Eastern Region, serving all commodity groups and supply chains. These range from intermodal to sand to coal to merchandise, crude, and autos. In the Chicago to Halifax corridor, we can grow at a very low incremental cost.
We have capacity to handle organic growth in Michigan proper, along with any growth in the Chicago to Toronto to Montréal to Halifax segment. An investment in Q4 of 2018 has allowed us to bring our live lift program to Port Huron, Michigan. This allows us to handle containers flagged by customs much more efficiently. This enables us to also handle current and future intermodal growth in the Eastern Corridor that ties in with our strategies at the Port of Halifax and Québec City. It also closely mirrors what has been successfully active for many, many years at International Falls and Rainy River, Minnesota, which continues to service our trains and customers from the ports of Vancouver and Prince Rupert. In the Chicago to New Orleans corridor, we can also grow at a very low, low incremental cost.
With recent capital investments that were completed in late 2018 and very early 2019, we have capacity to fully service our coal, coke, grain, and crude supply chains to the Gulf Coast. The most recent addition was the opening of the drop table at Fulton, Kentucky. This facility allows us to do a full mechanical inspection known as the CCI and gives us the ability to fuel the power at the same time. It also allows us to change wheels in train versus sending bad order cars out in a terminal, keeping the train in one continuous piece the entire time. This drop table, when coupled with the upgraded mainline fueling facilities, has allowed Fulton to become a mechanical focal point on the region.
This plan also triangulates the fueling locations between Winnipeg, Toronto, and the Gulf Coast of the U.S. with some of the cheapest diesel fuel costs in the country. By leveraging these recent investments, along with some service design changes, year to date 2019 versus year to date 2018, we have increased car velocity by 40% and increased network train speed by 14% on the Gulf Division, delivering on those capital investments entrusted to us. Our Chicago to Winnipeg corridor continues to be a major catalyst of growth in the Southern Region and in many ways is an extension of our 104 Western Canada franchise. We continue to make targeted capital investments across this territory, including two in 2019, so we can maintain a fluid operation while still growing the business.
Past capital investments have allowed us to increase car velocity by 16% and network train speed by 13% when you look at the numbers year to date 2019 versus 2018. This is that has addressed some key capacity constraints in the corridor. These numbers show we are choosing the right locations to invest in and are delivering the operational improvements that we are expected of us. We are doing that along with handling the volume growth that continues to come online in this key segment. This corridor for CN touches all commodity groups and supply chains that we are an integral part of on a day-to-day basis. Now I will speak about CN's all-important Chicago advantage. Believe it or not, it has now been 10 years since the EJ&E purchase, and it continues to pay dividends as we continuously save 24-36 hours on transit times through Chicago.
In working with some of our interchange partners via run-through service, we have also seen similar improvements while lowering costs at the same time. In order to maintain this competitive advantage, we have two key capital improvement projects planned for 2020 on the former EJ&E in Chicago. Also, as part of the transformation in Chicago with the purchase of the EJ&E 10 years ago, we've been able to consolidate our intermodal and automotive operations at Markham Yard, allowing us to fully leverage the hump processes at Kirk Yard. The Greater Chicago Terminal continues to be critical to the success of CN and is the anchor of the Southern Region. In conclusion, we continue to be focused on growing at the lowest incremental cost possible.
We've been able to achieve an over 10% GTM growth in the Southern Region, but now are exceeding our key operating metrics when compared to 2017 levels. With the former EJ&E as our core hub, CN will continue to pursue business opportunities and the growth that comes with it for many years to come. However, and in closing, at the end of the day, nothing I have spoke about prior to this happens without good people. Developing good people and putting them in key operating and leadership roles continues to be a goal of mine on the Southern Region. This focus will continue to allow for seamless transitions into new roles for managers, along with cross-functional opportunities across CN when they become available over time. And with that, Mr. Corey, congratulations on your upcoming retirement. Mr. Reilly, welcome to the CN family. Look forward to working with you, sir. Thank you.
All right. Very nice. Thank you. Okay. Last up for the operating chiefs is someone with a ton of railroad experience. In fact, J.J. coined it earlier. He beat me to it. Scheduled sales and marketing, we call it. And he's someone I've really, I've known Doug for a couple of decades. Doug MacDonald heads up our Eastern Region and his railroad intelligence and understanding of true operational and service excellence. He's going to row the boat as well as he steers the ship as we continue to grow our business in the East. I've worked with Doug on many initiatives over the years, and he's just got this action-oriented approach that's coupled with an extremely strong background in marketing and sales. So I know what he's going to do for that region. He's going to lead him to new heights. So with that, come on in, Doug. Come on up.
Well, thanks, Mike. So it's a little different being on the side, this side on the operating side. So one of the questions everyone's asked me over the last couple of months is, why are you moving from sales and marketing to operations? It seems kind of an oxymoron. It's been good, right? So I do it because I think you heard J.J. say it. I lost, I stopped keeping track at number seven. He said, we're going to grow the East, right? So I said, what better way to grow the East than actually put a sales guy in the East running it? Now, why can we do this? I mean, kudos to Michael Farquhar, right? Michael has left such a rock-solid shop, great plan in place, great team in place that the place almost rents itself.
So it allows me to come in, learn how to do this properly, a lot of tutoring from Mike and the team, and be able to focus on the growth, though, and try and teach the Eastern Region guys how we're going to grow. I mean, you look at that chart and it's a nice anemic little arm going out to Halifax. So J.J. basically stole just about everything I wanted to talk about, which is a good thing. It means we're aligned. So, and I'm sure I'm going to take some of Keith's things, which means we're aligned. But how are we going to grow? Big consumer market in Canada, in the East, Montréal, Toronto, probably more about half the population that buys things in Canada. So we're going to be focusing on what moves that. So it's intermodal.
So today we've been focusing on the on-time performance, getting boxes in and out, the trains in and out of both Montréal, Toronto, and the East, going west, going south. That's been a big benefit. But for the future, how do we focus on growing it even more? So Québec City, great announcement. I'm sure Keith will talk about it more, but growing more import business into there. And then there's Halifax, another great area that's already set up. You're not having to worry about a greenfield build there. That's simply waiting for, I'll say, Halterm purchase to go through with PSA and working with them on how do we get that big ship, big train concept to move into the markets, into Toronto even, but into Detroit, into Chicago, and growing that little branch line and really making it a true mainline train going through there.
The other key part is you look at automotive, another big consumer item in Toronto, Montréal, and the rest of Canada. So once again, for Keith, April and May, two record months. We've had two largest revenue months we've had in automotive history. It's not just the East. The East is a big player in it, but it's also in the West and in the South. So it's a combined team effort between James and Derek and all the Auto port teams of Martin and his group. So it's really, really working. So how do we do that? Efficient switching, efficient network. So cars come in, we'll double switch the auto compounds every day, get those cars unloaded, get them off-site to the dealers, move those cars to the nearest loading point, which is a lot less than moving them back to origin where we got them.
So, and that's how we supply our own Canadian and other suppliers of autos. They reload those cars, they send them elsewhere. So it's just the efficiency of it. So that's all what scheduled railroading is about. And lastly, it's more about manufacturing. So Québec still has a very good industrial base, sorry, natural resource base, and so does Ontario. So we're going to continue to move those lumber cars, those mineral cars, those pulp and paper cars into the market. And how we're going to do that is making sure we have the right boxes there at the right time. And really, for the last few months, we've been fortunate enough to get really, we're supplying about 100% of the orders.
We're going to keep doing that and making these our own customers in the East highly efficient and able to get into the markets that they need to be in. So really, that's going to be my job over the next, next little while, and I will be very focused on that. Mike's been a great tutor. So I knew I was doing better in my job when Mike phoned me about two weeks ago, and I actually had the answer. I didn't have to go looking for it. So hopefully I'm starting to keep up with them a little bit, but I'll never get to that point where I know everything. All right. Thanks very much.
Very good. So, okay, you've met the three operating chiefs, and so now it's time to introduce the people that we've searched long and hard for.
These are the folks that are behind our mechanical and engineering transformations that are so important. First up, it's going to be Jim Sokol. Jim's a well-seasoned maintenance specialist who comes from the airline industry. I hired Jim for many reasons, but one of the primary ones was his similar belief in the reliability of our assets being a key to our future success. I kid Jim, but not really. I want the same level of reliability with our locomotives and our cars as he did with airplanes, but not at those margins. He's got to still bring it in around 55. Jim and the team are definitely up for the challenge. You met a lot of them yesterday.
He's really building his team to deliver a scheduled maintenance program and model that's going to extend life and provide us the future we know that we need in terms of reliability. But he really, this strong discipline around reliability and availability is what's going to transform the mechanical function. So with that, Jim, I'm very proud. Come on up.
Well, good morning, everybody. As Mike said, I'm new to the railroad, but very excited to be here. My experience, and many years back, actually started out as a mechanic and worked myself through different leadership opportunities and really love maintenance. It's been a passion. So I'm not the type of person that's moved from an outside position into mechanical. This is stuff that I know and I believe in and really embrace it in many regards. I'm excited because this is a great transformation.
As Mike mentioned, I came from an industry of 36 years in aviation. 20 of those years, I actually led the maintenance and engineering for Southwest Airlines as the Vice President. Remaining portion, I spent in maintenance, repair, and overhaul, where we performed third-party maintenance for large airlines and globally throughout the world. A lot of that stuff that was passed is now transferable into another exciting part of transportation. For me, that really is where the energy comes. I'm excited because it lends a lot of different opportunity to improve our performance. I'm going to talk about the three major points that I want to bring out. The other thing that I really want to address is where Mike was talking about my past life. The margins in the airline industry are very small.
So it taught me a lot of things to ensure that process was really important to have repetitive results. And that really is the foundation, the transformation that we're looking at right now at CN to make us different and more leading as a class one railroad. The three categories that are important to us at CN is number 1, availability. Every asset that we have is important. Every asset needs to operate. It's our ability to turn it from equipment that operates in success to high potential. And the way that we do that is really converted into a planned maintenance program. When we started our transformation, we actually planned about 35% maintenance, which what that meant is 65% of the time it just went out on the main line and there's a chance it could fail.
Obviously the results were not good for us and my customers up here. From that perspective, there's opportunity that it lent. As we're in our transformation right now, we're up to about 65% planned maintenance, which gives us an opportunity to really focus on the right type of maintenance based on the age of our fleet and the variances within that fleet, which allow us to make more success in the overall availability, a very important part of that. Second part of that is reliability. Reliability to me, it's really fascinating because the way the term is used sometimes in railroad is very vague. It's healthy things. Of course it is. It's a measurement over a period of time, statistically how it's operating. So it's a number. It's a percent. It's a fact that tells you how it's operating.
In my past life, as Mike mentioned, the margins were very different. But anything less than 99.7% reliable was not acceptable. It's what we demanded. I don't think we can get there with rail, but I feel like we've got a lot of opportunity ahead. We're about 25% off from that. So the way that we do that is look at things that are analytical, understand the risk with that. We've been able to grade our equipment to understand what equipment is showing good signs, what opportunities we have to do more maintenance, and the way we need to really address our maintenance program based on the age. Not everything is the same. All units are different based on their age, obviously their manufacturer. The final part of this is the shop.
When it goes into the shop, the frontline employees, our technicians who do such a great job at CN, they need to ensure that they're set for success. So that is all about reducing dwell. And for us, our ability to reduce dwell is having some basic things, a lot of 5S, obviously clean, bright, shiny shops, some basic technology that Michael Foster and Michael Farquhar are working on. You saw our handheld devices within the car side of the business. And in our infancy, what we're trying to do is take that device and put it into our locomotive shops so we can automate our maintenance program. If you think about rail in the past, most of the railroads have bought maintenance programs from the original equipment manufacturers. We don't want to do that.
We want to develop a maintenance program that's more tailored to our needs to understand when it needs to be maintained and not just sell parts based on the benefit of the manufacturer, but do the thing that's right for us to ensure that we have better availability, better reliability. So it relies on some basic technology, some steps that are incremental. But the encouraging part for me is that we're showing good improvement in all three categories, which really is the momentum and the encouragement that I take away being humbled by the employees at CN that embrace this change. It's a transformation that shows improvement that really separates us from other Class I railroads, looking at things differently, being open to different thoughts, and looking at things factually based on data, which is very important to us.
And finally, I would tell you that in all three categories, we've seen again incremental improvement, improvement that in most cases is above 10%, reduction in power delays, reduction in shop dwell up to 11%, improvements in availability. So that's the takeaway that we all have as a group that collectively builds the momentum that we're doing the right things for us as a company to make us different. So our strategy is not about always buying new equipment. It's about trying to make the best out of the equipment that we have to control our cost and to get the best value from that. So with that, I thank you and I look forward to today. And again, Mike, very humbling. I'll deeply miss you.
Thank you, Jim. Okay. Next up is Raj Gupta.
Raj came to CN with very rich experience in both the automotive and aerospace industries. He has leadership on experience and design, on strategy, technical sales, and program and cost management. You know, from the moment I met Raj, his view on discipline, process, control, and his background in innovation and technology just resonated with me. What it really told me was that this was the guy who was going to lead our engineering team into the future. He's now the proud owner of a construction company, a technology lab, and a very large maintenance operation. He's a discipline process engineer with a vision for reliability at reduced cost. Just music to my ears. I know at some point I'm going to look back at the transformation he's about to lead, and I'm going to be very satisfied we did the right thing.
So with that, come on up, Raj. Just a little, one little comment for you, Mr. Butcher. We took a straw poll up here and you missed the precision railroading part about having us close to the stand. We're wasting everybody's time with the 30 seconds coming up. We'll take that back for the next one.
Thank you, Mike, for a very humbling introduction. I'm honored to be part of this great company. You know, having worked in automotive and aerospace industries for many years, and especially having run two businesses at a prominent diversified industrial company, I must say that I'm very excited to see the direction that we are taking as a company and the possibilities that we are creating as one team. In engineering, we are transforming, but we are transforming with a purpose.
We have a clear and concise strategy that is supported by capabilities and capacity to execute and crossing the finish line by delivering results for our customers and our shareholders. Let me share with you four key strategic objectives that we have established for engineering. Number one, maintain a strong, safe, and reliable network. If you look at engineering, we are responsible for physical infrastructure of the company across all three regions. That includes 20,000+ miles of mainline track, 4,000+ miles of track and yards, more than 22,000 switches, 1,000 sidings, more than 21,000 crossings, approximately 7,000 bridges, and 56,000 culverts. With the help of 6,400 engaged and talented employees, and combined with effective systems and processes, our key job is to ensure safety and reliability of the network 24/7 throughout the year. The second goal is to build infrastructure as needed to support company's growth.
Anytime network operations in collaboration with our customer-facing organization determines potential pinch points in our network and a need for capacity expansion projects are identified, engineering goal is to deliver on such projects. For example, last year, approximately 60 miles of double track, 11 sidings, and seven yard projects were targeted. We worked together as one team and implemented best practices from within and outside our industry in the areas of program management, project control, material logistics, and cost management. The results speak for themselves. This was the first time in the history of CN that we delivered so many projects in such a short duration, and that too on time and on budget. The third strategic goal is to help create capacity by reducing the required number of work blocks to maintain a safe and reliable network.
In other words, doing the same amount of work in less time, and hence contributing to better cash flow and effective use of our capital money. We are adopting principles of continuous improvement to achieve higher productivity, such as improving reliability of work equipment, enhancing material and information flow, improving and eliminating non-value-add activities, and reducing variation to improve year-over-year. If I may, let me share with you an example of a pilot program that we just completed successfully. With specific focus on material distribution, strategic placement of work equipment, continuous flow, and reducing bottlenecks on our various stages of the process, we created a concept of super mega gang for installation of ties. Even though we are early in its deployment, this concept can potentially save more than 50 work block days and, as a result, helping us unlock capacity to run additional revenue trains in 2019.
The fourth goal is directly linked to digitalization of engineering. We have created a framework of intelligent engineering business systems, IEBS, that is based on three key value drivers: safety, execution, and efficiency. Each one of the projects where we leverage technology, whether that is machine learning, it could be artificial intelligence, or LiDAR, or for that matter, it could be a combination of all three, must contribute to at least one of those value drivers. You witnessed the autonomous track inspection program yesterday, a program that contributes to all three. Some of the other initiatives under the umbrella of digitalization would help us improve planning and execution of processes through more efficient data capture, unifying knowledge, simplifying complexity, leveraging advanced analytics, and creating reliable data streams to build real-time decision capabilities.
To recap, our four key strategic goals are maintain a safe and reliable network, execute on capacity expansion when needed, deploy capital effectively through continuous improvement, better systems and processes, and digitalize through Intelligent Engineering Business Systems. Our journey is on as we continue to deliver results and shape our future through a purposeful transformation. Thank you for your time.
Okay, last up, head of our network operations, Doug Rehorchak. Doug is a seasoned railroader that I have spent countless hours with. His background is very similar to mine. I've cleaned up the words, Doug. He's a grunt, started at the bottom. Doug's got an incredible thirst for learning. He's taken all the opportunities that have presented themselves, and he has worked his ass off.
He followed me in the West when I became EVP, and prior to that, he's really worked all across Canada in a variety of roles. He is the cheapest guy I know, but he values reliable, consistent application of our operating model. Doug has an innate ability to steer the ship in both calm and troubled waters, and he and his team are deeply tied to our marketing sales team. This really is the backbone of us growing our business at low incremental cost. Now, I'm going to miss our discussions. Doug probably won't. So with that, come on up, Doug. See Paul? Just. It should have been right here. It's like switching in a lead. You don't throw the cars over there if you're building the train here. You'll get that next time.
Good morning. Thank you, Mike, for the introduction.
Yeah, I'm going to probably miss our coaching sessions and the learning and tutoring there. So you might not realize it, but it does become addictive. So let's start here. So I'm looking forward to taking on this new challenge and opportunity as a vice president of network operations, which I started about a couple of months ago. Building upon my 35+ years of experiences and learnings, coaching, mentoring, tutoring at the school of CN, from obviously Mr. Corey and numerous other chief operating officers. You've just heard from my colleagues from the three regions, Derek, James, and Doug, along with Jim and Raj from mechanical and engineering, and the results they're delivering on. Pretty darn impressive. Let's talk about the network operations team here now. So the team is responsible to coordinate all these efforts and opportunities they will yield to maximize CN's operations and growth potential.
The network team, though, will not only work with my colleagues, but lock step with CN's marketing and sales functions to be one complete team, as you heard JJ talk about here. The network team is made up of the following: the supply chain team. They are responsible to align customer demand with network optimizations for our bulk partners. The service delivery team who interacts daily with our merchandise customers and their car orders. These two teams are the voice of CN with our customers and supply chain partners. The asset team who is responsible to manage the focus on rail cars, which are both CN cars and probably owned cars. The asset team will ensure we have the right number of cars at the right locations now and in the future.
The service design team, who is responsible to maximize and maintain a balanced and efficient train service plan throughout the peaks and valleys. This will ensure the principles of scheduled railroading are applied. You always want to stretch for incremental volumes, but when it's quiet or there's a downgrade, you got to be able to control your costs. That's one of the principles of scheduled railroading. That's what this team is responsible for. And finally, but not least, the network operations center, who is responsible to ensure an overall fluidity of the network, aligning the efforts of all the three regions, along with capitalizing with the work mechanical and engineering are delivering on. The network operations team is focused on three main areas, which will drive to instill optimal operating plans. These areas are as follows: the use of our locomotive resources.
We all know what the cost of a locomotive is. It's critical we continue to use these resources to the best of our ability. The maximization of car supply, car velocity, which you've heard Derek and James talk about. And lastly, maintaining a fluid network with optimized network train speed. This will progress CN beyond scheduled railroading to enable us to achieve continued top-line growth. For locomotives, the network operations group is responsible to act on Jim's visions and results into a strategic service plan. The network team will align the right type of locomotives to the region's needs and where they're required. They are accountable to enable the most efficient use of these assets. Key deliverables are these, such as locomotive velocity, gross ton-miles per total horsepower. Last couple of months, we're already seeing our efforts paying off.
For Q2 of 2019, velocity has improved by almost 4% over 2018. These results have enabled improved crude productivity, mainline efficiencies, and in turn, yield cost savings. We have seen this in the removal of some of the leased locomotives that were putting down or returning. These cost savings will position CN to improve value to our shareholders. Having the right service plan and locomotive plans drives car velocity, which translates into improved cycle times throughout the network. Improved cycle times enable additional capacity gains without capital costs. The network team is responsible to have the necessary controls to enable proactive management of both CN system and private cars. Right-sizing our car inventory drives productivity. Through these efforts, we are more efficient.
If you look back in the month of May of 2019, we were operating with just over 5% less cars than last year, while we're moving the same GTMs. So basically, that's 5,000 less cars on our network day in and day out. That's less cars that are in the yards of Doug, James, and Derek, reducing congestion. We heard about how long it takes to inspect a car, two minutes a car, so that's less time that Jim needs to have his people inspecting cars. Raj is able to get out there to inspect the track. Furthermore, we're not just putting down any cars. We look at the strategic right cars to put down, cars that we can get car hire relief on, cars that can be returned to other owners, leased cars, and so forth. This is all about scheduled railroading. This is paying dividends also.
As in the second quarter of 2019, car velocity has improved across the system by over 8%. Raj spoke about the capital investments in the last couple of years. This has enabled us to create additional ability to capture top-line growth. The network team will plan the work blocks strategically to maximize the productivity of our engineering work gangs and to balance network fluidity to maintain network train speed. Lock step with these capital investments, ensuring the efficient use of our locomotives and strategically controlling the deployment of rail cars creates the opportunity to drive speed. Network speed is improving. We're up 4% over last quarter of 2018, and we continue to go in the right direction. We're continuously challenging the status quo and engaging in technology with data analytics. We are proactively using technology to pinpoint future capacity investments to keep par with our growth.
Later today, you're going to hear about an initiative called Smart Network. Smart Network will be a tool closely tied with the network strategy to consolidate and translate data to make educated decisions to maximize network fluidity. You've heard it already from James. These are exciting times at CN. The future is bright. We've gone beyond scheduled railroading. We keep the principles in place, but we're taking it to the next step here. The network operations team will continue to drive and to push for improved results for our shareholders. I'd like to thank everyone for yesterday and today for having engaging conversations. I look forward to what we can do moving forward into 2019 and 2020. Thank you.
Okay, Mr. Reilly, get your butt up here. This is your team. We didn't plan this, so Butcher, I'm going off script, I know. That's the way it goes.
Now, I'm extremely humbled to have led these people. I've worked here, as you know, a long time, and I've worked with some of the greatest operators that have ever railroaded. Rob, have a seat. I'm not going to make you speak. But this team, in my opinion and estimation, second to none I've ever worked with and second to none that are out there today. So with that, I'm going to just leave you with this. Yeah, the precision mindset. It's alive and well here. I said precision in honor of Mr. Harrison. But it's much more than that. Our franchise, we talked about it earlier, second to none. Our growth potential, second to none. And especially under JJ's vision. I see the future looking very well for CN, and I'm here to pass the torch. But I wanted to do one thing.
Oh, I have to give an instruction. After this, we take a break.
Okay, I've always wanted to do this, but Corey's out. Thank you. Thanks.
[song] Gonna stand up on my own two feet. This conversation ain't coming easily. And darling, I know it's getting late. So what do you say we leave this place? Walk me home in the dead of night.
Everybody, if you just want to come back here at 10:00, thank you.
[song] Is on my mind. So stay up, stay with me tonight. There is so much wrong going on outside. There's something in the way I want to cry that makes me think we'll make it out alive. So come on and show me how we're good. I think that we could do some good. Walk me home in the dead of night. I can't be alone with all that's on my mind.
So stay up, stay with me tonight. There is so much wrong going on outside. Walk me home in the dead of night. 'Cause I can't be alone with all that's on my mind. Say you'll stay with me tonight. 'Cause there is so much wrong going on. Walk me home in the dead of night. I can't be alone with all that's on my mind. So stay up, stay with me tonight. There is so much wrong. There is so much wrong. There is so much wrong going on outside. Remember the words you told me, love me till the day I die. Surrender my everything 'cause you made me believe you're mine. Yeah, you used to call me baby, now you're calling me by name. Takes one to know one, yeah, you beat me at my own damn game.
You pushing, you pushing, I'm pulling away, pulling away from you. I give and I give and I give, and you take, give, and you take. Young blood, still you want me, still you want me. The idea's out, and I'm just a dead man walking tonight. But you need it, yeah, you need it more than this time, yeah. Young blood, still you want me, still you want me. Back in your life, so I'm just a dead man crawling tonight. 'Cause I need it, yeah, I need it more than this time, yeah. Lately, our conversations end like just the last goodbye. Yeah, one of us gets too drunk and calls about 100 times. So who even calling, baby? Nobody could shape my place. When you looking at those strangers, hope to God you see my face. Young blood, still you want me, still you want me.
The idea's out, and I'm just a dead man walking tonight. But you need it, yeah, you need it more than this time, yeah. Young blood, still you want me, still you want me. Back in your life, so I'm just a dead man crawling tonight. 'Cause I need it, yeah, I need it more than this time, yeah. Pushing, you pushing, I'm pulling away, pulling away from you. I give and I give and I give, and you take, give, and you take. You're running around and I'm running away, running away from you. Young blood, still you want me, still you want me. The idea's out, and I'm just a dead man walking tonight. But you need it, yeah, you need it more than this time, yeah. Young blood, still you want me, still you want me.
Back in your life, so I'm just a dead man crawling tonight. 'Cause I need it, yeah, I need it more than this time, yeah. Pushing, you pushing, I'm pulling away, pulling away from you. I give and I give and I give, and you take, give, and you take. Young blood, still you want me, still you want me. The idea's out, and I'm just a dead man walking tonight. I don't want to be alone tonight. It's pretty clear that I'm not over you. I'm still thinking 'bout the things you do. So I don't want to be alone tonight, alone tonight, alone tonight. Can you fight the fight? I need somebody who can take control. I know exactly what I need to do. 'Cause I don't want to be alone tonight, alone tonight, alone tonight. Look what you made me do. I'm with somebody new.
Ooh, baby, baby, I'm dancing with a stranger. Look what you made me do. I'm with somebody new. Ooh, baby, baby, I'm dancing with a stranger. Dancing with a stranger. I wasn't even going out tonight. But boy, I need to get you off of my mind. I know exactly what I have to do. I don't want to be alone tonight, alone tonight, alone tonight. Look what you made me do. I'm with somebody new. Ooh, baby, baby, I'm dancing with a stranger. Look what you made me do. I'm with somebody new. Ooh, baby, baby, I'm dancing with a stranger. Dancing with a stranger. Dancing with a stranger. Dancing with a stranger. Look what you made me do. I'm with somebody new. Ooh, baby, baby, I'm dancing with a stranger. Look what you made me do. I'm with somebody new. Ooh, baby, baby, I'm dancing with a stranger.
I'm dancing, I'm dancing. I'm dancing, I'm dancing with a stranger. I'm dancing, I'm dancing with a stranger. I'm dancing, I'm dancing with a stranger. I didn't mean to hurt you. So why'd I let you walk out the door? You said that you don't know me. You don't know who I am anymore. But if you knew the truth, then you wouldn't feel insecure. 'Cause if I didn't have you, I wouldn't have nothing at all. I wish you could see yourself through my eyes. I always forget that you can't read my mind. As long as I got you and me moving through this world as a two-man team, I'll always have everything I need. You don't even realize what you need. No one can fall for your cry like me. No one can get me so perfectly.
You don't even realize that all that I need 'cause I want you and me, you and me. I know one day we'll look back. Stories on the tip of our tongues. A library full of pages remembering when we fell in love. All of the broken hearts and the stupid mistakes have got us to where we are. It was worth all the pain. Yeah, we'll look back. We'll look back and laugh. As long as I got you and me moving through this world as a two-man team, I'll always have everything I need. You don't even realize what you need. No one can fall for your cry like me. No one can get me so perfectly. You don't even realize that all that I need 'cause I want you, you, you to be me, me together. Oh, I want you, you, you to be me, me together.
Oh, you and me, you and me. Oh, you and me, you and me. Oh, you and me, you and me. Oh, you and me, you and me. As long as I got you and me moving through this world as a two-man team, I'll always have everything I need. You don't even realize what you need. No one can fall for your cry like me. No one can get me so perfectly. You don't even realize that all that I need 'cause I want you, you, you to be me, me together. You and me, you and me. Oh, I want you, you, you to be me, me together. You and me, you and me. Oh, oh, oh. Would you believe me now if I told you I got caught up in a wave? Almost gave it away.
Would you hear me out if I told you I was terrified for days? Thought I was gonna break. Oh, I couldn't stop it, tried to slow it all down. Crying in the bathroom, had to figure it out with everyone around me saying, "You must be so happy now." Oh, keep preaching, then I'll keep calling back. If you're gone for good, then I'm okay with that. If you leave the light on, I'll leave the light on. I am finding there's just no other way, and I'm still dancing at the end of the night. If you leave the light on, I'll leave the light on. Do you believe me now that I always had the best intentions, babe? Always wanted to stay. Can you feel me now that I'm vulnerable in oh so many ways? Oh, and I'll never change.
Oh, I couldn't stop it, tried to figure it out, but everything kept moving and the noise got too loud with everyone around me saying, "You should be so happy now." Oh, keep preaching, then I'll keep calling back. If you're gone for good, then I'm okay with that. If you leave the light on, I'll leave the light on. I am finding there's just no other way, and I'm still dancing at the end of the night. If you leave the light on, I'll leave the light on. I'll leave the light on. Oh, would you leave the light on? Keep preaching, then I'll keep calling back. If you're gone for good, then I'm okay with that. If you leave the light on, I'll leave the light on. I am finding there's just no other way, and I'm still dancing at the end of the night.
If you leave the light on, I'll leave the light on. If you leave the light on, I'll leave the light on. Oh, if you leave the light on. Call it magic. Call it true. I call it magic when I'm with you. And I just got broken, broken into two. Still, I call it magic when I'm next to you. And I don't, and I don't, and I don't, and I don't. No, I don't, it's true. I don't, no, I don't, no, I don't, no, I don't. Want anybody else but you. I don't, no, I don't, no, I don't, no, I don't. No, I don't, it's true. I don't, no, I don't, no, I don't, no, I don't. Want anybody else but you. Call it magic. Cut me into two. I'm of all your magic. I disappear from view.
And I can't get over, can't get over you. Still, I call it magic. You're such a precious jewel. And I don't, and I don't, and I don't, and I don't. No, I don't, it's true. I don't, no, I don't, no, I don't, no, I don't. Want anybody else but you. I don't, no, I don't, no, I don't, no, I don't. No, I don't, it's true. I don't, no, I don't, no, I don't, no, I don't. Want anybody else but you. Want to fall. I fall so far. I want to fall. I fall so hard. And I call it magic. And I call it true. I call it my magic. And if you were to ask me after all that we've been through, still believe in magic. Well, yes, I do. Oh, yes, I do. Yes, I do. Oh, yes, I do. Of course, I do.
We were staying in Paris to get away from your parents, and I thought, "Wow, if I could take this in a shot right now, I don't think that we could work this out on a terrace." I don't know if it's fair, but I thought, "How could I let you fall by yourself? Well, I'm wasted with someone else." If we go down, then we go down together. They'll say you could do anything. They'll say that I was clever. If we go down, then we go down together. We'll get away with everything. Let's show them we are better. Let's show them we are better. Let's show them we are better. We were staying in Paris to get away from your parents. You look so proud standing there with a frown and a cigarette, posting pictures of yourself on the internet out on the terrace.
We breathed in the air of this small town on our own, cutting guys with the thrill of it, getting drunk on the past we were living in. If we go down, then we go down together. They'll say you could do anything. They'll say that I was clever. If we go down, then we go down together. We'll get away with everything. Let's show them we are better. Let's show them we are. Let's show them we are. Let's show them we are. Let's show them we are. Let's show them we are better. We were staying in Paris. Let's show them we are better. Let's show them we are. Let's show them we are. Let's show them we are. Let's show them we are. Let's show them we are better. If we go down, then we go down together. They'll say you could do anything.
They'll say that I was clever. If we go down, then we go down together. We'll get away with everything. Let's show them we are better. We were staying in Paris. If we go down. We were staying in Paris. If we go down. We were staying in Paris. If we go down. We were staying in Paris. Let's show them we are better. We were staying in Paris. Let's show them we are better. Let's show them we are better. If we go down. Let's show them we are better. If we go down. Let's show them we are better. If we go down. Let's show them we are better. Let's show them we are better. I guess I just feel like. I guess I just feel like. Nobody's honest. Nobody's true. Everyone's lying to make it on through.
I guess I just feel like I'm the same way too. Tell me what you really like. Baby, I can take my time. We don't ever have to fight. Just take it step by step. I can see it in your eyes 'cause they never tell me lies. I can feel that body shake in the heat between your legs. You've been scared of love and what it did to you. You don't have to run, I know what you could do. Just a simple touch and you could set you free. We don't have to rush when you're alone with me. I feel it coming. I feel it coming, babe. I feel it coming. I feel it coming, babe. I feel it coming. I feel it coming, babe. I feel it coming. I feel it coming, babe.
You are not the single type, so maybe this is the perfect time. I'm just trying to get you high. I'm just trying to fade it off this touch. We don't need a lonely night, so baby, you can make it right. You just gotta let me try to give you what you want. You've been scared of love and what it did to you. You don't have to run, I know what you could do. Just a simple touch and you could set you free. We don't have to rush when you're alone with me. I feel it coming. I feel it coming, babe. I feel it coming. I feel it coming, babe. I feel it coming. I feel it coming, babe. I feel it coming. I feel it coming, babe. I feel it coming. I feel it coming, babe. I feel it coming. I feel it coming, babe.
I feel it coming. I feel it coming, babe. I feel it coming. I feel it coming, babe. You've been scared of love and what it did to you. You don't have to run, I know what you've been through. Just a simple touch and you could set you free. We don't have to rush when you're alone with me. I feel it coming. I feel it coming. I feel it coming, babe. I feel it coming. I feel it coming, babe. I feel it coming, babe. I know what you feel right now. I feel it coming. I feel it coming. I feel it coming, babe. I feel it coming, babe. I feel it coming. I feel it coming. I feel it coming, babe. I know what you feel right now. I feel it coming. I feel it coming, babe. I feel it coming. I feel it coming.
I feel it coming, babe. I know what you feel right now. I feel it coming. I feel it coming, babe. I feel it coming, babe. I feel it coming. I feel it coming. I feel it coming, babe. I feel it coming, babe. I feel it coming, babe. I've been reading books of old, the legends and the myths. Achilles and his gold, Hercules and his gifts. Spider-Man's control and Batman with his fist. And clearly I don't see myself upon that list. She said, "Where'd you wanna go? How much you wanna risk?" I'm not looking for somebody with some superhuman gifts. Some superhero, some fairytale place. Just something I can turn to, somebody I can kiss. I want something just like this. Oh, I want something just like this. Oh, I want something just like this. I want something just like this.
So if everybody can make their way back here. Okay, so it's my turn for a bit of payback time here. So our next speakers, and actually, Mike, they are actually pretty close, so they're not going to have to walk too much here. So I've learned from you already. And what I do want to say, Mike, once again, I think it's an honor to have been working with you for so many years. And I think your contribution to CN over the last 30 years has been amazing. And I think we should all thank Mike and applaud him for all his service. Thank you very much, Mike.
All right, our next speakers here. And I have a dynamic duo. We like to say at CN that we don't have one chief marketing officer, but we have two. So it's my pleasure to introduce Keith Reardon, who's our Senior Vice President, Consumer Products Supply Chain, as well as James Cairns, our Senior Vice President, Rail Centric Supply Chain, who are going to give us an update on where we stand in terms of our growth opportunities, our organic growth opportunities going forward. Thank you.
Well, thank you, everyone. And Mike, I echo those sentiments. You and I, we've also had our coaching sessions on the phone, whether it was you back in Western Canada or in your current role. So I appreciate those times, and I'll miss those as well. Somebody in the back of the room said to me, said, "Keith, how are you going to backfill?
How are you going to follow up after that Mike Corey dropped the mic statement?" And I think if you've paid attention today and if you know us, we don't worry about upstaging each other. We work together, and that's how we're so successful. So today you're going to hear from James and myself about our respective businesses. But Paul made a great point. We don't have one CMO. We have two. We're not CMOs. We're SVPs of our respective businesses. But a year ago, when JJ transitioned from CEO, our CMO, to CEO, we all sat down, and in fact, it was Doug and myself and JJ at the time, and we said, "Okay, how are we going to do this moving forward? What's the strategy?" And as JJ told you earlier, he sold to the board his strategy.
That strategy was that we needed to keep the pace of growth or actually accelerate the pace of growth that we've had successfully over the last 10 years. That takes time. It also takes a deep-rooted knowledge in the supply chains that we work with. And that takes time. It takes people's time and effort. A lot of it's away from home, a lot of listening to customers, a lot of traveling the world if your customers are located so. And so JJ decided we were going to split the business because it would give us enough bandwidth, especially in my part of the business. James' is bigger as far as the revenue side, but ours is an up-and-comer.
Remember, we were sitting in a meeting, and JJ said, "Here's what we're going to do, this, that, and the other." I took it as a challenge because I wanted to grow our business so it would be surpassing the rail-centric piece of the business. The other reason that James and I have our respective roles is not only because we have that deep supply chain mindset and it takes time and effort, but it's also that we have operational responsibilities in our sales and marketing business. There's probably only one or two, maybe other class ones that have some of that operating experience like we do. Let me talk a little bit about the details behind what James and I may do on that operational side.
So for James, it's managing the first-mile and last-mile warehouses, distribution centers that help us feed the beast on the petroleum chemical side, the bulk side, and the IP side. It's also on James' side, the iron ore part of the business, tremendous capital intensity, the vessels, the docks. And I did that before, so I know the time and effort it takes to put into that. On our side of the business, Martan and myself as the operators for our consumer products group, it's the inland intermodal terminals. It's the relationships with our port partners, those 15 port partners on those three coasts, which is a unique situation in our industry. It's the automotive compounds that are inland, as well as our eastern passage compound. And it's another key point of differentiation. It's our CNTL owner-operator fleet.
Most recently, with the acquisition of TransX, it's also the responsibilities that I have to help support Mike Jones, Derek Lachaine , and their team to continue to grow and do what they do best, and that's build markets. The principles of the strategy of our growth have been built on the schedule railroading foundation. Each and every one of us has a story about how we were taught the business by Mr. Harrison or others. It's all of those things that we had to go through, all of those situations that we came out of that have well-rounded us, made us well-rounded to be a schedule railroader, whether you're in sales, marketing, you're in procurement, or you're in the traditional form of operations. Each one of us has that inherent in us, and it's built into our DNA.
So how are we going to continue to grow at these levels? Well, we're going to continue to rely and refine the foundation principles that we speak about. We're going to continue to expand the reach for our customers. We're going to continue to provide capacity for our customers to grow. We're going to continue to expand and improve the products and services that we offer to our customers to make it relevant for them to win in their markets. We're going to continue to provide our customers with a high level of service. The service levels that Mike and Doug and Doug and James and Derek are providing now are phenomenal, and they'll continue to get better. We've given our operating folks the tools to actually do their job with the capacity improvements last year, the 25% capital. I know some of you think that's a little much.
Well, you know what? They're putting it in place, and we are making those types of investments highly sought after by our customers, and we're going to be able to grow at low incremental costs because of that. We'll do that again this year. We're going to continue to innovate. So not only the products and services that we're going to put forward, that we're going to generate moving forward, but the ones that we provide our customers with today, we're going to be able to refine those by innovation. The technology that you saw over the past couple of days, and Michael Foster and Mike Corey will talk about it a little bit later, but that's going to allow us to grow at low incremental costs. It's going to allow us to continue to be the leader in cost in our industry.
We have ambitious goals, but we've always had ambitious goals, and we've always been very successful in taking them over the finish line. So we have these key points of differentiation between us, our competitors, the peers in the industry, as well as the truck. JJ spoke about the unique three-coast capabilities of our network. I can't tell you how important that is on the overseas side of the business. It allows us to go get business that others can't. And then for our domestic business on the intermodal side, those retailers that want to have multiple gateways to get their product into North America, by having those multiple gateways, they can create strategies that are resilient, that are consistent, and also cost-effective. You saw yesterday the first and last-mile tools that we have.
The story is at the last minute, I asked them to bring the EMP container into the paddock there of all of our tools in the toolkit. Why did I do that? Because that's going to be one of the points of differentiation for us moving forward. We've been an agent in that pool, but now that we're a full-fledged member, our economics will improve, and we'll be able to compete head-to-head with those folks in our industry. The seamless border crossing that Derek and Doug spoke about, we were the pioneers in live lift and Rainy River years ago.
In fact, we took it to another level a couple of years ago when they gave us the responsibility of doing the inspections at a facility that we constructed on the regulator's behalf for even truck traffic, not just the rail traffic, because that's the type of confidence they had in our ability to bring goods across the border in a highly secure manner. Then we took that show on the road and put it to Port Huron, which is going to pay huge dividends as we develop the ports in the east.
On the domestic side of the business, it's taking the ideas of the cold supply chain that we've been very successful at over the last four or five years in developing, but taking it to a new level by bringing in Mike and his team in to help us understand the nuances of the business and help us understand our other wholesale partners who are in the same space. Why do they not bring business to us sometimes, or why can we not help them win in the marketplace? It's those nuances that we're now understanding that is allowing us to change the way that we service those customers that will allow us to grow even faster. It's the service I talked about before. The team giving us the truck-like service has allowed us to bring back business from the couriers, the highly sensitive couriers.
It's allowing us to work with our wholesale partners and generate even more business. On the automotive side, Doug mentioned, and Doug's very proud of that because a lot of that inner motor of the automotive business is in the eastern region. He's very proud of the fact that we had two record months in a row, growing faster than all of our peers in the automotive industry. Bill Reichard, Sarah Zielinski, Martin Lefebvre, all of those folks are the best in the business. We might not be as large as everybody else in the business, but we're the best in the business. I want to give them new storefronts to sell, and we'll talk about those storefronts moving forward. We also added a customer service group. We ran automotive without a customer service group forever.
In the past couple of years, we put that customer service group in place. It takes a little bit of pressure off the salespeople and allows them to go out and get new business. I want to briefly speak about contracts. Highly publicized within the last three or four days about contracts. Well, contracts move around all the time. Back when we had Hanjin and they went bankrupt, within three to four months, and they were a large customer, within t hree to four months, we brought all that business back onto the CN Railway. We didn't know where it was going to go. It was a jump ball for all that business. The reason the customers came back to us is because of the unique gateways we have, the multiple gateways, and the service levels we provide our customers. The ONE, highly publicized, partial loss of our business.
That was a conscious decision on our part to jettison some of the business because we didn't have the capacity to handle it, and we did not want to have our customer lose face. That's why we did it. So as we move forward and contracts go back and forth, there's reasons why we maybe choose to do them, and there's reasons why we choose not to do them. Let's not forget who the ultimate customer is. It's the person that pays the bill who's got their goods inside the box. They don't buy the cheapest rate. They buy the best value because they have goods inside of that box that are highly valuable, and they're looking at the total cost of getting that to market.
That's who makes the decision on what gateway they want to go to, what railroad they want to put their stuff on, and what intermodal terminal inland that they choose to service. I know many of you want to know what's next, so we'll talk a little bit about what's next. We're going to talk about infrastructure, the expansion of terminals, the new builds of terminals, the new storefronts, because when we have more capacity, we sell into that capacity, and we've been highly successful at doing that over the years. Number two, Janet's going to come up, and Sean and her are going to have a session. We're going to talk about the acquisitions, the M&A opportunities that we have in front of us. Finally, number three, it's getting deeper and deeper into the products and services that we offer to our customers.
So here are the numbers. You guys have been waiting on the numbers all morning, so here they are. Over and above the economic growth that comes to us, we have opportunities and projects and initiatives that are going to grow our international intermodal business over the next three years between $550 million and $750 million. On the domestic side of the business, same parameters. Over and above what the economy is going to give to us, we're going to grow between $200 million and $350 million. And on automotive, those numbers are between $50 million and $100 million. Those are ambitious goals, but we always have ambitious goals. If you don't set them high, you never achieve them. If you don't ask for the business, you never get it. So how are we going to do this? Well, let's talk about the infrastructure.
Container port expansions in Prince Rupert, highly publicized. You know what they are. I'll go into a little bit of the details. At Centerm and Vanterm, at Halifax, at the Port of Montréal, the Viau terminal . There's four terminals there. One of them, the VO, will expand. St. John, Port of New Orleans, and the Port of Mobile. There's going to be some new container ports that are constructed. We'll talk about the ones that are announced or soon to be announced. Port of Montréal, Contrecœur, expansion again of Port of Montréal. And the Port of Québec, highly publicized, the partnership between ourselves and Hutchison and the Port of Québec. There's new inland terminals that are being constructed as well. When you go into a customer and you say, "Tell me what you want to do.
Here's all the places you can go." And they ask you and they say, "Well, can you go to Regina?" Now we can say, "Yeah, we go to Regina." It'll be September 1st opening date. We also have a new, the expansion of the James will talk a little bit about maybe what Nova and the other folks are doing in the Alberta Heartland for resins. When they increase that capacity, they're going to want to have markets to go to. So we're working in joint partnership with Ray-Mont Logistics, somebody who's just been highly successful at creating a supply chain for us in Rupert. He's going to open a bagging and container stuffing operation in Prince Rupert this summer. Another way to reduce our customers' round-trip economics, the ocean customers' round-trip economics, so that they want to come and do business on CN. The auto facilities.
Again, when a customer says to you, "I want to give you all my business, but do you go to Minneapolis?" Well, traditionally, we haven't. But we're in the midst of putting together a facility just outside the Minneapolis-St. Paul limits in New Richmond, Wisconsin. And we have several customers that will be there. It's the Port of Mobile auto terminal. It's a facility that will be done sometime next year, and that facility will allow the imports, the exports, as well as domestic handling of autos in that Alabama region for us. It's also our Vancouver facility just inside of our Thornton yard. So I know the highly publicized terminal that our competitor put up. Well, ours is done too now. And we will be servicing the domestic market through that terminal. So it's creating storefronts for all of our sales and marketing people to grow into.
We're also expanding our domestic terminals, as you saw there in Brampton and also Malport. So let's get into the specifics of some of these bigger projects. But before I do that, let me go back. 19% growth. We handled the growth, and we're handling the growth. With the operating team's initiatives, the capital they're putting in the ground, that 19% growth can be repeatable. So Prince Rupert. I travel around the world, JJ and myself, and when we talk to people five, six, seven years ago, they didn't know about Prince Rupert. Now we sit down, the first thing people want to know is, "Prince Rupert. Prince Rupert." It's because it's successful. It's successful because of all the attributes that it has, the one- to two-day closer sailing time on the way from the central part of Asia and Northern Asia.
It's the round-trip economics that we've been able to create through our DRP program, our domestic or our export facilities that we've constructed all along our mainline in all the major cities on the way to Prince Rupert and now over the past two years in Prince Rupert. It's also the close partnership that we have with the terminal operator and the port authority. We have those relationships with everybody else as well. But this one is much less complex. It's only three of us. And you can get a lot done when you don't have more parties at the table that you have to negotiate with or you have to get everybody in alignment. To have only three people and really only two, it makes it very efficient, cost-effective, and as you can see over the years, very highly effective.
We will see two tranches of increased capacity between now and 2020, 2022. We'll take it from 1.35 million TEUs to 1.8 million TEUs. I'll remind everybody that when we were at 500,000 TEUs, we were actually doing 750,000 TEUs through the terminal. And when we had a nameplate capacity of 750, we actually did over one. So just because the nameplate capacity says that doesn't mean we're not going to do more. I know that messes up your model, so sorry about that. Vancouver. So let's take Vancouver. Vancouver is a very, very busy place. And when we travel the world, people go, "Why is Vancouver congested?" Well, it's congested because we had some infrastructure issues, and a lot of those issues are now being addressed. Deltaport has completed their 600,000 TEU project, which allows more rail to be loaded, 600,000 TEUs more, more efficiently. It's taken a while.
It took a while to go through the process. We did our part. We used our VIT terminal, which is our domestic terminal, to accommodate some of that growth that they could not handle through the expansion. That actually hurt our domestic business because we took some of the capacity away that was at the domestic terminal, and we gave it to an inland terminal. Dan Bresolin, who heads up our overseas business, he jokingly says that VIT was one of our largest port facilities in the last two years. Now that the construction is completed at Deltaport , we will be able to get back after the domestic business into the Vancouver marketplace. We've spent some money. The feds have spent some money. The port authority has spent some money on infrastructure down at the waterfront.
And with the increased capacity of Vanterm and Cent erm and the plans that they're working on, this infrastructure at the railhead is going to allow us to accommodate those projects. If we had not spent the money and the feds had not spent the money and the port authority had not spent the money, we may have sub-optimized those upgrades. So it's key all the stakeholders are coming to the table to try and improve the congestion, improve the fluidity, and the resiliency of the port. And oh, by the way, it doesn't matter what's said in the press or whatever. We're going to maintain our position in the Port of Vancouver, and we will allow our customers to also grow in the port, and we'll take our rightful market share there. Port of Halifax.
We work together very, very well with the Port of Halifax as well as the operator. Now, the operator is selling the business to PSA. But the two gentlemen, Andy Herriott and Kim, who operate the terminal, have been very, very good stewards of that terminal. And we've been able to grow the business over the last couple of years. With PSA coming in, with their knowledge, with their customer relationships around the world, and with their ability to invest, and with recent announcements like on Sunday, the CAD 45 million that the feds are putting in that's going to help the infrastructure, the truck traffic downtown, it all lines up Halifax to be one of those key gateways into North America. And we will be there every step of the way with PSA to enable that, and we will be the best operator they have ever seen.
On the domestic front, this is our [audio distortion] this is as Hunter told me one time before, he says, "Keith," he says, "on the transload business, you're my whole card. You're my whole card. Domestic is my whole card right now because we haven't been doing so good over the last little bit because of service issues." As the team has brought back the service, we're going back to our customers. Our customers love us, and they're coming back. The couriers are coming back. Some of the big retailers that maybe had taken some of their business elsewhere, they're coming back. The wholesalers are coming back. We sit down with our wholesalers, and we say, "Don't be afraid when we bring on companies like TransX or H&R because they're only making us better.
Our service that we provide you is going to be even better because of those types of things." Domestic is going to be a growth engine for this company moving forward. Automotive. As I said before, the folks in automotive have done a fantastic job growing the business. One of the things that we haven't done is invest in some of the terminals over the last little bit. We lost a piece of business because we didn't have enough room for everybody at one of the terminals. We won't let that happen anymore. We haven't let that happen anymore. We're going to give them more storefronts to sell into. As I said before, we also gave them the customer service that they needed to work with our customers on. Our customers are also expanding their plants.
We happen to have a great franchise of the OEMs. Places like one of the largest selling automotive vehicles in the world is the F-150. We have that plant in Dearborn. We're working with Chrysler. We're working with Nissan. We're working with all the manufacturers. We also have this great little franchise in Eastern Passage, which is our Autoport facility, which is all of the vehicles that come into Canada from Europe pass through there. It's something that we're going to maintain our position in, and we're going to keep expanding services for our customers there as well. In the franchise of the business that I'm operating, it's service-intense. It's capital-intense. Doug and Doug and James and Mike and now Rob and Derek and the whole team have been fantastic helping us come out of the doldrums that we were in.
And now that they have the tools to provide the services that our customers require to win in their marketplace even more so than in the past, I feel highly confident that those ambitious goals that I mentioned before will be achieved. And we have such a great group of railroaders at CN. It's one of the reasons why I came to CN, and it's one of the reasons why I stay here. I'm a railroad brat too. I'm not a fourth generation, but I'm second generation. And I've seen a lot of, and I used to work with a lot of the other railroads in my former life. And I've seen a lot of ways that business is run. And I've seen a lot of the interactions between sales and marketing and the operations team. And I've seen a lot of leadership.
There's none better than the folks that we have here at CN. For all those reasons, I'm confident. That's why I put my neck on the line, as JJ says, one throat to choke. I put my neck on the line for those ambitious goals that we have moving forward. I feel confident we'll achieve them. With that, Mr. Cairns, would you take over, please?
You bet you, Keith. Thank you very much. Now, 10 years ago, I used to work for Keith. I always admired Keith's passion, passion for his people, passion for his customers. The one thing that I took away from my time with Keith that I could talk about in this room is you can never go wrong focusing on your people and focusing on your customers. We have a little internal nickname for Keith at CN.
We call him JT. Anybody know why we call him JT? Justin Timberlake. Because Keith, he's bringing sexy back, right? You talk about what we're doing on the intermodal side of the business, the consumer product supply chain, opening up new storefronts, doing all these great things. It's pretty sexy. It's pretty neat. Well, I got to tell you, there's a lot of real sexy things going on on the carload side of our business today as well that I want to walk you through. So let's talk about it. Keith talked about his 19% growth in the intermodal side of the business between 2016 to 2018. We don't compete that much, but you notice my [audio distortion] I see that. 20%. Okay. So 20% growth in the rail-centric supply chain, I thought of the business in that three-year period. Remarkable, remarkable, $1.6 billion of new revenue brought to the table.
A lot of it was exports, JJ. I mean, James.
That's right. Well, that's why we're a team, right? We're working together. Keith is generating those empty containers. We stuff all sorts of consumer or all sorts of products for our customers in those containers to access international markets. So it's a good symbiotic relationship, and it works. But how did we do it if you kind of look back? Well, there were two pieces of our business, right? There's the traditional rail business. That's kind of your grain, forest products, petroleum and chemicals business. Okay? We'll call that our non-energy business. And Tony, you asked me at the break about what do we think for the base business growth. And you gave me some comments from some other railroads. I won't repeat them today. But I got to tell you, for us, table stakes is growing with GDP.
That's how we get to the table. But that's not what we deliver. We have a consistent track record over time of delivering better than GDP, outperforming our underlying markets, and consistently outperforming our peer group, right? Why? It's our network. It's the geography that we're blessed with. Energy, energy carloads, and that would be considered, call that diesel, call it frac sand, crude oil, propane. The energy markets for us are a growth accelerator. So we grow our base business better, faster than GDP, outpacing our peers. The energy carloads are the gravy on top of it. So all in, 20% growth, $1.6 billion, pretty darn remarkable, I got to tell you.
All this underpinned by consistent inflation plus railway cost inflation plus pricing that allows us to invest back in our network to create the capacity of the customers' need that allows them to give us more volume and grow faster than our peer group and underlying markets. Moving forward, we'll talk to you a little bit about 2020 to 2022 timeframe. How are we going to win? Well, we're going to continue to help our customers win, right? It's that relentless customer mindset and customer focus that allows us to do things that, frankly, some of the other railways can't or don't, right? When I go to a customer meeting, I always carry with me in my bag, and all of my team does as well, a CN network map.
More often than not, as we sit down and talk about our customer's business, we unroll the map, put it out on the table. We talk about what we can do, how we can create market reach certainty for domestic markets and international markets. There's power in that map. There's power in that franchise. We will continue moving forward to invest smartly and in lockstep with our customers to create the new capacity that they need to win in their end markets. The key is investing smartly, slightly ahead of the curve so that you have the capacity when it's needed, but not too much that you have idle capacity, okay? Next three years, we'll continue to ride the wave of some new business that has been developed over the past couple of years here as business ramps up on the energy side of the business.
In the next few slides, I'm going to talk to you about some specific markets where we will outperform the base economy. These are specific energy-related markets. Let's talk about that. Non-energy, we will grow faster than the economy. Okay? GDP, poker stakes get to the table. Our track record says we will deliver better than the economic growth. We will grow faster than the economy because we've got a great product to sell and a great story to tell. Energy, again, will be that growth accelerator. I'm going to walk you through some specific opportunities in different markets that will show you how we will grow between $450 million-$1.15 billion in new revenue 2020 to 2022, specifically tied to energy-related products. We create market reach, certainty, and reliability that underpins our customers' investments, whether that's the base rail business or the energy business.
Interesting on the energy side of things, you can really think about it in terms of a couple of different waves, right? The first wave of the energy renaissance, call it maybe started, let's say, 2012, 2011, this new thing like fracking came up. Fracking. What's fracking? Well, you guys all know what fracking is now. That was the first wave of the energy renaissance. And what were we moving then? We were moving a lot of pipe. We were moving some sand and unit train type business, moving a little bit of extra additional liquids that came out of this development in the fracking. And we were moving frac sand, crude oil. Then the second wave came, and this is when things really started to gel for railroads. So you moved from, "What's going to happen with this fracking? Is this going to be real?
“Is it going to take hold?” to massive development on the oil and gas side. More drilling, more exploration, more frac sand. Frac sand moved from being a manifest type business to being a high-velocity, high-speed unit train business. Same with crude by rail. Crude by rail started as a manifest business. As we went to the second wave, it turned into being a unit train type business. From there, moving forward, we're going into what I would call the third wave of that energy renaissance. What characterizes that third wave is now we move from mining to moving to manufacturing. Here's where there's value added at source to the molecule that comes out of the ground, and we're moving stuff like methanol, polypropylene, propane, all the stuff that there's some value added to in the marketplace before it moves to its destination market.
Do you guys want to talk about crude oil? Should I skip this one? I got to tell you, as much as we got a very, very diverse portfolio, it seems every time at a meeting like this or I speak at a conference, everybody wants to talk about crude, crude, crude, crude. So it's the first slide. We're going to get out of the way, and we're on the conversation about crude. The underlying fundamentals for crude by rail coming out of Canada are strong. They're extremely strong. I looked at numbers just this morning. We have a differential between WTI and WCS. WCS is basically Hardisty Western Canada Select. That's kind of the marker everybody goes by. $14 a barrel. Not bad. Pretty good. Pretty good for rail. But here's the kicker. When you look at Western Canada Select, versus Maya, there's another $4 differential.
Maya actually trades today at a premium to WTI. Why? Gulf Coast really needs a heavy barrel to replace some of that declining Maya and the disappearing Venezuelan. Makes that Canadian barrel more attractive. So $14 differential plus another $4 for Maya, what's that give you? $18. I could tell you right now, $18 is a sweet spot. It's the magic number for crude by rail out of Alberta to work for everybody. Crude by rail makes economic sense at $18 for refiners, for producers, and for marketers. We're there. We're there today. There was a lot of things that happened in the marketplace with the government putting their thumb on the scale, making some changes with curtailment, talking about getting into crude by rail space. It created some confusion in the marketplace. Created a bit of a speed bump for us, I would say, in the first quarter.
Some into the second quarter as well. When you look at December for CN, in December, we are starting to hit our stride. We are moving in the neighborhood of 250,000 barrels a day of crude by rail. Working on creating that capacity to get to 350,000 barrels a day of crude by rail with line of sight that that would happen. Then along came curtailment at crude by rail barrel and exited the market. When it exited the market, what happened? Inventory started to build up. Now we're at a point now we're at record inventory levels in Western Canada again. That's why that differential is widening out. Let's talk about pipelines. I'll tell you a little story. I moved to Calgary nine years ago. When I moved to Calgary, JJ said, "James, go figure out this crude by rail thing. Is it real? Is there something there?
Let's figure it out." Nobody was moving crude by rail nine years ago. So I went and I made the rounds and put our economic case together and said, "Here's why it might make sense for you to consider moving crude by rail." And I met with all the executives, those that let me in the door in Calgary, put the compelling case out there, and it was unanimous. "Yeah, I guess it kind of makes sense. But this temporary problem we're having right now, this is nine years ago. Pipes are going to be built, and in two years, we'll have all the capacity we need because the pipes are coming." Okay. I said, "Okay, thank you." Left with my tail between my legs, and I went back and I said, "I don't know, JJ. I'm here in this crude by rail thing.
I don't know if it's going to be real." And every year after that, I went back, talked to those same executives. I got the same answer. Pipes coming in two years. We'll have our takeaway capacity. We don't need to invest very strongly in crude by rail. Well, that all changed, didn't it? About 2017, end of 2017, there was a realization that some of these pipe projects that are planned, they may not be coming to fruition. And this two-year dream that everyone has, a dream I share, and I'm an Albertan, I'm a Canadian, may not come to fruition. Then I think the real catalyst for the increased demand and focus on crude by rail and where we started to sign some long-term contracts with really strong commitments to ship by rail before government intervention was when the Trans Mountain Pipeline got nationalized. Pretty strong words, right?
But I got to tell you, if anybody thinks that when a pipeline is owned by a government, that it's going to get built faster or cheaper, I don't know. There's a surprise in that for you. Yesterday, there was just an announcement on Enbridge. Enbridge Line 3 is probably the next pipe capacity that's going to be available in the marketplace. It was supposed to be the end of this year, and it got delayed a year to kind of second half of 2020. And heard yesterday that there was a challenge or change in a challenge in Minnesota, some environmental regulation stuff that's missing. And now might be looking at another delay for Enbridge. I hope for the sake of Enbridge they could sort it out and they can get things done, built in the right timeline.
But at the end of the day, as this uncertainty creeps in, it creates a longer life or a longer desire for rail to continue to be part of that supply chain to move crude to destination markets for a longer period of time. You think about our network. And when I used to talk at conferences and talk about crude by rail, I used to put up a map of the pipeline network. And if you squint really hard and you look at that pipeline network map, you go, "Jeez, what does that ever look like to CN network?" Right? You think about the new pipelines that are desired to clear markets and get those barrels, those crude barrels to market, the desirable end markets. Keystone XL , Edmonton to U.S. Gulf Coast, that's our railroad. Edmonton to Kitimat, Gateway, canceled project, but that's our railroad.
Edmonton to Vancouver, that's our railroad. Edmonton to Halifax, that's our railroad as well. So clearly, we have the infrastructure in the ground that connects production with desirable demand markets for our customers. Creates that length for crude by rail. Finally, I'll sum up here on crude by rail is we're making our own luck. We know crude by rail will diminish or go away one day when the pipes are built. How are we making our own luck? I think many in this room have heard about CanaPux. We talked about that in 2017. CanaPux is an environmentally cautious way of moving crude oil to the West Coast tide water to access international markets. CanaPux solves two problems, doesn't it? It provides increase in total market takeaway capacity, but it also provides access to international markets. Okay?
The second thing we're doing is we're working with customers to advance the notion of building DRUs or diluent recovery units. Because the one thing that is shared across the board when I meet with oil executives, rail is competitive with new build pipe if you can ship it without diluent. How do you do that? You get the diluent out, diluent recovery units. And I got to tell you, the energy around this is growing all the time. And it's growing because of the availability of these Permian barrels. A very light Permian barrel available down on the U.S. Gulf Coast, blended with a very heavy Canadian barrel. That's the perfect crude to run through these heavy oil refineries. So when you send Dilbit down there, it kind of creates a problem, right?
They go, "Man, we already got this light stuff that comes in the form of this diluent that's blended with the heavy stuff. We just want the heavy stuff." So I think there's some momentum around there, and it may not be in a position to replace every single carload of crude by rail that we move today or we'll move in the future. But I think we're well on track to build out some long-term crude by rail business moving forward. Frac sand and NGLs. So as you heard today, I'm relatively new in the job. I'm taking over for Doug McDonald. And I always remind people that, sorry, Doug, but I have some very big shoes to fill. Literally, I think it's size 13, I think, Doug, something like that. So big shoes to fill with Doug.
But I'm learning about this business, and I'm learning about frac sand. And I got to tell you, brilliant, brilliant decision when we bought the WC, WC, Wisconsin Central. I guess we knew at the time that we were sitting on the best frac sand in the world, right? Right underneath our feet. Well, we didn't, but we bought the WC, expanded our network, and lo and behold, that's where all the good frac sand is. So what did we do? We went out and we invested smartly, capital in lockstep with our customers to create unit train capability, high-speed, high-capacity unit trains to connect the frac sand with the desirable markets across North America. One of those desirable markets is Western Canada. Okay? Very, very excited about things that are going on in that Western Canada oil and gas space, primarily on the gas side.
So you think about BC and Northern Alberta, Duvernay area. LNG Canada project announced. I think you were all aware of LNG Canada. That will be the largest capital program in Canadian history. They build out LNG Canada. Wow. What do they need? Natural gas. What's that mean? That means a solid future of more drilling, more wells. And as technology advances, we're seeing more sand per well. Some headwinds on the frac sand side with disruption caused by local supply. We'll see how that plays out in the marketplace, but we're all positioned to address that. So what else happens when you have more drilling? Well, when you have more drilling, you have more liquids. Propane. Okay? Propane, a big deal for Alberta, a big deal for BC. A big deal for railroads because that's the only way to market.
There's no available pipe capacity to take this propane away. It's got to move in a rail car. For the most part, it moves on a rail car on our network. I was just up at Prince Rupert. It was a beautiful sunny day in Prince Rupert. I've been to Prince Rupert five or six times. I've never seen the sun. I went there this week, and the sun was shining. I went there as a guest of our good friends at AltaGas, Randy Crawford and his team. They just built a brand new facility in Prince Rupert to export propane. They did it in very short order, and they got it done. They have proven to the marketplace that you can build energy infrastructure projects in Canada if you do it smartly and the right way.
Now, facility on Western Canada, the only export facility for propane in Western Canada, somewhere in the neighborhood of 50-60 rail cars a day, is up and running. And now there's whispers in the industry. Everybody like, "How can I get on that? I want a piece of that. I want to clear my barrels on the West Coast. I want to access international markets. I want to take advantage of CN's superior network and supply chain so I can clear my barrels and get a better price." It's strong. It's fantastic. So if we think about that, between frac sand and NGLs, over the next three years, we will deliver somewhere between $200 million and $300 million of new revenue. Let's talk about coal and pet coke. Again, new market that I'm learning about.
Who would have thought just a few years ago that coal would be a growth engine for CN or any railroad for that matter? You guys probably did because you're the smart ones in the room, right? It's your job to think about the future and look at those crystal balls. And five years ago, you all sat down and figured, "Coal's coming back. We're going to invest in coal stocks," right? You guys, nobody's nodding. Well, I got to tell you, coal's a cyclical business. It's here today, and it's very, very strong today. Very strong Newcastle pricing, very strong API2 pricing. As a matter of fact, if we look at how we're doing on the coal side of the business, we've had many coal mines on CN reopen over the last few years. Just last month, we had a new mine that opened up.
This new mine will produce somewhere between target now 3 million tons a year on an annualized basis, our friends at Coalspur, but the potential to grow to 10 million tons a year. The very exciting thing about Coalspur is they're a low-cost producer. They tell us that they're in the bottom quartile of costs relative to the world market, so they're in a better position to sustain some kind of the ups and downs in that marketplace. Coal is very exciting. What do we do with coal? Well, we create this multi-port, multi-coast direct connectivity and deliver for our customers on the coal side, market access certainty. That's what you get with the railroad. Market access certainty because you're moving an infrastructure that's already in place. Prince Rupert is that gift that keeps on growing.
It's great for Keith's side of the business, but it's also great for the bulk side of the business where it's our friends at AltaGas, it's the coal business that we're growing, the pet coke business that we're growing. We've created some change and disruption in the marketplace working with Doug and his team on the pet coke side of the business. Well, how did we do it? We got this great transload at Fort McMurray. Keith talked about part of my role as I look after the transload and the distribution centers of a fellow named Justin Waldeck that runs it for us, does a fantastic job. But we transload all the pet coke in Fort McMurray. So we've transitioned from a steel car manifest service, Fort McMurray to RTI, to an aluminum car unit train service. All right? More pet coke per car, higher velocity, higher turns.
So we move more pet coke with fewer assets, creating a more reliable supply chain so that our customers can get to their end market and take advantage of this very, very strong pricing for pet coke. Similarly, in the U.S. Gulf Coast, we've got our Continental Marine Terminal. So now, working on starting to move pet coke with some investments by CN in lockstep with our customers and track infrastructure in the Chicago area and down in the U.S. Gulf Coast to move unit trains of pet coke similarly from Chicago area, the U.S. Gulf Coast to clear and access international markets. So altogether between coal and pet coke, you can expect revenue growth in the range of $150 million-$250 million over a three-year period. These are big numbers. Let's talk about refined petroleum products and sulfur. Here's where market disruption plays a role.
Talk about sulfur first, real quick. So with sulfur, it's an example of us investing in lockstep with our customers to create capacity as our customers invest in more prilling to take advantage of market reach, access, certainty that we create shipping on CN directly out of Fort McMurray. On the refined side, very, very interesting. Again, it's market disruption created by a pipeline story. Constrained pipeline capacity with a pipeline serving the GTA that's been derated, right? Less product can move through that pipeline. So there's a supply problem in the GTA. And what do we know about the GTA? It's growing and there's more people. More people, growth, more flights. What's that mean? We need more diesel to move around all those consumer goods that people are buying.
You need more gasoline for people's cars, and you need more jet fuel for all those flights that are taking off and going out of Pearson. Some of you are going to be on those flights this afternoon, I think. In order to make sure that demand is met, the incremental barrel of refined products moves to that market by rail. Increasingly, it's moving to that market by rail on CN. We connect available production capacity in the Alberta market with desirable end markets in the GTA. We do this through investing in new transload facilities and capacity to help our customers connect to the last mile via truck. We have a facility we run ourselves. We have a couple of other facilities that are owned and operated by our customers and third parties.
There's more facilities that are being developed to take advantage of this market opportunity. It's a short market in the GTA. It's a long market in Alberta. It's a long market in Eastern Canada. And it's a long market coming out of that Midwest area in the US. So we're moving carloads from all three of those regions into that GTA-type area. Between refined petroleum products and sulfur, we will deliver between $100 million and $200 million of new revenue growth. What a great energy story that one is. Already, we've seen on the diesel side of business the new North West Upgrader that was built in Edmonton. I think you're all familiar with that. Built out of Redwater, CN-served facility. We're moving diesel carloads out of there. We're moving VGO out of there. And we've been doing that since kind of early in 2018.
A lot of those carloads are taking advantage of this market opportunity in Eastern Canada and exporting off the West Coast. This is our base business, right? And I love talking about our base business because it shows the opportunity for us to use the entire CN map. Right? Doug wants us to sell business in Eastern Canada. We're doing it, Doug. Right? Derek, he wants more business down to the U.S. Gulf Coast. It's coming. We're doing it. James, I got more business for you. I'm sorry, but I know you can handle it. James and I got a funny story to tell. It's about the glass half full or glass half empty view of the world. I'm the marketing guy, glass half full. James is the operating guy. I don't know. Glass half empty sometimes. We'll see. So anyway, we're sitting in this conference room.
There's myself and James and Mike and a bunch of other operating people and some commercial folks. And we're putting our heads together. We're figuring out how are we going to solve this problem for propane. This propane business is expanding and growing. The demand is there. We had massive investments by our customer, Pembina and Redwater, because they want to move propane. Right? 300 cars a day. Oh my God. How can you do that at one facility in that congested area? Well, we put together a plan that involved a significant amount of capital investment that we had to go to Ghislain and say, "Ghislain, we will deliver on this. Please write a check." And if you guys know Ghislain, there's always an excuse. I can't find the checkbook. The pen's empty. I don't know. There's always some, but we got them. Okay?
We spent the money, got that done. Then James came up with this idea. He said, "You know what we got to do? We got to go to our customers and tell them our skin in the game is we're investing the capital to support your business." Right? We're building a bypass track. We're expanding Scotford Yard. We're putting other additional tracks in at Symington. Right? Remember that conversation, Mike? We're going to build this extra set of tracks in Symington. We're going to solve this problem. But what do we need our customers to do? We need our customers to work with us to create a new level of, I'll call it resiliency when times are tough. Because you know when customers want to move the most propane? January and February. Kind of the toughest operating conditions in Western Canada that you might have because of weather.
We needed our customers' help to create resiliency so we could deliver for them. We introduced something called Day of Week Directional Block Loading. I'm not going to explain it because I don't want our competitors to figure it out. We put this on the table with our customers and said, "We're going to invest here. That's our skin in the game. Your skin in the game is to work with us to change your practices and how you load cars and how you operate to create more resiliency for you." After the meeting was done, I was VP Petroleum and Chemicals at the time, and James was GM for the region. He kind of looked at me. I looked at him, and he went, "Uh-oh.
We got everything we wanted," I said. "Yeah, yeah, we did." And he says, "You know, if this doesn't work, we're going to get fired." And I said to him, glass half full guy, I said, "But if it works, we're going to get promoted." And it's one of those rare times, James, where I can say, "I was right. You were wrong." And you're smiling about that. So it's a very good news story. So let's talk about our base business using the whole map and how that works for us and how we know we will continue to grow faster than the economy because of our great network. Right? Our resilient network. We have a relentless focus on our customer, a relentless focus on trying to create solutions for our customers so they can win in their end markets.
We put the map in front of our customers with that customer focus and say, "Let me help you. Let me help you win." We invest smartly in lockstep with our customers to create the capacity that they need to succeed and win in their end markets. That's the formula. It's pretty simple. But you can't replicate it if you don't have the right people. You can't replicate it if you don't have the right commitment to investment. Right? And you can't replicate it if you don't have CN's network. And last time I checked, we're the only one that has this network. Right? Think about our chemicals business. Remarkably, we connect U.S. Gulf Coast petrochemical facilities in U.S. Gulf Coast with Eastern Canada, Sarnia-type region, petrochemical developments, petrochemical business in Eastern Canada with Western Canada, all that petrochemical growth and petrochemical business there.
So we have direct connection with all of these major petrochemical centers. And then we extend our reach or our tentacles through a vast and growing network of cargo flows and distribution centers that allow us to connect our customer from their origin point to their customer's dock or demand point via truck. On the forest product side, we're the largest mover of forest products in North America. That's our base. We're big. Right? We're big. We're successful because we invest smartly. We invest smartly and wisely in assets to help our customers grow and win in their end markets and access new markets. A lot of change going on in the forest products industry these days. A lot of change around things in BC with mills shutting down or temporary closures kind of related to stumpage fees and changes with the allowable cut moving forward.
But I'm going to tell you, we're still pretty bullish on what's going to happen on the forest side. Size matters. We've got that size. On grain. What a great news story grain is. Think about the disruption that's created in the grain supply chain. Okay? There's two major things that are happening. We're seeing a significant shift towards unit train type business, unit train business at origin and destination. Real unit train, loop tracks, not making up unit trains from ladder tracks, creating high efficiency, high velocity connectivity for our customers to speed grain to market. The other thing is the introduction of private cars. CN's a leader in that regard. More of our customers are putting in private cars to supplement the railcar fleet. And it makes sense.
If you're a customer that builds a facility at origin, loop track, unit train, connected with a facility at destination, loop track, unit train, you put your own private cars in there. Now you directly benefit from the speed, the velocity increase that goes along with this new way of thinking about the grain business. And I'm going to tell you, we're blessed. We're blessed with geography. We're blessed with great customers. We provide that multi-port, multi-coastal access that customers desire. 20 of the last 25 announced grain elevators built on CN. That's a big deal. It matters. It gives us the opportunity to win and create that for our customer. And Rupert, again, gosh, I got to tell you, Rupert, that's the gift that just keeps on giving.
Grain, coal, pet coke, brand new LPG, all the things that Keith is doing, the stuffing that we'll be doing at Prince Rupert with our good friends at Ray-Mont, creating supply chain certainty for our customers to access these end markets. It is the gift that keeps going. And yes, Tony, I'll tell you again, we will grow faster than the underlying economy. Rest assured. All right. Let's sum it up here. So on the carload side of our business, we will deliver between $450 million and $1.15 billion of new revenue associated with these specific opportunities I identified. And we're going to grow our base business, our base carload business faster than the economy. Pretty impressive.
The consumer product side, as Keith laid out for you, a very, very sexy $800 million-$1.2 billion of new revenue projects that we're extremely confident and extremely excited about. So combined together, we got a low $1.3 billion-$2.4 billion new revenue growth products over the three-year period 2020 to 2023. I'm very proud. I'm very excited to be part of this. I got to tell you, the future is very bright for the Canadian rail sector, for CN. I love having all these projects to work on. I love all the growth that's in front of us. And we're very excited, Keith and I, to work as a team and move this thing forward and get that done. So there's going to be a question period afterwards where Keith, myself, and JJ are going to be up on stage.
When that happens, Keith is going to be very happy to take all your questions. So with that, I want to call to the stage Janet and Sean. And Janet and Sean are going to talk to you guys a little bit about our inorganic growth opportunities. Thank you very much.
Get the glasses out. There we go. Well, that was great, James. Keith thought it was very exciting and very interesting. So we thought maybe typical railroad, try and innovate something different. We're going to have a fireside chat at the most fireplace, but fireside chat this afternoon or this morning. And Janet Drysdale, who you all know very well because of her past responsibilities as VP Investor Relations, is the VP Financial Planning. And we're going to have a conversation, Janet, myself, and Dan have questions from you on our inorganic growth strategy.
Obviously, acquisitions and integrations are very important to our strategy going forward. We thought maybe also we'd innovate by having you at the end submit questions via a technology called Slido. You have on your little agenda under the 11:00 A.M. time slot the code to access the Slido where you can submit questions. Those of you who have your computer, submit questions. If you don't have a computer, ask your neighbor to submit a question, and we'll go from there. We'll do so at the end. So Janet, thank you for participating in this discussion. Obviously, it's a great segue to say where we're going after the great presentation by Keith and James. But also this morning, as you heard JJ talk about our acquisitions and partnerships and a bit of ideas of what we're thinking about.
I thought we'd have a chance with you, Janet, to go a bit more in detail so we can explain to our guests here this morning how we see this going forward when it comes to inorganic growth at CN. So Janet?
Thanks, Sean. It's great to see so many familiar faces here today. I'm not going to lie. It feels really good to be participating and not organizing. Let's talk about acquisitions. Our acquisitions and our partnerships really both share the same objective, and that's to help customers get their products to market more efficiently. So the strategy is really quite simple. Inorganic growth is another lever to drive incremental profitable growth. So maybe we can talk a little bit about why now, why is this the right strategy, why today. We have a very strong commercially focused leadership team in place. I think you've seen that today.
We have a strong balance sheet. I think we're cognizant of the fact that some of these organic growth opportunities will moderate over the longer term. So multiple levers of growth, I think, really make sense. The strategic rationale, though, only takes you so far. Winning requires execution. Execution is a team sport. You've heard that repeatedly this morning in terms of the one team. The acquisitions and the integration team is really tied at the hip to the commercial teams. We are collectively focused on doing the right deals at the right time in order to create customer and shareholder value.
That's great, Janet. Maybe before we go into the future, we should talk a bit about the past. What has been historically CN's acquisition strategy? We were probably on a rampage in the late 1990s to early 2000s. Rampage is a big term, but we did quite a bit of acquisitions. And maybe talk a bit about how this is structured. But it's not new for CN. It's something that was part of our DNA. We haven't lost that muscle. The question is flexing it a bit more going forward.
Yeah, you're absolutely right. This is truly in our DNA. We have a great track record. And that really began shortly after our IPO, which was in 1995. As you can see from the map, at that time, we were largely a Canadian network with only a modest presence in the U.S., our most southerly point on the network really being Chicago. So as we fast forward and get a little bit into the future here, we had a very strong time period, as Sean referenced, between 1998 and 2004, where we really did go on a rampage.
Significant activity in order to build up our unique North American franchise. In the case of Illinois Central, it also brought us scheduled railroading talent, namely the late Hunter Harrison, who I think you can appreciate his legacy lives on at CN. During that time period, we also extended our reach in British Columbia, building up the, as James referenced, the largest forest products franchise in North America. We also acquired the Wisconsin Central and the frac sand that goes with it. That really gave us the missing link in our network to directly connect our Western Canada region with the U.S. region. With these acquisitions, this really formed our unique North American franchise. After that, we got a little bit more focused on shortline opportunities. I think JJ referenced it this morning.
The success of scheduled railroading, the discipline of asset utilization, and the resulting decrease in our cost base made it the right time to buy back some of these shortline properties, which we felt in our hands had more potential to actually drive incremental growth. And of course, I think you're all aware of the acquisition in 2009, which is the EJ&E, which is a unique sustained structural advantage in this industry. Over 25% of all U.S. rail traffic touches Chicago. So it is the largest and often most congested interchange location in North America. And we have a way around that. And I think Derek already gave you some numbers on that in terms of 24 hours-36 hours savings to get around the city as opposed to through the city.
So this is a significant speed and service advantage that really supports the business growth that we're looking to do. So what we have today is a truly unique North American franchise. We are the only railroad to touch the three coasts of North America. And we originate over 85% of the traffic that moves on our network. We originate and terminate over 65%. And what that means is that we have more control over the end-to-end shipment. And that matters from a customer service point of view. For those of you who know me, you've probably heard me say this before, but in railroading, geography matters, and CN has great geography. So our focus going forward with the acquisition opportunities is to make the best possible use of that geography and, where possible, to extend that geography.
That's great, Janet. I noticed that we didn't footnote the attempt to combine CN and BNSF in 2000. But we did sort of try and get Rob Reilly. So we waited 18 years. Now we have him finally. So the main driving force was to get somebody of his quality. But just jokingly, clearly, what comes out of that period too is a lot of regulatory review, a lot of changes. So as we go about doing this, obviously, there are different environmental impacts that we look at going forward and how we impact it. But I think that some people would say that we've changed how we look at these acquisitions, that we do things differently. I'd like you to expand a bit and now where do we hunt and how do we go hunting for what targets?
Yeah, I think we've changed and we haven't. So that's kind of a yes and no answer. On the rail-centric side, I don't think I'm going to shock anybody by saying that we don't think there's any opportunity in the near term for Class I consolidation. And so when we think about the rail side of the opportunity, what we're really talking about are tuck-in shortline opportunities, shortlines that are contiguous to our network. That's where we get the value in terms of creating the synergy. And the reality is there's fewer opportunities today than there used to be. So we have pivoted a little bit. We've enhanced the strategy. We've looked at intermodal and logistics, and I'll talk a little bit more about TransX. But these are opportunities where we can bring supplemental services to our business, where we can get new talent, and where we can extend our reach.
We've also talked a little bit today about port partnerships. That's really consistent with our end-to-end supply chain strategy. From a strategy point of view, not new, but certainly something that we're getting more involved in than we have in the past. At the end of the day, all of these buckets of opportunity are all to drive incremental volume at the end of the day and to help our customers get their products to market more efficiently. Underlying, it's all the same strategy.
Janet, how does your team evaluate the targets per se? And what do we look at when you're allocating capital and resources? Only so many people can work on these transactions. We have a railway to run every day. How do we go about deciding what are the value triggers and how do you allocate the resources in a way to look at these transactions?
We have a highly structured and disciplined approach when we're evaluating targets. That's both on the commercial side as well as the financial side. On the commercial side, first and foremost, does the target have the potential to create incremental volume? We also look at the talent. Do they have a strong entrepreneurial and/or technology-focused management team that would be part of the transaction? Are there incremental services that would broaden our offering? Would the target give us access to new geography, new markets, or new customers? On the finance side, we take the same structured and disciplined approach. In that context, it's really first and foremost about the standalone return, as JJ mentioned.
So we're assessing the soundness of the underlying business. And I have to tell you, we are in the finance function. So at the end of the day, we're very mindful of competing priorities for cash. And the acquisitions, at a minimum, must meet our internal hurdle rate and support our overall ROIC objectives. We also look for synergies. So when we acquire the properties and make them part of the CN network, what we're looking for is a one plus one that's more than two. So in our hands, how do we create incremental volume? As you know, Sean, we also have to be mindful of the regulatory environment. And at the end of the day, we have to pick targets that we think we can get done. So it's a disciplined and structured approach, but I would also say it's also very nimble and very fast-paced.
When we look at the TransX deal, for example, it was three months from the very, very first meeting until the deal signing. I can tell you the Starbucks location next to headquarters saw a huge spike in sales during that period. So very proud of the team's efforts to get that one done. And then really putting all of that together, this is about getting the right target, getting it at the right price, the integration, and doing this to drive customer and shareholder value.
Yeah. Well said too. From the outset, you look at this, there's never a big problem from a regulatory point of view. Until you get to the front of the competition, really, STBs are talking about the deal. They say, "Well, we don't sort of see it differently." So a lot of focus on that as we put it together, I guess, also.
Janet, it's often when we put a deck together or an inflation analysis for JJ and the board, and we commit to the acquisition of a timeline. We also commit to the synergies and the values coming out of it. How do we make sure? Because boardrooms are full of decks that had great potential acquisitions. People go up and buy, and then for some reason, integration doesn't go like it should. And we at CN, for many years, had somewhat of an in-house expertise on how to integrate. Haven't done a lot recently. So how does your team go about making sure that the value we committed to both JJ and the board finds its way to the bottom line in a relatively quick fashion?
That's a great question, Sean. Let me talk about TransX as an example. So TransX is our first deal after about a 10-year hiatus.
We started to back up again the machine, if you will, in terms of the acquisition opportunity. Very pleased that Mike Jones is here with us today. So hopefully, you've had a chance to connect with him. He's a key part of the talent that came with the deal. Let me be very clear about TransX. This is not a fixer-upper. This is not a flip. Okay? They were a very successful company in their own right. Keith Reardon and his team have known them well, respected them, and operated alongside of them for the last 20+ years. They were already in a sale process. So from our point of view, this was very much an opportunistic opportunity. And this really was with the support of JJ, who I think you can feel his bias for action. So this was all about seizing the opportunity.
TransX complements and enhances our existing intermodal supply chain. They have a very strong management team, deep expertise in logistics, dispatching, operations, and temperature-controlled shipments. So this was really an opportunity for us to enhance our intermodal service offering. It enables us to give customers multiple options in terms of the full-load reefer market and really enhance our CargoCool business. So the integration, Sean, is absolutely key, as you've said. We do have a dedicated integration team that is making sure the mothership of CN is not overwhelming TransX as they're coming into the fold, so to speak. The business will be run independently, and we're going to integrate the right pieces at the right time to make sure that we drive value.
That's a great example, Janet, and concretely how you go about in a disciplined fashion post-acquisition to make sure we're going to get what we said we're going to deliver in value. So it's a very good example. Thought maybe we'd skip or change a bit to the East Coast ports. So a lot of media the last couple of weeks, announcement out of Québec City last Tuesday. Maybe give us a bit more detail. What's our thinking and what's your thinking about as JJ talks about Prince Rupert of the East? What are we looking at? And what would the criteria go out to determine what we're going to do next in the East?
Okay. Maybe we just start with a little bit of context. As many of you may be familiar, the shipping industry is moving towards ultra-large container vessels.
So they're calling fewer ports, and they're dropping more freight per port. And really, that means there is increasing competition among ports that are capable of handling those larger vessels. We really believe that Canadian ports can offer a competitive gateway for European and Asian cargo. And we think that this is an underdeveloped opportunity, particularly in Eastern Canada. So for us, this is really about emulating the success of Prince Rupert and leveraging our efficient, direct, and underutilized Eastern network to the U.S. Midwest, also allowing us to leverage the EJ&E route around Chicago. And really, what this is doing is enabling less capital-intensive growth. So in some cases, CN may take a minority equity position in a terminal. And we've heard a little bit this morning about Québec. We do that when we think our participation is required to create that tipping point for success.
In other cases, that may not be required. The key success factor here is to have an aligned and tightly integrated terminal and rail operations working together. We need to create big train, big ship, competitive service in order to really grow our presence in that U.S. Midwest market.
That's great, Janet. Very insightful for the East. And obviously, a lot of people are watching the map. And when we get calls from ports, we say, essentially, look at the map, look where the railways go, and we're going to play in most of these markets because of our presence. Maybe, Janet, before we move the question period, if you had to sum up, but also give us some insight, what should the room and the people on the webcast take away from our strategy going forward when it comes to intermodal growth? Maybe just if there are one or two things we should make sure that people leave the room with that in the back of their mind.
Here's what I'd like you to take away. CN has a solid track record when it comes to successful acquisitions. The team, the whole team, is very much focused on doing the right deals at the right price and ensuring that we integrate those deals seamlessly. Inorganic growth opportunities are an incremental lever of growth. At the end of the day, we're doing these because we believe that they support customer and shareholder value. Maybe with that, we can.
Yeah. I remind you, we'll take some questions. We even had a timer, so we got lots of time for questions. I remind you, look at the agenda, the Slido.com event code is there, investor today, 2019. I imagine we're getting the questions up here too. So I'm not going to pick them, I guess. I'll have to go through this because there's an automatic audit. But maybe the first question, is there a dedicated amount of capital you plan to allocate to M&A over the 2020-2022 time period?
Yeah. I don't think we're—we're not taking a top-down approach to this. So we're going to assess opportunities that come available. We're going to find our own opportunities, and we're going to evaluate them based on those commercial and financial criteria that we talked about. So there isn't a specific amount of capital that we're setting aside, per se. And even if there was, I probably wouldn't tell you what that number is. But we have a very strong balance sheet. Those of you that follow the company know that. So we have the ability to be opportunistic when something comes up that we want to act on.
Good. That's great. And the questions are trending, so we can go by likes, so it's a democratic process. But maybe the next one, by pursuing an acquisition strategy, are you implying that you foresee organic growth and non-acquisitions top line to look weak heading into 2022, 2023?
I really wish I knew what 2022, 2023 would look like. I don't have that kind of crystal ball. I don't think anybody does. I think both James and Keith have made a compelling case for the confidence that they have in the organic growth opportunities and really gave you some specific numbers around that, all in from $1.3 billion-$2.4 billion of growth opportunities above and beyond the economy. I think what we're saying is that we like to give ourselves multiple chances for success and multiple levers of growth. That's what the inorganic strategy is all about. We have the right team in place to do it, and we have the right balance sheet to do it. So that's the strategy, giving ourselves really more chances for winning.
Good. Janet, one very interesting question also. How would you balance revenue M&A opportunities versus non-revenue acquisitions like tech? Investing in the business, I imagine.
Yeah. I think, as I said, I'm in the finance side of the house. So we take capital deployment very seriously. We only do this when we believe we can get a return. But whether it's investing through the capital program itself or investing in the context of acquisitions, the same principles apply. We're looking for that value. First and foremost, we're trying to find opportunities that bring that value directly to the business. So whether that's investing in the technology, investing in businesses that give us incremental services or opportunities, it's the same approach. I think that's how we go about it. I don't think we're distinguishing between a revenue acquisition versus a non-revenue. We're looking for value creation at the end of the day.
Good. Thanks, Janet. I'm going to skip the CanaPux question. I'm going to get James to note it down. And maybe in his wrap-up, you can say a few words about CanaPux. Maybe the next one is, are there businesses or regions that are non-starters for CN to consider an M&A aspiration target?
Yeah. I think just to clear the record, we're not buying trucking companies. So you can put that in your report. That is not what we're doing. We are really focused on buying businesses that feed the franchise. So this is all about driving incremental volume growth. We have been active so far in Canada. I think we have a broader network when we look at the North American scale. It's early days in terms of the strategy. As JJ mentioned, this was something that really we began in August. So we're not even a year into this. We're going to do this in a disciplined and measured approach. We're not going to bite off more than we can chew to start. So I think stay tuned on that front.
Yeah. I think the last question was what we won't do. The next question is what we will do. And I think it's answered both in one response. I'm assuming we're not going to telegraph our acquisition strategy when it comes to targets specifically because the price would probably go up. I imagine we'll skip that. One interesting question, though, is as more rails adopt scheduled routing, do you think this makes a major Class I rail consolidation more or less likely?
I think it makes it less likely. The reality is, in my view, consolidation of the remaining Class I railways would need to come from a point of weakness and not a point of strength. I find it hard to envision a regulatory environment that would allow this to go through unless some rail was failing, unless some rail couldn't earn a return and reinvest in the business. If all the Class Is are improving through scheduled rail routing, I think ultimately consolidation is actually less likely. I think you're solving some of those interchange problems as well through that same process. So certainly not something we see in the near future or perhaps ever, Sean.
Good. Okay. I'm going to consolidate the next two questions. I think one's probably a sub-question of the first. So the first question is, can you talk about the financial return criteria for new deals? And then more specifically, given valuations and competition from other potential bidders for rail-centric deals, can acquisitions in this area still be completed at a price point that meets your ROIC hurdle?
That's a very good question. So we talked a little bit about acquisitions needing to meet our internal hurdle rate. Put some numbers around that.
Our internal hurdle rate is a kind of minimum of 12%, which gives us a nice buffer versus our 8% weighted average cost to capital and is supportive of the longer-term ROIC targets that just I will get into in a little bit more detail. So I think you've got to be able to meet those hurdles. We're not doing deals to do deals for deals' sake. Okay? This is not a growth by acquisition strategy. This is a growth through acquisition strategy. I will say that certainly the infrastructure and private equity funds out there do create a lot of competition. And there are some opportunities that they will win at in that regard. I think we need to continue to be extremely disciplined in how we deploy our capital. We're not interested to overpay.
But we do believe that very often there's properties that in our hands, we have a unique ability to drive the synergies that an infrastructure fund may not have. So I think we're mindful of the numbers, Sean. We're not going to do something crazy out there. And there will be things that private equity does because the number maybe in our world doesn't totally make sense.
You're doing a great job, Janet. You're at a disadvantage. Everybody in the room sees the question and sort of why. And you're stuck just answering as you go along. So it just shows the depth of your knowledge and what our strategy is specifically. Maybe one, again, a bit tied to the previous, but talking about these acquisitions, what does it mean for CapEx, use of cash, credit metrics, and shareholders' distributions going forward?
So nothing has changed in terms of our capital allocation philosophy. First and foremost, we reinvest in the business. That's through capital investments and through acquisition opportunities. Second call on cash is to really reward shareholders. That's through dividends and share buybacks. We do have a very strong balance sheet. We are well within our kind of target credit metrics with the rating agencies. We have room to be aggressive in terms of our approach to opportunities that may come up. We have room to be opportunistic. All the pieces come together in that regard on the financial sense. But the underlying approach to capital allocation certainly hasn't changed.
Yeah. I thought maybe the next question, and I think Keith referred to it a bit about the fact that CN now owns TransX. How will we behave or react in the marketplace? We know it was an issue discussed in quite detail with the regulators. So I thought maybe the question would be, and you can just from your perspective, when you started off the transaction, how did you see that us playing in that part of the marketplace? So the question is, will ownership by CN constrain an IMC's ability to offer service, or will TransX be free to continue using CP in markets that make sense?
This is about, for us, growth. So we have a wide range of wholesale relationships, customer relationships out there. We want to see all of those wholesale relationships grow their business with us. I can't imagine any reason why TransX would necessarily need to use the competition. I think we have great geography. And I think we can meet all the service and customer commitments that we need to leveraging the CN network.
So I guess the last question, looking at the time, would be, over time, the railroads have created tremendous shareholder value by focusing on rail and divesting of non-core services. Why is now the right time to change direction, excuse me, and focus on non-rail M&A?
Yeah. I don't think we're focusing on non-rail M&A. That's not how I would articulate the strategy. We are, as I mentioned before, open to rail-centric opportunities. When we look in the intermodal and logistics space, this is also very much tied to rail. In the context of ports, this is end-to-end supply chain. So you've heard the term before. This is about feeding the beast, feeding the network. So this is creating incremental levers of growth in order to drive more volume onto that great franchise that we have, and particularly focused, as we saw the density map, in the eastern portion of our network. So I think this isn't about rail or non-rail or a dramatic pivot in terms of the strategy. This is about enhancing and exploring incremental opportunities to bring incremental growth to our existing rail network.
Good. Janet, as usual, when you're involved, we're on time and on budget. So thank you very much for that. Thank you on behalf of our guests in the room, people on the phone, but also our colleagues at CN who have a chance to hear from you directly what our strategy when it comes to inorganic growth. It's now my pleasure to introduce the next two of our colleagues.
We'll come back and say a few words, excuse me. Michael Foster, who is the EVP, Chief Information Technology Officer, who joined CN a bit more a year ago from FedEx in Europe, will come up with Michael Farquhar, who's a well-known senior railroader at CN, who's now the VP, Railroad Technology Deployment. So Michael and Michael.
Hello, Sean. Yeah. All right. Well, good morning, everyone. It's been a long ride since the break. We will be having lunch right after this. So just hang on to your seats for a few minutes longer. It's my pleasure to be here today. My name is Michael Foster. I am the Chief Information Technology Officer at CN. And I just enjoyed my first investor day. So it was great to be out on the road with you all yesterday.
I've seen many of you in the room today that were out there with us yesterday. We had great weather yesterday. A little bit cool, but at least it was sunny. I wasn't here the last rail investor day. So we will be talking a little bit more about the transition that we've come through since the last investor day when many of you were here. But first, just a little bit of clarification: CITO versus CIO. I know a lot of the companies that you review, they probably have a Chief Information Officer. We have a Chief Information Technology Officer. So at CN, with our widespread network, the geographic spread, all the locomotives we use, we use a lot of sensors, a lot of physical and technically related electronic capabilities. We call that operational technology.
That's why it's reflected in my job title because it's just so critical to CN. Prior to that, let me just give you a little bit of history where I came from. I grew up in California, moved to Europe when I was 17, went to school in London, went to university in London, and I stayed ever since. 2017 was the first time I came back to North America. I ended up being the CIO at FedEx Freight, working on their FedEx Freight 2020 program before joining CN. Prior to that, I was 20 years Europe, Middle East with FedEx Express, the airline. I was about 2/3 in IT, 1/3 in the business. I do have a lot of business background, bringing a lot of business knowledge to CN.
My last business assignment at FedEx was General Manager of FedEx Supply Chain Services in the Middle East. We also had offices in Singapore with that operation. So done bulk freight, road freight, sea freight, air freight, even barge freight, if you can believe it. But 2003, I went full-time back into IT, continued my career ever since there in that space. But I still maintain a lot of business connection. So I was part of the M&A team for the EMEA region at FedEx and led multiple acquisitions from an IT perspective. Did multiple acquisitions in Southern Africa, multiple acquisitions in India, plus Poland, U.K., France. Finally ended up being the global IT lead for all of FedEx for the TNT acquisition that was concluded a few years ago. So from that background, you probably think, "Okay.
He spent his whole life, pretty much adult life, overseas in Europe, Middle East, worked for an airline, CN. Well, that's a good question. I was celebrating Thanksgiving at my in-laws in Austin, Texas. I got a call from a headhunter, a guy that I've worked with to place other candidates from time to time over the years. He said, "Hey, listen, I've got a railroad opportunity. Do you know anybody who'd be interested?" I said, "Well, I'm not sure. I don't think I know anybody who'd be interested in that, frankly, due to my ignorance about the railroad at that time." But he said, "Well, let me just send you the brief. And if anybody comes to mind, let me know." So of course, I got the brief and I read through it. Of course, I learned a lot more about CN.
I realized just the geographic spread, the blend of legacy technology, so technology that runs the railroad along with modern technology. I learned a lot about the business team that was running the franchise. I found it really very interesting. I lined up some meetings. I came up to Montréal and hit it off with the team. What really impressed me was just how much they believed in technology, how much they wanted to make it a part of the railroad, a part of our success story. You can see it here today. JJ started off mentioning technology, digging into it, spending a lot of time on it. You heard all of my colleagues up here today. They are running the railroad. They're running intermodal. They're doing sales and marketing.
But they're all talking about technology and what it can do to them to help us make CN successful. So it's my pleasure to be here. I've been a year and about a month and a half now. It's been a great ride so far. What I would say, Rob Reilly's joining us. You all met him today. I came in as an outsider, 22 years at FedEx, joined the management team here. They let me in the door right away and allowed me to start working, collaborating with them together. Michael Cory, you were one of the folks that welcomed me first when I came in the building. I'll miss working with you. So appreciate your support and friendship during my first year here. So thank you for that.
What you'll hear today as we go through our 30 minutes here, Michael and myself, is that I'll talk a lot about how IT and business are highly correlated. One of my personal beliefs is that I'm working towards with the IT team is when business and IT get together, great things happen. It's not when we're working separately. It's when we're working together. As JJ's mentioned, we're out of the lab. We're into the field. We're not experimenting without a goal in mind. We are business-led but technology-enabled. That's going to come through my remarks today as I move forward. To get into my presentation, I'm going to talk a little bit about the three focus areas that we're kind of orienting ourselves around to modernize IT at CN.
I'm going to introduce Michael Farquhar to talk about what we've done since last investor day and the group that we've created led by Michael embedded in IT. And then I'm going to come back on stage and wrap things up and talk to you about just what an impact that these technologies are going to have on CN in terms of cumulative cost savings. So with that, if we can move on to the next slide. Do I have the clicker?
Oops, sorry. Sorry, Michael. Apologies for that. It's all right.
So if you see on this slide here, we've got three core areas that we are really rallying ourselves around. One team, you heard JJ talk about the talent, right talent, right place, leveraging enterprise architecture, having a master plan so we can enable business agility. And finally, we do know rail technology.
We've got a lot of great rail vendors that we work with, but widening the aperture, looking outside of the traditional rail industry and bringing in the best technology possible to help us modernize the railroad. So to start off with the one team, JJ talked about right talent, right place. We have a very specific program led by our CHRO, Kim Madigan, that's helping us do that. We are taking that very serious in I&T. And we are mixing existing talent at CN. So we're finding our high-potential candidates. We're growing them. We're giving them stretch assignments. We're putting them into positions of influence and change. But we're also bringing in external talent that I'll talk a little bit about so that we can bring that diversity of thinking.
To give you an example of that, JJ had up on his slide a new Chief Digital Officer that we're recruiting. I can't tell you the name of the candidate right now. They'll be coming on board or we'll be able to announce it in the next probably two to four weeks. But we've got a great candidate coming in to help us digitize the railroad. So remove those bottlenecks, remove paperwork, improve customer experience, improve the employee experience as well. He's also a CIO, so he's a current CIO that's coming to join the team. And I'll come back to that in a moment and why that's important. The next person I want to talk about that was not on JJ's slide yet, he started yesterday, June 3rd. His name is Dominic D'Amata . So he's our new head of enterprise application development. And he is also CIO.
He was the CIO for Aldo. It's the fashion footwear company. He also had a manufacturing background prior to going into retail. He's bringing to us that speed of retail, that customer-centric mindset, doing a lot with a little. So he's bringing all those capabilities. Plus, since he came from a manufacturing background, he's going to help us with that journey and making that transition to IT team, how to think differently as we move forward in the future. Why did I call out that both were CIOs? Well, we know that we need to be technically competent in our disciplines. But what JJ and a lot of the team members were talking about, it's so important for us to know what our business is doing and have that peripheral vision.
Since they are CIOs coming into CN, they've already started to develop that great peripheral vision that'll help us connect the dots with our business partners and build out those solutions that will make their jobs easier. But we also have to build our technical competence. We have Nayan Bharadwa , who's on the team. He's our head of operational technology. He has many years of embedded systems design background, critical safety systems, creating systems of systems, of which PTC or Positive Train Control is a great example. And he is also in charge of delivering PTC. And we are delivering PTC not just to deliver PTC, but we are learning a lot about running a railroad based on technology. We're taking those learnings, embedding them in our new operational technology organization so we can start to proliferate those throughout the organization.
The automatic track inspection car is a good example of that. Some of the components that are on that car are benefiting from a lot of the learnings that we made in PTC over the past year or two. But we're also doing more at CN. And I think this is something very different that we're doing here than some of our competitors. And that's highly correlating business and IT. You heard me talk about how important that was. Well, the reason why Michael Farquhar is up here today is that we are also embedding railroaders inside IT itself. So Michael Farquhar is in charge of the railroad and technology deployment function. So whatever we build through the CDO function, through the application development function, operational technology function, he can assist his fellow railroaders in making sure that that technology is deployed and that they can easily consume it.
He has 30 years' experience. I have a lot of logistics, supply chain experience, but I've never worked on a railroad. So having Michael on my team as one of my peers giving me that knowledge, that really just helps me fast-cycle my ability to learn and know the railroad even faster. Michael is also bringing a team with him that has over 600 years of combined experience that we're embedding into IT. So you can just see how we're making that interface happen. And that doesn't mean in IT we don't have railroad experience. We have fourth-generation railroaders working in IT. That doesn't mean they started out in IT four generations ago, but they are now in IT. We also have dozens of certified conductors in IT. So we do have a lot of railroad experience.
But Michael Farquhar and his team coming in gives us the ability to turbocharge that. And then finally, on talent and that kind of peripheral vision, being connected with our business partners, you heard all my counterparts up here speaking today just how important technology is to them. You saw the presentations yesterday when we were out in the field. Those were not IT people presenting. Those were my business partners presenting what they're doing. And because of the way we're architecting the future, and I'll touch on that in a moment, it's allowing us to build that expertise in the field so that they can also consume it at their own pace. And that's why you see a lot of technical competence embedded in Jim Sokol's area, in Raj Gupta's area, in Keith Reardon's area that's making this so powerful. So the second focus here is enterprise architecture.
CN, like most companies, grew one good idea at a time from a system point of view. That works really great in the beginning, but it becomes ever more complex to be agile as you move forward. I brought in Mohit Bhatt, who I introduced earlier, who's heading our enterprise architecture and technology strategy function. He is helping us create that master plan that helps us build those technical capabilities that allow us to have business agility when all is said and done. We don't know exactly what the future will hold. You saw Janet speaking about the fact that we will be picking the best acquisitions or the best opportunities to invest our money in.
So we don't always know what the future will bring, which is why enterprise architecture, having a plan, having a flexible foundation is so critical to that to allow my business partners to make the choices they need to be successful. And then finally, the third area we're focused on is making sure that, yes, we are running a railroad. We do have railroad technology. We do have technology vendors that we interact with. And they are good. We're going to continue to use them. But we're widening the aperture. We're looking outside the rail industry and rail technology to give us further opportunities. And I will just give you a very simple example on how we're thinking. A lot of this work we're doing in our R&D function right now, so it's proprietary. But I'll just use an example to highlight how we're thinking.
So if you think about a railroad train approaching a crossing, the barriers come down, the lights start to flash, and pedestrians, cyclists, personal car users, commercial vehicles, they know to stop that there's danger ahead. That is very traditional technology. It's working very well. But what we're working on with different regulators, different government authorities is how do we broaden those types of things? We already have GPS transponders on our locomotives. If we could have access to wireless spectrum allocated by the government, we could start to do things like transmit messages. So as commercial vehicles, school buses, what have you, are approaching a crossing, they would get an alert saying, "Hey, you're approaching a crossing in five kilometers or so. Be aware.
The barrier is more than likely to be down because there is a train crossing." It's a little bit like the assistance you now find in passenger vehicles now, where you have things like the light and the side view mirror letting you know that there is something you should be aware of before you try to change your lane. So we're looking at doing those types of things to broaden our horizons. So before we introduce Michael Farquhar, he's going to talk about all the great work we've done. You saw a lot of it demonstrated yesterday that we've done since last investor day, where we've taken our proof of concepts, our trials, and we've moved them into production. We've got points on the board. And I'll talk to you about what the financial impact they're going to have on us in the coming years when I wrap up.
But before I turn it over to Michael, what I would like to say is that these programs that are on here, these are not one-off programs. These are based on patterns. So these are what we call the first of the new at CN. So we're not building them once. We're building them to be used again and again. So if you think about the automated inspection portal that you saw yesterday, where we can do the car inspections and look for defects, look for risk areas. So that is a single project that's got an ROI, but it's based on a platform that we can run advanced algorithms on. We've already built the first 16 or 17 so far to get started. We already have in the backlog almost 80.
And the reason why we can do that is because we built a platform so that it's extensible, so that we can keep running more and more algorithms on it. It's not just for that one use case. And that's the type of thinking that we're embedding in all the activities that we do. We are trying to build things that are scalable and repeatable for our business partners so that as we build these solutions out over time, we actually get faster and faster in our ability to deploy these solutions. So with that, I'm going to take a moment to introduce Michael Farquhar. He's going to walk you through the key projects that we're deploying, what state of play they're in, how much success we've had. Michael, like I mentioned earlier, 30 years' experience. It's great to have him on the team.
He's going to introduce himself a little bit and the path he took to get here. So I'm going to turn him loose and let you go, Michael.
Appreciate it. Thank you very much. Let me just pull up my waterproof notes.
Yes. No rain yesterday, but.
No. No. So good morning, everybody. I am Michael Farquhar, Vice President of Railroad Technology Deployment. So some of you may be looking at me saying, "I've seen him, but I've seen him in different roles," and that would be correct. So last investor relations, I was here presenting to you as the head of the Eastern Region. And if those that can really remember investor relations day prior to that, I was presenting to you as the head of safety and sustainability. So with that deep knowledge and my experience in operations, hard to pass up that opportunity to kind of move a portfolio like this, railroad technology, to propel us into the future. So when JJ and Michael tapped me on the shoulder, extremely exciting. It's tough to pass up being part of the future and really to continue the evolution of CN in yet another direction.
So yesterday, I think I'm a little bit biased here, but it was a real exciting day to see a lot of you out there yesterday. When we spoke about we're not in the lab, that was the theme about yesterday. We are not in the lab. It was there for you to touch, feel, see, and to experience. So when we saw that train going through the automated inspection portal, it was all about this technology is real, and this is how it's being used. So real exciting from that standpoint. We've heard it a couple of times. I think Raj articulated that what we are doing is really solving business opportunities, looking at how to solve business problems. It's really with distinct value drivers.
So when we think about these value drivers of safety, efficiency, reliability, and that customer experience, that's where we're really using this cutting-edge technology. I do know this year, this week, we're celebrating our 100th anniversary of CN. Pretty exciting times. Reason to celebrate, but it's no reason for us to stand still as we begin using new-age industrial technologies to really propel us into our next 100 years. Reason to be excited. If you look at my title in terms of railroad technology and deployment, three distinct elements is bringing that railroad experience, using technology in a business-led manner. Deployment, JJ talked about that bias for action. Deployment is where we really get things moving. Yesterday was a good example in terms of the technologies that we have deployed. As Michael said, I myself, I bring 30 years of railroad experience.
And my team, 600 years, sounds like a lot, but they bring a lot of experience. What's important is they bring operational perspective to the information and technology department to really drive home those business needs by using the appropriate technological solutions. Really, our aim is to transform our business approach from a predictive means versus a reactive one. That's a really keen focus for us. Yesterday, my colleagues, Raj Gupta and Rahim Karmali, for those who had the opportunity to be in the sunshine yesterday, walked you through that realism in terms of deployment with our autonomous track inspection program. Now, if you think about it, and I think Doug Rehorchak made mention about corridor capacity is definitely a real hot commodity. When we look at inspections, inspections are necessary, but they're also complementary to the use of the corridors.
Lo and behold, the need for inspection consumes corridor capacity. So when you think about our autonomous track inspection program, what it does is it marries up into the existing train service, freeing up corridor capacity. So when we're out transporting goods from point A to point B, that's revenue service. At the same time, we're inspecting track. So that increase in terms of frequency provides more data, allows us to be a lot more reliable. Hence, we're going to be increasing the safety portfolio as we go forward, as we are continuously inspecting that key piece of infrastructure. Rahim also walked you through yesterday the purpose of the car.
In fact, all the geometry that it's measuring as it's going down the track at track speed on these revenue trains, whether it was the gauge of track, whether it was the alignment, whether it was the cross level, and so forth. What was really interesting, for me at least, was the machine learning involved when it was looking at the infrastructure to make a determination of what's right and what's not. That allows us to better schedule maintenance, to better respond to emerging problems. All that source of data allows us to begin trending investments in terms of infrastructure in a scheduled manner, in a priority fashion, and in the right fashion. To us, that's real key. The other thing was that connectivity, that real-time data feed that we get with regards to that.
So if you recall, that autonomous track inspection car was generating about 20 GB per mile of data. That's a lot of data coming in with live feeds for individuals to be able to take the appropriate and necessary actions. So it is real with regards to autonomous track inspection cars. We've got eight that are coming into operation this year, and we will continue to equip ourselves in 2020 and 2021 so that this piece of technology will become our primary inspection means for our infrastructure. We also had the opportunity to visit the automated inspection portals where my colleagues walked you through the real intended need from a safety element. So when we think about it, it wasn't just a series of cameras and lights. It was the brains behind that really sets us apart.
The machine vision learning algorithms that we are teaching, the intellectual property that we have in terms of the mechanism to teach these algorithms, that's what's key. When you think about as that train was going through yesterday, we saw him going over 40 miles per hour, nice intermodal train, and he was reviewing key elements on those cars to determine is that train safe to continue its journey to destination. The algorithms themselves are identifying whether there's any problem areas and highlighting to us. Other railroads may be receiving images, and they are reviewing the images themselves. We know the human is not infallible, so things can become missed.
When Jason Baylis or Carmen was pretty upfront and center and said, "There are times where I can miss elements in terms of an inspection," the portal itself with a 360-degree view, snow, rain, inclement weather, night, day, it's got the ability to see most everything. The other remarkable element was with regards to the 120 rail cars versus the one rail car. So when we talk about efficiencies with regards to our car mechanics, it actually allows us to transfer that work from finders to fixers. So again, allows us to do a lot more with a little less. So let me just borrow one example from an airport just to kind of bring home the point about machine vision.
When you're in an airport and you're going through your security checkpoint, think about having to put down your baggage, going through the detectors, going through the scanners, and you have an individual who's reviewing the images on that scanning of your carry-on luggage. He's going through the images. He's taking time. You're queued up. You're probably going to have to high-step it to the gate because you're running late. Just think if we had machine vision technology like we do with our automated inspection portal, the precision that we would get, the expediency of the review, and then we can casually walk to our flight. For us, that's what's key is the algorithms that we have put forward with regards to our automated inspection portal. Another exciting platform that we're developing and have rolled out is the mobility platform.
We've got three applications that are in a rollout and almost one that's completely deployed. We've got the car repair billing. We've got the electronic operating manual and the mobile reporting. Yesterday, my colleagues, Colin, Chris Howard, and Marc Lancia, they were able to show you what we are doing with regards to handheld technology. I couldn't help myself, but I'm sure you can all see this. This was our communication tool for our car mechanics in terms of repairs done. This greasy piece of paper would be transferred over to another car mechanic where we would have to try and decipher what's being written on this. And I'll be honest, I don't think a pharmacist could even read this and would have to enter it in, and we'd hope that it was correct.
Yesterday, Chris and the team showed you what the future looks like and how paper is no longer required. All information, better billing accuracy, more precision, more completeness with the use of the handheld device. So our 1,700 car mechanics, for the most part, have received the training, have deployed. We're in about the 96% deployment. We've got another month left, and that technology is fully deployed and is serving the right business needs. We're also rolling out mobility with regards to our transportation folks, electronic operating manuals. If you ever see pilots come onto a plane and they've got the big luggage bag of all the data, of all the information they need, they've gone towards tablets as we are. So no longer the big brick of information we require from our train crews. They will have all that information in a handheld device.
In addition, all their information for trains will be hosted on this mobility platform. What's also quite interesting for us is the customer experience that we're going to gather from our mobility device. The fact that we will now be in a position through our handheld device is to advise customers when we're coming to service their facility. So our advance arrival notification will allow customers to know that we are here and we're coming and allows them to be better prepared for our service, which we understand has been a great or has been met with a lot of excitement from our customer base. So we are looking forward to rolling that out as of July. And by year's end, we would have rolled out all of our devices and additional applications in 2021, all of our devices to the transportation employees. Enterprise automation.
Anybody who knows a little bit about enterprise operation will lean towards the banking industry where they've gone very heavily with regards to some of these technologies to really rid themselves of those routine processes that can be done with intelligent automation. But we're no different. That's where we're leaning towards. We're reviewing all the intelligent automations with regards to robotic process automation, with regards to chatbots, cognitive automation to really do away with these manual work processes. So we're very excited about that. We've already had a couple of test cases in two of our departments, in the accounting department, in our service delivery department, and we've had a lot of success so far with it. So the technology is ripe for CN. We're very excited about it.
We're in the process, as I speak, of building a center of excellence, and that's really to identify, to capitalize, and maximize the opportunities with this technology. So my colleague Doug Rehorchak, he made mention about Smart Network. And I'm going to be honest with you. I think Smart Network is a game changer for us. Smart Network is going to allow us to evolve scheduled railroading to an even larger degree. And I want you to think about Smart Network as a virtual scheduled railroading. So as CN continues to grow, we've heard the growth story with my colleagues Keith and with James. We oftentimes get customers that will solicit a portion of our network greater than others. And this true Digital Twin will provide us the ability to truly understand capacity and needs of the network. And Smart Network does just that.
So this digital tool is currently in development. By the end of 2019, we would have digitized, entered in our full network, and it'll allow us to be able to analyze current train service plan, but more importantly, forecasted business and the growth opportunities and how that translates into the effect on our network. By year's end, actually, even in about a month's time, we would have been able to simulate the activities between Edmonton and Winnipeg. By mid-fall, we will be able to do the West Coast to Chicago. By year's end, we'll be able to have all the major corridors on our network to be able to simulate, to truly understand what's transpiring with regards to new demands and how the network may or may not be stressed in terms of infrastructure.
For that, it'll allow us to make very pinpointed decisions, informed decisions in terms of where do we need to invest? Perhaps where do we not need to invest? Where does the capacity lie? And what's the right business decision? So it's hard not to be excited about the technologies we have. I'm very energized by that. Before I hand it back to Michael, I just want to let you know that we are very well positioned in the future. Future for us is real. You had the opportunity to see it yesterday. Don't think for a moment that I don't need to compete with the infamous jar that JJ has as we need to bring real business solutions by the appropriate technology. That's really what's driving us is to seek out. It's not to use technology to adapt it to a problem.
It's really to understand the business problem or the business opportunity and for us to be able to translate that into what could be an applicable technology, but truly understanding the value that it can bring for our organization. So that's the competition that we have with regards to understanding the available funds that we can put towards a technological project. So with that, Michael, I turn it back to you. Super.
Thank you, Michael. Appreciate that. So I'm just going to wrap things up. I know we're a couple of minutes behind schedule. Yeah, Paul's looking at me. So thank you, Michael. I appreciate that. Exciting work that we're deploying. These are the initiatives you saw in action yesterday, many of them. We've got a lot to look forward to. This is really about business and technology working together. I just want to reiterate that.
You can see that by the way we've done our updates today. Part of being correlated with the business is going back to what Janet said earlier when she was talking about investment opportunities and having it based on the ROI. The IT technology initiatives are no different. We are holding ourselves accountable with our business partners to make sure that whatever we invest in generates the hurdle ROI criteria as any other project, whether it's a siding, a locomotive, double track, etc. You can see that with the numbers up on the slide. So it is $200 million-$400 million in cumulative savings over the next three years. As I said, these savings are coming out of ideas, technologies, innovations that we're deploying in the business that are the foundation for something in the future.
This is not a one-off cost savings or cost reduction. This is the start of a new era where we bring increasing technology deployments that allow us to grow our business at lower incremental costs, moving forward in the future, improve our customer experience, improve our employee experience as well. In conclusion, I am building a multidisciplinary, technically talented team with a lot of business orientation, a lot of deep railroad experience. And because of that, I'm very positive that we are going to be a part of the CN growth story and enable the CN growth strategy. With that, I'm going to hand it back over to Paul Butcher so that he can take us away to the next section. Thank you very much.
Thank you, Michael. And Michael, I actually thought I was off the hook here when Mike was retiring. That's the issue I had with Mike; he's always going overboard, and now I got to deal with Michael and Michael. But great session, though. I think it was definitely worth the overtime. And so this ends our session for this morning. But before we go for the break for lunch, I'd just like to do maybe a quick recap of the sessions from this morning. So we heard from JJ early on about his strategy and also the vision that he sold to the board last year and how we're all embracing that strategy. Then you heard from Mike. Mike came up and really introduced his team. That really highlights the solid foundation that we have at CN.
And I think really what that shows is now he's ready to kind of pass that baton to Rob and really to be able to have CN go to that next level of scheduled railroading. Then we had James and Justin[audio distortion] sorry, I mean Keith. And really, I think what we laid out there is really the power of the network that we have, the power of the people, and how we're putting that together and leveraging the solid growth opportunities that we have over the next many years from an organic perspective. After that, we had Sean that was interviewing Janet and really gave us a good overview of how we have a disciplined approach to looking at these types of acquisitions, gave you a bit of an insight of how we've integrated TransX, how that's folding well into the CN family.
So I think that's a next leg of opportunities for CN as we move forward. And finally, we finished the session this morning with Michael and Michael, who talked about all these key technology projects that we're developing. And I think that's the next driver of value of CN. A lot of you who were there yesterday really witnessed with your eyes and had the opportunity to really meet some of the people that were actually behind some of these projects. So I don't know. We were really, I think we're all excited about these projects going forward. So now we're going to break for lunch.
After lunch, we're going to have Fiona Murray, who is our VP of Public Affairs, and she will be interviewing Ghislain, where we're going to kind of put everything together and give you a bit more color in terms of the financial outlook for the next three years. Then after that, we'll finish with a Q&A session for about 45 minutes. We're going to break for lunch if everybody can be back here at 1:00 P.M. Thank you very much.
[song] I need some superhuman gifts, some superhero, some fairytale place, just something I can turn to, somebody I can miss. I want something just like this. I want something just like this. Oh, I want something just like this.
Where'd you want to go? How much you want to risk? I'm not looking for somebody with some superhuman gifts, some superhero, some fairytale place, just something I can turn to, somebody I can kiss. I want something just like this. Oh, I want something just like this. Oh, I want something just like this. Oh, I want something just like this. I was scared of vintage and the dark. I was scared of pretty girls and starting conversations. All my friends are turning green. Yeah, the magician's assistant in their dream. Oh, they come on. Up, pretty lady, running down to the riptide, taking the way to the dark side. I want to be your left-hand man. I love you when you sing that song. And I got to open my throat because you're going to say your words wrong. Is this movie that I think you'll like?
This guy decides to quit his job and head to New York City. This cowboy's running from himself. She's been living on the highest shelf. Oh, they come on. Up, pretty lady, running down to the riptide, taking the way to the dark side. I want to be your left-hand man. I love you when you sing that song. And I got to open my throat because you're going to say your words wrong. I just want to, I just want to know if you're gonna, if you're gonna stay. I just gotta, I just gotta know. I can't have it, I can't have it any other way. I swear she's destined for the screen. Closest thing to Michelle Pfeiffer that you've ever seen. Oh, they're running down to the riptide, taking the way to the dark side. I want to be your left-hand man.
I love you when you sing that song. I got to open my throat because you're going to say your words wrong. Oh, they're running down to the riptide, taking the way to the dark side. I want to be your left-hand man. I love you when you sing that song. I got to open my throat because you're going to say your words wrong. Oh, they're running down to the riptide, taking the way to the dark side. I want to be your left-hand man. I love you when you sing that song. I got to open my throat because you're going to say your words wrong. I got to open my throat because you're going to say your words wrong. Tell me something, girl. Are you happy in this modern world? Or do you need more? Is there something else you're searching for?
I'll fall in. In all the good times, I find myself longing for change. In the bad times, I fear myself.
Tell me something, boy. Aren't you tired trying to fill that void? Or do you need more? Ain't it hard keeping it so hardcore? I'm falling in all the good times. I find myself longing for change. And in the bad times, I fear myself. I'm off the deep end. Watch as I dive in. I'll never meet the ground. Crash through the surface. When they can't let us, we'll fall from the shallow now. In the shallow shallow. In the shallow shallow. In the shallow shallow. We're far from the shallow now. I'm off the deep end. Watch as I dive in. I'll never meet the ground. Crash through the surface. When they can't let us, we're far from the shallow now. In the shallow shallow. In the shallow shallow. In the shallow shallow. We're far from the shallow now.
I keep fighting voices in my mind that say I'm not enough. Every single lie that tells me I will never measure up. Am I more than just the sum of every high and every low? Remind me once again just who I am because I need to know. Oh, you say I am loved when I can't feel a thing. You say I am strong when I think I am weak. And you say I am held when I am falling short. And when I don't belong, oh, you say I am yours. And I believe. Oh, I believe. What you say of me, I believe. The only thing that matters now is everything you think of me. In you, I find my worth. In you, I find my identity. Oh, you say I am loved when I can't feel a thing.
You say I am strong when I think I am weak. You say I am held when I am falling short. When I don't belong, oh, you say I am yours. And I believe. Oh, I believe. But you say you love me. Oh, I believe. Taking all I have and now I'm laying it at your feet. You'll have every failure, God. You'll have every victory. You say I am loved when I can't feel a thing. You say I am strong when I think I am weak. You say I am held when I am falling short. When I don't belong, oh, you say I am yours. And I believe. Oh, I believe. What you say of me. I believe. Oh, I believe. Yes, I believe. What you say of me. I believe. We've seen the waters rise. We've lived through desperate times.
We've built it up and watched it fall down right before our eyes. We're still here as long as I'm breathing. I'm never leaving. I'll hold you in the dark or the daylight. I love you. It'll be all right. We've said things we regret and wish we could forget. But you and me, we both agree to choose our love instead. We're still here as long as I'm breathing. I'm never leaving. I'll hold you in the dark or the daylight. I love you. It'll be all right. If I could go back to the beginning, I'd do it all again. I will choose you every moment from now until the end. As long as I'm breathing, I'm never leaving. I'll hold you in the dark or the daylight. You'll never have to doubt I am on your side. Whatever it may cost is worth the price.
I love you. I love you. It'll be all right. This night is cold in the kingdom. I can feel you fade away. From the kitchen to the bathroom sinking, your steps keep me awake. Don't cut me down, throw me out, leave me here to waste. I once was a man with dignity and grace. Now I'm slipping through the cracks of your cold embrace. So please, please, could you find a way to let me down slowly? A little sympathy, I hope you can show me. If you want to go, then I'll be so lonely. If you're leaving, baby, let me down slowly. Let me down, down. Let me down, down. Let me down. Let me down, down. Let me down, down. Let me down. If you want to go, then I'll be so lonely. If you're leaving, baby, let me down slowly.
Cold skin drags my feet on the tile as I'm walking down the corridor. I know we haven't talked in a while, so I'm looking for an open door. Don't cut me down, throw me out, leave me here to waste. I once was a man with dignity and grace. Now I'm slipping through the cracks of your cold embrace. So please, please, could you find a way to let me down slowly? A little sympathy, I hope you can show me. If you want to go, then I'll be so lonely. If you're leaving, baby, let me down slowly. Let me down, down. Let me down, down. Let me down. Let me down, down. Let me down, down. Let me down. If you want to go, then I'll be so lonely. If you're leaving, baby, let me down slowly. I can't stop myself from falling.
And I can't stop myself from falling. And I can't stop myself from falling. And I can't stop myself from falling. Could you find a way to let me down slowly? A little sympathy, I hope you can show me. If you want to go, then I'll be so lonely. If you're leaving, baby, let me down slowly. Let me down, down. Let me down, down. Let me down. Let me down, down. Let me down, down. Let me down. If you want to go, then I'll be so lonely. If you're leaving, baby, let me down slowly. If you want to go, then I'll be so lonely. If you're leaving, baby, let me down slowly. I look up from the ground to see your side and teary eyes. You look away from me and I see there's something you're trying to hide.
I reach for your hand but it's cold. You pull away again and I wonder what's on your mind. Then you say to me, "You made a dumb mistake." You start to tremble and your voice begins to break. You say, "The cigarettes on the counter once your friends, they were my mates." I feel the color draining from my face. My friend said, "I know you love her but it's over, mate. It doesn't matter, put the phone away. It's never easy to walk away. Let her go. It'll be all right." So I still look back at all the messages you'd sent. I know it wasn't right but it was fucking with my head. Everything deleted like a past year was gone. When I touched your face, I could tell you're moving on.
But it's not the fact that you kissed him yesterday. It's the feeling of betrayal that I just can't seem to shake. And everything I know tells me that I should walk away. But I just want to stay. And my friend said, "I know you love her but it's over, mate. It doesn't matter, put the phone away. It's never easy to walk away. Let her go. It'll be okay. It's gonna hurt for a bit of time. So bottoms up, let's forget tonight. You find another and you'll be just fine. Let her go." But nothing heals the past like time. And they can't steal the love you're born to find. But nothing heals the past like time. And they can't steal the love you're born to find. I know you love her but it's over, mate. It doesn't matter, put the phone away. It's never easy to walk away.
Let her go. It'll be okay. It's gonna hurt for a bit of time. So bottoms up, let's forget tonight. You find another and you'll be just fine. Let her go. It'll be all right. It'll be all right. It'll be all right. It'll be all right. It'll be all right. There's something in the way you roll your eyes. Takes me back to a better time. When I saw everything is good. But now you're the only thing that's good. Trying to stand up on my own two feet. This conversation ain't coming easily. And darling, I know it's getting late. So what do you say we leave this place? Walk me home in the day tonight. I can't be alone with all that's on my mind. So say you'll stay with me tonight. But there is so much wrong going on outside.
There's something in the way I want to cry. It makes me think we'll make it out alive. So come on and show me how I'm good. I think that we could do some good. Walk me home in the day tonight. I can't be alone with all that's on my mind. So say you'll stay with me tonight. 'Cause there is so much wrong going on outside. Walk me home in the day tonight. 'Cause I can't be alone with all that's on my mind. Say you'll stay with me tonight. 'Cause there is so much wrong going on. Walk me home in the day tonight. I can't be alone with all that's on my mind. So say you'll stay with me tonight. 'Cause there is so much wrong. There is so much wrong. There is so much wrong going on outside.
Remember the words you told me, "Love me till the day I die." Surrender my everything 'cause you made me believe you're mine. Yeah, you used to call me baby, now you're calling me by name. Takes one to know one, yeah, you beat me at my own endgame. You pushing, you pushing, I'm pulling away, pulling away from you. I give and I give and I give, and you take, give, and you take. You're on the floor, say you want me, say you want me. I'm the audience live and I'm just a dead man walking tonight. But you need it, yeah, you need it more than this time, yeah. You're on the floor, say you want me, say you want me. Back in your lies so I'm just a dead man crawling tonight. 'Cause I need it, yeah, I need it more than this time, yeah.
We leave conversations and then kiss the last goodbye. Yeah, one of us gets too drunk and calls about 100 times. So who you been calling, baby? Nobody could shake my place. When you looking at those strangers, hope to God you see my face. You're on the floor, say you want me, say you want me. The audience live and I'm just a dead man walking tonight. But you need it, yeah, you need it more than this time, yeah. You're on the floor, say you want me, say you want me. Back in your lies so I'm just a dead man crawling tonight. 'Cause I need it, yeah, I need it more than this time, yeah. Pushing, you pushing, I'm pulling away, pulling away from you. I give and I give and I give, and you take, give, and you take.
Running around, I'm running away, running away from you. You're on the floor, say you want me, say you want me. The audience live and I'm just a dead man walking tonight. But you need it, yeah, you need it more than this time, yeah. You're on the floor, say you want me, say you want me. Back in your lies so I'm just a dead man crawling tonight. 'Cause I need it, yeah, I need it more than this time, yeah. Pushing, you pushing, I'm pulling away, pulling away from you. I give and I give and I give, and you take, give, and you take. You're on the floor, say you want me, say you want me. The audience live and I'm just a dead man walking tonight. I don't wanna be alone tonight. It's pretty clear that I'm not over you.
I'm still thinking 'bout the things you do. So I don't wanna be alone tonight, alone tonight, alone tonight. Can you fight the fight? I need somebody who can take control. I know exactly what I need to do. 'Cause I don't wanna be alone tonight, alone tonight, alone tonight. Look what you made me do. I'm with somebody new. Ooh, baby, baby, I'm dancing with a stranger. Look what you made me do. I'm with somebody new. Ooh, baby, baby, I'm dancing with a stranger. Dancing with a stranger. I wasn't even going out tonight. But boy, I need to get you off my mind. I know exactly what I have to do. I don't wanna be alone tonight, alone tonight, alone tonight. Look what you made me do. I'm with somebody new. Ooh, baby, baby, I'm dancing with a stranger. Look what you made me do.
I'm with somebody new. Ooh, baby, baby, I'm dancing with a stranger. Dancing with a stranger. Dancing with a stranger. Dancing with a stranger. Look what you made me do. I'm with somebody new. Ooh, baby, baby, I'm dancing with a stranger. Look what you made me do. I'm with somebody new. Ooh, baby, baby, I'm dancing with a stranger. I'm dancing, I'm dancing. I'm dancing, I'm dancing with a stranger. I'm dancing, I'm dancing with a stranger. I'm dancing, I'm dancing with a stranger. I didn't mean to hurt you. So why'd I let you walk out the door? You said that you don't know me. You don't know who I am anymore. But if you knew the truth, then you wouldn't feel insecure. 'Cause if I didn't have you, I wouldn't have nothing at all. I wish you could see yourself through my eyes.
I always forget that you can't read my mind. As long as I got you and me moving through this world as a two-man team, I'll always have everything I need. You don't even realize what you need. No one could fall for you quite like me. No one could get me so perfectly. You don't even realize you're all that I think 'cause I want you and me, you and me. I know one day we'll look back. Stories on the tip of our tongues. A library full of pages remembering when we fell in love. All of the broken hearts and the stupid mistakes have got us to where we are. It was worth all the pain. Yeah, we'll look back, we'll look back and laugh. As long as I got you and me moving through this world as a two-man team, I'll always have everything I need.
You don't even realize what you need. No one could fall for you quite like me. No one could get me so perfectly. You don't even realize you're all that I need 'cause I want you, you, you need me, me together. Oh, I want you, you, you need me, me forever. Oh, you and me, you and me. Oh, you and me, you and me. Oh, you and me, you and me. Oh, you and me, you and me. As long as I got you and me moving through this world as a two-man team, I'll always have everything I need. You don't even realize what you need. No one could fall for you quite like me. No one could get me so perfectly. You don't even realize you're all that I need 'cause I want you, you, you need me, me together. You and me, you and me.
Oh, I want you, you, you need me, me forever. You and me, you and me. Oh, oh, oh, oh. Do you believe me now if I told you I got caught up in a wave? Almost gave it away. Would you hear me out if I told you I was terrified of days? Thought I was gonna break. Oh, I couldn't stop it, tried to slow it all down. Crying in the bathroom, had to figure it out with everyone around me saying, "You must be so happy now." Oh, keep preaching, then I'll keep calling back. If you're gone for good, then I'm okay with that. If you leave the light on, then I'll leave the light on. I am finding there's no other way, but I'm still dancing in the day. If you leave the light on, then I'll leave the light on.
Do you believe me now that I always had the best intentions, babe? Always wanted to stay. Can you feel me now that I'm vulnerable in oh so many ways? Oh, and I'll never change. Oh, I couldn't stop it, tried to figure it out, but everything kept moving and the noise got too loud with everyone around me saying, "You should be so happy now." Oh, keep preaching, then I'll keep coming back. If you're gone for good, then I'm okay with that. If you leave the light on, then I'll leave the light on. I am finding there's no other way, and I'm still dancing in the day. If you leave the light on, then I'll leave the light on. I'll leave the light on. Oh, would you leave the light on? Keep preaching, then I'll keep coming back.
If you're gone for good, then I'm okay with that. If you leave the light on, then I'll leave the light on. I am finding there's just no other way, and I'm still dancing in the day. If you leave the light on, then I'll leave the light on. If you leave the light on, then I'll leave the light on. Oh, if you leave the light on. I guess I just feel like. I guess I just feel like. Nobody's honest, nobody's true. Everyone's lying to make it on through. I guess I just feel like I'm the same way too. I guess I just feel. Tell me something, girl. Are you happy in this modern world? Or do you need more? Is there something else you're searching for? I'm falling. In all the good times, I find myself longing for change.
And in the bad times, I fear myself. Tell me something, boy. Aren't you tired trying to fill that void? Or do you need more? Ain't it hard keeping it so hardcore? I'm falling. In all the good times, I find myself longing for change. And in the bad times, I fear myself. I'm off the deep end, watch as I dive in. I'll never meet the ground. Crash those surfaces where they can't hurt us. We'll fall from the shallow now. In the shallow shallow. In the shallow shallow. In the shallow shallow. We're far from the shallow now. I'm off the deep end, watch as I dive in. I'll never meet the ground. Crash those surfaces where they can't hurt us. We'll fall from the shallow now. In the shallow shallow. In the shallow shallow. In the shallow shallow. We're far from the shallow now.
I keep fighting voices in my mind that say I'm not enough. Every single lie that tells me I will never measure up. Am I more than just the sum of every high and every low? Remind me once again just who I am because I need to know. Oh, you say I'm loved when I can't feel a thing. You say I'm strong when I think I'm weak. And you say I'm hell when I am falling short. And when I don't. It all. Oh, you say I'm yeah. I got this feeling inside my bones. It goes electric, baby, when I turn it on. All through my city, all through my home. We're flying up, no ceiling when we end us down. I got that sunshine in my pocket. Got that good soul in my feet. I feel that hot blood in my body.
When it drops, ooh, I can't take my eyes off of it. Moving so phenomenally. You're more like the way we rock it. So don't stop. And under the lights, when everything goes, nowhere to hide when I'm getting you close. When we move, well, you already know. So just imagine, just imagine. Nothing I can see but you when you dance, dance, dance, feel the good creeping up on you. So just dance, dance, dance, come on. All those things I shouldn't do, but you dance, dance, dance. There ain't nobody leaving soon, so keep dancing. I can't stop the feeling. So just dance, dance, dance. I can't stop the feeling. So just dance, dance, dance, come on. Ooh, something magical. It's in the air, it's in my blood, it's rushing on. I don't need no reason, don't need control.
I'll fly so high, no ceiling when I'm in my zone. 'Cause I got that sunshine in my pocket. Got that good soul in my feet. I feel that hot blood in my body. When it drops, ooh, I can't take my eyes off of it. Moving so phenomenally. You're more like the way we rock it. So don't stop. Under the lights, when everything goes, nowhere to hide when I'm getting you close. When we move, well, you already know. So just imagine, just imagine. Nothing I can see but you when you dance, dance, dance, feel the good creeping up on you. So just dance, dance, dance, come on. All those things. Shouldn't.
do, but you dance, dance, dance. Ain't nobody leavin', so keep dancin'.
I can't stop the feelin'.
Just dance, dance, dance.
I can't stop the feelin'.
Just dance, dance, dance.
I can't stop the feelin'.
Just dance, dance, dance.
I can't stop the feelin'.
Yeah, so keep dancin'.
Oh.
Yeah.
Yeah.
I can't stop the...
I can't stop the feelin'.
Nothing left to see but you when you dance, dance, dance. Feel the finger gripping up on you, so just dance, dance, dance.
I can't stop the feelin'.
All those things I shouldn't do, but you dance, dance, dance. Ain't nobody leavin', so keep dancin'.
I can't stop the feelin'.
I can't stop the feelin' in my body.
I can't stop the feelin'.
I can't stop the feelin' in my body.
I can't stop the feelin'.
When I see you movin' my body.
I can't stop the feelin'.
I can't stop the feelin' in my body. I could lift you up. I could show you what you wanna see and take you where you wanna be. You could be my luck. Even if the sky is fallin' down, I know that we'll be safe and sound. We're safe and sound. I could feel your cup. You know my river won't evaporate. This world, we still appreciate. You could be my luck. Even in a hurricane of rounds, I know that we'll be safe and sound.
We'll make it back to sound.
We're safe and sound.
We'll make it back to sound.
We're safe and sound.
We'll make it back to sound.
We're safe and sound.
We'll make it back to sound.
I could show you love. In a tidal wave of mystery, you'll still be standing next to me.
Okay, everybody can take their seats. We're ready to start. We have two more sessions to go this afternoon. So our first one here, definitely one that's gonna attract a lot of attention. Everybody's been waiting for. So this is when Ghislain will kind of put everything together. And we have the opportunity to have Ghislain being interviewed by Fiona Murray, our Vice President of Public and Government Affairs. It's all to you. Thank you.
So good afternoon, everybody. I’ll apologize in advance for my somewhat nasal voice. This is a cold, and not the result of last night. So good afternoon, and I hope you enjoyed your lunch. Welcome back to everybody who’s on the podcast. I am Fiona Murray, the Vice President of Public and Government Affairs at CN. And I’m here with Ghislain Houle, our Chief Financial Officer, who I’m sure everybody in the room already knows.
Good afternoon.
Hi, Ghislain.
Hi, good after noon.
As you know, we've worked together for many years. Not only am I one of your colleagues, but I'm also a shareholder and an investor. I have a few questions for you.
You're a small one, Fiona. You're a small investor.
It's true. I am a small investor, but I'm thinking.
But all investors count. I mean, all investors matter. Trust me. So hopefully you've been convinced this morning, but if not, we'll convince you in the next 35 minutes-40 minutes, 45 minutes to buy more stock.
Well, we'll see. We'll see if I become a larger investor.
I was worried this morning. All the other roads were green, and we're the only one red. So hopefully now we're green. We're on the good way. So hopefully after the session, it'll be greener.
Okay, well, we'll be watching. We'll be watching. I'll take full credit, of course. No, but seriously, I'm gonna ask you a series of questions, Ghislain, and I'm hoping your answers will sort of tie together everything we've heard this morning, everything we saw yesterday. So it sort of brings some depth, and whether you're a small investor or a big investor, give you a sense of what makes CN tick.
Yep.
Okay, so are you ready?
Absolutely.
Okay, buckle up. Okay, first question. So lots has happened since the last time CN held an Investor Day in 2017. Can you give us a mini summary of what was said back then and the results that you actually achieved?
Yeah, so actually, this is the same slide that JJ used this morning. I'm not gonna repeat what our CEO said. All I'm gonna say, a couple of points. Number one, the key is that we, as you know, back in 2017, June of 2017, last Investor Day, we were targeting to deliver a CAGR EPS of 10%. And frankly, I'm extremely proud that we achieved it. Despite all the noise and all the trials and tribulations that everybody in the room and on the phone listening on webcasts are aware of, we did deliver the EPS and the growth that we promised investors we were going to do. We had a little bit more trials and tribulations than what we expected. Trust me, we wanna go back to be boring and predictable. We like to be boring and predictable.
With the game plan that you've heard from JJ and others this morning, trust me that that's our game plan is to go back to boring and predictable and continuing to deliver strong earnings growth and strong value for shareholders going forward. The other points are all there. So I think that sets the table for your other questions, Fiona.
Yeah, absolutely. So back to boring and predictable. Excellent. And those were tough years. So they are impressive results. But as you know, CNers are not known for sitting around patting ourselves on the back. So let's talk about present day and future.
Yep.
My second question is about what can we expect, investors expect over the next three years with respect to EPS growth?
Yeah, well, you know, before we go there, let me give a little bit more visibility on the financial outlook for 2019. I think this is not gonna come as a surprise for a lot of you. And again, JJ talked about it in a conference that he attended last week. So as you, as all of you know, our volumes are coming in slightly weaker than what we expected in terms of revenue ton-miles. So we are changing our assumption to mid-single-digit volume growth in terms of RTMs versus the previous assumption, which was high single-digit volume growth. Now, the key to this, though, is that we are able, and we are reaffirming our earnings outlook on EPS growth to be and to remain in the low double-digit growth versus 2018 full year.
That really demonstrates our ability to be nimble and to quickly react and adapt to changing demand conditions. Let me give you a couple of examples. As we speak, we have about 500 conductors that are currently on layoff. JJ and the rest of the team were looking very hard to continue to have management be as productive and efficient as possible. We are returning essentially 60 less reliable, very expensive locomotives. As you remember, these locomotives we leased to help us from the stopgap measure. I've told everybody that as we were going to finish the winter and as we are receiving the brand new units, 140 of them this year, we were gonna be very aggressive in returning these leased units. We are doing what we said we were gonna do, and that's what we're doing as we speak. The other is we're returning cars.
So we're returning around 300 center beams. These center beams are non-premium. So we're taking this opportunity to actually get a better fleet. And then Doug mentioned this morning, we're parking a bunch of other cars, 5,000 of them, that really gives us fluidity and will help our operating metrics going forward. Last point, which has a lot of visibility to people, is our capital infrastructure investments. Again, last year was big infrastructure investments. And we delivered very well under the leadership of Raj, with the help of transportation to get the work blocks. We've started that infrastructure capital investments this year. It's in line with what we did last year, essentially. And we've learned from last year. I think the team will better deploy how we're building these double tracks and these sidings. And we plan on essentially being done for Q3.
So therefore, being done essentially for the peak fall season. Fiona, as you know, you used to be in marketing for Intermodal and Grain, and of course, before the winter. So that's 2019. Now, let me talk about 2020 to 2022. You know, we have been telling investors that we were shooting to deliver at least 10% EPS growth. And that was our last guide. That was our last target in 2017. Our target now is to deliver low double-digit EPS growth for the next three years. And that's really driven by the solid pipeline of organic growth opportunities that you heard Keith and James talk about. These are real. These are coming at us. And therefore, it makes us comfortable with that target. It's also about solid, sustainable, incremental profit margins.
And lastly, it's about our friends from IT that talked a little too much before the lunch about taking the scheduled railroading to the next level by deploying advanced technologies. I think these are the three items that really make us comfortable that we will be able, and we should target, low double-digit EPS growth in the next three years.
Good. In a nutshell, you're gonna be guiding in line with or better than the 10% EPS growth you delivered after the last Investor Day. A compelling continuation and acceleration, really, of our growth story. Let's talk about assumptions, 'cause of course, my next question is, what are the macroeconomic assumptions that underlie this growth? What do you need to see there?
Yeah, I mean, some of it is written in the looking forward, very small fine prints on the press release. But I mean, I've been asked a question at lunch, and we are continuing to assume a supportive economy. I know there's a lot of noise being caused with the U.S. administration, with the tariffs and so on. But as we speak, we are, and we believe that the North American industrial production will continue to be about 2% per year. And this is in line, by the way, all of these assumptions with the assumptions that we have currently for the 2019 year. We assume that the housing starts will continue, or at least to be, in the 1.25 million units. If you look at consensus today, that's about what it is. Annual U.S. motor vehicle sales, about 17 million units.
As you remember, we hit a peak of about 17.5 million units. U.S. and Canadian grain should be in line with the three-year average. We're assuming that the Canadian dollar to U.S. currency should be at $0.75. I think if you look at it today, it's probably a little lower than that. Then the average price of crude oil, WTI, will be in the range of $60-$65 a barrel. If you look at it today, I think it's a little lower than that. The key today is as well, and it's not on the slide, is when you look at unemployment, unemployment in the U.S. is at an all-time low, south of 4%. And in Canada, it's 6%. So people are working. People are working. Therefore, people are consuming.
I know at lunch, some people will say, "Yeah, but what about if now tariffs starts increasing price?" And I agree. I mean, if tariffs 25% on products, imports coming from China starts hitting the consumer spending, that obviously could have an impact. But at this point, I think we're not assuming this. And nothing really tells us that this will go to a point where it could stifle the economy in North America and the US. And therefore, that's what we're that's behind the targets that we've just talked about.
Okay. So turning to top-line growth.
Yeah.
We heard from James and Keith earlier about their organic growth opportunities.
Yeah.
Can you talk to us about what kind of growth and pricing you're gonna need in order to deliver on this EPS?
Yeah, so without repeating what Keith and James talked this morning, I mean, I hope it was clear to everybody that this solid pipeline of growth opportunities is real. It's coming at us. And when you add them all up, it's in the range of $1.3 billion-$2.4 billion. So it's substantive. And this is why we feel comfortable that we can grow volumes over and above the economy for the next three years. We will continue to price above real inflation. And Janet talked about TransX. TransX, of course, we've closed the transactions. So that's in our numbers. But any other potential inorganic growth opportunities we have within the next three years is not baked into these numbers. So in fact, if anything would happen, then the benefit of this inorganic growth opportunity would be over and above the numbers that are just there on the top-line growth.
So any of these projects that you're particularly fond of or more sort of excited about?
Yeah, I'm very excited. I met a lot of investors. I'm very excited about Halifax, to be honest. I mean, as you know, Halterm used to be owned by Macquarie. Macquarie is a financial owner, did not look at the terminal the same way as a strategic buyer, and had to sell, and they did. I'm very, very pleased that PSA, who we know very well, Keith and JJ knows them extremely well, and Dan Brosnan, and others, they're a strategic buyer. So they bought the terminal. I think that working with them to make it as efficient and, frankly, to replicate the Rupert model, we have the model with DP World, make it so that, again, you can have big train, 12,000-foot, very efficient hook and haul, big ship ready.
The beauty with this is that now you're bringing a lot of volume on our underutilized. On top of it is we would be able, therefore, to accommodate that growth with very little capital. Again, when we look at this like Rupert, these assets are gonna stay with us for the next 30 years-40 years. You can have ups and downs and good and bad and you have tariffs here and there. But we're the only railroad going to Halifax. Working with them and PSA, and we do have the role model, is exciting because I think we will drive value, and we will drive value on a network that can accommodate a lot of growth with very little CapEx.
So, crude. Now, we did talk a lot about energy and crude this morning, but it's in the media constantly. What can you say to us on crude?
Listen, crude, we're taking advantage of it. I mean, pipelines are lacking capacity. So as other railroads, crude is a good business for us. You've heard James talk about crude quite a bit this morning. I don't wanna repeat what he said, but I wanna tell investors that from a mid- to long-term standpoint, we are not counting on crude. I think crude for the rail business, mid- to long-term, will remain a niche business. Why? Two things. Because one, the railroads offer a routing flexibility that pipelines don't. And second, oil, big oil companies have spent a lot of money, a lot of sunk costs in obtaining crude by rail assets. So they will use them. But from a mid- to long-term, I think that crude will wanna go by pipelines.
So if pipeline becomes available, now you've just heard James talk about this morning, and it was in the paper that they may, that again, the Enbridge line may be delayed some more. So listen, whatever we can take advantage of and accommodate at low cost, and this is good business, we will. But I still believe that just looking at the economics moving crude by pipeline versus rail, I believe that mid- to long-term, this will go by pipeline.
Okay, very good. So pretty compelling top-line growth story. Let's talk about the flip side now. Let's talk about costs and what you're doing on costs. Maybe you can start with the supply management transformation.
Yeah.
You set the stage in 2017 about talking about it. What's actually happened? How are you doing there?
Yeah, so supply management is a good story for us. If you remember 2017, we laid out a transformation of supply management. Supply management, as everybody knows in the room and on the phone, is a very mature function. We laid out a transformation at that time where we were targeting to deliver $100 million of savings. The good news is we have delivered those savings. We believe that there's still about $50 million more savings to come as we complete the transformation in the next year or two. This is a good example as well of bringing outside talent. So Paul Harridine , who's in the room, he's from the U.K. Don't hold this against him. He's brought in a mindset. This is not rocket science. As I said, this is a very mature function. It's basically executing master agreements. It's basically putting discipline, detail, KPIs.
It's really negotiating the total cost of ownership instead of just negotiating price. Paul and the team is bringing a mindset that says, "Listen, we need to treat our suppliers like our customers." This mindset actually makes a big difference.
So can you just explain that a little more, this idea of treating suppliers like customers? I'm not sure I quite understand that.
Yeah, well, you see, you need customers to have a business, but you need suppliers to have a business as well. And when you go into an agreement or an initiative with a supplier, and the supplier understands that you're there as a partner, that you understand that it's okay for the supplier to make a reasonable profit, they need to live as well. All of a sudden, they're more involved into driving the solution. They're more involved into driving quality. You're looking into a longer-term type of relationship than just on a transactional basis. And they will be helping you find a solution, sometimes could be at a higher price, but overall total cost of ownership, much better. And this is what the team is driving at. And frankly, I'm a finance guy, as you know, pretty blunt and down to earth. The proof is in the pudding.
Like we said, $100 million. I think we're good. I think that Paul is a sandbagger here a little bit. Maybe we'll be a little bit more than $150 million, but we'll see. That's what I mean by partnering with our suppliers. They are as important to our business as our customers are.
So yeah, it's great to hear about the transformation in supply management. So what's next? Which other functions do you have similar opportunities in?
Yeah, my friends in engineering and mechanical, obviously, you heard Jim Sokol and Raj again this morning. And it's exciting. These are two big functions with big budgets. And these guys are coming in from outside. They come in with a fresh pair of eyes looking at opportunities, looking at processes. And if I look at Raj, and he touched upon it a little bit this morning, I mean, he's looking to improve the regular day-to-day maintenance of the network. He's looking to improve the efficiency and productivity of his engineering gang within the work block. So how can they be more productive when they do have that precious work block so that we get more bucks for our money? And he's also looking to better plan work blocks with his friend Doug Rehorchak from Network Ops.
Because again, Raj needs the work block when he needs it and on time. Otherwise, you incur overtime, you incur on productivity. But as well, it's a conundrum because then Doug needs to have the train running.
Right.
The train needs to run to make sure that the network remains in sync. So getting the work block on the Kingston sub, where we do, and JJ touched upon it, we do have double track from Montréal to Toronto. It's not a problem. Getting the work block on the Edson sub, which is the line from Edmonton to Jasper, where we don't have any detours when we do our basic maintenance, is a little bit more demands, a little bit more creativity. So these guys are working on this. And I think there's lots of opportunities because again, there's such a big base. I mean, Raj Engineering is like a big construction company. So just a small percentage of benefit will deliver big dollars. Sokol comes from Southwest Airlines. So they're looking at locomotive reliability.
Now, I don't think locomotives will ever be, Jim, as reliable as airplanes, but there's lots of room to grow. When you improve on locomotive reliability by a more structured and disciplined preventive maintenance of locomotives instead of fixing them when they break, then you create locomotive capacity. It's very sensitive. You also, what you do, you create locomotive capacity. When you have locomotives breaking on line, us seeing being a single-line, mostly single-line railroad, then you create a lot of benefits. Because otherwise, when you have on the Northern Ontario Division, which is 1,200 miles of railroad with nowhere to go, and you have locomotives failing on you, it's very costly. Therefore, I think that we haven't, and I know in the room, you guys would like us to quantify some of the benefits coming from these two initiatives. We're not gonna do that today.
It's early on. Stay tuned. I think there's lots of dollars there. I think that I'm very excited about the opportunities and savings that we will get from the fresh pair of eyes of these two leaders and their respective teams.
Good. Well, it's actually, it's really interesting to see new blood come to CN with expertise and new business processes. It speaks to our continuous improvement mindset. It speaks to not being afraid to bring people in from the outside to learn from them. And they're both sitting there. They're great guys. So speaking of new, you saw all the new technology yesterday. We heard from Michael and Michael this morning. Can you kind of summarize it for us where you see this new technology taking scheduled railroading to the model to the next level?
Yeah. Yeah, I think technology is a strategic driver of shareholder value creation in the next years to come at CN. I think a lot of you in 2017 that was with us, you saw some of that technology. That technology was in the lab, and you heard both Michaels talk about it. The beauty is JJ will say the word jumping in the pool. We're jumping in the pool. Some of us maybe needed help to be pushed in the pool, but we're jumping in the pool. And we're actually deploying this technology. And I think that when you look at us, and the guys talked a little bit about it, technology at CN is not just for technology's sake. It's about delivering value.
You can rest assured, and investors in the room here and on the phone can rest assured that all of these projects go through all the wringer in terms of detailed business cases with detailed benefits, detailed costs, detailed return on investment. I wanna reassure everybody that the return on all these projects are well above our threshold on return on investment. Some of these projects, the bigger ones, will actually be audited by. I think I saw Jamie Lockwood here, is a young Chief of Internal Audit. So he's gonna go back in and actually look at the actuals after a year or two of implementation and compare that with the business case and report back to the audit committee of the board. So it keeps the system honest. I'm very happy.
And again, I don't want people to think that all the quirks have been dealt with. That's not the case. But I think that by deploying, we'll learn much more, we'll go much faster, and we'll create value. And this is why we're comfortable, very comfortable to say that we will deliver operating net savings from these projects in the range of $200 million-$400 million. Some of it will be backhand loaded a bit because again, you need to deploy the project to have the benefits. But we're comfortable that we're gonna deliver these savings.
So is there a technology project that you're particularly interested in? You think it's got?
Yeah, the guys made a big deal yesterday about the portal. The one that excites me a lot is the automated track inspection project. And give you a quick example. Today, as the guys said this morning, it's mandatory for assistant track supervisors and engineering track supervisors to go and inspect the track. And today, the way they do it here at CN, and it's the same for the other railroads. They have a white pickup truck, and it's a CN red logo on the door. And they need track warrant to be able to get on the track. Sometimes they get it. Sometimes they don't because at the time they want it because they're competing to get track time with our regular revenue trains that go on the track.
Sometimes when they don't get it, they turn around, they go to Dunkin' Donuts and they have a nice donut and coffee. I'm teasing guys, by the way. Then they get on the track. Every time you get somebody on the track, there's a safety concern. Then what they do is they actually inspect the track both visually and with automation at 10 miles an hour. So imagine the day that you've got the technology where you have a boxcar that's fully loaded with all the technology and the lasers and the gizmos that's attached to a regular revenue train. That regular revenue train goes on the track at track speed and fully automates the track inspection. So all of a sudden, at CN, we have hundreds of people inspecting track today. These people would be able to do other activities.
They would not have to go on the track. They would not have to do this activity. You would get a better track inspection, therefore better preventive maintenance, better preventive maintenance, lower accident costs, lower accident costs, better safety record, better safety record. We're solidifying our social license to operate. I think this is, I mean, we still have some of the quirks, guys, to fix. But I think that this will change the face of our railroad. And I think this is extremely exciting because this is a great opportunity.
Great. All right. So moving along here, you've told me about the growth story, and you've told us about the cost opportunity. Now tell me how this all comes together around operating ratio. There's all these moving parts. Previously, your guidance was high 50s. Recently, you've been in the 60s range. So what should we investors expect?
So how could we not talk to investors without talking about the famous OR? So of course, we're gonna talk about the OR. So we are gonna target a high 50 OR. And a high 50 OR, as you know, we're about in the 60 range. And we believe that's our sweet spot. And remember, we think that this is an aggressive target because TransX, who we acquired, is adding up about 100 basis points to our OR. So again, these businesses have different profit margins than railroads and, of course, much higher OR than us. And as I said, adding about 100 basis points. So we believe that high 50 OR for the next three years is a good sweet spot. And let me say again to investors what I've said many times before. At CN, we're not enamored with the OR.
At the end of the day, we'd rather be a $20 billion at 59 OR than a $14 billion at 57 OR. I mean, just make the math. So high 50 range, it's got our sights. It's a bit negatively impacted with one of the reasons because negatively impacted by 100 basis points by TransX. But this is our sweet spot, and this is what we're gonna target in the next three years.
Okay. Not enamored with OR, but still important. Clearly, strategic sustainable growth is the future. Growth takes investment. My next question is about capital investment. You're in the second year of record-level capital investments. Is this the new norm? I mean, how much capital do you need to deliver on this guidance?
Yeah. Well, before I touch upon CapEx, let me again, and I think Janet and JJ took a little bit of thunder away from me on that one, but reassure investors that our capital allocation policy has not changed for the last 15 years-20 years. So again, the first use of cash is towards the business. The second is to have a strong balance sheet so that we can weather a downturn in the economy should there come one. And at one point, it's not if, but when, but to be able to weather that and/or to participate to some of the strategic opportunities that Janet was explaining investors about this morning. The third is actually shareholder distribution. And we start with dividend. And what's important for us is actually the consistency of the growth in dividends that you can have at CN.
I'm happy to report that since we've privatized, we've grown our dividend every year at a 16% CAGR. Lastly is share buyback. We use share buyback as a tool. We don't want to have a lazy balance sheet. So we use share buyback to get to a targeted leverage level. Targeted leverage level, if you talk to the agencies, they talk about adjusted debt to adjusted EBITDA. We've communicated to them, which supports our current rating, that we could be up to 2.25. And today, as we speak, we're about two. So we're in a good zone. And that will continue. And I think you can hear it. You could hear it from JJ this morning and Janet. So that's where we are. In terms of CapEx, you're right. I mean, CapEx has had a lot of visibility from investors in the last two years.
Big CapEx envelope last year in the range of about 25%. We've said that. We said it was gonna be a two-year thing. Big CapEx again, the same range. Investors should expect that our capital intensity will return back to historical levels from a CapEx to revenue standpoint. Now, at the end of the day, you gotta look at, though, this is what we call catch-up CapEx. So we needed to catch up. I had some discussions with people at lunch. We saw this growth opportunity coming at us very hard, and we needed to catch up. We will have caught up at the end of the year. Now what we need to do is we need to keep up. Keep up in front of our customers' growth opportunities that are coming at us. We need to keep up. Why do we need to keep up?
It's because when more growth from the economy comes at you as a railroad, if you wait and you don't keep up, then you're behind the eight ball. Because it takes quite a while to build infrastructure. It could take a year or two to build some infrastructure, depending on where you build it. It takes a long time to train crews. Could be 9 months to 12 months. And it takes quite a while to get locomotives. So you need to keep up. Let me give you an example. Prince Rupert is a very good example. Great story. You've heard Keith talk about it. We're very proud of Rupert. Used to be 850,000 TEUs, up to 1.35 million TEUs. They've publicly said they wanna grow to 1.8 million TEUs by 2022. So they're investing.
We need to keep up our end of the bargain on our network to make sure that together as partners, this gateway becomes as competitive and stays as competitive as can be so that we can continue to get market share from Long Beach. We need to be ahead of the game. Otherwise, then DP World will look at us and say, "Well, guys, I'm doing my part. What are you doing? And now you're less competitive." We need together with our partners to make sure that the supply chain remains fluid and remains competitive. Now, as we do invest, we're gonna be disciplined. We've given a lot of visibility on return on invested capital to investors. This is an important measure, especially with the fact that, again, we invest a lot back into the business.
We are gonna target, and we do expect to deliver return on invested capital in the range of 15%-17%. If you look at it today, we're just south of 16. I think we're 15.7. So this is what we have in line of sight for CapEx. So catch-up CapEx will be behind us, but we need to keep up and keep up ahead of business opportunities coming at us.
Okay. So I get the catch-up and the keep-up. Makes sense. But for investors, cash is king. So what can we look forward to on CN's free cash flow?
Well, cash is king for me too, I feel like.
I know. That's why I'm smiling.
So we are gonna grow free cash flow faster than earnings in the next three years.
Very good. Okay. So pretty solid numbers for the next three years. What happens to all of this if there's an unexpected economic downturn that you have no control on? What happens to all of that?
Yeah, that's a good question. I think we've seen it before. I think we're pretty good at it. I mean, just 2019 is a very good example where volumes are quickly coming slightly weaker than expected. And look, we're able to right-size our resources very quickly. And we're comfortable this morning or this afternoon to reaffirm our earnings outlook for the year. So we've done this before. I think, I mean, there's different tools that we have, locomotives being one of them, and cars as well. I mean, the other good example is in 2009. And these are actual numbers, so I'm not making anything up. When 2009 Great Recession, I mean, our revenues went down 13% and our expenses were down 12%. I think we even surprised ourselves.
So I think, frankly, it's even easier to cut costs than it is to catch up when big growth comes at you. And we've seen both ends of the cycles. So rest assured that we will right-size. And under JJ's leadership and the rest of the leadership team, we will right-size our resources for whatever demand comes at us.
What about CapEx? What would you do?
Yeah, CapEx, listen, if you want to CapEx, it's not about when you look at CapEx, it's not about minimize. It's about optimize. One of the reasons why we do value a strong balance sheet is when there is a downturn in the economy, sometimes it represents opportunities for companies with strong balance sheets like CN. Sometimes you can get contractors that you need grading for at a lower price because they have less work. Sometimes the material costs are lower as well. So when we look at CapEx, if we do have a downturn, don't expect us to cut on basic plant maintenance. I mean, this is key to us. We've lived it in 2016, where actually it wasn't a recession, but our volumes, as you remember, were down 5% because of the energy trough.
Some investors were telling us that we should consider cutting basic maintenance CapEx, and we didn't. The good news was that because of better pricing on contractors and material, because of easier to get work blocks that Raj and the team needed, we were actually the unit cost of installing rail and tie was actually down by 15%-20%. That was the right thing to do. When you look at capacity, obviously we would realign our capacity CapEx in line with demand. Don't be surprised if when you look at the nerve of our network, which is essentially Edmonton to Winnipeg, Winnipeg to Chicago, this is where all of our commodities go through. Don't be surprised that if we do hit a downturn, that we're not gonna take this as an opportunity to get ahead of the game again.
Because, as I said, all the commodities go through that corridor. This is the nerve of the network. You, Fiona, as an investor, believe that we'll grow this business. So we'll need eventually that capacity. And I've said that on a few conferences, and some people told me that I shocked some people by saying as a CFO that what we've found out in our trials and tribulation in 2017 and 2018 is the cost to overinvest. Now, not overinvest everywhere, but the cost to overinvest in some of the key parts of our network is actually lower than the cost to underinvest. Why? Because, again, it's what is the cost of being wrong? If you overinvest and you're wrong, it's the time value of money. Not to take lightly, but it's the time value of money. If you underinvest consistently and you're wrong, you have the risk of regulation.
You have the risk that people will go and knock on the door of the government and say, "These guys need help. These guys have a common carrier obligation." In a highly regulated industry like ours, when the government wants to help you, this is not a good thing.
You're right about that. So sorry. I took off my mic because I had a cough there. So it sounds like a great story, Ghislain . One last question for you. And this might actually determine whether this small investor gets bigger or not. So you've got.
You're like my wife. You're hard to convince.
But really, if you can sum it up for us, I've given you two minutes. Kind of tie it all together. Make sure that we understand really what's driving here. And I'll give you two minutes on the clock and go.
Yeah, maybe it'll be two minutes to you west. But so as I said, I think the key here is we're gonna target to deliver double-digit earnings growth for the next three years. Free cash flow will grow faster than earnings. Dividend will be in line with earnings. We are going to target a high 50 OR, including transX. This is our sweet spot. We like that spot. And you can expect normalizing our capital intensity to historical levels in terms of CapEx to revenue. However, keep in mind that we need now to be ahead of the game, not behind the eight ball the way we were for the last two years. And you can expect us to deliver return on invested capital, an important measure for shareholders in the range of 15%-17%.
Very solid. So you did that in, well, less than a minute. That's not bad for you.
It was two-minute Canadian.
Two-minute Canadian. So any last words? This is it. This is your absolute last minute.
Let me summarize our strategic pillars of our game plan that JJ touched upon this morning before we go on to questions. It's, again, it's really the foundation of that pyramid is really the scheduled railroading. We are the pioneers of it. We did it 10, 15 years ago. A lot of us have been trained and coached by late Mr. Harrison. And frankly, this is the foundation, something that our peers are doing today. We did it 15 years ago. We have the right talent to win. I hope you could see people in the room that participated, not only at the executive level, but at a lower level where we have the talent to deliver on our strategic agenda, whether it's talent coming from outside, whether it's talent coming from inside.
We are the first railroad, the only railroad to implement talent to value, which actually is to take strategic position, to line them up with value creation that's totally linked to our strategic plan. So we are putting our money where our mouth is in terms of people at CN. You've heard Keith and James talk about the solid pipeline of organic growth opportunities, some of it market share coming at us. I hope this is real for you guys. It's real for us. It's coming, which makes us very comfortable that CN will continue to be the industry-leading profitable growth railroad for the next three years coming forward. And we will use technology to bring the schedule railroading model to the next level. As the other guys are doing what we did 15 years ago, we're taking the advantage to actually get ahead of them from a technology standpoint.
Maybe 10 years or 15 years from now, they'll be doing what we're doing today. Frankly, when you put all of this together, I think this is what drives shareholder value. This is why when you put the strategic plan, the strategic ingredients together, we're very comfortable about the targets and the numbers that we've provided to investors today. Now it's gonna be to us to demonstrate with actual numbers that we're delivering. I'm comfortable that we will deliver with the team we have.
Good stuff. Well, thank you, Ghislain. This has been great. You answered a lot of questions that I think.
We're ahead of time, guys.
Yeah.
We're finished five minutes ahead.
Thanks. A lot of folks in the room probably still have questions they'd like to ask the senior executive team. So we're going to set up for some Q&A. You're gonna stay here. We're gonna move some furniture. And I would like to invite JJ, Mike Corey, Ghislain , you're here, Keith Reardon, James, and Michael Foster back onto the stage. And I'll leave you to the room.
Thank you, Fiona.
Thanks, Ghislain.
Thanks. Thank you. Thank you. Okay. For the next session, we're gonna ask you to use the microphone so everybody who's listening to us on the webcast can hear your important questions. And then as you ask your question, you can ask your question directly to one of us. Or if not, I will direct the traffic. So who's the brave first person who can ask a question? So please use a microphone so you're gonna have to do we have any? Yeah, you're gonna have to walk to the microphone. Tom.
Yeah, I got a list, but I'll just give you two here.
You have a list. There's other people also in the room.
So you've got a lot of growth in kind of energy and then intermodal. It seems implicit that at some point energy may peak. And then in the future, you might have a rising mix of intermodal. How do you think about profitability of intermodal in the longer term? Is that something that as it gets bigger and bigger, profitability of intermodal can improve? Or is that something that you just kind of think about in the future will have some effect potentially on margin? And then one for Ghislain , just in terms of kind of calibrating, you've talked about CapEx lower. So I think if you're at 25% of revenue, you go to 20, something like that. I know you haven't been precise on that. But what does that tie to in terms of RTMs on a multi-year basis? Is that 5?
Is that what if it's up at 10? How do we think about CapEx on that? So I'll leave you with those two. Thanks.
So maybe I'll start with the intermodal question. So remember what Ghislain just mentioned is targeting a return on invested capital of 15%-17% for the enterprise. That includes anything we do that's on the intermodal space. So I think that's one of the ways to measure success is return on invested capital. It may or may not impact the operating ratio, but for the next two years, we've actually said operating ratio for the next two years is high 50s. And one of the successes of intermodal is to be sure you do it very cost-effectively. That's why when we talk about the Rupert of the East, we're talking doing bigger train from bigger port, very high utilization. We need to be able to do that to make that business as profitable as we aim it to be. And then the other part is pricing discipline.
There was a press release last Friday. We win some, we lose some, but the success of CN on the scheduled railroading, the basics of what we learned from Hunter is from time to time, you have to lose some business to find where the price point is. Also from time to time, you have to decide that this piece of business may not be for you, for your model, for your cost. And that also is part of the recipe of a solid railroad is there has to be a price that's reasonable for what you do, including intermodal. Also the way you operate with long train, heavy train, and we hope to do that from the East Coast is also a significant factor.
Yeah. So yeah, on CapEx, Tom, I think exactly we're gonna go back to historical levels.
We don't want to get stuck to a number. You know the historical levels as good as we are. You can go back to the previous years. I think that to JJ's point, I think what's key for us is to deliver a solid return on invested capital. We believe that the catch-up will be done after this year. If you listen to what Keith and James and I've said, with this returning on historical levels in terms of CapEx to revenue, we believe that we can grow more than the economy. We feel that, again, our volumes are gonna be over and above the economy. Now, we're not gonna get stuck with a number, whether so if you believe that the economy gives you two or three , then it's gonna be more than that, whatever that number is.
But we feel that that's good enough and that fits together to deliver that volume growth going forward. And frankly, we'll look at where the volume is coming. Because again, volume coming from Halifax will require with PSA and the development and the expansion of Halifax will require very little CapEx. Volume on our Western franchise, we need to keep up on our investments. At least now we've caught up. So each corridor and where the volume comes is not the same everywhere. But overall, as a system, we feel that historical levels without getting stuck to a number and we'll be able to deliver volumes over and above the economy.
Other questions? Can somebody use a microphone?
Thanks for the presentation. JJ, maybe the first one for you. Very comprehensive today. I think we have a pretty good sense of what CN will look like in the next three years, maybe in the next decade. What is the rail industry gonna look like in that three-year period, in that 10-year period? Maybe if you can go over some of the risks you see, both cyclical as well as maybe structural or secular in the coming years. A second question for maybe Keith on Halifax. You guys have made it pretty clear with Prince Rupert that you see a 24 hours-48-hour savings in the supply chain for something coming in from China to Chicago. Do you have a similar quantification for something coming in from Southeast Asia to maybe Chicago? Thanks.
Well, maybe starting with CN. I think for CN and the industry, scheduled railroading or PSR, depending on which word you want to use to describe it, is a foundation. A good railroad can't divert away from that basic success, basic practice. And then technology will become a bigger factor. I think we will prove that model. Technology is a way to really leap forward. And after we've proven that model, I think others will want to follow. Maybe others right now are maybe looking at it and hesitating, but I think there will be followers on that. And I think also defining how you define your franchise at CN, we use it two ways. We'd like to extend our reach physically, but also we'd like to extend our reach commercially. And I think the extending your reach physically is well understood. You bolt on other railroad properties.
That's why some people are talking so much about Class I merger. But it's also a way to extend your reach commercially. I think that's an untapped tool that CN will try to find a way to tap and create some new model. Keith?
Yeah. The attributes that Halifax brings to the table are almost exactly like Prince Rupert. If you look at how the vessels will come into North America, there's probably actually less deviation time coming by Halifax than there is going by Rupert down the coast. And as JJ and others have alluded to with the big ship ready, big train ready, we're gonna have enough density to go direct to a city. Therefore, we're gonna evacuate those boxes very quickly. We're not gonna have two or three or four stops like a Milk Run that's gonna be direct. That'll save time for those boxes to get there. So we will have those boxes to the destination market probably one to two days faster than the traditional routing that they may have.
Yeah. Bascome Majors, Susquehanna. Hey, JJ, several ports of interest today. You mentioned late 2017, early 2018 when demand growth came in well above capacity. Beyond the capital projects you've already discussed, what changes have you made that would give investors and customers comfort this can't happen again at CN?
Yeah. So it's a very good question because we want to avoid that ourselves at all costs. One of those tools is the tool that was described this morning by Michael Farquhar and Michael Foster is a digital twin. So having a way to look at your network, a better enabler, a decision-making tool, a digitized network that will allow you to recreate in simulation what will happen if we add some business to a specific piece of the network. Or do we add in a mix of different business, train going at different speed or different condition so that we can mimic better what are the next pinch points on the different scenarios and address these pinch points before they become a crisis.
I think to the point made also by Ghislain to invest ahead of the need, just maybe a year ahead of the need, as opposed to invest behind the need, which is really it's actually more costly. We've seen that. The winter of 2018, you saw our operating ratio go out of whack and all of our metrics. We didn't equip our operating team with the right tools. So I think bias for action, taking calculated risk, having better tools to understand our network, I think these are the things that are some of the basic points that would allow us to prevent that we have another winter or mishap like we did late 2017.
And then you called it Digital twin, Smart Network.
Smart Network. Digital twin, Smart Network. A way to look at your network that's not dependent on people having a lot of experience in looking at things. More science to it.
Great. So maybe a first question just on some of the revenue assumptions. When you think about the outlook over 2020 to 2022, how do you think about the price contribution over the course of that period? We're in a strong environment now. How do you sort of see that, I guess, with some intermediate-term perspective? And then coming back to maybe your comments earlier about sort of where the industry is going, some very interesting stuff on the technology side. If you were to stretch out the timeline a bit beyond the window that we're talking about, the $200 million-$400 million, what do you think the opportunity looks like? What are the major gating factors or preventative factors to kind of really realizing something significantly bigger? Is it labor or are there other factors that we need to consider?
Okay. So you want to start with the price, James?
Yeah, sure. So on the price side, we expect to continue on the path of railway cost inflation plus pricing. At the end of the day, our customers expect us to create the capacity that they need to succeed in their end markets and grow their business. And I think we have a great relationship with our customers and they understand that in order for us to continue to invest in capacity that they need, we need to have that strong railway plus railway inflation plus pricing moving forward.
Yeah. So that model is very, very critical. Not just the future of CN, the future of the rail industry. The rail industry has been very capital intensive. Having this small layer every year of compounded inflation plus pricing as defined as rail inflation is quite critical for us as an industry to reinvest. What could technology bring to us that we haven't really quantified yet in those presentations? Maybe one of them is over time a more reliable network, which means it's a more superior network to compete with whoever we compete with, the barges on the Mississippi, another railroad, or probably more likely the trucking industry. And also probably create capacity, right? We have a lot of capacity wasted by automotive. A locomotive that dies online.
We have an unplanned small derailment or we have a work block that discovers more stuff than what we knew about and needed to be done. These disruptions from a capacity point of view, they're quite disruptive. Having a more reliable machine not only will save you on operating costs, but I think at some point will get us into the world of we will gain more capacity out of that. Just like in the early days when Hunter came in, we created capacity out of nothing from PSR. And I think technology will also create capacity that today we can't unshackle. That technology will be able to unshackle and create. And then there was another point. I forget you had another thing in your questions.
No. Labor regulators.
Yeah. Okay. So in some of the technology that we're deploying, I don't know, maybe you can pick that one, Mike. Yeah.
Well, I think you always have the risk of regulators stepping in if you don't do other things properly. Obviously, we have labor contracts that we have to deal with. But I think to JJ's point a little further, automation or machine learning or AI, it starts to bring inherent capacity that's there today, whether it's signal spacing going down to a train-to-train movement versus two-mile signal spacing. It's just our ability to do things on a more regular, consistent manner. And that's what you're gonna get. But to answer your question about what's in front of what's preventing us, all the things that prevent us today, but it starts with a bias for action. And that's what we have here. So we'll get through whatever comes across.
Yeah. And I think, Mike, the technology is really the fundamental to safety. It's the fundamental to bring safety to the next level. I mean, when I was talking about the example of automated track inspection, I mean, it's not about downsizing hundreds of people that are doing that today, but it's about getting a better track inspection, better preventive maintenance, therefore supporting our safety agenda, which is core to the rail industry and to CN. I think the technology in the years to come, Chris, will be the foundation to get safety to the next level for the railroad industry.
Yeah. And I think, Ghislain , that if we look across what everybody talked about today, just the patterns that we were looking at about Raj, Jim, myself, some of the demonstrations you saw yesterday, we've been in the habit for many years now of doing reactive maintenance. Jim Sokol and Raj, they described it very well that when things break, we fix them and we fix them well. But as we onboard this new technology and it's deeply permeating all aspects of our business, we'll be able to move to more planned maintenance, planned activities. So we get a little bit better. But as we build out the richness of the data, we start to learn how to use it. We start to learn how to it will inform us. We can start to get to predictive insights. And that will give us a lot of fluidity on the network.
If we have problems, it'll give us the ability to recover very easily. And I think that's the game is that it's not a silver bullet. It's all of us working together to use the technology to get or derive business outcomes.
We have another question.
Thanks, Allison Landry from Credit Suisse. First, I wanted to ask about ROIC. Just sort of running through the math, it seems that a high 50s OR and the top line growth that you guys have outlined in terms of the incremental opportunities along with a return to more normalized CapEx levels, it seems that the 15%-17% may be a little conservative. So I just wanted to get your thoughts on that and if you think returns could approach the 20% range. And then the second question, if you excluded TransX, would the OR target be closer to a mid-50s? And do you think that a mid-50s is attainable for either CN or the industry? Thanks.
You want to pick that up?
Yeah, I can. Well, Allison, you need to trust our math. So I know in God we trust, the rest we audit. And that's why we have Lockwood in here today. He wants to make sure we say the right things. But when you put everything together and CN, do we have a little bit of a tendency to be slightly conservative? In the past, I mean, you know this as well as I do. We do. I think that at the end of the day, everything holds together. And I think that look at today, we have an ROIC of close to 16. I think we're 15.7. And remember, Allison as well, that ROIC doesn't move that much because again, it's a big base when you do the math with the denominator. It doesn't move that much.
So even getting to 17, I would say, is not all that conservative. So I think that we're comfortable with that. And if we can do better, then so be it. But that's the best foot forward we have today. In terms of OR with or without TransX, I'm not going to say without because TransX is with us. And I think it was a great move. I think, I mean, hopefully you guys had a chance to chat with Michael Jones. He looks actually better in person than he looked on the picture. And I think Keith is doing a hell of a job integrating and working. And frankly, we see opportunities on both sides. So we are cross-pollinating between people that have a sense of entrepreneurial coming to us and helping us on some of our own operations.
And remember, we have about 1,000-1,100 truck drivers at CN. So they're coming in with some pair of eyes and we have our people going in there. So TransX is here to stay. And as I said, I wanted to give visibility to people that, of course, it's a different business model for them when they were on a standalone than us. And when you put them together, they actually add about 100 basis points to the OR. So they are with us. They are with us to stay. And high 50s is the sweet spot that we have going forward.
We'll go to Tony and then we'll go to the front microphone.
Thank you. Question about some of the assumptions in one of the earlier questions. Do you see a big disparity in your commodity mix in operating ratio? And more importantly than that, is there equally big a disparity in the return on investment as you look at, say, intermodal compared to the rest? And the second question is, are you guys building in surge capacity at all on a permanent basis given how hard it is to match capacity and demand on a regular basis for political reasons and others?
So maybe I'll start. So the way we measure specific business profitability is contribution per car day, which we equate to return on invested capital, ROI, and/or RCR if it's private equipment, and I also equate to return on invested capital. So all of them have to carry their weight. Everything that we do at CN, when we do the business case for new investment or to add in containers or to add in chassis or to add in box cars or even to when we build a yard in South Beamer, which is 100% private equipment, we're looking for a return on invested capital minimum of 12% because we have a cost of capital of 8%. Ideally, when money compete, though, if you can do better than 12, you have a shot at getting your project approved. Otherwise, it might be delayed.
So all of these things really have to carry their own weight. We don't believe at CN, and that's been history since we were privatized, especially after a few years after the first merger, that no business should cross-subsidize another business. We will not take a contract with low profitability because we have some other contract at higher profit margin because of captives or other situations. Same thing with business segment: carload, private cars, crude, intermodal. All these things have to stand alone on their own, with at least meeting the minimum hurdle. And after that, if they're much more profitable, then obviously we will try to do more of them. You got to remember this railroading in a way is like if you're surfing the ocean.
Some days it's a big wave, and if you catch that wave right from the get-go, you're going to surf it a whole lot. Some other days, the waves are not as big and it's harder to surf. And that's what the economy gives you. The economy gives you a range of opportunities, some cycle more of it, some cycle less of it. You should never take everything for granted as forever. And that's why really, in many ways, we're looking at re-engaging in the world of acquisition and GV because we don't believe any wave is a for sure wave for the next 10 years, right? Things happen. Trade, commodity pricing, exchange rate, diversity of customers, diversity of geographic exposure, diversity of commodity is one of the strengths of CN.
The other question, and that's exactly what I wanted to hear, by the way. Thank you. The other question was whether you're building in surge capacity as opposed to I got a little nervous when you talked about the reduction, the furloughed people and whatnot, and how you might move CapEx given the political realities of the day.
Yeah. So yeah, sorry about that. So I would love for us to have at all times, most times, some surge capacity in the western network because the western network would always be busy. But Mike, if you want to add to that.
Yeah. Tony, to your point about people, we're very cognizant of very tough-to-hire locations. Doing something different in those locations to retain those people. We certainly offer people that are furloughed from one craft opportunity in another. But go back into technology, we need to continue to work on getting rid of that variable, the people side. And that's why Michael and the team and Mike, these things we're doing are there to not expose us as much to need that surge capacity. In western Canada, I'm very comfortable and I appreciate the last two years how much capital investment we've made. When you start tying that in with a better view of your network, a tighter understanding of the gives and takes of a forecast, the probabilities, that's what Smart Network will do.
It'll get away from some of the tribal knowledge we've been living on and succeeding, by the way, but living on and being able to actually cascade that through the whole organization. So we make a decision, it ripples right through. And you don't want surge capacity when you're so capital intensive, however, you need some. So it's to find that right balance and know your business enough that you put it in the right place. And that's what we'll do.
As being one of the big railroads in North America and definitely the bigger in Canada, we need some surge capacity to prevent the desire of some from time to time to re-regulate us. Our license to operate is based on the contract that we will move the economy when the economy needs to be moved. If we do that, then we don't attract the regulators. When we don't, then we put the business at a long-term risk.
I think James this morning gave us a great proof point of the capacity that we have today just using that more efficiently. The fact that we've grown the business out of Prince Rupert and the containers, we only ran three more trains, but we ran thousands more containers. We're better utilizing the trains that we do have. So we're creating our own surge capacity by being tighter connected and figuring things out.
Absolutely. Next question.
Just along with Steven's, and my question kind of builds on that. I wanted to first ask about resource levels. You've talked about locomotive deliveries this year, headcount expectations for this year. But as you look longer term at that plan through 2022, what are your assumptions for both of those locomotive purchases and headcount? And then secondly, I wanted to ask about any updated thoughts on the potential for one-person crews if you think there's a probability we see that materialize at some point before 2022. Thank you.
Michael?
Well, I'll take the second part of the question first. Just my humble opinion, I don't think for 2022 you're going to see one-person crews to the extent that what you'll see past 2022. First, Positive Train Control has to come into place. So at the end of 2020 in the U.S., it's going to take time to actually understand and then work with the roads working together with the unions to come to some determination on how we move forward on a crew consist. But I don't think, Justin, that would be pretty aggressive in my opinion. In terms of headcount, look, we look at everything based on whether it's an RTM level or a GTM level. We have attrition. We know what our workforce, which the workforce is going to leave. Same with locomotives. We're in a big revitalization plan. Mr.
Sokol is going to produce locomotives with a much better maintenance plan. But we'll do that all in lockstep of protecting our customer service and controlling our cost. So I wouldn't give you numbers over the next years. We'll hire people. We'll purchase locomotives. We'll retrofit locomotives all based on what the demand is of the volume.
So I think I can answer the locomotive delivery. As you know, we're receiving 140 locomotives, brand new locomotives this year. A lot of it is front-end loaded. So I think we'll have received about 120 or so. And Paul Harridine , you can correct me if I'm wrong, but I think it's in that range in the first half of the year and then another 20 or 25 in the second half. I think we're in for another 50, I think, next year. And then we'll see for 2021. But as Michael, you're saying, Jim here in improving locomotive productivity and locomotive reliability will create capacity. Remember, it's very sensitive. With 1% better reliability or productivity of locomotive. You're talking about 15 or so units that you're producing. So that's the game plan. All of these ingredients have to work together.
The good news is we're getting rid of some of these older, less reliable, leased locomotives that were very expensive. We're changing this with brand new locomotives that are under warranty. So we're comfortable that we have the assets to go forward. I think that sets up well for this year and next year. Then we'll see for 2021.
Microphone in the back.
Yeah. Thanks very much. So question first for Keith and then one for Ghislain. The Prince Rupert opportunity, 6-7 million TEUs you were talking about, I think one of those includes a 2.5 million TEU facility on South Kaien Island. And Keith, would you be willing to or would the team be willing to invest in that type of project if it were a go or no-go decision, if it were going to get it off the ground? And my second question for Ghislain, you've heard about $1.3 billion-$2.4 billion of revenue growth opportunities sounding incremental on top of what the economy could deliver. So I'm just curious, in your forecast for low double-digit EPS, I mean, an argument could be made you could almost get there without those incremental revenues. So do you have those in your targets?
And if so, how much of it? Is it the lower end or the higher end? Or is that gravy if it does come to fruition?
I'll start. I would imagine that when Sean Stevenson and his team at PRPA put out an expression of offers to the industry about who wants to come to Prince Rupert and operate the terminal. I don't think we're going to have to get involved if we don't need to. There's going to be a lot of people who are stepping up and want to come and invest in Prince Rupert. So remember, the reason we do that is to seed the ground, seed the field to make sure that things go and they go in a timely manner. So just sitting back and never really thought about that because it's out of ways. But I think that there'd be enough people who would step up to the table and we could at that point just choose to be the railroad if we needed to. Ghislain?
Yeah. In terms of exactly the $1.3-$2.4, and by the way, Walter, you and I talked at your conference about catch-up CapEx versus keep-up CapEx, so.
I got the copyright on that.
That's right. You have the copyright on that. So I think obviously this is a range. And we're not ultra-negative thinking we're going to be at the low end, but we're certainly not all positive in thinking that we're going to be at the high end either. Some of them is going to happen. Some of them are not. Some of them we didn't think about and will come. And again, when we put this forward-looking targets, we do use a little bit of healthy skepticism, if I want to call it that way. And that's where we are. And frankly, if we can surprise ourselves and do better, then so be it. And hopefully, we'll surprise you and investors and it'll be a good story. Hopefully, we're not going to surprise ourselves the other way.
The 2017 is a testament of that when we laid out those specific targets at the time. And it was a bit noisy for the last two years and we still delivered on the earnings that we are targeted. So we're in a good space and we'll let the actuals come in. But I'm happy because the team is as replenished and continues day to day. And that's not only these two guys, but that's everybody working in their team to replenish that organic growth pipeline. And you need to work hard to replenish it. I mean, Coalspur to have Mr. Cline who owns the to convince him to come to our network. And of course, he had to have the coal there and so on. But there's a lot of discussions. I mean, this does not happen overnight.
I mean, people have been working on this opportunity for years and you need to continue. And the marketing team, and we have probably the best marketing team in the industry, continues to fill up that organic growth pipeline. And we'll see what converts, but we're comfortable. And if we do better, then hopefully we'll surprise you and investors going forward.
We'll go with Scott.
Thank you very much.
Thanks. So JJ, in an ideal world, how much do you think acquisitions could add to the growth? And then just when you think about types of M&A, you've done intermodal Canada. Would you do something large intermodal in the US? Would you look internationally? And then we heard from Janet, but maybe your thoughts on class one consolidation. And then just one quick clarification, Ghislain, the operating ratio of the high 50s, is that starting next year or is that sort of by the end of the three-year plan?
You want to do the short answer, but short answer on the.
Yeah. Our guidance, not our guidance, but our targets of the numbers we've given is actually starting 2020 to 2022.
So on the type of acquisition, at this point, we would rather not quantify how much we will do or want to do because all of them are ready with willing sellers or willing people willingly to partner with us. So it's a question of how many of these willing partners or willing sellers will we find and what kind of opportunity will they be? And will they meet this hurdle that we talked about, namely the ROIC of 15%-17%? I think from a geography point of view, you mentioned international. Seeing at this point, there's enough opportunity for us to exploit within North America and we're going to stay on the continent at least for a while, definitely.
Class one mergers, long term, I can't tell exactly whether or not one of us needs to merge to the point where we can make a case to the customers and defending them and the regulators. But it seems to be a very hard situation to create an environment where customers and regulators would support a merger and support it in a way that you will not be giving out a lot of pricing power where your synergies are 100% destroyed by you gain so much on one hand and you change the marketplace to the point and you made this concession that you're actually going to create value. However, there might be different ways for us to work together in some ways that is maybe not as drastic as a class one merger, class one company merging with another class one company.
I think so we'll see what the future holds. I can't see in the back, but I know there's somebody in the microphone.
Hey, JJ. It's Brandon Oglenski with Barclays. So my first quick one, I know we've talked a lot about the incremental revenue, but I guess James or Keith, how much market risk is in that projection? I know it's based on a lot of specific projects going on on the network, but this to me seems like you're anticipating taking share from other ports on the East Coast and the West Coast. So if the market does slow, do you think even those low ends are still the attainable realm for CN?
Maybe Keith on intermodal and if you want to maybe add some comment on carload, like crude and whatnot.
Yeah. I mean, all those assumptions are relative. I mean, if it's a dramatic downturn, then maybe we're exposed on the low side, but I don't think so. I mean, we talked about the waves, right? If it's a 1-foot wave or a 10-foot wave. So I can't really get into the specifics. I can tell you one thing, that whatever is given to us to go out and get with the team that we have here, whether it's the operating team, procurement, finance team, mergers and acquisition team, or our folks, I'm confident that we're going to be at the top of whatever game is out there. We've been proven to do that for years. Nobody here on this stage or anybody else that's coming into this company is going to let that go.
We have a proud group of people and there's been a lot of people that have paved the way for us to keep this thing rolling.
James, maybe you want to add some comments about this year's crude, what crude might be or not be.
Yeah. So if you think about what we said about crude, we say between up to 400 million, which means 0 to 400 million at the end of the day. There is some inherent risk in the crude business. We saw that and what happened in February. We went from a run rate of 250,000 barrels a day in December, going great guns, building up to 300,000, 350,000 barrels a day at capacity. And then there was some government intervention outside of our control and we had a dramatic drop down to under 100,000 barrels a day in February. So these things are kind of unplanned outside of our control.
But I look at the balance of the business and the specific opportunities we walked you through, most of them, the vast majority of them, in fact, are based on significant capital investments being made by our customers on our network to reach their end market. So that gives me a sense of calm that these are real and will happen and will deliver carloads for us. Now, short of a significant economic downturn that affects everybody, it affects the whole industry, I'm very confident, very confident.
Yeah. Going back briefly on crude, we can ramp up back to 250,000 barrels, probably exceed 200,000 barrels. So we are in a position that we can execute quickly because we do have the crews on layoff. They qualified and we have some locomotive parks and we have a network. We can quickly help the province of Alberta increase its crude production and get that product to market in mid-June or early July.
I wonder if I can get just one quick follow-up. And Paul, thank you for setting up the day. But JJ, I guess I even have to look at my notes here. Rob, Michael, Jim, Raj, I mean, we've heard from so many people that have come from outside CN, even outside the railroads. I cover a lot of companies. We see companies that are very insular. They promote from within. They don't go outside a lot. So can you talk about the culture of CN? Investors have been here a long time. They see, no offense, Rob, but someone coming in from another railroad to run operations. So is this picking best practices from other industries, other companies, and what's the ultimate goal?
Yeah. When I was at ICI in the chemical industry, we had the benefit of being present in many continents, pretty much all the Commonwealth countries. And that in itself gave us a different perspective of the world. And so when we were coming together, there was a lot of stirring of what is the possible. When I came to CN, CN was very Canadian. Very, even very government. And what Paul Tellier at that time did, he also probably obviously believed in the melting pot of culture and skill. And he hired some people from outside the rail industry to get us into the IPO. Jim Ford came from Chicago and North Western. I came from the chemical industry. You came from one of the big consulting firms and Price Waterhouse, I think it was.
Anderson. That created a big success. We created a lot of energies doing that. When we did the first merger, we created this big energy also by bringing in the talent, opening talent of Illinois Central. I think for a period of time, we were really riding hard on that strength of the melting pot, creating a different art of the possible that other railroads did not embrace at that time. Then over time, we become more insular. Now we need to re-engage us to bring some of this outside talent that will help us. When you listen to Michael Foster, he doesn't speak like a railroader. He speaks like a business person. He looks at us, why don't we do this? Why don't we do that?
And so you need people in that room who bring you a different perspective, I think, to be more successful. I think you see that in sport. You see that in life. And.
Diversity is good.
Diversity is success. That's what talent wins. You don't want everybody to look like just twins of all of us. You'd like to have a different perspective around the table to make things happen. And again, act as one team and bias for action. Jump in the pool.
But we don't forget what got us here.
Yeah. Thanks, Brandon.
Hey, thanks. In regards to your high 50s OR target, how much of that is dependent on volume growth? And if volumes come in a little bit weaker than you're anticipating, do you still feel confident that you can get to that high 50s number over the next couple of years with some of your cost initiatives or savings initiatives?
Listen, I think things are going to happen. So in three years, lots of things happen. I mean, look at how many things happened for the last two years. So I think at the end of the day, I hope we were able to demonstrate today through specific examples that we can quickly adjust to changing demand conditions. We can quickly adjust to volume conditions. This team is very nimble. And with JJ's leadership, we don't they call it analysis paralysis type of thing. I mean, we don't need five meetings to make a decision. We need one meeting, a good one, and we make decisions. So we're comfortable. We understand that things are going to happen. Some will be better than others. We understand that. I think that at this point, based on the assumptions that what we've provided, we feel comfortable with the high 50 OR.
You can rest assured, and 19 is a good example, that we're very nimble and we can adjust quickly when changing demand environment happens.
From an operating perspective, I'll be honest with you, it's much easier to have less traffic than it is more. It's more fun to get more, more fun. It's better. We can showcase our skills better when we have more coming at us, but we're very nimble. We know how to put costs away.
Cherilyn?
Thank you, Cherilyn Radbourne from TD Securities. This one is probably for Ghislain. In thinking about different investment opportunities, typically a digital investment or M&A is going to involve softer assumptions versus organic growth CapEx. So can you talk about how you account for those qualitative factors in your assessment? And do you do the same post-completion audits on digital and M&A as you do for the bricks and mortar CapEx?
Absolutely. When we look at, you're right, I mean, it's a good question. When you look at development, like technology development, I mean, we define it really in three things. Hard benefits. What are the real hard benefits? And then there's the qualitative stuff. So there's, well, the cost avoidance, well, we would have had to replace that system anyway. There's other things. So when we look at the return, we look at the return on hard stuff. And when we look, Janet talked about some of our views when we look at M&A. And again, it's hard return. It's return on a standalone basis. And absolutely, I can tell you and reassure you, Cherilyn, that Jamie Lockwood, our Chief Internal Auditor, actually did a post-completion audit on the AG&E.
So we went back and Jamie, I think you finished that, I don't know, a couple of years ago, but he, and frankly, the numbers came better than I thought on the EJ&E because remember, we paid $300 million to US Steel for this. And then when we were all said and done, the price went up with the mitigation we had to pay for the STB and so on, $800 million, but the numbers came pretty good. And frankly, so we do have that discipline. And those technology projects, I mean, again, they've got to have scale. They've got to be big enough that's worth the board's attention. But he will go in and do some post-completion audits and compare the real benefits, actual numbers with the business case. And Jamie reports directly to the chair of the audit committee.
So he's got a dotted line to me, but he reports directly to Don Carter, who's our chair of the audit committee. So there's a reason why we deliver ROIC of 15%-17% or we're close to 16% now is because we have that discipline and we're not always right. Sometimes we make mistakes. Sometimes we have projects where we thought volumes, assumptions were going to come in. They didn't come in. Something happened. But your batting average, your batting average has to be better than 500. But to his point, JJ, when he says when the ball is in the strike zone, if you want to grow the business, you're going to have to take some risk. And we like to call it calculated risk. And that's what we do. And sometimes we'll be wrong. We don't like to be wrong too often.
I don't think we have and don't expect us to be wrong too often in the future.
Another question from the front. I'm going to ask Paul how much time we have left. Last one.
Thanks. Brian Ossenbeck from J.P. Morgan. So a lot of the technology you talked about is focused on efficiency, reliability. But I was curious to see how you're focused on visibility because I'm assuming the shippers, the customers want that as well. Is that a point of differentiation for CN? And do you think the broader supply chain is ready for your digitalization push across the industry? And then a second quick one would just be PTC talked about being the backbone of a digital railroad. I know it's not mandated for your entire system, but just curious to see what you think that's going to impact the system. Any benefits to your tech initiatives over the next couple of years?
Maybe Michael, you want to add some comments PTC first?
Yeah, sure. So like I mentioned in my update earlier, that we have Nayan Baradwaj who joined us running operational technology. And one of his key deliverables is to take the learnings of PTC and transfer that knowledge into operational technology. We're also taking all the learnings we've made and we're applying it to north of the border. And we're working with the regulators here to see how we can best improve the safety of the railroad in a stepped and conscientious manner. So we're using PTC to really drive a lot of learning and behavior across the organization. And from a visibility perspective, I'll probably ask Keith to comment on that. But what I will say is that what I'm trying to do is build out the structures that the visibility is available.
So as and when the customers feel like they're ready to consume it in new ways using modern things like APIs and things like that, that it's available to them. These things are great because you can also build them once. They can be used by all customers simultaneously. You can start to put many APIs together to solve complex problems. But I'll defer to Keith to talk about the customer perspective.
Sure. But I will say a lot of the mobile apps and reporting and all that we're developing are going to accentuate the amount of information that we can then push to the customers in a timely manner. But on the customer side, we've had a team of business people looking at this alongside of Michael's IT folks and working with customers and pilot customers. And now we're adding customers in lanes, as you heard yesterday, in our TM, our transportation management group, and the folks who are working on that. We definitely think visibility is key for us, especially in the consumer product side of the business. And the connectivity of our customers to us, to our supply chain partners, to the ports, and to trucking companies, and all the mobile apps are key to us. We're continuing to go down that path.
We do see it as a true differentiator moving forward.
Okay. So thank you. We're going to wrap this up. Thank you for taking the time in such a large group to come and visit our industrial site and spending most of the day with us today. Hopefully by now, you have a good sense of what is our vision, what is our strategy, where we're heading for the next three years. You got to know the team, not just the people on the podium, but the deeper bench of the team. Some with CN for a long time. Some with newer with CN. And in closing, I really, really, really want to thank Mike for his three years of service working 24/7 the railroad. And it's with great pride that we're going to take care of the team you built. And I hope that once in a while you come and visit. So thank you very much.
Thank you for joining us.