Good morning. If I can ask everyone to take their seats, we'll begin here in just a moment. My name is Scott McDonald. I'm the Senior Vice President of Operations for Canadian Pacific. At CP, safety is extremely important, so it's my task here this morning to walk us through the procedures we will follow should an emergency situation arise during the annual general meeting. In the event of an emergency, the facility has a trained first response team on site, and we'll take their direction and assistance. If you do require assistance, you can pick up any hotel phone within the area. When you pick that up, you'll be directed to the emergency assistance personnel. In the event of a medical emergency, any of the security staff in the building are trained as first responders, and they'll also liaise with the city's fire and medical staff.
Should it be necessary to evacuate for any reason, we will (it's a bit of a maze to get out of here) but we'll go through the south doors. We'll take a right, a left, but really just make your way to the front of the hotel, and there'll be additional hotel staff on hand to assist and direct us. So with that, I appreciate your attention and welcome to the annual general meeting for shareholders.
Good morning, ladies and gentlemen. I'd like to extend a warm welcome to everyone to the 134th annual general meeting of CP. I would also like to welcome those listening to the meeting via the audio webcast over the internet. With me on the platform today are Paul Guthrie, Chief Legal Officer and Corporate Secretary, Hunter Harrison, Chief Executive Officer of the company, and Keith Creel, the President and Chief Operating Officer. Today's meeting is considered an annual and special meeting of shareholders. In addition to the ordinary business of an annual meeting, the special business of this meeting relates to an ordinary resolution to confirm CP's Advance Notice Bylaw and a special resolution to authorize an amendment to CP's articles to allow meetings to be held in both Canada and the United States.
To amend the articles of the corporation, the special resolution must be passed by an affirmative vote of no less than two-thirds of the votes cast at the meeting. I now call the meeting to order. I will act as Chairman of the meeting, and Paul Guthrie will act as Secretary. I hereby appoint Mark Thompson and Muriel Mallette from Computershare Investor Services Inc., to act as scrutineers for the meeting. The Secretary has deposited with me a statutory declaration establishing the sending of notice of the time and place of this meeting to each shareholder entitled to vote, to each director, and to the auditors of Canadian Pacific as required by law. The scrutineers have confirmed that a quorum is present. The scrutineer's final report will be kept with the records of this meeting.
I declare that the meeting has been regularly called and properly constituted for the transaction of business. Before we commence the formal business of the meeting, I would like to share with you a few thoughts on the past year. In one of his employee communications, Hunter called 2014 CP's year. I think anyone looking objectively at our results would agree with that assessment. Our company has performed extraordinarily well on all levels, and every member of your board of directors has been actively contributing to the success and momentum of the organization. It is an exciting time to be part of the CP team. All of the change that the company has undertaken in the last three years has lifted us to a position in the industry that CP hasn't enjoyed in decades. Each quarter of 2014 set a new company record in our key metrics.
It was a remarkable performance. In addition, this success was achieved while maintaining our strong safety performance, which is pivotal to Canadian Pacific's operations. On behalf of the board of directors, I would like to extend our thanks to Hunter Harrison, Keith Creel, the executive team, and the men and women of Canadian Pacific for delivering such outstanding results for 2014. This has all been very gratifying, but financial success is not the only area in which CP has made great strides. Along with all of this accomplishment comes the added bonus of a renewed sense of pride in the company. Your board of directors has also undergone some changes in the past year. In May of 2014, I was selected as Chairman when Paul Haggis decided to step away from that position. Paul remained on the board and was a member of both the audit and finance committees.
Paul was elected as Chairman of the CP Board following the conclusion of the 2012 proxy contest and subsequent management change. He was instrumental in laying the foundation of the new board's positive working relationship. As Chairman and later as a valued member of the finance and audit committees, Paul brought a great passion and expertise to the CP Board. Paul has decided not to stand for election to the CP Board this year, and I would like to take this opportunity to thank him for his time and many contributions to the board. Would you please join me in thanking Paul for his service and wishing him all the best for the future? The CP board of directors is a group of men and women of diverse backgrounds with a broad range of experience and skills. Our board believes in a balanced approach to governance of the company.
We attend to long-term value creation and value preservation. We recognize the business value generated through the skills mixture of industry experience, perspective, and quality of input. It is my pleasure to be the Chairman of such a dynamic board. At this time, it is my pleasure to introduce you to the management nominees for election as directors of the corporation. I would ask each nominee to stand as they are introduced, and I would ask everyone to hold their applause until everyone has been introduced. Firstly, Bill Ackman, Founder and Chief Executive Officer of Pershing Square Capital Management. The Honorable John Baird, who is one of our two new nominees for 2015. John is the former Minister of Transport. He currently serves as a Director of PineBridge Investments, the FWD Group, and is a member of the International Advisory Board of Barrick Gold. Isabelle Courville.
Isabelle is Chairwoman of the Board of Laurentian Bank of Canada and formerly a Senior Executive at both Hydro-Québec and Bell Canada. Keith Creel, the President and Chief Operating Officer of CP. Keith is our second new board nominee for 2015. Hunter Harrison, the Chief Executive Officer of CP. Paul Hilal, a partner at Pershing Square Capital Management. Krystyne Hoeg, Corporate Director and former President and Chief Executive Officer of Corby Distilleries. Anthony Melman, President and CEO of Acasta Capital and formerly a Managing Director at Onex Corporation. Linda Morgan, partner at the law firm of Nossaman LLP and previously Chair of the United States Surface Transportation Board. Andrew Reardon, formerly a partner at the law firm of Reardon & Chastang and former Chairman and Chief Executive Officer of TTX Company, the leading railcar leasing company in North America. And myself.
Now, we have two other nominees that, due to unavoidable conflicts, they were not able to be with us today. They are Rebecca MacDonald, who is the Founder and current Chief Executive Chair of Just Energy Group, and Stephen Tobias, who is the former Vice Chairman and Chief Operating Officer of Norfolk Southern Railway. Ladies and gentlemen, the management nominees for the Canadian Pacific Board of Directors. It is my belief that good governance is not something limited to the inside of a boardroom when policy and agendas are being formulated. It is a philosophy that extends beyond applications of strategy and business plans. For CP, part of our practice of good governance is bound to the knowledge that we have been an important presence in communities for more than 130 years.
As a result, we have many generational ties with communities, and our success as a company is enhanced when we are able to share with those communities and champion important causes. One of these causes is heart health. In June of 2014, we launched our CP Has Heart campaign, where our company focuses on fundraising for initiatives that combat a disease that affects many of us. I am proud to share with you that to date, CP has already contributed over CAD 2 million to heart causes in North America. I'm also pleased to announce that Canadian Pacific is partnering with the Heart and Stroke Foundation of Canada. We've signed a CAD 3 million commitment to become their visionary partner for research and support the tremendous work that is being done around heart health.
I invite you to watch this brief video that illustrates a very personal example of the real impact of heart health research to even the littlest of hearts.
Waiting for this day has been very difficult. There's nothing I can do to change what needs to happen. It's coming. But as a mom, it's utterly terrifying. This is a very severe heart defect. Talking to him about it, he'll tell you he has a broken heart and he needs to have the two sides put back together. It's only that simple, but it's what he understands.
Owen has Hypoplastic Left Heart Syndrome, which means one side of the heart was too small to support the systemic circulation. 30, 40 years ago, I saw babies like Owen die.
I knew that once he was born, that everything was going to be different, that he was no longer safe. The final stage of Owen's surgeries has been a long time coming. There's this thing hanging above you, and you know it has to happen in order for him to live. I want him to be happy and healthy, however long that is.
John, look, everybody's so happy that you're walking.
Heart and Stroke funding has helped us to take better care of babies like Owen, and Owen's done great.
No, no, no.
Where are you going?
Home.
Home?
Yes.
Woo-hoo!
The Heart and Stroke Foundation means more than they will ever know. You are changing my life by saving my son.
Owen's story is a powerful call. It reminds us that a need exists to support those organizations that assist people who require cardiac care. The Heart and Stroke Foundation is devoted to investing in lifesaving research, educating and empowering people to take control of their heart and their health, and being an advocate for governments to invest in healthy public policies. I'm very pleased that we have with us today Mr. David Sculthorpe, Chief Executive Officer of the Heart and Stroke Foundation of Canada. He is here this morning. David, would you please stand? I would invite all shareholders to visit our website at www.cpr.ca and learn more about our CP Has Heart program and the work we're doing as a company to help raise awareness and funding to save lives and promote healthy life choices. Now on to the formal part of the meeting.
Please note that after the formal business is concluded and the meeting is terminated, Hunter Harrison will present his formal address to shareholders, after which he and Keith Creel will take questions relating to CP's operations and other related matters. To expedite matters, a number of shareholders or proxy holders have agreed to propose and second the motions with respect to the business of this meeting. While this will help speed the handling of the formal matters, it should not discourage any shareholder or proxy holder from speaking to any motion after it has been proposed and seconded, or from bringing up any questions or comments properly within the scope of the meeting. If you do have any such questions or comments at the proper time, please proceed to one of the aisle microphones, identify yourself, and advise whether you are a shareholder or a proxy holder.
Please keep your comments brief and ask only one question at a time. Shareholders who do not wish to address the meeting but would like to submit a question or comment in writing may use the bottom of the agenda, a copy of which has been placed on each chair. Please hand your written questions or comments to an employee of CP or a Computershare on leaving the meeting. Management will respond to your questions as soon as possible. There are five matters set out in the notice of this meeting to be voted on by shareholders. We will conduct all substantive items of business by way of a single ballot. If you are a registered shareholder or proxy holder and advise that you wish to vote in person at this meeting, you should have received your ballot when you registered for the meeting.
If you completed and returned your form of proxy or voting instruction form, it is not necessary for you to vote today. However, if you wish to change your mind, you may do so by voting in person at the meeting by submitting a ballot. Anyone wishing to vote at the meeting who does not have a ballot, please raise your hand and you will be provided a ballot. I would request that the Secretary provide instructions in respect of completing the ballot. Mr. Guthrie.
Each shareholder or proxy holder may use the ballot provided to vote on all matters of this meeting. In particular, the appointment of auditors by placing a mark beside either for or withhold in respect to the appointment of auditors. CP's approach to executive compensation by placing a mark beside either for or against in respect to CP's approach to executive compensation. The election of directors by placing a mark opposite the names of the nominees for whom they wish to vote. CP's advance notice bylaw by placing a mark beside either for or against in respect of acceptance of CP's advance notice bylaw. The meeting location resolution by placing a mark beside either for or against in respect of amending CP's articles to authorize CP to hold shareholder meetings in Canada and the United States. The ballot should be clearly signed.
If you are a shareholder or proxy holder and the space for your name has not been pre-completed, please print your name on the ballot. Ballots will be collected later in the meeting after all matters have been voted on.
Thank you. The first item of business is the receipt of the consolidated financial statements as included in the 2014 annual report. A copy of the annual report has been made available to shareholders in either hard copy or electronically. I now place before the meeting the consolidated financial statements and report of the auditors thereon for the year ended December 31, 2014. The next item of business is the appointment of auditors. Chris Burns, may I have a motion?
I move that Deloitte LLP be appointed auditors of Canadian Pacific to hold office until the close of the next annual meeting of shareholders.
Mr. Chairman, my name is Maeghan Albiston, and I second the motion.
Thank you. Is there any discussion on the motion? I declare the polls open for the vote on the appointment of auditors. The next item of business is a non-binding advisory vote on CP's approach to executive compensation, commonly known as say-on-pay. Breanne Feigel, may I have a motion?
I move that on an advisory basis and not to diminish the role and responsibilities of the Board of Directors, that the shareholders accept the approach to executive compensation disclosed in the corporation's information circular delivered in advance of the 2015 annual meeting.
Mr. Chairman, my name is Colin Goldie. I second that motion.
Thank you. Is there any discussion on the motion?
Yeah. Andrew Pollock, beneficial holder of 2 shares of stock because I enjoy annual meetings but can't afford a lot of shares, and proxy holder for those 2 shares. Yeah, I just want to comment on Say-on-Pay as I did last year. That is occasionally, perhaps not at CP Railway, but people complain about the level of pay that executives get. My own view, even though I'm not obviously in their pay scale myself, is that if they're doing a great job, you've got a certain competitive market for talent, and if you want the talent, you have to pay up for it, and if you want to pay them half as much, your competitors will be glad to scoop them up. So I figure everyone might as well vote in a good pay package for executives if you want the best talent running your company.
Since the executives are doing a great job running the company, in my amateur opinion, and I'm sure in many professionals' opinions as well, they certainly deserve every penny they're being paid. Thank you very much.
Well, thank you very much for your comments. There's no question that what you'll see what happened here. I've been trying to lead the applause on several things, and I think this applause was started by senior managers. So I think that's very good, but we appreciate those comments very much. We could maybe hope that when you come to future meetings, you might even have more than two shares. I declare the polls open for the vote on the advisory vote on CP's approach to executive compensation. The next item of business is the election of directors. In accordance with the articles and bylaws of Canadian Pacific, the board of directors has determined that 13 directors are to be elected at this meeting. I now declare the meeting open for nominations.
Mr. Chairman, my name is Josh Pender, and I nominate the following 13 Canadian Pacific director nominees: William Ackman, the Honorable John Baird, Gary Colter , Isabelle Courville, Keith Creel, Hunter Harrison, Paul Hilal, Krystyne Hoeg, Rebecca MacDonald, Anthony Melman, Linda Morgan, Andrew Reardon, and Stephen Tobias.
Mr. Chairman, my name is Peter Stewart. I second the motion.
Thank you. Are there any further nominations? As there are no further nominations, I now declare nominations closed. Scott Cedergren, may I have a motion?
I move that the persons nominated to be elected directors of Canadian Pacific each to hold office until the close of the next annual meeting of shareholders or until such person's successor is elected or appointed.
Mr. Chairman, my name is Peter Stewart again. I second that motion.
Is there any discussion on the motion? I declare the polls open for the vote on the election of directors. The next item of business is the consideration of, and if deemed appropriate, passing of an ordinary resolution confirming bylaw number two of CP, adopting advance notice requirements for nominations of directors by shareholders. Maria Barkovic, may I have a motion?
I move that the ordinary resolution, the full text of which is reproduced in the corporation's information circular delivered in advance of the 2015 annual meeting of shareholders, confirming Bylaw Number 2 of the corporation, adopting advance notice requirements for nominations of directors by shareholders, be approved.
Mr. Chairman, my name is Aman Alibhai, and I second the motion.
Thank you. Is there any discussion on the motion? I declare the polls open for the vote on the corporation's Advance Notice Bylaw. The final item of business is the consideration of, and if deemed appropriate, passing of a Special Resolution approving amendments to the articles of the corporation to authorize the holding of shareholder meetings in both Canada and the United States. Jeremy Berry, may I have a motion?
I move that the special resolution, the full text of which is reproduced in the corporation's information circular delivered in advance of the 2015 annual meeting of shareholders, approving amendments to the articles of the corporation to authorize the corporation to hold shareholder meetings in Canada and the United States, be approved.
Thank you. Is there any sorry.
Mr. Chairman, my name is Jade Wong, and I second the motion.
Thank you very much. Is there any discussion on the motion? I declare the polls open for the vote on amending the corporation's articles with respect to the location of shareholder meetings. We will now pause so that the scrutineers can collect the ballots. If you have a ballot, kindly raise it so that the scrutineers can recognize you. Would the scrutineers please proceed to collect the ballots? I will wait for the scrutineers to advise me that this process is complete. Okay. Thank you. I hereby declare that the polls have now closed with respect to all items of business. The scrutineers have provided a preliminary report based on proxies received prior to the meeting. I call on the Secretary to report on the preliminary results of the votes.
I note that the company will report the detailed final voting results, including those votes submitted in person by ballot following the meeting once the tabulation is complete.
Deloitte LLP have been reappointed auditors of Canadian Pacific. The say-on-pay vote received 97.42% of the votes cast in favor of the resolution. Each of the 13 nominees has been elected as a director of Canadian Pacific with greater than 98% of the votes in favor of their election. The ordinary resolution confirming the corporation's advance notice bylaw has been passed with 98.13% of votes cast in favor. The special resolution authorizing the corporation to amend its articles to hold meetings in Canada and the United States has been passed with 99.7% votes cast in favor.
Thank you, Paul. I adopt the preliminary report of the scrutineers and declare the 13 director nominees duly elected directors of Canadian Pacific, and each of the other matters of business passed. I direct that the scrutineers' report be annexed to the minutes of this meeting. Ladies and gentlemen, your duly elected directors of Canadian Pacific Railway are Bill Ackman, the Honorable John Baird, myself, Gary Coulter, Isabelle Courville, Keith Creel, Hunter Harrison, Paul Hilal, Chris Hoeg , Rebecca MacDonald, Tony Melman, Linda Morgan, Andy Reardon, and Steve Tobias. Thank you very much. As there is no other business that may properly be brought before the meeting, that concludes the formal business of the meeting. I wish to thank you all for attending, and I now declare this meeting terminated. Hunter, the stage is yours.
Well, good morning, Calgary. It's nice to be here. Those of you, some of you might know that I've been a little bit under the weather, but when I come to a group like this, my adrenaline gets to flowing, and I naturally feel much better. So it's going to help me get over the hump this morning. But let me take this opportunity to welcome all of you, our guests, particularly the shareholders. This is your meeting. This is what this meeting is all about. And so we especially welcome you. I want to recognize and thank our distinguished board of directors for the confidence that they've shown in this management team and the leadership they've given us. And without their guidance, we could not have accomplished some of the things that you're going to see today in my presentations. Also, I should special note, Mr.
Baird, it's certainly nice to have you join the board. We look forward to your guidance and with all your years of public service. I take particularly special pride in Keith Creel joining our board. The first time I had a relationship with Keith is we hired him as an entry-level assistant train master about 24 or 25 years ago. So it's with a certain degree of pride that I take in seeing him voted to the board of directors. So congratulations, Keith, and welcome, Mr. Baird. One of the things I'd like to do today is take a look back at where we've been over the last three years since the proxy contest because I think it gives some indication of where we're going in the future. This story is a long way from being over. I want to share some of those accomplishments today.
And as somebody once said, it's not bragging. It's just fact. We have developed and put together, and I'm proud to say, the best team of railroaders in North America. And if you're the best in North America, you're the best in the world. So let me just recognize all the CP railroaders. Please stand and be recognized. Great job. There's a famous, probably the most recently famous sports commentary. Words that came out of an announcer was in Lake Placid, New York, 1980, Russians, US hockey semifinals. And the Russians were certainly the powerhouse then. The Americans were given little chance at all.
As we got within 6 or 8 seconds of victory in that hockey game, Al Michaels' quote was, "Do you believe in miracles?" Well, we're going to show you some miracles today that have happened in the rail industry, and these are the people that have accomplished them. I'm often asked how we have been able, how this team has been able to produce the results we've been able to produce. It kind of goes to the message you see on the board here from the annual report. It's simple. It's simple. Sometimes we make business much more complicated. We have to continue to remind ourselves about our foundations and principles and what this model of Precision Scheduled Railroading was built on. I want to talk to you a little bit about that. It's very simple.
First of all, we start with providing good service to our customer. Now, that's a simple statement. But the first thing you have to do is say, "Well, let's define what is good service and what good services to one customer is different to another customer." So we went through a great deal of dialogue and discussion, and we decided that good service is just simply doing what you say you're going to do. So this organization has spent a great deal of time over the last three years in improving the service to our valued CP customers. The second thing is to be able to do that, you have to control the cost to stay in business and to be able to reward our shareholders and our owners of the company. So there's a delicate balance between good service and low cost, which we always are sensitive to.
The third issue that I would tell you about is our asset utilization. I've said before that asset utilization in this industry is a missing ingredient to success because if you go back 10, 15 years ago, nobody measured asset utilization. The next thing is our people that we recognize here and what they do and what they accomplish. I learned early on in my career, if you don't get the right people, the right team, developed, motivated, trained the right way, you're not going to be successful. So we've come a long way in putting this team together and developing the appropriate chemistry and esprit de corps, if you will, in this industry. So I'm very proud of that. So people are what this is all about.
Now, the last issue, I simply like to say, "Don't get anyone hurt." That's particularly appropriate today to be sensitive to what this industry has gone through over the last year or so. It's not a proud record. It's something that's going to be a challenge to all of us that have been a part of this. You take those five principles, those foundations, cornerstones, and I like to say it this way, if you season it very heavily with integrity and passion, that's what this model of Precision Scheduled Railroading is about. Given that model, given the team that you just met, let's look at what the results have been produced over this last three-year period. It's pretty phenomenal. Thank you, Paul. Excuse me. If you look at, first of all, train length, it's up 15%. Train weight is up 22%.
At the same time, when you're improving your train speed 19% with much longer and heavier trains, which produces then fuel efficiency of 13%, locomotive productivity of 32%. We're operating with today with 500 less locomotives than we had three years ago with about 14,000 less railcars. Those are figures that people have never seen in this industry before. And others, I'm proud to say, are trying to and probably the best flattery or compliment you can receive is somebody try to copy your model. And we look at other rails as much more our partner than we do as our competitor because we turn over a lot of our business to other rails. And it's good that we get the car to Chicago, but if they don't do a good job of getting it to Dallas, the customer doesn't receive the right service.
So these type of productivity numbers are really phenomenal. And you have to be and have some appreciation of the industry to recognize what those have done. Now, what you will recognize if we turn to the next slide is you will look at what this converts to in the way of shareholder value. And let's look at what's happened over the three-year period of time that this team has produced. Operating Ratio, which is so sacred in this industry as far as efficiency, has improved 1,660 basis points. And that shows 64.7. We were better than that even in first quarter. We had record levels that even exceed this number. So there's much more in the bucket. Revenue over that period of time is up 28%. And so 28% more tonnage with 500 less locomotives. So now you'll really be interested in this one.
What's it said to the shareholder directly? The market cap. Market cap is up $30 billion in 3 years, from effectively $8 billion to $38 billion. Free cash flow of $1.4 billion. Adjusted earnings up 170%. I mean, what else can you look and see that you need? So this team has done an outstanding job. There's much more to do. We met and talked with our board of directors yesterday and went through some of the initiatives going forward that are still left for us to accomplish. I have intentionally got to cut my remarks short this morning because we're going to do this question-and-answer period. But let me just close by making a couple of comments. One is a little bit political, which I hesitate to do. But let me recognize something. Canada, and this is not a recent statement by me.
I've said it for some period of time, has the finest rail system in the world, right now led by CP. But our friends and competitors in Montreal are also doing a wonderful job. What you've seen is both of these organizations and companies go from the worst to first. So I would caution some of the legislators, policymakers, to be careful of fooling too much with the winning combination. The last thing I'd like to leave you with is this, and I think it's very appropriate in the times we're in, is one of my favorite quotes from George Bernard Shaw that says, and I'm paraphrasing to a degree, but says, "Forget about the likes and dislikes. Just do what must be done. It's not happiness, but it's greatness." That's what this organization will continue to pursue. Thank you.
Service, Mr. Chairman?
No, if you have questions from the audience, either I or other members of the staff would be happy to try to address them for you. Yes, sir.
Hi there. My name is Marc Duguay. I'm a shareholder. I guess one of the key aspects of your operating ratio is that you're a lot more efficient now than you were previously as far as your operating ratio. I think in the last quarter, it was 63% or whatever. It was even better than the 64 you posted. When you look at foreign exchange tailwinds and fuel costs, which is something that's out of your control, how much of a tailwind is that in driving down your operating ratio?
Well, I think there's been some headwinds at the same time. So you've always got some headwinds and tailwinds. But I think if you look back two or three years and look at the efficiencies, there's very little impact artificially from exchange or others. We get exchange, so we get a boost in reporting in Canadian dollars. But at the same time, our expenses in the U.S. go up. So there's a lot to puts and takes. I think what you'll see is regardless of what those numbers fluctuate significantly, this organization will continue to move down into the low 60s and will probably, as I turn the reins over to Keith, break through and move into the high 50 numbers.
A follow-up question with the low commodity price environment, have you noticed a significant hit in the amount of volume for oil from your customers tonight?
Well, yes, to some degree. I mean, clearly, right now, in the US, grain's not moving. It's sitting in silos. And we're going to have an issue that we talked about yesterday where it's going to have to clear out by the time the harvest comes in. So there's not much happening now. There's locomotives stored. There's cars stored. There's people of availability. And then we're going to get into when the crop comes in, everybody's going to want to go at one time, and it doesn't work very well. So in my world, that model has to change. But we're seeing a little bit of softness with our coal business, a little bit, a little bit with Canadian grain also. Our potash is going pretty well. They've had some production problems.
But overall, pretty good, but not as robust as it was last year because we had a lot of carryover from the first quarter with the bad weather. So it kind of camouflages what the actual numbers are.
Thank you.
Ammo Shimpney . I'm the shareholder. I didn't follow your slide on the fewer locomotives and fewer cars, but yet you had lengthier trains. So how do you account for the fact that if you had longer trains, wouldn't you require more cars?
So essentially, more is not always better. If you have more cars that are sitting there not moving or more locomotives that are sitting there not moving, it's money wasted. It's asset wasted. So when we talk about asset utilization, when we talk about train speed, if you move trains faster, you turn those assets faster. You move them faster through the terminals. You can take fewer cars and fewer locomotives and move more business. It's no different than, say, rush hour traffic on the interstate. If everybody's trying to go there at the same time, it's 5:00 P.M., you're not going to get there any faster. But if you spread those assets out over a 24-hour period, you don't need as many cars, and cars move faster. So that's the same principle. So you manage the pipeline. You turn it faster. You have fewer cars.
Make quicker turns. Reduce your cycle times. Those cars can carry more load, be it to the port, be it for our customers. You don't need as many locomotives to do it. As you extend length of trains, you create capacity on your main line because you're eliminating train meets. Instead of having 10 short trains meeting each other, you have 6 longer trains meeting each other, which creates opportunities for capacity to move more trains into that line segment with fewer crews, fewer locomotives, and fewer cars. That's how the model works.
Secondly, what does the precision concept mean?
It's about a schedule. It's about every car being scheduled. It's about every locomotive being scheduled. You run it with precision. So it's understanding what you need, not what you've always had. But again, if you define a cycle time to move a particular lane of business, you understand the time it should take. So you design the schedule. And the precision is you have to operate the schedule because every part, A's got to get to B for B to come back to A. So those locomotives, when you reduce locomotives, if you don't run a precision schedule, the locomotives that might leave Calgary, I need them to get to Vancouver at a specific window so that I can run that train out of Vancouver with precision out in the window to come back east. So it's all about executing to the plan with a precision mindset.
Thank you very much.
Thank you.
I can't figure out why there's not a rush to the mic. Of course, a lot of our employees who can ask their questions in other contexts. I realize that some people have other contexts in which to ask questions. Let's see. Just a word of thanks. After last year's meeting, or week and a half after, Catrina Gagné , your facilities manager, gave me a tour of your new Ogden facilities and offices. Very much appreciate that. Mr. Harrison, you sent me, let's see, two of your books, How We Work and Why, and Change Leadership Made and Why. Thank you for that. It came along with a thank-you letter and CP Rail Calendar, so.
Those are valuable.
Oh, I know. But oh yeah, my one suggestion, my one suggestion is publish in a way that they end up in chapters. Or just write your memoirs when you finally retire. Personally, my suggestion is they just extend your contract by about 25 years. Now, that's in no way a negative comment on Keith Creel. He's wonderful too. But yeah, I'm happy to see you around a much longer time. Let's see. In hiring all kinds of people over the years and working with all kinds of people, I'm kind of wondering how you see the relationship between formal education and work experience. Because as I understand it, you've worked your way up from being a laborer through to being CEO. You're phenomenal at what you do.
Other people like, say, Bill Ackman have gone and done a greater degree of formal education in addition to their practical experience. How do you see the relationship between formal education and practical experience in achieving success in the business world? Thank you very much.
Well, I just made a little small donation to my alma mater that kicked me out of there three times. So I was not the best student in the world. But I think what we have to recognize today, and it was really important in my generation, we were told that all you got to do is get that diploma and walk off the stage. And GE and DuPont and IBM, they're going to be there to get you. And they were. Until the second year, they said, "You didn't produce any results. You're out of here." Well, nobody told us that. So I think the issue becomes how you take whether it's formal, whether you have an MBA, or whether you are a sophomore dropout or kicked out, more appropriately, how you apply those learnings.
At a point in time, when I was doing some labor work, I decided I didn't want to do that all my life, that maybe there was a different road and way. I started applying myself a little late. But I played a little catch-up. If you look at the makeup of employees we have, it takes a blend from everywhere. We've got people that don't have any formal education that do a wonderful job. We've got a mix of MBAs that we recruit from the campus and everything in between. It's just the right fit, I think, of putting the right people together with the right circumstances. In our business, we have to do a lot of training and development ourselves. In fact, I'm going to be down in Springfield, Missouri.
They're putting together the first real transportation railroading school where you actually teach railroading. Now, you can go get a transportation course on how to read a tariff or how to do this. But when somebody, there's no place to go but the railroad to learn how to move trains and cars and do those things. So it takes a blend of all of us.
Shareholder?
Yes, sir.
The more we hear about DOT-111s , and the rail tank cars, carrying petroleum products, the more we wonder how it's going to affect the bottom line of our organization. What's going to cost us? What kind of timeline are you looking at? And overall effect on our movement?
I didn't quite.
The Tank Cars?
What it's going to cost us specifically?
Basically, the changes are imminent. They're coming around the corners. There's a push from the environment. There's a push from the government that somehow we should transition our existing to the new legislation. Sometimes I wonder if that's going to be a big impact on our bottom line or our customers are going to carry loss of equity.
Well, I would say this. At a point, you can only spend so much money and make money. So if you get to a point that they push this so hard that we can't physically get all the cars converted or physically get all the cars built, then obviously, that would have impact. But in the big scheme of things, these cars, we've been strong advocates. Hunter's been a strong advocate. I'm a strong advocate. These cars need to be improved. I'd like to say we'll never have a train derail. At CP, we're pretty good at that. We're working ourselves out to be very progressive to make sure that we protect the communities we operate in and through and protect our employees and protect our customers and protect our franchise.
But at the same time, these cars that we don't have a choice but to move this product in, they need to be more robust. So the sooner we can get that done, the safer this industry's going to be, the less likely we're going to face an impact to the industry relative to some of your concerns. So I think and I hope the Canadian government as well as the U.S. government, on most parts, they've gotten aligned with the tank car design, which is a big positive. There are a couple of issues that we don't feel are necessary. They've put a requirement for ECP brakes. ECP brakes, electronically controlled brakes that effectively brake each individual car. And the idea is, or at least the theory that they're trying to sell, is that it's going to reduce derailments. It's not going to reduce the derailments.
The science they've used effectively is not valid science to put this through, to sort of shove it onto the tank car manufacturers to have to equip these cars. Eventually, or we slow the trains down to a point that it affects all of our customers' business. I just don't think that we should be spending money. We, be it the railroad, which we don't have to on these particular cars, we'll have to invest in the locomotives to be able to run an ECP train. I just think that there's money better spent to get a better safety impact for the public than to waste it on something that essentially has this much impact when there's things we can do that have this much impact.
That's a good question in the way I because every time we hear about the petroleum-carrying tanker cars being transitioned to a higher, I always wonder about the effects on the bottom line. And it has been a little worrying for me. And I'm going to answer it this way.
It's moving in the right direction. It can't happen soon enough as far as we're concerned, as far as the new, more robust tank car.
Thank you.
Thank you.
Hi. Mark Dubolt. When you look at your current business in Canada and the U.S., a lot of it's commodity-dependent. And it's really hard to predict with prices being so volatile the way they are right now. In the future, there's some international shipping lines contracts that are coming up for renewal. Do you see this as a big part of CP's international growth to diversify your business a little bit more when these contracts come up for renewal?
It's definitely a piece of our growth story. It's an application. Actually, some of that business on the international side, we walked away from the last round of negotiations because we weren't going to haul it for free. What we're going to do for practice. Now that our cost basis is a lot different than it was three years ago, our service level is much improved versus where it is three years ago. You combine low cost and good service. It's a very compelling product offering. So we fully intend to be competitive for some of that business that we walked away from in the past as well as business that we haven't enjoyed in the past. So it definitely is a piece of our growth story.
Thanks.
As part of the reason for one of the books that talks about change, it's that challenge to get people to change. Now we have a good service offering. Now we have a competitive price. But we have lost market share over the years because of not very good service. And so it takes a while to take the new product and to get the shipping public to change their habits. And so that's very difficult. It's the same thing with people with the culture and so forth. And so part of our challenge is to learn to manage change. And that's one of the things that we're doing with the leadership here that I recognize is trying to learn to manage and deal with change. A lot of us resist change and push back and are resistant to it.
It's something we've got to be able to deal with.
Yeah. Andrew Pollock, Calgary, Alberta. Proud owner and beneficial shareholder of 2 shares in CP Rail common shares.
I'm going to get you some more.
Yeah, yeah. Well, when I can afford it, I'll be happy to buy more.
I'm going to do it this way.
Just remember, the companies, when I own more stock, I have this tendency to submit shareholder proposals to them. That's the one disadvantage. Once I get more stock, I'll start thinking of shareholder proposals to submit to your company. Then I'll get to give speeches about them at your AGMs. Then you may wish I were back to two shares of stock.
He's way down the split, Hunter. That's what he said.
Yeah, yeah. I've actually thought of that, have a shareholder proposal saying, "Let's split the stock." But on the other hand, you guys can make that sort of decision on your own without having a proposal submitted on that issue. Let's see. My other question is, given that you put a lot of care into choosing good board members, you're bringing on Keith Creel and John Baird. And so you care a lot about getting very high-quality people on your board. At the same time, you have very high-quality people as employees of your company. So your employees, the experienced ones in particular, already know what they're doing in your industry. So what is it that the board adds to all their knowledge and skill?
Why do you take it as such a critically important thing to get people of the caliber of Keith Creel and John Baird on your board? What does the board contribute to the overall operation of the railroad? Thank you very much.
Yeah. We know how to railroad, to your point. Maybe we hadn't done it the best and put it together. What we need is guidance and direction that help us answer questions like, "What's going to happen to crew? What's going to be political impacts and changes? How should we position this organization?" And so we don't have a lot of "railroad expertise" on the board. We don't need that. We have Keith and I, and that's arguable. We got too much there. But we have a very diverse group that covers a broad spectrum out there that I think is what you need with the board. And we're well-equipped then to deal with those issues that I thought would come up today. What's going to happen to crew? My answer is, I don't know.
There's a lot of things from a political standpoint that I don't know that we have to think through about. We've got issues with common carrier obligations. We've got social responsibilities. We've got things to be sensitive to rather than just the bottom line. That's the type of guidance and direction that the board lends to us. Yes, sir.
Stephen Noble, CP shareholder. Hunter, I was just wondering if you could reiterate some of your thoughts on mergers and acquisitions. It's been in the media a lot lately.
Yeah. Look, I think I was misunderstood a little bit. It's no secret. We had an exploratory meeting, if you will, just to see if there were opportunities to really enhance shareholder value. And there weren't with that organization. We saw the world differently. So we didn't waste a lot of time there. As I said earlier, I think the board will support this. We have the finest management team in the world. We have a great deal of expertise. We could be a wonderful partner for other organizations. So if there's an opportunity for us to do something in M&A that's clearly in the shareholders' interest, that's something we'll pursue. We don't have any poison pills. I'm a shareholder. If somebody makes an offer of X, I'm voting for it. So we're not out there looking.
There's not a lot of other people that want to do it for, I think, the wrong reasons. And that's why you have a little more some activists today that I think are helpful and creates a healthier situation. And so they just hate to see us coming. So I'm sorry, but we're going to be there.
Jeremy Berry, proxy holder. I'm just curious, Hunter, I guess, for you, your thoughts on the new government in Alberta and where that leads CP moving forward?
Well, people would say I have limited expertise here. They would be right. Look, I think kind of the details of the platform and I think we're in a position right now that we're going to reach out to the new premier and to bring to her attention issues and concerns we have, but at the same time, to try to cooperate with the new government in the interest of all Albertans. Look, if there's fiscal problems here, which there are with the oil patch and all, and our tax bill has to go up like everybody else's, look, we're willing to pay our share if it's the higher fuel tax. I think we're going to reach out. Before we make decisions to be critical and listen and have a dialogue, hopefully. Then if we need to take a different position on some issue, we will.
I mean, I think there's going to be a lot of pressure given the crew, the oil patch, and those issues and what it does to deficits and so forth. Somehow, it's got to be made up. You can't keep the same services and do the same things with a less tax base. So hopefully, we're going to be a cooperative, good corporate citizen and work with the new administration to achieve what needs to be done here. Any other questions? Well, thanks so much for joining us. And we look forward to a great year and having this celebration again next year. Bye.