Good afternoon, everyone. For those of you that don't know me, my name is Janet Drysdale, and I'm Vice President of Investor Relations at CN. I'd like to thank all of you for joining us today, both here in person and via webcast. It's really a pleasure to have everybody here. We have a great lineup for you this afternoon with some very informative presentations from our safety experts. That should take us till about 4:30 P.M. At that point, we'll give you a little bit of a break. There's some interesting things to look at here in the lobby. And at 5:15 P.M., just to the room to my right, we'll have Claude Mongeau, CN's President, Chief Executive Officer, kick off the meeting with his opening remarks.
Just before we get things underway, I would like to do a quick safety briefing. If there's a medical emergency, we do have a Daniel Oziel, who, I think some of you saw outside manning the locomotive simulator. He's qualified in CPR and first aid, and he will attend as a first responder. The lights are a bit bright in my eyes, but we've got Paul Butcher, if you can just wave at the back there, who's our Senior Manager of Investor Relations. Paul will call 911. If for any reason we need to evacuate, as instructed by the hotel, we'll exit this room, turn to the left, walk past the elevator, and take the stairway to the hotel's front driveway.
With that being said, it's my pleasure to turn the microphone over to Michael Farkouh, CN's Vice President of Safety and Sustainability. Michael?
Thank you, Janet, and good afternoon. I welcome you to our session today, where my colleagues and I will guide you through our world of safety. We will discuss our elements of our safety management system by virtue of our main safety pillars, which are people, process, and technology. As a member of the CN team for the past 24 years, I've worked various roles, from the design and maintenance of our railcar fleet to managing operations in both Western and Eastern Canada. I was recently appointed Safety and Sustainability for CN, and I'm pleased to walk you through this important primary element for CN for the next hour and a half. Dave Ferryman, Sam Baratta, and Dave Radford and I have several presentations which will be followed by a question and answer period before we wrap things up.
At CN, we take pride in how we do our jobs of moving customers' goods, both safely and efficiently in the tasks we undertake, in being the backbone of the economy when transporting a varied portfolio of goods for both North America and overseas markets. We are also proud of what our company stands for, a core belief, core beliefs that drive how we conduct our business every day and that support our continuing transformational journey. These core beliefs are anchored in a spirit of delivering operational and service excellence while creating value for our customers. Innovation and continuous improvements have become our mindset, and we work hard to run more efficient trains and process cars in an expeditious fashion through our terminals. We are establishing true, sustainable transportation solutions for our customer base.
We also set our sights on becoming a true supply chain enabler by elevating our service performance from end to end in the supply chain. We are pursuing greater operating efficiency to help garner a greater market reach for our customer base. On a daily basis, we at CN are hard at work as the economy's engine, providing means of reaching North American ports for delivery and receipt of goods such as grain, potash, coal, intermodal containers, and automobiles. We service many manufacturing plants, be it forest products, metals, petroleum goods, and chemicals. Most of the goods that we consume on a daily basis would have been by means of rail. We do move in the order of about CAD 250 billion of goods in a single year. This is truly fostering the prosperity of the North American market we serve.
A key underpinning of our transportation company when considering our supply chain partners, the loading and unloading of goods from railcars, maintaining our infrastructure and rolling stock, and the operation of our trains, is always by putting safety first. Our expectations are clear, and those of our stakeholders, those being customers, the general public, our employee base, and shareholders, that what CN stands for is performed on a platform of safety. Nothing is more important to CN than running a safe operation. In our efforts of risk mitigation, we achieve this through people, process, and technology. We continue to invest on an annual basis on all three of these fronts. We will dive down a little deeper on all three of these elements to allow you to see our efforts hard at work. CN safety record is one of continuous improvement.
We can see over the past seven years, an encouraging trend of reduction of both accidents and injuries. The above viewed graphs measure the performance for accidents in a standard means by which railroads in North America use, the Federal Railroad Administration accident ratio. These accidents, which attain a dollar amount of over $10,000 of damage, are measured on the basis of accident per million train miles. CN finds itself among the leaders in the lowest ratio of Federal Railroad Administration accidents in comparison to the other Class I railroads in North America. As our growth and additional rail lines have been added to our network over the years, we continue to see improvements in this area. Our injury trend has also seen improvements.
Although we see a small uptick in injuries, our harsh Canadian winter and US winter of this past year contributed to additional slips, trips, and falls, which attributed to the small increase in injuries. Needless to say, we have reviewed a wide range of these factors and are strengthening this for the upcoming year. This improvement is not without a very structured and robust safety management system, which we are continuously refining and modifying to enable this trend of improvement. One accident injury still remains too much for us at CN. This drive enables us to review our processes, bolster up our training, and continue our investments in risk mitigation technologies. Any incident which occurs in our railroad, we ensure that we perform the proper root cause analysis to ensure we truly understand what transpired and how we prevent any such event from recurring.
We engage our employee base to work alongside as a team, ensuring we truly know what was in play and what methods can be leveraged to allow us to continue this improvement. We cannot speak about our downwards trends without reviewing a host of investments in training and technology, or considering our rigorous operating rules which guide us in our daily tasks. Our employee engagement, which fosters a safety culture, is truly an area where we have leveraged and will continue to in the future. As a whole, we firmly believe that our employees' engagement in developing processes, identifying and reviewing risk areas, building safety plans, will enable us to continue on our journey of continued safe practices. It becomes difficult to speak about safety without recognizing the events which occurred this past summer in Lac-Mégantic.
We at CN were there to assist in the emergency response, to provide a helping hand to that community. Equally important, it was to learn what led to this tragic event. We needed to understand what failed, to truly know what was at play or whether such an incident could occur on our railroad. We needed to know whether we were vulnerable to such an incident. In our investigation, it was clear that CN had all the ingredients necessary and safeguards in place to not have such an incident. We have worked alongside our rail partners in Transport Canada to ensure that securement of trains was to be properly applied and done so in a consistent fashion. This tragic event is being thoroughly investigated by the Transportation Safety Board, and their findings will detail all the elements of this rail accident.
Such events allow us to take a step back and review what else can be done. How else can we build on our safety management system? What action can we take to reassure the public of the safety of rail in North America? Although we speak often of the reduction of rail accidents and the 99.997% safe transport of dangerous goods, it provides little comfort on the heels of the Lac-Mégantic tragic event. This is why CN propels itself ahead in looking at a different—at an additional way to build on its safety program.... As previously mentioned, we cannot speak about safety without truly understanding how continuous improvement manifests itself through the combination of people, process, and technology. CN is in a hiring mode to replenish our workforce. Many are retiring after having led a healthy career, and we're also hiring due to growth.
CN is hiring in many areas and in many of our trades. We are preparing the future of our company with new railroaders being fully trained on CN property. We have invested heavily in our training programs for our employee base, for which Dave Radford will guide you through in detail shortly. Our soon-to-be open facilities in Winnipeg and Chicago will be industry-leading for the development of talented, skilled, and safe railroaders to push CN well into the future in a sustainable fashion. Our Winnipeg campus will be open in April of 2014, followed closely behind our Chicago campus in September of 2014. The use of technological means will enable better learning with a revamped curriculum, which has been and continues to be developed for all our departments.
Fellow qualified employees will assist in the training of their peers through on-the-job training to put forward both their classroom and laboratory learnings in a field environment. Risk mitigation and assessment is an important element of our Safety Management System. We continue to undertake risk assessments for changes in our operation or tasks that may be modified. One such risk assessment, which we have undertaken, is our Corridor Risk Assessments. Sam Baratta will guide you through the effectiveness of these analyses and the solutions brought forward to further mitigate our risks. He will speak to you on the comprehensive approach we take in an area which is being reviewed to understand how volumes and commodities flowing through varying corridors and our approach to the use of safety technologies, operating approaches, or process enhancements can be used. Just recently, CN made a special announcement on a further investment for risk mitigation.
This investment complements our already healthy investment, over CAD 1 billion in this calendar year, in maintaining the safety and integrity of our network. Our recent announcement was to build further on new and existing technologies to help further enhance our risk mitigation. The investment entails inspection equipment along the right of way on corridors for passing trains. Additional elements of inspection for the geometry and the quality of rails, including detection equipment, which could reduce the severity of an incident in key locations, also form part of this announcement. As we've announced these additional investments in technology, they become additional lines of defense to an already robust inspection and detection network we have in place. When I spoke earlier to the ongoing downward trend in accidents, our inspection and detection systems have contributed to this positive safety trend.
CN has the most advanced wayside information systems, linking together and trending information on the health of some key components of our rolling stock while trains travel over the CN network. CN is an industry leader for detection of wheels. Dave Ferryman will further enlighten you on just how involved we are and how we leverage technology to ensure the safety of our network. These key elements of people, process, and technology all work hand in hand to further enhance our safety approach to minimizing risk while delivering our customers' goods in a safe and efficient manner. We have heard as of late, through some media sources, that the railroads are self-regulated. Allow me to clarify to you that an extensive regulatory framework exists in both Canada and the United States for railroads. Transport Canada administers the Railway Safety Act.
Transportation of Dangerous Goods Directorate administers the Transportation of Dangerous Goods Act. These two acts administer railway safety for the operation of trains, maintenance of track and roadway, along with the rolling stock, being rail cars and locomotives. Transportation of Dangerous Goods administers the rules and standards for the shipment of hazardous materials. In the United States, we are administered by the Federal Railroad Administration. Once again, the FRA, Federal Railroad Administration, administers the same elements we see in Canada: operation of trains, maintenance of track and infrastructure, along with the rolling stock. Since the accident of Lac-Mégantic, Transport Canada have issued an emergency direction. This was for the securement of trains, much like the Federal Railroad Administration issued their emergency order for securement of trains. The added safety elements were, for the most part, already embedded into CN's instructions for our train crews.
The issuance of these orders, directions, resembled much of what we already had in place. We are working closely with Transport Canada and the Federal Railroad Administration, and do not anticipate any major rules or regulations which would alter our course of business. Any changes may only enhance our already robust safety management system and complement what we have in place. CN has also welcomed the protective direction, which were issued by the Transportation of Dangerous Goods Directorate, for both the proper classification of flammable liquids and the distribution of dangerous goods information for emergency responders in the communities we traverse and operate in. As briefly explained, railroads are subject to extensive safety regulation. We continue to work at the reduction of any incident on our network.
However, when such an incident does occur, we mobilize all the necessary and required individuals and assets to attend to an emergency event. CN has a structured emergency response plan, which we review on an annual basis. We either update or modify certain elements, ensuring that we have a fully functional plan in the event it is required. Our emergency plan incorporates a network of qualified companies, which are well-placed across our network, to assist in hazardous materials, environmental mitigation, track restoration, and car rerailing. These companies only complement an extensive team of highly skilled and trained individuals within our company. As an example, CN has a team of hazardous material experts, better known as our 12 dangerous goods officers, who are strategically located in the varying provinces and states that we serve.
We have also trained many dangerous goods responders in many parts of our network to assist our dangerous goods officers for emergency response to smaller incidents. Our network of emergency response stretches outside of CN, whereby we are building and have built a network of mutual aid through railway partners, industry, municipalities, and our customers. We can draw upon many locations for specialized equipment and resources to assist in the efforts of an emergency response. Along with our emergency response is our structured community outreach program. This program is geared towards those emergency responders in the varying communities and their preparedness for a rail accident. In a structured manner, we are informing communities of the dangerous goods flowing through their community and offering specific training for these emergency responders on elements related to the railroad.
These elements include the CN emergency response plan, our incident command structure, and knowledge of railway tank cars, such as the functionality of the valves found on these cars. This training is a hands-on familiarization of key components, which will allow responders to complement their learning of emergency response. I have highlighted an overview of CN's Safety Management System plan and our emergency response capability. I will now allow my colleagues to further expand on people, process, and technology. Dave Ferryman, Vice President of System Engineering, will speak to you on some of CN's industry-leading technologies and how they support our safety management system.
Thank you, Michael. My name is Dave Ferryman. I'm the Vice President of Engineering for CN Railroad. I lead the group of the other engineers on the railroad, not the ones that ring the bell and toot the whistle, but the ones that work every day to make the railroad as safe to run on as possible. I'm a civil engineer by education, a registered professional engineer. I'm a fourth-generation railroader, and I've spent 25 years in this industry, all of which in engineering, except I did 3 years in operations. I also serve as a governor on the board for AREMA. That's the American Railway Engineering and Maintenance Association. I've had the fortune to be able to work for 3 different railroads in my career, started with Burlington Northern and went to Illinois Central in 1997....
Eventually that became part of Canadian National a couple of years later. But I've had the fortune to be able to see many different styles of railroading, railroading under different conditions and the evolution of technology during that time. At CN, we're driving reliability of our trains and our infrastructure through inspection. Now, our first line of defense is with our people. Those are the folks out there working every day on the ground level, whether it be in the mechanical department, engineering department, or the transportation folks in the field. But we really have a multilayered approach where we leverage the latest technology that's available to us. There's technologies to monitor the track, rail cars, locomotives, and our people as well. The density of our systems is industry-leading. Today, I'm gonna talk about a few things.
As an overview, technology as it relates to rolling stock, our cars, our locomotives, anything that traverses the track. That involves the inspection of car, car parts, locomotives, and the loading of those cars. The picture you see here happens to be a picture of what we call a hot box detector or a hot bearing detector. This device uses infrared technology to sense the heat of the roller bearings as they pass by, looking for differentials to know if we have an issue with one that might be overheating. We also have a number of other technologies that are shown up here, but in particular, we have a new high-definition machine vision system that uses video to look at car and car components, where we can flag issues that there might be with those cars.
We're also gonna touch on technology as it relates to track. That's our rail, our ties, our ballast, or the surface of the track, and any hazards that may pose a risk to the track structure itself. We also have technology we'll talk about as it relates to train handling and our operators or engineers. Safe train movements depend on multiple components, all working together as a system. Let's talk some more about rolling stock inspection systems that we have at CN. We have 815 wayside inspection locations across our CN network that are providing diagnostics on the health of our rolling stock. We're an industry leader in the density of these wayside systems. Let me put it in perspective. You can see up there, it shows that we have a wayside inspection system every 12-15 miles across our core network.
Transport Canada guidelines set the limit at 60 miles, where the industry average is 30. So we far exceed the industry and what is required by regulation. Our Wayside Inspection Systems, or WIS, WIS sites, are looking at bearings, wheel bearings, as I referred to earlier. They're looking at wheels that we might have an issue with. They're also equipped with what we call dragging equipment detectors. So if we have any low-hanging hoses or brake rigging or something along those lines that happens to be dragging on the car, it'll trip that and provide us warning as well. We also have what we call Wheel Impact Load Detectors, or WILD sites. We have 39 of these wayside wheel impact load detectors across our network. Once again, let me put that in perspective for you.
That's a third of what the industry has in all of North America. These wheel impact load detectors are looking for flat spots that might be developing on wheels that can lead to either a broken wheel or broken rail. The wheel impact load detector is measuring the impact on the rotation of each and every wheel as it comes by, and it's measuring what we call KIPS, or kilopounds per square inch. We set certain thresholds out there by which when that threshold's exceeded, we know to provide warning to the train crude to take appropriate action. We have all this information, but doesn't mean much if we don't alert the appropriate people.
So the wayside inspection systems are all equipped with the ability to warn our dispatching forces and our dispatching centers, as well as the train crews themselves, so they can take immediate action to either slow or stop their train and take appropriate action. How do they know where the issue is? Well, it gives them an axle count, so when they can walk back in their train, they can perform a proper inspection and take appropriate action. We use our wayside inspection systems for much more than just pass, fail. We monitor trends, cars, car types, wheel, wheel types that we may be having issues with. We can also check field diagnostics of our equipment. If we have equipment that keeps telling us that we have an issue when we don't, that's not good either.
But we can track that and dispatch maintenance personnel to either go out and recalibrate or make necessary repairs. We are a data-driven company using analytics to monitor trends and strategize. Let's talk about CN's largest asset, our track. Now, our first line of defense, once again, is with our track inspectors. These folks are out there every day, providing us daily inspections across our network. We supplement those inspections with our two, what we call geometry cars. We had just one car until up about five years ago, now we have two. So what is a geometry car? When I say geometry, I think some of you probably had a flashback to a high school class. Some of the same principles are there, but it's, it's a bit different.
Geometry really is these vehicles; they can go down the track at track speed and train service, and we are looking at the gauge of the track, we're looking at the alignment of the track, we're looking at the surface of the track. So like you in your car going down the highway, if you feel a pothole or a low spot in the road, or as you go around a curve, maybe the elevation isn't quite right. Our geometry cars are taking all of those measurements and looking at them and warning us when we may have an issue. We traveled 72,000 miles with our geometry cars last year, and we're adding a third unmanned geometry car in 2014. This is a car that we can put in a train consist and will provide us wireless information about the geometry of our track.
We're also adding a gauge restraint system that will load the track outwards to alert us if we may be having issues with a portion of the track that could be developing a gauge issue. We also are, in 2014, adding optical inspection technology. It's an emerging technology where we take high definition video of the track at a high rate of speed, and through various algorithms, are to be able to determine if we may have an issue with missing fasteners, spikes, anchors, things of that nature. Now, this geometry—our geometry cars also are equipped with lasers that measure rail wear. We use this for planning purposes. The more we run on the rail, the more it wears. So we're able to determine when that is reaching its useful life.
That way, we can plan for our best asset utilization, so we're not taking rail out too early. At the same time, we're not waiting too long to replace it. Our geometry equipment alerts us immediately for corrective actions. We also use the data to plan our surfacing and ballast programs. It provides almost a report card to our supervisors in the field, a measure we call TQI, or Track Quality Index, so they can know how their particular territory is doing run over run, where they need to plan additional maintenance and additional capital. We also have another layer of inspection through what we call VTI, which are equipped on about 10 of our locomotives presently. So as those locomotives traverse the track, there's accelerometers built into them that warn us of any really rough track conditions.
The information is fed directly to the supervisor for that territory, where he can send folks out and check those particular spots. The climate that we operate in on the CN is very tough. We have extreme cold and temperature swings. Those temperature swings result in rail stresses. As you heat steel, it wants to expand. As you cool steel, it wants to contract. So over time, those rail stresses, whether they be compressive or tensile, wear on that rail. And if we have small defects in that rail, they're apt to grow more quickly through those temperature swings. Visually, we can't see inside the rail. This is a picture of an ultrasonic rail flaw testing vehicle that can see inside the rail. We run up to about 40 of these during the winter months. We tested last year, over 35,000 miles of track.
The way they work is they shoot ultrasonic waves at various angles into the rail head, and if those waves come back distorted, the operator knows he needs to get out and do some further checking with a handheld device. That way, he can pinpoint the location of that defect and ensure we take appropriate action, which may mean actually cutting it out and cutting a piece of rail in. We test more than anyone. Those 35,000 miles we tested last year were more than any Class I railroad. We've developed, internally, our own risk-based model, by which we take to determine proper frequency, by which we take into the account factors such as the tonnage that runs over the line, the type of traffic. Are there dangerous commodities? Is there passenger traffic on the line? What environmental hazards may exist?
What is the history of the line? At certain locations on our core route, we test every up to about every three to four weeks. At CN, we've internally developed a data collection system we call Precision Engineering. It collects all of our track inspection data, whether it be from the Geometry Car, the rail flaw testing cars, or the visual inspections. Through that, we can track our work orders to see from inception of a particular work order through completion. We can also track the frequency of our inspections. It gives warning to any particular location that might be coming due for inspection to make sure we don't exceed that frequency. We can monitor trends and also use that information for planning purposes as well. Now, are all these things working? Certainly, the numbers Mike showed you earlier shows that it is.
I can speak to the fact that broken rail derailments have decreased by 70% on the CN Railroad since 2006. Now, I don't know how many of you have had a chance to operate a locomotive. It's a little bit different than a car. First of all, there's no steering wheel. There is a throttle. There happens to be a few different brakes. Train handling is a lot about the management of in-train forces, kind of like that toy you had as a kid, a Slinky. Those train forces work back and forth throughout the train. We have the latest technology available to help our locomotive engineers keep their train together in one piece while optimizing train speed and maximizing fuel conservation.
Distributed power or DP power, as you see here in this picture, that's where we have a locomotive towards the center of the train, as well as locomotives on the head end of the train. Greater than 40% of our high horsepower fleet is equipped with DP power following it in the train. It provides more uniform, tractive effort, as well as brake application. It's particularly important during this time of year when it's really cold out, it becomes much more difficult to keep air continuity in a train in cold weather. Having that distributed power in the train helps to keep better control of that air. We also have our own train marshaling rules, which really dictate how we can place loads and empties to minimize in-train forces within the train. We have something we call Wi-Tronix, which is remote train locomotive monitoring for diagnostic purposes.
Nearly 90% of our locomotive fleet is equipped. We have something we call Trip Optimizer. It's like cruise control for a train to help that locomotive engineer manage those in-train forces and once again, minimize fuel consumption. We've internally developed a system called LEPP. That's really the Locomotive Engineer Performance Monitoring. Helps us to know where to direct our coaching and training people to engineers that might need a little help, that aren't necessarily handling, handling their train on a routine basis in the most desirable fashion. We have training simulators. Hopefully, you all get the opportunity in the concourse out here to take your hand at operating the train. One of the locomotive simulators is here. At CN, we also employ other wayside technology that helps us in the fight against mother nature. We have what we call slide fences and detectors.
They're placed in areas that are prone to rock slides and avalanches, and they can provide immediate alerts to approaching trains as well as the dispatching center. We have high water detectors in areas that are prone to flooding. We use an earthquake notification system as well as a weather warning system to provide us real-time information on seismic activity and weather warnings. Once again, we can provide immediate warning to trains to either reduce speed or stop their train and direct our maintenance personnel to head out to the field and do proper inspections as well and give, give us an all clear. We have some high wind detectors on some of our key bridges across our network. When we have extreme wind weather events, we receive a warning to where we can slow down or stop a train as it approaches.
All in all, CN is utilizing a vast assortment of inspection technology to ensure the safe operation of trains and transportation of our customers' valuable freight. Now, to share with you more on CN's people and process, processes, excuse me, I'd like to introduce Sam Baratta, General Manager of Safety and Regulatory Affairs.
Good afternoon. We really appreciate this opportunity to provide you with an overview of the progress that we've been making in managing safety, improving our safety management systems, and strengthening safety culture. My name is Sam Baratta, and I've been with CN for a little over 30 years in a multitude of responsibilities and operations, as well as corporate functions encompassing transportation, mechanical, as well as safety. I'm currently General Manager of Safety and Regulatory, with system responsibility for safety, regulatory, operating practices, as well as transportation engineering. This is truly an exciting time at CN because of the progress being made in a number of fronts in strengthening our safety management system, as well as our safety culture, with commitment from the top and engagement at all levels of the company.
Michael talked about our commitment to risk reduction with initiatives encompassing people, process, technology, and investment, and that we exceed regulations in many areas. David then provided concrete examples of how CN has been a leader in many areas that leverage technology, in order to inspect tracks, rolling stock, and to reduce in-train forces, looking not only at critical thresholds of data, but also at leading data, such as predictive temperatures for bearings. I will now take us through the processes that have been put in place to drive safety at the field level and how we strengthen safety culture... I will first talk about how we drive the consistent execution of effective safety action plans at all levels of the company, and how we meet this challenge in the context of a very large, decentralized organization. The answer starts with clear direction on expectations.
To address this challenge, we developed a system standard based on safety management system regulations and CN's best practices. This document, which we call the Safety Management Plan Framework, identifies what an effective safety action plan must contain. We have been supporting this initiative by providing training and coaching to drive the notion that safety action plans are much more than proficiency testing, safety audits, or safety monitoring, but that an effective safety action plan must be broad-based, with key elements such as the need to perform analysis and identify local causes, and the development of customized safety action plans that are connected with these local causes.
This is really important from an effectiveness of safety action plan perspective, because CN is such a large company, spanning from the Atlantic to the Pacific to the Gulf of Mexico, with significant variations in weather, demographics, and operating characteristics, as well as topography. So effectiveness of safety action plans requires precision with the right initiatives to address the specific local causes. There must also be an audit plan to ensure that we have coverage across each terminal throughout the shifts, days of week, ensuring that we also provide proper support for our new hires, as well as employee engagement with initiatives that strengthen safety culture. These plans are implemented in each region, each function, and each division, and they are audited through CN's integrated audit process, which encompasses rules compliance, safety management system, as well as safety culture.
This safety management plan framework, as well as CN's audit process, are both identified by Transport Canada as a best practice, but they are also featured in their website. So this provides clear direction on expectations and oversight to drive consistent and effective execution, and this supports safety into day-to-day operations. CN safety management system recognizes two basic principles. The first is that incidents can occur not only because of one cause, but because of several contributing factors. And we have processes to identify the relevant behaviors, conditions, and processes in the work environment. The second point is that preventive actions must be comprehensive to address the causes and contributing factors with multiple lines of defense. You've heard this term several times. It's really important to us, because, and I'll talk about that in a second.
To exemplify this, the importance of having multiple lines of defense, I'll refer to the work done by James Reason on risk and behavior. The principles that he establishes are that, you know, each line of defense is imperfect and has its vulnerability, and that having multiple lines of defense reduces risk significantly. In our safety management system, we aim to implement multiple lines of defense to address each cause and bring the residual risk down to the lowest level possible. To exemplify this, David talked about track inspections and how we use visual inspections as the first line of defense, with the proper training and follow-up in the field. We supplement that with ultrasonic rail flaw detection, as well as track geometry testing, as a second line of defense.
This is very powerful because if that first line of defense is 99% effective, the visual inspections, if it leaves that 1% residual risk, then by adding that second line of defense, consisting of technology, which is also 99% effective, then those two combined lines of defense bring down residual risk from 1 in 100 to 1 in 10,000. So this is a process that we use to reduce risk by implementing several initiatives around people, process, technology, and investments to address causes and contributing factors comprehensively. One key process that helps us to reduce risk is our risk assessment process. This is a formal approach that we use to assess risk by anticipating hazards and by quantifying their frequency as well as severity.
This process is used at all levels of the company, and in its most simple form, it is a robust job briefing, which we call a Field Level Risk Assessment, where employees work with their peers to identify the proper tools, the procedures, to ensure that they have a good understanding of who's doing what, what can go wrong, and to mitigate those potential risks. Risk assessments are also triggered to prepare for operational changes, with structured documentation to assess risk, ensure that mitigations are in place before the change is implemented. Recent examples of risk assessments include how we assess risks and implemented operational changes to allow us to operate longer trains with distributed power locomotives during winter months. David alluded to that, but there was quite some background and preparation for this, and that we performed a risk assessment.
We performed some field testing, some data gathering, and with that information, prepared such a compelling case that we convinced the regulator, Transport Canada, that it was the appropriate time and that the risk was low in changing the relevant rules. We led the way with this initiative, and the rest of the industry followed on both sides of the border. So both Transport Canada and FRA went along with that change, with the notion that distributed power has inherent advantages that protect safety while ensuring that we can run longer trains. Another recent example is our ramping up for crude oil, where we have mapped out the routes in detail, assessed risk and sensitive locations, such as those with high population densities, waterways, and significant structures, looking also at the topography, and implemented a number of initiatives to reduce risk.
Examples include the addition of hot bearing and hot wheel detectors, an increase in track inspections, and closer monitoring of the train handling activities by our locomotive engineers through that LEPP information system that David just talked about. In fact, CN made an announcement recently about this corridor risk assessment approach, which has allowed us to be even more pinpointed with our technology investments in order to reduce risk. And to exemplify this point, we didn't stop at the fact that we have the densest network of wayside inspection units in North America, with a spacing typically of about 12 miles in our main track.
We progressed from looking at these detectors from a subdivision basis and saying, satisfying ourselves that 12 miles may be the best in the industry, and taking it that extra level and looking at it from a risk-based approach, looking at the population, looking at the waterways, looking at the topography, looking at these other risk drivers. As an example, if you have a city with a detector that is 11 miles to one side and another 1, 1 mile to the other side, there is still some residual risk on the 11-mile side. We are adding detectors in a pinpointed fashion to ensure that risk is brought down to the lowest level possible. This is just one example.
As Michael alluded to, we are supplementing those Corridor Risk Assessments with structured engagement of communities to ensure that we meet them systematically, that we provide training, that we provide information on dangerous goods, and that we strengthen emergency response. Michael also made reference to the fact that we're introducing operating procedures that recognize that certain types of trains, which we call Key Trains, have higher risk because of dangerous goods, and we mitigate that risk with specific operating procedures, such as limiting train speed on Key Trains, which is something that has been used in the United States. But in Canada, CN is the only railway to adopt this practice to further reduce risk. The two pillars that uphold CN's operational safety are those of compliance and culture.
We'll first talk about compliance, because this is fundamental to safety, and it must be embedded in the culture of every employee. Compliance starts with those principles that I talked about earlier, the direction, competence, opportunity, and motivation. It starts with an effective training program, which David Radford will talk about shortly. There must also be processes to actively monitor activities with consistent feedback to employees, whether positive or constructive. We have multiple layers of safety monitoring and audits, starting with supervisors, who are accountable to perform structured proficiency tests. Those tests are not selected randomly. They're selected on a risk-based approach with those, that knowledge of the local causes that I talked about earlier, which is an accountability that every division has, to ensure that they're properly connected with their local issues.
We perform a huge number of these proficiency tests, about 400,000 a year. To give you a sense of what that means in terms of how many per employee, it's about 25 efficiency tests per year for our operating employees. So it's not only about quantity, it's not only about performing a lot of tests, it's also about performing quality tests. We have numerous processes that drive the quality of efficiency testing to ensure that we get value from the time that we invest in this activity and that we have results. There is regional and functional audits, which span bigger territories than the efficiency testing or proficiency testing that a supervisor would do locally in their territory.
They also get an external set of eyes in the territory so that we get an objective appreciation of the state of safety at that location. The other element, which is really important to us, is the integrated audit process, which really brings it all together because it brings together rules, compliance, safety management system, as well as safety culture. When you stop and think about it for a minute, if we don't have good rules compliance at a specific location... There is likely going to be other reasons that make it that way.
It's going to have to do, like, possibly with training, with the follow-up in the field, with whether there is a safety action plan locally that is connected with those local causes so that employees are aware of the proper activities to follow in order to comply with those critical activities. Those are all important points that are brought together through this integrated audit process. So when we do an integrated audit process, we look for rules compliance, we assess the effectiveness of the local safety action plan. We ensure that they have coverage across the different risk areas, that they've identified their causes and are connected with them in terms of their activities. We also verify whether they perform risk assessments. This is an important part of our process in terms of trying to anticipate what can go wrong and to plan for it.
We also measure safety culture subjectively as well as objectively, and I'll talk about that very shortly. This structured approach, which includes a report and findings, also has a formal report that is sent right up to our Chief Operating Officer, with specific findings, with a timeline of 30 days for corrective actions to be submitted, and that is re-audited to ensure that those corrective actions are actually implemented, but that they're also effective in bringing a turnaround to those issues that were identified. This process was also identified by Transport Canada as a best practice, and it is in their website. I will now talk about safety culture and bring in on the context of those two really important pillars that make the difference in terms of operational safety, and those are compliance and culture.
The previous slide showed us how we drive compliance. Safety culture is the other important pillar, and there are a number of initiatives that strengthen safety culture. But before I talk about those, I'll take you through our evolution in safety culture over the past years. In 2008, we worked with industry, unions, and the regulators to develop a formal definition for safety culture based on reviews across industries spanning North America, Europe, and Asia. We came up with a definition in this group, that safety culture would be comprised of five key dimensions: leadership, communication, employee engagement, a learning culture, and a just culture.
So we acted upon this work and implemented a formal process through our senior labor representatives in our Policy, Health and Safety Committee, and they were recognized by the Railway Association of Canada for the work they did in safety culture last year. And this year, they are recognized again with a System Safety Award from the Railway Association of Canada for the work they have done in terms of training and the CN Campus initiative. So that brought us to having the right tools and definition of safety culture, with the ability to measure safety culture, which we did in 2010, with a system survey encompassing all regions, functions, with almost 3,000 people that participated in the survey. And again, this measurement process was recognized by Transport Canada as a best practice and is in their website.
This survey identified areas of strength as well as areas of opportunity, which we acted upon. It wasn't only about taking a numerical result in terms of what our number is on a scale of one to five, it was also about reading what the employees had to tell us in terms of opportunities that would strengthen our safety culture. One of the things that they told us in 2010 was that we needed, we had an advantage to strengthen our training processes, and we did just that by modernizing, taking a comprehensive approach, bringing structure to our training processes. We are continuing to measure safety culture through our integrated audit process. To the best of our knowledge, CN is the only railway in North America to measure safety culture on an ongoing basis.
This is an area that distinguishes CN from the other railways, because all railways have locomotives, they have track, they have freight cars, but what makes CN different is our people and our culture. We continue to strengthen culture in many areas, with examples that include safety committees, which involve employees locally in over 100 locations across the CN system. We have peer safety programs, where employees are trained to identify critical activities and to provide feedback to their coworkers in order that we support safe work practices. We have on-the-job trainers that are being used in many locations to monitor and support new hires with safe work practices. We have safety summits that are held systematically. We have over 70 that have been held so far this year, where new hires are brought together in a forum for refocusing on safety and culture.
These safety summits assemble groups of new hires and involve them in focused two-way dialogue. It's not only about a one-way communication session, it's about listening to what they have to tell us as opportunities to strengthen our culture and safety. We have an onboarding process, which consists of scheduled and structured discussions between employees and their managers, and we also have a process called an employee performance scorecard, where each employee, including new hires, are assigned a designated supervisor, and they meet to review and structure schedules and discussions, safety as well as performance. These processes have been valuable in supporting and strengthening safety culture, and they are allowing us to shape our future by hiring and developing a critical mass of skilled and motivated railroaders that will deliver safely and efficiently for an entire generation.
As you can see, much has been done, but yet we recognize that much remains ahead of us, because this is definitely a work in progress that we are committed to for the long haul. And because this is the right and responsible thing to do, not only for our employees, but our customers, as well as our different stakeholders. We also recognize that all the investments that we make in safety will make us more successful as a company. I will now turn it over to David, who will talk about what we are doing to bolster our greatest resource, our people.
Thank you very much, Sam. Good afternoon, everyone. My name is David Radford, and I am the Director of Operations, Training and Development. Good afternoon, everyone. My name is David Radford, and I am the Director of Operations, Training and Development at CN. I'd like to think from my perspective, that the next presentation is the most exciting one you'll see today. I'm very excited to be here today to talk to you about training. I've been with CN for the past 15 years, having first been hired to work in transportation, actually, by our CEO in Vancouver. Since then, I've held a number of different field transportation assignments across the country. In late 2012, I was tasked to transition a number of different internal organizations into the technical training group, under the guidance of the VP of Safety and Sustainability.
Like I said, I'm very excited to be here today to talk to you about CN's Training Excellence Initiative. As we call it, CN Campus. CN's workforce is in the process of renewal. We're currently onboarding over 2,000 new employees a year, and as a result, CN is seizing this great opportunity to develop them in a way that allows them to better understand our safety culture. They will not only learn how to do their job safely and effectively, but more importantly, they will learn the skills to be able to mentor and teach future railroaders coming in behind them. We are able to seize a generational opportunity and convert it into a stronger safety culture, allowing the transfer of knowledge to new generations of railroaders and assisting in the coaching between experienced employees and new recruits. With the support of our CEO, Mr.
Mongeau, over the last 24 months, we've been revitalizing our training programs with a key focus on curriculum, resources, and facilities. On the curriculum side, our new hire employees are receiving a modernized training program that includes the usage of technology in the classroom, as well as very defined on-the-job training programs. On the instructor side, we strengthen the core group of training instructors by investing in train-the-trainer programs, as well as developing our own internal instructor certification process that will allow us to better evaluate them on a consistent basis. It also allows us to identify their future needs and development. On the facility side, we are investing in state-of-the-art training centers to better blend the classroom with hands-on training experience. We're ensuring the right governance and support systems around training are in place to monitor regulatory compliance.
This is a unique opportunity that we have to embed the CN culture to new hires, and it is also critical to our daily operations. This will provide our new hire employees the opportunity not only to learn their jobs, but also gain perspective on the overall operation, connect the dots, and understand their future position in a safe and sustainable way. One of the first opportunities identified when we began to modernize the training curriculum was to leverage technology to better connect with a new generation of railroaders. We wanted to create an immersive learning experience using tablets that would be both portable and illustrate complex technical content in easier ways. We used high-resolution simulations, images, and videos that were embedded directly into the course textbook itself, which was a significant evolution from the past, where the content was all paper-based.
I must say, the results are outstanding, as you'll see on by the following example. If you look to the right, top right-hand corner of the screen, you'll see a 3D model of a freight car. The 3D modeling of railway rolling stock provides students with the ability to rotate, position, and position components to better understand how they're made and how they function. Late last year, we'd introduced tablets to the new hire conductor classrooms. The tablets allow students to learn and practice simulations outside the classroom at a student's pace, without a fear of classroom stigmas, allows for review of video as many times as necessary to strengthen comprehension and learning retention. Assistive learning features, like the ability to highlight material for later use, and also allow students to print that highlighted material so they can further review it.
Analytics built into the course tools allow us to better understand how much time and what material students are reviewing after class, and it provides to that instructor the opportunity to review specific areas the next day in an effort to minimize knowledge gaps and promote standardized training. Late in December, actually, within the next couple of weeks, we'll be piloting the midterm exam on tablets, as well as we're currently developing the final examination for our new hire conductor classes on tablets. Having examinations on tablets will allow for instant feedback on exam results while freeing up instructor time to review areas that students have had trouble with. As you may have seen when you walked in this afternoon, we have a number of tablets outside for your viewing, so we can take you through some of the scenarios that we have on the tablets.
This slide shows us an example of our signals challenge simulation. Our railway signals are similar to traffic lights on a roadway. They allow for the safe and efficient movement of traffic. While you're learning to drive, traffic signals were fairly basic. At the railway, students are required to learn and understand over a hundred different operating signals. In the past, operating signals were previously memorized from printed material, such as this deck of flashcards. Lots of you who work at the rail have seen these. We're now teaching them an interactive process where students gain knowledge using the signal challenge simulation, which takes them through animated operating scenarios and prompts them to identify the signal shown. The simulation is available on multiple skill levels and immediately tells the student which signals they have correct and which ones they do not.
We've received very positive feedback from the students utilizing the signals challenge and tablets through both qualitative and quantitative results. It's still in the early days, but so far, we're consistently seeing higher test scores from students using tablets than students who are using traditional paper-based material. In the past, on-the-job training was very inconsistent across all functions of the system. However, it is a critical element to enhancing employee integration and improve retention. In 2012, a working group was formed that included both, or actually, labor, management, field on-the-job trainers, and our operating practices staff. This group was given the mandate to revise and strengthen the field training component of new hire development. The first target group was new hire conductors. Very positive buy-in from the trainers in the field, as well as the union representatives.
So under the guidance of the working group, an on-the-job tool was developed, which would provide visibility on a trainee's progress that allows tracking and monitoring by both local supervisors and their unionized coordinators. We developed the on-the-job training tool, which has also allowed us to provide timely tracking reports to general managers and superintendents that allow them to track employees' performance in line with their expectations of a safety leader. It allows for monitoring of data entry on trainee evaluation forms. Automated alerts are created when a new trainee is not meeting expectations, and this allows us to provide a more focused follow-up with that employee. It also ensures employees are given timely and accurate feedback. So not only are we evaluating our trainees, this tool also allows the trainees to evaluate their coach, their coaches. This is the tool I'm probably most proud of.
It's called the training or trainee evaluation tool, which has been developed internally at CN and is leading edge in the railway industry. At the completion of each training shift, the on-the-job trainer evaluates the trainee's performance based on a number of criteria. The ratings are then entered into the system, and the data is collected for each trainee, which then calculates a grade point average for each student. The process uses a checklist, which activates with activities that a new hire employee will need to master prior to being qualified. The trainer provides coaching and rates a level of proficiency for each skill and activity. This tool was built for the new hire conductor program, but is very agile and easy to maintain, and we've now rolled it out to the locomotive engineer program, track maintainer program, rail traffic controllers.
As well, we're using it in our management program for our assistant track supervisors to help them develop the skills they need for the job. In 2014, we'll be rolling it out to the car mechanic function, as well as our signals and the communications new hire group. So in order to support our new hires, as well as current employees in their training development, it's important to ensure they're able to receive consistent quality training in facilities that really align the classroom and the field. CN is investing over CAD 50 million in two state-of-the-art training facilities to accomplish this. As you can see on the top, the Winnipeg Center will be opening in the spring of 2014. It will consist of 23 classrooms, a 9,000 sq ft high bay.
It'll have 6 locomotive simulator stations and a lab for our signals and communications employees. We're also in the process right now of developing an extensive field setup, where students will be able to take what they've learned in the classroom in the morning and go into the field in the afternoon and apply it. The facility in Winnipeg will be able to handle 250 students on a daily basis, for who will be there for programs from anywhere from our new conductor programs to our locomotive engineer, track maintainer, welding, and rail car repair. The bottom slide shows you our Homewood Training Center, which is similar to Winnipeg, but on a smaller scale, and that should be opening in late summer of 2014.
... CN has invested significantly in the modernization of our curriculum, and we've strengthened our resources, and we've developed state-of-the-art training facilities. These steps will not only benefit new employees, but also our current ones. The linkage between classroom, hands-on, and field training will continue to allow us to strengthen our safety culture at CN and make CN the employer of choice. Thank you. I'd like to turn it over to Michael again.
Well, David, I got to admit, it is very exciting with regards to what we've embarked on, with regards to getting the evolution of our training, with regards to all new railroads are coming on. So David, Dave Ferryman, and Sam Baratta provided you an overview in relative detail for people, process, and technology, and how it supports our safety management system. We firmly believe we are on the right track. Our continuous improvement, our downward trends in injuries and accidents are truly showing and bearing fruit to see that improvement.
When we look at the foundation that we have for our inspection and detection technologies, and how we are continually building upon them through such elements as risk mitigation and corridor risk assessments, to truly understand our business, shore up potential weaknesses that may exist, or seize opportunities, such as the example Sam talked about in reference to positioning of some of these detection systems. But truly, one of the core elements is our people. Fostering that employee engagement to net out that safety culture, that's key. That's truly an element that we have and will continue to leverage. As I said earlier, this is a journey, it's a transformational journey that we are on. One accident, one injury is still too many. We have the sobering reminders of such tragic events as Lac-Mégantic. That's what fuels our fire.
That's what propels us to continue to build on our safety platform. So I hope these presentations have been informative. I hope they've shed a light into our world of safety. I'm going to ask you to think about what we've said. We've got a period right now where we'd like to entertain some questions that you may have, answer some elements that are intriguing to you. So I believe Paul's got a microphone to help assist in some of the questions, and I'm going to ask my colleagues, Dave and Sam, and David, will be available for any questions that you may have.
Hi. I just noticed that a lot of the data and the thought process seems to have started around 2008. Just want to know, what was the catalyst, what was the generator of this evolution, as you call it, transformation, in terms of the safety culture? And for those of you who have been here before, to what extent does it differ under different leaderships? And it's not the point of my question, but I just want to know over time, how this has evolved.
I think within the engineering group, certainly we had this Precision Engineering database that we created in and around that time. I don't think there was anything necessarily that revolutionary about 2008 or 2009 when we put into place. It's been something we've been talking about really for years, and technology really wasn't quite there at the, you know, anything prior to that. But we developed it. It took time to develop it and put it into place, and then to get it right. So even once we put it into place in, say, 2008, we had our growing pains for a little bit of time, too, but now we have what we feel is a state-of-the-art times-- type system. But I can't say, you know, necessarily overall leadership so much as just evolution of technology.
I may add also, you know, arguably, CN has been a leader in many, many areas of technology back in the nineties. And to give an example of that, when we started to work with predictive temperatures of warm bearings rather than hot bearings, and started to apply that, we were the first railway to do that, and that allowed us to reduce our burnt-off journals by a factor of two, almost instantaneously. So, you know, CN has been a leader in many areas of technology for, you know, over a decade and a half or two decades.
But what's really been an impetus as well, is the ability to leverage information systems, so that when David talked about, you know, the Precision Engineering track information system in David's slide, he also had this Locomotive Engineer Performance Monitoring that brings us visibility in the locomotive cab, allows us to understand what locomotive engineers are doing in real time, so that we can mitigate risk of excessive in-train forces, as well as control-
... take controls to reduce, you know, excessive, fuel usage. The other element has been the Railway Safety Act review in 2007, 2008, which, as we've said, we really took that as an impetus to roll up our sleeves, work with the industry, work with the regulator, work with the unions, and that's propelled us in terms of safety culture. So combining the two, the technology and the safety culture, you know, with the information system, helping us to bridge those, those areas that where we didn't have visibility in the past, that we now have the capability to bring visibility to.
And then let me say a little bit more, too, on the, because I just spoke about Precision Engineering.
In particular, with the rail flaw testing and with the geometry testing, you know, I took this job. Been in this job eight years. When I came to the job, I really felt we, as a company, needed to do a little more in those arenas. So I got executive support to build another geometry car to do additional rail flaw testing. And I think, you know, the results show that we made some good choices there.
Don Newman from Cormark Securities. Right here, guys.
Yes, sir.
Just to be very specific and maybe not overly granular, but just in terms of the overall reaction on Lac-Mégantic in terms of the industry, what specifically they're doing in terms of labeling equipment on the tank cars, as well as the pressure relief valves and operating practices. Maybe just sort of recap, you know, what has been coming out from Transport Canada and FRA on that front, just, you know, across the board.
There's been a lot of discussion in reference to tank cars and the transport of dangerous goods. Transport Canada, they have issued protective directions with regards to product classifications, and we welcome that approach. It's truly, it's a, it's a, a very strong view of ensuring that we truly know both shipper as well as carrier of what these products are. So the protective directions that went out was to really ensure that people truly understood this emerging product, understood its characteristics, and it was classified properly in the shipping documents. So that was a, one of the core elements. The other element, which we did see and we, we endorsed, was providing emergency responders in the communities information about dangerous goods that flow through their community.
This was in the spirit of ensuring that they have emergency plans to respond to what dangerous goods flow through their community. We are very open and are and have engaged with them already with regards to understanding these products and providing some training to them. Sam also spoke a little earlier about how we've adopted what we call OT-55. It was an operating guideline which we used in the United States, that the railroads as a whole, not through regulation, but through an industry practice, we can have had a very common view about restricting speeds with certain amount of products.
As of Lac-Mégantic, we made it a little larger to include this in Canada, and as Sam indicated, we are the only railroad right now in Canada that is adopting that restriction of speed when having various hazardous material products on the trains.
Just to maybe just recap, what are they doing on the tank cars? Obviously, I think the shippers own them for the most part, or the lessors, but as well as valve replacement, any rules coming down on the pipeline on that front as well?
So there's definitely a move afoot with regards to the evolution of the tank cars. So the tank cars themselves have seen changes over the years, most significantly in October of 2011. It was a common view put forward to help strengthen and make it even more safe, the tank cars, through different materials, thicker shells, protection of the valves. We have, since Lac-Mégantic, as an industry, we have come together and taken another look. What other lines of defense could we put forward for these Department of Transport One Eleven, the general purpose tank cars, for which we see the large majority of tank cars are those style of cars.
So we've very quickly, as an industry, through the American of Association Railroads, for which we form part of, have come to a very common view of other elements that would render these cars even more safe. And these would include high flow safety valves, full head shields toward the ends of the cars, a thermal jacket, which will, in essence, assist in if there's a pool fire, and as well as with the jacket around the outside of those tanks, help with regards to the puncture resistance of that shell. So we've put forward those recommendations to the U.S. Department of Transportation, for which they are in the process of reviewing. So we just feel as an industry, that is a safe approach. And you are correct, the railroads typically do not own the lion's share of cars.
They are shippers, customers, lessors that own the majority of the railcar fleet.
First, I wanna say thank you for this presentation. We don't usually see that in these kind of meetings, but, from a higher level, can you classify the typical train accidents in terms of what is due to the infrastructure itself, what is due to the rolling stock itself? And the second question is, during your presentation, you mentioned that, the first line of defense is usually the visual inspection, and the second line of defense is the technology inspection. And intuitively, I would have thought technology would be more precise to be the first line of defense. And so if you can a little bit address that, please.
Certainly. The first point to mention is that, that causation of accidents is very different in main track versus yards. So typically, on the main track side, the lion's share are going to be infrastructure related, so track geometry issues or rail issues, and mechanical is typically going to be the second largest cause. In-train forces would come in next, and then you'd have environmental factors such as, you know, excessive precipitation or other. So in terms of those causes, we monitor them really, really closely. And as David mentioned, you know, rail failures, which are the leading cause, has dropped by a factor of three over a period of less than a decade. And that's on the strength of the increase in ultrasonic rail flaw detection.
You know, it may be just a matter of terminology, what's the first line of defense and what's the second line of defense, but we've always been doing visual inspections. But that notion of having multiple lines of defense is where the power comes from in terms of reducing risk and taking it from a residual risk of, let's say, one in a hundred, when you have a visual inspection only, supplementing that with the technology that has come on stream as technology has evolved, as information systems have allowed us to leverage that data in a more powerful way than we have in the past, bringing in all those lines of defense together, bringing our residual risk to the lowest level possible with all the means that we have at our disposition. So we monitor those causes very closely.
We do trend analysis, and it's not just the broad brush approach, because, as I said, causes do vary from one region to the next because of weather, topography, operational characteristics. We develop our capital plan, our technology plan, many of our people initiatives around that causation. So we have systemic issues that we deal with, with system initiatives such as training excellence. We also have local issues that we identify, that we have, for example, pinpointing installation of either wayside detection, new rail, specific increases in terms of track inspections, where we monitor.
We have track quality indices in all our trackage, so we know where our best track is, where our less quality, lower quality tracks are, and that allows us to inject the right capital and the right inspection to mitigate risks using all those lines of defense together.
I had a quick one, this is for Dave Ferryman. How are you?
Good. How are you doing?
Sony Hanch.
Tony.
You gave a great overview of the track side that you're responsible for, but I assume also under your bailiwick are bridges?
That's right.
I know that's a big concern, I think industry-wide, certainly in the short line side of the business. So I just wonder if you could, you know, just sort of the same, the same, update you gave on the track side. Can you talk about what you're doing on the bridge side?
Absolutely.
Or is that no longer a concern? Have you updated them?
It's, you know, it's a concern, any of our infrastructures, you know, we plan around. When they built a lot of the bridges for the railway industry, they were built when the railroad was built, and they assumed they would last a lifetime, and in most cases, they lasted several lifetimes. We, as a company, have made a conservative effort to do our bridge testing, loading testing. We go out and do stress testing on bridges and make sure that they're capable of handling the particular loads that operate over them. We have a planning envelope every year in our basic capital to the tune of about CAD 105 million.
And, Luc Jobin, CFO, has even recognized additional capital beyond that to a strategic capital to go after some of our larger bridges across our property, in particular, our structure at Dubuque, over the Mississippi River, which we've recently renewed or are about to complete. Sault Ste. Marie, at the border crossing, we spent considerable amount of capital. These are major structures, right? The Quebec Bridge, several others, but we... That's how we've approached it. We have our basic capital, ongoing capital for replacement, as well as a, a strategic, fund of capital to go after some of these key structures. You bet. Thanks, Tony.
Cherilyn Radbourne from TD Securities. I just wondered if you could speak about the extent to which you're able to quantify the cost benefit of some of the investments you've made in detectors and so on.
Yes. I mean, I think when we take a look at our overall costs of accidents and the amount they've come down, and we put that up against what we've, what it costs to do the additional testing, we see a favorable return when it comes to that. So, you know, these technologies, aren't, you know, in the grand scheme of our bottom line, huge sums of money, but the accidents they are preventing, I think, are or potentially are. The risk is there. So it's good. It's money, good money, well invested.
In the back, it's Scott Group from Wolfe Research. Just want to follow up on the safety regulatory question from earlier. I guess we've seen the kind of the changes in best practices and maybe something coming with one eleven tanks. I'm wondering if you're expecting any additional regulatory things that might require more capital from the rails, positive train control, electronic braking systems, anything along those lines that you're expecting or planning for?
... At this point, I think we're working very closely with both the Federal Railroad Administration as well as Transport Canada. As we do know, and you made mention, PTC is, it's emerging, and it's evolving in the U.S. It is regulated at this point in the U.S. properties, and we're working very strongly to have it in place with the other Class One railroads, and we are developing the technology. And we have to understand it is a technology that is evolving and being built up. In Canada, as we stand right now, the regulations are fairly robust. They are fairly detailed. We don't anticipate, at this point, any elements that would really alter our business.
What we've really been focused on with Transport Canada is ensuring that what is in place is effective in terms of the rules, some of the operating elements, so we've been working very closely with them. But we haven't stopped there. So when we look at the effectiveness of what we do and some of the risk elements, that's where it allows us to push ourselves a little bit more forward. And we talked about restriction of speed. We talked about a recent announcement with regards to our risk mitigation. So in essence, we are putting forward a lot more lines of defense to really reinforce that existing regulatory framework that is there. And earlier, we talked about how we exceed on some of the elements. Transport Canada recognize the elements of what we are doing. They're fostering what we're trying to bring forward in terms of that risk mitigation.
So whatever may come in place, we don't really foresee any large-scale changes with regards to regulation that would alter our business. In fact, some of the elements may complement some of the elements that we have in play and that are emerging for us in terms of our safety management system. We've got time for about one more question.
Hi, John Vermeer from AGF Investments. I'm just curious, we've talked a lot about technology, but we really haven't talked about the, the human element. As you're onboarding 2,000 new hires, I'm wondering if you've somehow made adjustments to your hiring practices to, perhaps screen out some, you know, bad actors?
There's a tremendous amount of work that has been done on the selection processes. We have actually worked closely with Saint Mary's University over the past year to understand where the opportunities are, to ensure that there's a clear expectation for potential new hires from the time that they apply, so that there's no surprises when they come to the field and realize it's an outdoor job and there's seven/twenty-four, and so on. But also, in terms of the cognitive abilities of the individuals, we use multiple tests, such as Wonderlic and Hogan personality tests.
We've actually tweaked those and are working on enhancing one, again, with the help of Saint Mary's University, to ensure that we have the right people, that have the right expectations, that have the right abilities, so that when we hire them and start training them, we have the minimum loss, that can be with, you know, the filtering process that we take at the selection phase. There's also the element of through the training, we want to ensure that they are a right fit for this trade.
So as we go along in the training, in the process of the training, if we see, for whatever reason, they're just not and don't have the ability to take in that information and process it and act upon it and so forth, then at that point, there can be individuals who we say, "You know, they may not be the right fit," and so forth, and we do look at other candidates. So it's a fairly rigorous process to be on board at CN. But with that, we've got a couple of elements out there, which I'm gonna challenge you on. Dave has got some tablets outside that gives you a little bit of a window in the world of our trainings. And we're always looking for good candidates at CN, so for whatever reason, you're starting. Part of the training, right?
Part of the training. It starts today. So for whatever reason, you see, and this is actually more tempting than what you do on a daily, on a daily routine, then take an interest with regards to that. And I'm almost willing to throw down the gauntlet with regards to our training, our simulator. And we are looking for very qualified individuals who can make the run. Now, word on the street is that there could be a prize for the best individual who handles that training through the simulator. So hence the challenge. We appreciate your time. We've we've thoroughly enjoyed having you here, allowing us to share our world of people, process, and technology through investment. So thank you very much. Thank you very much.
Thank you again, those of you that are here in the room, those of you that are just arriving from New York, and certainly those on the webcast, for joining us here today. It's really a pleasure to have all of you here. I'm gonna just make my, forward-looking statements. The executive presentations today and tomorrow may contain forward-looking statements within the meaning of applicable securities laws in both Canada and the United States. There are, of course, a number of risks and uncertainties that could cause actual results to differ materially. Those are detailed in the first slide of the presentation, as well as in our management discussion and analysis that is regularly filed with the SEC and applicable securities regulators.
Certain applicable assumptions are also outlined on the first slide, and I would like to mention that at times, the presentations refer to non-GAAP measures for the purposes of comparability.... A reconciliation of those measures is available on CN's website, and hard copies are available. It is now my pleasure to turn the meeting over to Mr. Claude Mongeau, my boss, and CN's President and Chief Executive Officer. Claude?
Thank you, Janet. I hope we will have a few forward-looking statements, otherwise, why would you all come here? Let me thank you, Janet, and let me first thank you all for being here. Some of you have braved the weather. It's not always easy when you have an investor or any meeting, actually, in December in Canada. You never know what weather will do. So I understand there's a few people from some parts of North America that are having difficulty getting here, but you are, and I thank you for showing up.
All of those who are on the web, listening in the comfort of their offices, I understand why you would have done that, and we will be trying to make the meeting as lively and as interactive in terms of content as we can for both audiences. In fact, I think we have a microsite, new innovation at CN, that allows all of you on the web to have access to all the presentation on an ongoing basis. So we're gonna be trying to make Dave a liar. We had this safety briefing a minute ago, and Dave said, "I think I have the most exciting presentation of the day." So I'm gonna try to make you a liar, Dave, and have an even more exciting presentation.
Because we have a great story to tell, and we have a great lineup, not just today, but basically over the next couple hours, tomorrow, into the afternoon. It's a great story, and it's a great lineup to tell it. So let me start right away, and give you an overview of the agenda. I think it's almost two years ago in New Orleans that we first framed our agenda in the manner that's laid out on the slide. So I don't think there's a word that has changed. It's exactly the same story as what we discussed in New Orleans, and it's effectively, other than Jim, who stepped up in the COO position, it's effectively the same lineup. But we're gonna go deeper.
We're gonna help you hopefully connect the dots, get a sense of all the initiatives that we have underway, all how they are connected together. We're gonna showcase a number of proof points. We have four years into that third leg of the CN transformation journey, and the proof points are adding up. We are building a lot of momentum, and so we hope over the next day or so to help you connect those dots, help you understand the core initiatives, help you understand how they come together, and, you know, use the proof points as evidence that it is resonating and that we are indeed building momentum with that agenda. So the team is very much deepening our agenda. It's the same agenda, we're just deepening it. We are all about balancing operational and service excellence.
You will see us take it to the next level. We want to become a true supply chain enabler. Same concept, starting from who we are in terms of operational efficiency, but balancing service and bringing it together with a top-of-the-hill view, end-to-end. Not just a great railroad, but a railroad that helps it connect across participants in the supply chains we are partners with, and all of it to the benefit of our customers and the participants in the chain. It's about growth, and it's about efficiency. It's about continuing to deliver superior growth. Our goal is to outpace base markets, to grow faster than our competition, all of our competition, not just, you know, one railroad, all railroads, not just one mode, all mode.
It's about helping our customers win in their markets, and when you add it all up, it allows us to grow faster than what the economy would otherwise give us. You do that in a high fixed cost business like the railroad industry, you do that in a well-managed company like CN, with significant margins, and you have scope to create significant value. I think you all-you now understand the power of that model, and we're gonna explain to you how it continues. It's all about building a solid team. I often say to people, it's not the, it's not the color of our locomotives, it's not the gauge of our tracks, it's the people and how they come together. That's the core differentiating factor. And how we come together is very strategic. It deserves one circle on this big picture agenda.
And it's about the broader agenda as well, not just our customers, our shareholders, the people who deliver day in, day out in our company, the people, the employees, the railroaders. It's about the broader stakeholders. We are a very profitable company. If we want to keep our right to earn that high profitability, we've got to be a true backbone to the economy. We've got to be perceived as a key part of the solution. We've got to engage stakeholders. It's a core element of our strategy... You bring all those core elements together, and you have the, the ingredients, the, the game plan to maintain our industry leadership, and that's definitely what we're committed to do at CN. So let's take it around the wheel, effectively, one by one. Thank you, Mary.
In the rail industry, beyond the right vision, the strategy, and people, it's really about the franchise. And I have said to you before, if I had to choose which railroad to lead, it would be CN. We have an unparalleled reach. We are a very strong originating carrier. We originate more than 85% of our traffic. You look across, in Canada, where we started, we are the railroad of the North. We go way up in British Columbia, where forest products, mining activities take place. We go way up into Alberta, where you have the energy sector, the forest products, all of the industrial activity north of Edmonton. You go north in the prairies, we are the railroad of the North, everywhere in Western Canada. We are the railroad of the East.
We go well beyond Montreal, all the way to Saint John, New Brunswick, Halifax. We cover Quebec like no other railroad. We have a very, very strong origination franchise in Canada. And through the years, five acquisitions, CAD 8 billion, we've been able to extend our reach deep into Mid-America. We go all the way to New, to New Orleans, and that allows us to funnel traffic north to south, all the way down to markets like Memphis, Chicago, Detroit, you know, and everything in between. That reach gives us our three coast network. That three coast network allows us to help exporters, importers from Canada to Asia, from Asia to North America, from, you know, Southeast Asia into the Eastern, using the Suez Canal through Halifax, from Latin America, up, the Gulf Coast. We are a three coast network.
We have a strong origination franchise, and that franchise has a very, very well-diversified business mix. You won't find another railroad with as diversified a business mix as CN. We have a superb intermodal franchise. It's growing very, robustly. We have a solid bulk franchise across many commodities, also growing well. And we have more merchandise traffic than any other railroad as a percentage of our business mix. More industrial products, more frac sand, more energy, more energy consumables, more forest products, more of all of these goods, automotive, et cetera, that are using single carload networks, where railroads have an ability to shine from a cost standpoint, increasingly because of our agenda from a service standpoint, and where we have the most leverage to gain market share over trucks as fuel prices increases and as we continue to deploy our agenda.
We have the same great diversity in terms of geography. A third of our business is export. Effectively, you know, a little bit more than 35% is domestic Canada or US business, and roughly, roughly a third is transborder. A lot of it's south, southbound, but more and more of it in today's environment, northbound. We come at it from all coasts. We have this diversified business mix. We have a great franchise, and it's key to our growth potential going forward. But it's not just the franchise, it's what you do with it. It's not enough to be born with a great railroad. You have to take it to the next level, and that's what our agenda is all about. JJ and his team tomorrow will... JJ and the team in general, tomorrow will share insights on how that strategy is laid out.
But let me say a few words. How we want to continue to deliver superior growth has as much to do about the markets we serve, than it does about our business agenda of innovation. All of these initiatives were words when we first met two years ago. Today, they are a reality. Our go-to-market, the so-called Sell One CN, is reality. You've seen how it's helped us win with our customers, offering them more than just one product through different channels, offering them all the products of CN through one channel. Sell One CN is one of those foundational initiatives. I call them gifts that keep on giving. We are on it. You'll hear about examples tomorrow. We are also thinking of ourselves less as just a great railroad, more and more as a true supply chain enabler. We see beyond what we do as a railroad.
We're in the middle of it all. We want to understand shipments from the moment they touch the coast to the moment they're delivered, whether we own the terminals or whether we own the relationship all the way to the receiver.... That supply chain thinking, I believe, is also a foundational initiative. It's a gift that keeps on giving. It's a mindset, it's a way of thinking about opportunities, and it's working. We have initiatives that are tied to raw innovation. The, you know, a good example would be matchmaking. Another example would be introducing new products like sleds to move, industrial, you know, steel products into containers, like flexi tanks, like the way we deploy our intermodal service inside our carload business to offer supply chain redundancy, Intermodal Flex.
When the carload business is under difficult, or order fulfillment is under pressure, can we come to the airport with two airline tickets? One is a carload with the car management excellence, another one is using container with CM drivers and using intermodal as a flexibility tool called Intermodal Flex. We have a range of product innovation, from cold reefer services, to Intermodal Flex, to flexi tank, to sled, to matchmaking. You'll hear tomorrow examples of how we are helping our customers understand all legs of the movement so that we can gain efficiencies by connecting them together.
Import from Asia into North America, street turns, return back for round-trip economics using containers of our shipping line, loading them into exports, going back to Asia, matching, matching legs of supply chain components into an efficient whole that is better from a service standpoint and also better from an overall economic and cost to the customer, and better for us to gain market share. We're bundling solutions. Our Supply Chain Solution group is offering tools to further differentiate our rail franchise. We call it Feed the Beast, so that we can have capability to differentiate our railroad product with the adjacencies, the transload capability, the cargo flow, the freight forwarding on difficult moves to help on, on, putting together the package so that we can do matchmaking. We're increasingly matchmaking customers, matchmaking the originator of product with those who are consuming it.
We are in the middle of it all. We understand those markets. If you think of yourself as more in a railroad, you become a supply chain enabler, you can innovate, and you can drive value to help your customers win in their market. That's our journey, and it's working. We're also driving project growth more aggressively than ever in our history. We want to be upstream. We want to be there before the project is born. We want to have a transportation agreement before the financing for the mine to be built is done. Why? Because we have value to offer there. We understand transportation. We understand First Nation negotiations. We understand, especially when the supply chains that are being created are very transportation intensive, we understand how to optimize costs to win, and maybe we can make a difference.
Maybe projects can be there that would have had a challenge because of our innovation. Maybe projects will arrive to destinations sooner. We don't care. More projects, more projects sooner. We win by winning one inch at a time. We drive project growth harder than we have ever done in our history. Why? Because our mindset is focused on growth, profitable growth, helping our customers win in the market. We're doing it in a range of markets, from commodity, to merchandise, to energy. We're helping Canadian energy move to market. We are not just a railroad, we're a supply chain enabler. And because we do all of this, we want to be paid a fair price. We're also pricing to value, because that's a fundamental drive of value creation. We understand that in space. So our goal is to continue to outpace markets. That's our strategy. It's been working.
We far outpace our competition and base market conditions over the last four years. We plan to do it again in 2014, and we hope to be able to, to do it for many, many years to come. You will hear more about that tomorrow, not just in JJ's presentation. We're a full team. This leadership team knows how to move the ball forward. We are rugby players. We are all locked into a scrum. We know how to play offense, defense. We know how to kick the ball, pass the ball, run the ball. We are connected. So growth is not just JJ, growth is Jim, growth is Luc, growth is all of the executives that are in this room with me today and tomorrow, whether they are in operations or marketing or even corporate functions.
How we grow is by offering a product that is differentiated in the marketplace, and it's all about balancing operational and service excellence. It's the word balancing is critical. Make no mistake here. Who we are is in our center of gravity, a bit of a technical term. Our center of gravity is operation. We understand that if you don't run an efficient rail network, you don't get to benefit from the fruits of the growth that you bring on. Only if you are highly efficient, only if you understand where you're strong and how to run the railroad efficiently, can you accommodate that growth at low incremental cost. We've been known to be the leader in the industry from an operational efficiency standpoint, and we have no intention of letting anybody pass us.
We like them in the rearview mirror, and we will keep them there. We know how to juggle three balls, but we needed to learn how to juggle four balls. That fourth ball is service, and I say this with a great amount of respect and admiration for my predecessors. If I didn't have a team that knew how to juggle three balls efficiently, it would be tough to have that fourth ball from scratch. We have a team that knows how to operate a railroad efficiently. We now have a team that knows how to juggle four balls better than anybody. We are leading the way in that fashion. We're pushing on car velocity, train speed, locomotive productivity, yard throughput. In fact, in the third quarter, Jim and his team delivered on four of the six core metrics we monitor.
They delivered historical records on 4 of the 6, and we're not done. It's getting better in the fourth quarter. Car velocity alone is not the end game. Car velocity and order fulfillment is the game we're in. It's about balancing customer outcomes with efficiency at the railroad. That's what we're doing. We are measuring order fulfillment more precisely. We understand it, one customer at a time, and we understand the trade-offs between car velocity and order fulfillment. That trade-off is being made by the very people who interact with our customers on a weekly basis, who are responsible to lead order fulfillment. We have opened the door to the people who distribute cars, the best in the industry. They're now not just car distributors. They are supply chain enablers.
They interact weekly with the customers, keeping them in sync in terms of supply, but also keeping them in check in terms of gaining flexibility. Want a car tomorrow? What about this one? You have it loaded for two days. That conversation is taking place every week, every day in the CN Car Management Excellence Group, and it's what I mean when I say that we are taking our game to the next level. The same goes for train speed and hub-to-hub consistency, locomotive productivity and efficiency of deploying our asset and spotting reliability in the countryside. How we deploy assets, locomotives in particular, there's a trade-off between locomotive utilization and the ability to spot the countryside or run the coal train efficiently with the customer in mind. The trade-off, at first, we were giving a little bit of locomotive utilization to gain a little bit on service.
Today, we're past where we were, and we have not lost an inch in terms of service outcomes to the customer. It's working, and we are taking our game to the next level, and Jim and team will help you connect the dots further tomorrow. It's about taking our game beyond, you know, balancing operational and service excellence. I said to some of you recently, I was out west doing a trip, you know, meeting prospects with investors with Janet. And I said to a few, I said, "If a few years ago I had come up on the stage and talk about becoming a supply chain enabler, many of you would have sold." You would have said, "Well, where are you going with this? You know, those are funny words. You know, what about operational efficiency?
What about the operating ratio?" Today, hopefully, you see the proof points. We have grown earnings, we have improved margins, we have not missed a beat from an operational efficiency, and we have a huge pipeline of innovation. And so I am now able to stand tall, relatively speaking, and, and come out of the closet and call it the way I see it, and it's all about becoming a true supply chain enabler. It started and gained a lot of momentum, particularly in intermodal. We went coast to coast with framework, collaboration agreements, service level agreements with terminal operators, nine terminal operators on our network, nine service level agreements. We share the precious few metrics. We daily engage. We co-locate our people. Our people co-locate in the port offices, in the offices of our terminal partners. We see the world the same way.
We problem solve in, on a joint basis, and we do that real time, all the time. And it's helping us reduce dwell time. It's helping us get better outcomes from a volatility standpoint. And that is why in intermodal- overall, we have grown double digits for the four last years. We have grown much more than double digit in overseas business. We have grown solidly in domestic intermodal. It's because of that supply chain collaboration, that mindset of seeing end-to-end, in putting ourselves in the shoes of our customers and understanding the entire journey. But we're taking it to the next level. After a few years of sharing data, of collaborating, of hooking things together, you start to get what I would call an ecosystem of collaboration. You get deeper hooks, you get the ability to have richer end-to-end visibility.
We are opening the doors, and I'm moving to other commodities. Coal would be an example. We are moving to opening the doors of inside the tent visibility. Ridley, the coal terminal in Ridley, shares with us information on every minute of dumper utilization. We assign every minute of shortfall, whether it's a rail problem, a hose that, that was not coupled right, or some, you know, problem with marshaling, or whether it's a belt problem that is a terminal issue. We assign every minute of dumper shortfall, minute by minute, to each one or the other. We have full visibility inside the tent. That rich end-to-end visibility is helping us manage throughput and address the bottleneck in that supply chain, which in this case was the dumper, and hit record in terms of overall end-to-end efficiency. Does that mean CN's got to do things differently?
Do we need to, you know, make sure that our-- that we don't have crossed hoses, that we don't flow cars in the wrong way? Sometimes, absolutely. Why? Because we have our eye to that dumper bottleneck. We understand the supply chain well beyond just CN. And you know what? What we do, we get paid in return two for one, because often they are one mile, we are a thousand miles. If they help us flow more throughput, if we work together to get visibility, the next thing you know, you have deeper mutual trust. And when you have mutual trust, good things happen. You have people willing to take a chance. We have terminal partners taking chances every day, adding graveyard shifts so that we can get out of the hole. We, in return, have strategic flexibility in our car fleet. We give, they give.
We have line of sight on what matters, and we are optimizing the supply chain together. It's working so well that the ecosystem of collaboration is broadening. Now, the customers are joining in. The customers understand that we see in coal, for instance, we see it from the moment it starts accumulating on the pile at the mine, through our trains, on the dock, how much inventory to the ship are joining in. The customers understand that we see in coal, for instance, we see it from the moment it starts accumulating on the pile at the mine, through our trains, on the dock, how much inventory to the ship, when, how big, what are we trying to work on? We have STEM charts every week, every month. We share it together with our terminal partners, with our customers, and you have a couple years of it.
And then eventually they see that we are optimizing to make sure we manage throughput, but that we are aiming, and we have the plan to get there, to stem the vessel, have all the tonnage, stem the vessel, have all the tonnage at the dock before the vessel is scheduled for laycan. And because the world always changes, there's huge opportunity at times to start to trade. And so now, when a customer has a late vessel, and he knows that our plan is green for that stem chart for his vessel, the Okayama, laycan December tenth, and we have 9 days of buffer, and that vessel is gonna be a little late, and the customer knows that we're gonna be there for them, guess what?
Wayne and his team are able to start to engage the conversation and say to the customer, "Hey, you know, your buddy is in the hole. The, you know, he's revved on his vessel. If I could deploy the sets for a week in that service, I'll get back to you. You would help your peer," which in this case is a competitor. Customers are starting to do that with us. They're allowing us to deploy sets in a way that will match STEM dates, yet take a risk. Why? Because they know we have a plan, number one, we see it end-to-end. Number two, we will reciprocate. They will get. They will have a day where the reverse will be true, and so everybody wins. The customer wins, CN wins, our partners win.
How you get to a point where you have an ecosystem of collaboration, it's not just sharing data, it's the people who are able to interpret that data. It's the hooks, the capability to connect the dots... the mutual understanding that we have a game plan that is designed to work, to be fair, not just for CN, but for all the parties involved. We had it in coal, we had it in potash down to the first mile. We're not quite there in grain, more difficult, more complex, but I don't know where we would be if we did not have at least the foundation of it with the huge crop we have. Yes, you see a few media reports at times, but I was with two of our customers yesterday in the grain trades, and we're dealing with issues.
There's no finger pointing, just opportunity and problems to jointly solve. It's working. It's a gift that keeps on giving, but it needs embedding, it needs deepening, and it needs leadership to make it happen day in, day out. That's our mindset. It's working. As you broaden it out, you will, you will hear more today on each one of those subjects, but you've heard more about this one earlier today. We wanted to take 45 minutes, actually an hour of your time, to go deeper into what we're doing about safety. We take a much broader view of our agenda. It's about becoming a true backbone. You hear me talk about it at times. It's about being a key part of the solution.
At the moment, the most important stakeholder issue we face at CN, and I believe the whole rail industry faces, is about safety, about convincing stakeholders that we deliver responsibly. Why? Not because we are an unsafe mode, quite the reverse. We are remarkably safe. The whole, the whole North American rail industry is remarkable, remarkably safe, and I'm proud to say that CN, with a bit of luck, will finish the year as the safest railroad in North America. But a huge accident took place in Lac-Mégantic. That accident shook, shook the confidence of many stakeholders. So we have to step back. We have to take account of the accident. We have to reassess risks in context, not, I mean, risks are at, always at the margin, but we have to reassess every processes, every component of what we do to understand risks in context.
We have to respond proactively. We are doing that at CN. You may have seen, you've heard today, if you were at the presentation, that we, we have changed a number of our processes. We have added to our detection capability. We're layering additional inspection. We are, you know, bringing the, our key train policy from the US into Canada. We're, we're rethinking all of our business processes that focus on mitigating risks. We are doing that because it matters and because we are taking account of what happened. But it's not just responding proactively. We also have to reassure. When you have a bad accident like this, every other accident takes a different light. We have to reassure. CN's safety record has improved by some 50% over the last 10 years. 50%.
If you focus on dangerous goods, specifically, we move 99.997% of the dangerous goods we move all the way to destination without incident. Those are the facts. What we need to reassure about is that we are taking account, that we are building additional lines of defense. That's why I felt that spending 45 minutes to an hour on safety was very important to our shareholders, and hopefully, a few other stakeholders or reporters that were listening in on the web took note of that, 45 minutes earlier today. Our agenda is to be the safest railroad in the industry. Our agenda is to have a leadership position in leading the way on safety.
We are in all of the conversations, whether it's at the Association of American Railroads, at the Railway Association of Canada, which I chair, with policymakers on both sides of the borders, we will be part of the dialogue. We have a reputation to protect, and we have communities to serve safely every day. So that broader agenda requires a focus on it, so it deserves a trust in our overall agenda. Next is people. You can have the right agenda, you can have a great franchise, but at the end of the day, it all comes down to people and even more importantly, how they come together. I use this rugby analogy for a purpose.
There is no better, in my view, analogy of how a team must come together in a business like ours, network, outdoor sport, all about being connected, knowing who's doing what, when. No star player, just a scrum. More connected, faster, nimbler, and all focused on the same big goals... That's what we're trying to do. It's not easy when you have 23,000 railroaders. It's not easy, as you will see, in the chart tomorrow with Jim, when many of them are being renewed, to use a good word, in terms of a workforce renewal. But we are spending a lot of time. We're spending money for training. We're spending sweat and tears on onboarding, on selecting the right people, on developing talent, and on communicating, preaching, coaching every day.
Because nothing is more important, nothing, than how chemistry builds at the leadership team and how alignment is spread out throughout an organization. If you wanna succeed in business, if you wanna lead the way, if you wanna continue your transformation journey in that third leg, you gotta get it right. And getting it right, one employee at a time, is our focus, and we're building momentum. In fact, we're gonna, tomorrow, we've decided you're gonna see, in addition to the senior lineup, the ones who are gonna have presentations, in addition to all the VPs who are actually leading every day in the field, you know, delivering the goods, you know, scoring those tries on muddy pitches. We're gonna have eight people, one level below. Senior people, but one level below, showcasing vignettes, how it all comes together.
A little bit about how we plan to get to the next level, a little bit how we innovate, how information systems are a critical component of our, of our, agenda, and a critical differentiating factor, a core source of competitive advantage for CN. You're gonna hear those two vignettes while Luc stands up at the end. You're gonna hear about our new tools to get that team, that scrum, to act on the field, always be connected. We're gonna showcase those tools. We're gonna show you some of the new initiatives that we have to get our customer-centric agenda to the next level. You're gonna get two vignettes on this during Jim's presentation.
You're gonna get two great examples of how we are innovating on the market front with our go-to-market initiative, selling one CN matchmaking, and how we are matchmaking again and driving project growth to succeed. In fact, one of them, you know, just to give you a little insight in how I think, one of them actually got a teaser. He had a press release yesterday about what we're doing in frac sand, and you're gonna hear his story tomorrow. We're investing to support our agenda. CAD billions. We're gonna have CAD 1 billion, CAD 2.1 billion that we are gonna be investing next year. Luc and team will provide you a lot more detail.
Let me just say, we are investing in safety, we are investing in innovation, we are investing in growth, we are investing in productivity, we are investing to make sure we are a true backbone infrastructure to serve our customers and deliver returns to our shareholders. Fortunately, we have solid profitability, and we have the balance sheet to do it. But make no mistake, our first call on cash is investing in our business. It's only limited by our imagination, our discipline, and our focus. The more imagination, the more opportunity to deploy capital in a disciplined way, the more we will invest back in our business. We feel CAD 2.1 billion is what we'll need next year.
If we can find more opportunities, you'll be the first to know, because our agenda is not about next quarter, it's not about 2014, it's about sustainable growth and sustainable shareholder value creation for many years to come. That's how we use the strength of our investment to support our agenda. You'll hear much more tomorrow throughout the presentation. Let me just wrap up before Marie gives me the hook. And give you, I saw some of you multitasking during the safety presentation, looking at your BlackBerry. We did issue a press release that describes our guidance for 2014. I will not steal the thunder of Luc tomorrow, who will be wrapping it up at the end, for a reason. This agenda is not about numbers.
We don't start with a number and then reverse engineer into it. We start with an agenda from the ground up, with clear vision on what we try to achieve, with a sense of where we have advantage. And when that agenda builds momentum, when we are in a position to deepen it, then we know we are maintaining our industry leadership, and we know that the numbers will follow. We know the numbers will follow. We have the proof points over the last four years, and with a bit of luck and a good economy, we see a strong 2014 ahead of us. We need to grow at increment, at low incremental costs. For that, we need to be disciplined.
We need to know where we have advantages, and we need to gain, share, and help our customer win in all markets. We need to do it against trucks. We need to do it, do it against railroads, all railroads. We need to do it against all modes. That's what we're doing. You're gonna see the contour of it tomorrow, and if we outpace base market condition, as we have over the last couple of years, and we're already well on our way in terms of initiative to deliver that into 2014, we will accommodate it at low incremental cost. You see the metrics every week. We are running a tight ship, a tight ship that's balancing operational and service excellence.
With a bit of help and focus, interest rates can be helpful in that regard. We should be able to continue to inch down in terms of our famous operating ratio or to inch up in terms of our margin. That's what we're doing. That's what will help us deliver solid earnings and free cash flow for many years to come. And that's how we get to keep our jobs and please you, our shareholders. So we are committed. I hope I did not disappoint, Dave, and I'm now open for a couple of questions before we mingle and have cocktails. I fully understand that I'm just a little bit of setting the stage.
Much of the meat is tomorrow during the presentation, but I'd be happy to take questions, and that will set us up for a great day tomorrow. Over to you.
Well, thank you. Brandon Oglenski from Barclays. You know, as you engage on this supply chain enabler strategy, how much growth looking forward is gonna be less macro contingent and more contingent on developing, winning success with your client base and finding more efficient ways for the railroad to operate with your customers?
Yeah. The, we're in a mature business, so you gotta fire on all cylinders. The, the more, the more initiatives you have, the more sources of innovation, the more markets you're in, the more projects you follow, the more chances you have that the sum total of the things you're focused on will deliver good news in terms of the top line. And I hope I, I've given you a, a good sample of how it fits together at a big picture level. You'll hear many, many examples tomorrow, not just from JJ, but from Jim and, and Luc and in the vignettes. And at the end of the day, that's what we need to do. My sense, and, we've outpaced ourselves in that regard by a fair margin over the last four years.
My sense is that long term, the expectation to outpace the market in terms of volume growth, 0.5 to 1 percentage point is a reasonable goal that you can carry through for the very long term. We've obviously been doing, I mean, quite a bit more than that over the last four years. And I think we are geared up next year to outpace base market more than what we need to do long term. But to answer your question, big picture, that's the range. 0.5 to 1 point long term, more so in the short term, given the initiatives and the momentum we have in the marketplace. You do that on the volume side.
Hopefully, if you have good service and discipline and the right, overall mix of value to your customer, you should also be able to price ahead of inflation. Again, half a point, maybe a little more. If you do that every year, you have the makings in a well-run business like us to accommodate it at low incremental cost and deliver solid earnings and free cash flow. Yep. Yep.
I guess, my question, I keep it top level or at, high level here. You a couple of years ago, you would put a lot more emphasis on your Canada or your CN Worldwide type of product, and I see more of a shift now toward your customer service agreements. And my question is, are you seeing an opportunity here that there's greater value to kind of push down some of the investments you would have otherwise had to make in CN Worldwide? And, you know, with your increased involvement with the customer, are they doing some of that work for you, where you're getting some of the benefit without having to make that first mile, last mile investment? Is that a good read into the shift in focus, it seems, away from-
You have to look at the big picture. Thank you for the big picture. I'm not sure I could answer a small question. To answer you, you have to link up what we're doing. We definitely want to sell one CN. And selling one CN means there's only one channel to offer CN services. So unlike in the past, when we had many different channels selling different services, today, we have only one channel. So that's the foundation to our go-to-market strategy. So we sell one CN. But we sell the whole of CN, and it's first and foremost the railroads, but we also have complementary activity that allow us to differentiate the railroad.
If we need supply chain solutions, and that's how we call them now, if we need services to be bundled so that we can differentiate and get more share of wallet in our customers, we will make those investments. So the Gas Group would run a transload activity, for instance, in Prince George. What do we transload there? Well, we transload forest products and containers. You know, which containers? Well, the containers that are going back towards Prince Rupert for Costco. Which customers? Well, Canfor. So we sell one CN, and we sell a suite of products. That's helpful for Canfor because they wanna grow their market in China, and they're looking for options in terms of finding those boxes. It's helpful that we are willing to invest in a transload activity in Prince George because we're doing it inland, away from the crowded waterfront.
It's helpful that we are doing it inland because that allows us to use the box of our shipping line and fill it with the products for better balance on the export mode. So how the bundling of various services come together in that supply chain, sold by one person to Canfor, is our new strategy. You'll hear other examples tomorrow from JJ and from Paul about how we are matchmaking, how we are using our freight forwarder services for return moves, you know, helping the boxes that are coming from Asia be maximized or optimized in terms of usage. We're not selling freight forwarder, we're selling supply chain solution. We are doing cargo flow.
If we are trying to develop a new origin for crude, and we need to set up a small, we call them rapid deployment loading facility, a truck to rail to start, you know, a crude supply chain, you know, guess what? You know, the supply chain group is gonna be doing that. If we need to establish a capability for petcoke near Fort McMurray, we do that. So we invest in supporting the activity. We add it to our rail service, but we bundle it in a supply chain offering. And so it's not called CN Worldwide. CN Worldwide, you know, doesn't exist anymore other than as a legal entity for our Chinese office and some of the freight forwarder activity.
But the supply chain solution and how we bundle them into our agenda is gaining stride every day. We're doing more of it and are more looking for opportunities than ever before. But it's adding value to the bottom line in a way that it never did, previously. Yeah.
Yes. Hey, Claude, Tom Wadewitz from J.P. Morgan. I wonder if you could offer a thought on how large the pipeline is for productivity drivers, a market, you know, how optimistic you are on pricing over a multiyear timeframe? And if you put those two together, those would naturally—if you're optimistic on both, that would naturally lead to OR improvement. So is it possible, if you're optimistic on both, that even if you're not OR focused, that you could see it keep marching down and you could be, you know, high fifties, mid-fifties OR company? So, thank you.
There's no question, Tom, you are OR focused. You know, you'll have to let us play it out and see how good we can be. But there's no question we see the opportunity to gradually improve our operating ratio if we continue to grow faster than the economy and accommodate it at low incremental cost. The key lever that has been a headwind for us over the last couple of years, even though we have lowered our operating ratio by about four points since I took over, is the interest rate headwinds, things like pension and depreciation expenses. But we are not optimizing on the operating ratio.
We think there's a better way to create value for shareholder, and that's to grow faster at a given operating ratio and actually create dividends to pay them to the shareholders. I never paid a dividend on a OR percentage point, and I don't think I will in my career.
Yeah. Thanks, Claude. Chris Weatherbee from Citi. Two years ago, you talked about probably getting a little bit more in-depthly embedded with the customer and opportunities. It seemed to imply that there was maybe modally competitive business that you could bring onto the network. When you think back over the last two years and maybe looking out a little bit, as the dynamic has changed, arguably a little bit on the competitive side within the railroad space in Canada, how do you think about that opportunity? Maybe over the last two years, what has been from different modes as opposed to, you know, competing railroads?
JJ will give you more contour on that tomorrow, but we are gaining market share in every way possible. We're gaining market share by helping our customers gain market share in the marketplace. That's the first place you would go. Help your customer win, and if it's your customer that wins, then you get more volume. We're doing that in spades, in all commodities. We're gaining market share in trucks, in all of our products. We're, you know, gaining market share in trucks, particularly northbound or US traffic, northbound into Canada or southbound towards the US. You know, we're gaining a lot of market share as we have reestablished relationships with wholesalers in the US in our domestic service.
This is truck competitive business or truck partnership business, if we're doing it with the, with the, you know, people like Schneider and J.B. Hunt and, and others in the US. We're gaining market share one step at a time in the cargo sector. We're gaining market share by creating new markets that were not served by rail before. Crude would be a great example of that, where, you know, we have built up under James' leadership a franchise, which this year will be close to CAD 400 million. That's against pipeline. So we're gaining market share against modes. We're gaining market share against trucks. We're gaining market share against CP. We're gaining market share against US railroad with our US discharge, for instance, Prince Rupert, Vancouver, Montreal, Halifax.
If we have a better supply chain and we gain business away from US ports, we are gaining market share against other railroads. So that's what we've been doing. That's what allowed us to far overperform the base rate of economic growth, that with the rising tide over the last four years, and that's the plan to do so. That way, in the future, the more innovation, the more you spread out your target, the more sustainable.
Hi, Claude, it's Dave Newman from Cormark Securities. You did some great acquisitions in the past, Illinois Central, Wisconsin, GLT.
Mm-hmm.
It's been a few years now. We've gone through a recession. Your free cash flow headwinds are subsiding.... You're controlling more of the supply chain. Could we see sort of M&A begin to creep back into CN's overall strategy?
Yeah, I wish there were targets. You know, if there were, we would be going after them, but.
Ports or any other parts of the supply chain?
Well, you know, that's a different construct. You know, we are prepared to look at any investment, but we're mindful of channel conflicts, and we're mindful of our center of gravity and core competencies. It's one thing to build up a capability and adjacency. It's another to branch out in related diversification. Not saying we're not gonna stay open to those opportunities. We are. There are some that we have been, you know, looking at throughout the year, but, you know, at the end of the day, they have to stand on their own two feet and need to deploy capital. And there's no target that I can, you know, pinpoint publicly in that regard, and it's not plan A.
It's not plan A in the rail space because there are very few targets that are affordable, and it's not plan A in terms of related diversification because our agenda is full. The pipeline, the momentum, our ability to create value in the rail space is huge. In a few years, if we get to a point where, you know, we need to look elsewhere to deploy our capital, we will certainly do so. In the short term, if we can find ways to inject additional differentiation capability and feed the beast, we are on it. Yeah.
Can you... Excuse me. Sorry. Can you look back at the answer you gave a few minutes ago in terms of looking at market share opportunities in carload and helping your customers grow intermodal, et cetera, et cetera, and try to rank them in terms of overall size of the opportunity, and then, more importantly, also not OR, but ROI? Where do you see the highest return on investment for your capital-
Yeah.
In terms of this?
You know what? Whether it's OR or ROI, at the end of the day, when you have a high fixed cost business, every piece of business well priced, that fits into your network capacity is gonna be accretive to return and accretive to pay the dividend. So we focus on all the business opportunities that we believe we can add value and that we can fit in our network at a low incremental cost. You know, intermodal is an area that we have a lot of momentum. Obviously, it's high on the totem pole. The energy, not just crew, but energy more broadly, JJ will discuss that tomorrow, is a clear area of growth.
The continuing support of the economic recovery and some of the sleepers in forest products, housing starts, are good areas for growth. We've made inroads and have a few customers who have decided to trust us for the future in automotive, for instance, that will add over and above however many automobiles are sold in North America next year. So it's a wide spectrum, but the areas where, you know, that pop up a little bit in the in terms of growth potential are those and the last one would be grain. Grain in both Canada and the US, I mean, we're dealing with an historical crop of... I mean, it's not just a record. It just basically blew by any past record for Canadian crop.
So we're gonna be moving that crop for many, many months to come, and that will obviously be a benefit into 2014. Maybe one more, because, you know, I want to keep some for tomorrow. Ken?
Hey, Claude. Thanks. Ken Hoexter from Merrill. Just, you didn't touch a lot on regulation. I know when you were talking about Lac-Mégantic, you talked a little bit about kind of the focus on safety and everything. You've now got a new STB commissioner in the US. You've got follow-up from Lac-Mégantic. You've got the safety regulations in Canada. The recent Metro North accident in the US brings PTC back, I guess, to the headlines a lot, maybe delaying that. Anything on the regulatory front that you fear? Does it - Do things pop up? Because usually when it's really heavy, it ends up not being as bad as it. When it's relatively quiet, things kind of come out of nowhere, especially-
Yeah.
when returns start getting to the levels that you're talking about.
Yeah. On the safety front, we are ahead of regulation. Like, we welcome sound regulation. We believe the regulator, just like us, have to take account and reassess their own processes. But we are always leading our business well ahead of the regulatory framework. We are partners with regulators in shaping what is the right solution for the industry. So I don't see the safety front as a concern. I see that as, hopefully, an enabler of sound, you know, regulation for the to do the right thing, to protect the public. In terms of economic regulation, I mean, there will always be noise.
If you provide good service, if you have an agenda that resonates with the customers, that noise level goes way down, and the equilibrium between using regulatory levers and engaging, you know, falls on the side of engaging. The customers that we have developed mutual trust with don't feel like they need a regulatory lever to get CN to do what's right. Doesn't mean we always agree, but it means we understand each other and are mature partners. I think we have mature partnerships across most of our customers, and I don't see regulation as a huge dark cloud on the economic front.
The, I mean, how we dealt with the Rail Service Review, using it as an opportunity to step up our game, to get better at it, to show that there was a better way to go about things, is a good example of that. You can fear. I don't fear. I try to lead the way.
Okay, this has been a good discussion. I'm very excited, as you can tell, about our prospect. We are not losing sight. We're not in denial. We understand that, you know, when you're high up there at the summit and you think things are good, that's probably when you're gonna slip. So we are mindful of the things we need to shore up, but we have a lot of good momentum.
We're excited about the opportunities in front of us, and I hope that tomorrow will give you a chance to feel that in a lot more detail with the lineup that's gonna come up to the podium. And as for tonight, we have an opportunity to mingle. Those of you who haven't passed the test yet on the locomotive simulator may give it a chance. There's a prize. There's a few drinks. We're gonna have a good dinner, and we're gonna start tomorrow bright and early, and with a packed up lineup and a few great vignettes coming from the second layer of CN leaders. Thank you for your time, and thank you again for those who are on the web. You won't get a drink, but hopefully, you'll be there with us tomorrow. Thank you.