Canadian National Railway Company (CNR) Earnings Call Transcript & Summary

Okay. Good morning. Welcome back. Brian Ossenbeck, again from JPMorgan to cover the transport. We're very happy to keep on here with Canadian National. Today on stage, we have Ghislain Houle, CFO; and Janet Drysdale, who is now the SVP and Chief Stakeholder Relations Officer. So congrats, Janet on the new role. So I'm going to turn it over to Ghislain to make some introductory comments. He's got a few slides up here, and then we'll come back for Q&A. So Ghislain, thanks for being here, and please take it away.

Well, thank you, Brian. Thanks for having us. I like you so much that I cut my vacation. Doug MacDonald was supposed to do this conference. He had a little bit of an issue, but nothing serious, and he's doing very well. So I'm happy to report that. I'm happy to see you have a hard time pronouncing Janet's new title because -- and you're English imagine, I'm French. So Chief Stakeholder Relations Officer. So it's a mouthful for a French person, but congratulations, Janet. And we've worked very well together for a long time, and I'm very happy and it's well deserved promotion. So maybe just a couple of opening remarks to set the table. First of all, I want to thank people in the room. I want to thank people on webcast listening and taking interest in our company. And just to give you and set the table here a little bit, first of all, we're starting the year quite strong, Brian. When you look at our volumes, and as you know, we do report volumes on a weekly basis. In terms of RTMs, our volumes are up 10%. Now when you remember last year, it was a very tough winter. When you look at January and February, 85% of those days actually had a restriction on our trains due to weather. So this year, it's about 40%. So we have easier comps. But I mean what's in the bank is in the bank. And when I look at the various segments, what really continues to show strength is really the bulk segment. So it's grain, it's coal, West Coast, it's frac sand and Automotive, which is on the bulk, but Automotive, I think Janet our volumes up-to-date -- quarter-to-date, I think they're up over 10%. So Automotive continues to show some strength. When you look at segments that continue to show weakness, it's more related to the Consumer Products segments like intermodal international, look at lumber, when you look at the housing starts, it's down. When you look at the housing permits in the U.S., I think it's down like 25%. So lumber is -- shows weakness. Refined petroleum products and chemicals and plastics. When you look at a macroeconomic standpoint, and again, consensus came out a few weeks ago, industrial production in the U.S. continues to weaken. I think we're close to 1.5%, in terms of decline on a year-over-year basis. So obviously, the environment continues to be quite volatile, continues to be quite difficult to read. When you look at interest rates, it looks like we're still calling for a mild recession at CN, but we don't really know. It looks like it takes time for the rising interest rates to feed itself into the system and combat inflation. So we'll have to see -- and it looks like in recession, if there is one, could be pushed more towards the back end of the year versus the front end of the year, but we'll see. We have good visibility on some commodities like grain, for example, in the first half of the year, we've got good visibility. But obviously, the visibility gets quite murky in the second half of the year. And Canadian grain is a good example. We don't know what type of crop we'll get. We had a strong one this year that we're currently moving. We'll see what we get for the second half of the year. At this point, we're assuming a 3-year average on Canadian grain in the second half of the year. Talking about operations, I'm very pleased to report that the network is very fluid that we run that railroad extremely well. I'll give you a few stats. When you look at our car velocity, we're at 210-plus car miles per day. That's up 35% versus last year. And when you look -- the key thing that I look for is really telling is the fact that as I said, we've moved 10% more volume, but with 15,000 less cars on the network. And that's really the value of scheduled railroading. When we say that scheduled railroading provides capacity, it actually allows you to move more volume with less cars and therefore, improve on customer service and improve on our reliability. When you look at our origin train performance, we're at 85% versus around 55% to 60% Janet, I think, last year. And then our 32-hour car dwell is down by 65%. So -- all of this is extremely good, but we have only 2.5 months behind us, so I don't want to counter chickens too quickly. And as I said, we'll see what the second half of the year provides. On the labor front, I think it's important to mention, we are in active negotiations with Unifor. Unifor is the union that represents intermodal, automotive, mechanical and clerical employees. We hope to have a negotiated settlement. We're actually talking to them as we speak. But they did receive a strike vote from their membership, and there could be a labor stoppage or labor action as early as next Tuesday, Janet, March 21. Hopefully, that won't happen. We intend to use management employees to continue to perform key activities. So for example, we will continue to serve our Canadian ports, so Rupert, Vancouver and Halifax. And we will continue to serve some of our key intermodal inland terminals and I'll name them. So Vancouver, Calgary, Regina, Toronto, Montreal and Halifax, and those that we will not serve, Prince George, Edmonton, Saskatoon, Winnipeg, and Moncton, we've already started ramping down some of the key activities on those terminals in light of what may happen. But I'm hopeful in crossing my fingers that we will get to a negotiated agreement. Maybe I'll finish on this and then turn it over quickly to Janet. From a long-term standpoint, I think that the stars are aligning at CN. I think that under Tracy's leadership. I'm very, very pleased to see what's happening. I think the team is gelling very happy to have Ed back. I've known Ed for 20 years or so. Doug and I have known each other for over 25 years. As you can see, Janet and I have worked very, very closely together, Janet used to be our VP Finance. So she's good with numbers. And so I'm very pleased with that. And I think that at CN, we have some specific CN growth opportunities that are lining up in front of us that we will walk you through at the Investor Day that I know you're participating, Brian, that's scheduled to be on May 2 and May 3. So hopefully, investors will participate in big numbers on that conference. We're looking forward to it. And also, we're looking forward to show some of the next generation of railroaders at CN during those 2 days. So maybe on this, I'll turn it over to you, Janet, for a few remarks.

Sure. Thanks, Ghislain. I couldn't be more pleased to be here today. I feel very privileged to be taking on a new role one, which includes Investor Relations and the opportunity to once again engage with the investment community. Maybe I can provide a few highlights on some of our key sustainability initiatives. We had a very strong performance last year, delivering an almost 2% year-over-year improvement in fuel and carbon efficiency. This is really an outstanding result. And I want to clearly point out that this relates directly to the disciplined adherence to our scheduled operating plan. When we run the plan, we stopped stopping trains and that improves the fluidity of the network. It improves customer service, and it improves fuel and carbon efficiency. So to me, this is a really great proof point of how sustainability and the business itself go hand-in-hand. We talked a little bit about safety. We had a very strong performance last year in terms of our personal injury performance. It was an all-time record for CN. We did well so far this year, I would say, both in injuries and accidents, but again, we're only 2 months in, but we certainly are pleased with the way that, that is trending. In terms of our DE&I agenda, we made significant progress. We now have a Board that has gender parity and at the executive management level, we increased our representation of women around the table from about 18% to nearly 30%. So really making tremendous strides on those aspects. And I think we're very, very pleased about the way the team is gelling, as Ghislain mentioned, and the way that the proof points are being delivered as it relates to the scheduled railroading operation which really, at the end of the day is all about delivering a better service to our customers.

Okay. Well, thank you very much for the comments there. And you please give Doug our best, sounds like he's -- we'll see him again and hear from him on the earnings call before too long.

No, absolutely. He's doing well.

Give me a break from all the questions. Thank you again for stepping in.

So just to talk more about what's been on in the news in everybody's minds in the industry from a safety perspective. There's been a number of advisories published, obviously, this is in the U.S., you operate in both countries but it's hard to ignore. We've seen announcements from the AAR in terms of what they're doing industry-wide and what they're proposing for some of these actions that we've seen from hot box detectors and the like. But maybe you could just give us -- set the stage in terms of how you view the network or any things that you might be changing or looking at internally based on what we've learned, knowing that there's still more discussion and discovery to happen?

Yes, absolutely. So obviously, safety is on a lot of people's mind. We are actively participating with the AAR on all the initiatives that's going on as we speak. Like I think safety at the end of the day is our -- is the industry's social license to operate. So I think that it's important that you continue to improve in safety. I think that statistics that have been given by the AAR, I mean, since 2000, I think that from a safety standpoint, the industry has improved, but we're clearly not 100% to where we need to be. But when you look at the accidents, since 2000, they're down by 30%. And if you focus more on the mainline accidents, they're down by 45%. So there has been some improvement, but there needs to continue. And frankly, my view is how to continue to improve is really 3 things: continue the deployment of technology. I think it's about process and it's about behavior. I'll give a few examples, and we've talked a lot at CN about our automated track inspection cars. Again, this is a way -- this is to bring a car on the mainline and inspect the track with technology with lasers and the likes, and it allows you to have a data-driven inspection that now focuses on better preventive maintenance. And if you have better preventive maintenance, you have better safety. Same thing related to our portals, and we've talked a lot about these portals. So today, for example, we have to do by regulation, a certified car inspection where we have a train in a key terminal and a mechanical person actually physically has to walk the train and gets on their knees and tries to look under the car and so on and so forth to be able to see potential defects. Well, now with the portals, and I think we have 7 of those, Janet, the train goes to the portal. The portal is equipped with high-resolution camera supported by algorithms that will be able to detect defects or potential defects that the human eye cannot detect. And again, that brings the fact that now it's a data-oriented inspection and therefore, better preventive maintenance and they is better safety. Detectors, I know there's been a lot of discussion about detectors we have. We have lots of different detectors on our track. We have hot bearing defectors, hot wheel detectors. We have dragging equipment detectors, I've ridden trains. I'm a locomotive engineer, and I can tell you these detectors work. It happened to me where we had a dragging equipment on one of my trains. I had to go and fix before the train could continue to move. So again, that technology on the detectors needs to continue because they instruct the crew that a potential defect could be there and something needs to happen before that defect creates an accident. From a process and behavior standpoint, I think CN has put a lot of effort in pushing safety culture in the last few years and really making like safety is uncompromised. And safety has to be first and foremost. And I'm happy and I'm knocking on wood to report that we have been 800 days without a fatality at CN and 610 days without a serious injury. So I think the industry needs to collaborate on this because it's an industry issue. We need to continue to work with the regulator on this. And again, safety is, as I said, and I'll close on this. It's our social license to operate. I don't know whether, Janet, do you want to add anything?

Maybe just the real fundamental importance of safety culture and the work that we've been doing around that to really migrate from a compliance-driven culture to a value-based culture where employee behavior is related to doing the right thing, not worrying about a demerit point. But worrying about themselves and their colleagues. The other exciting news we have on the safety front is actually we're in the midst of deploying our own new technology, leveraging handheld devices where employees will have the capability to report exposures in the field. And that information gets transmitted in real time. So Ghislain mentioned that we will be reporting in the FRA confidential close call reporting system. But this system internal to CN really is going to give us those exposures in real time so that we can take immediate corrective action.

And maybe just one more quick one on the hot box detectors because they are such a focal point at this stage. In Canada, I think they're regulated a little bit differently from the U.S. So is there any split between the 2 in terms of how you put them in place or how they're regulated or not? And then is there any sort of -- could it be worthwhile investment? Was there any sort of capital expenditure you would think to meet some of these new suggestions from the industry?

Yes. I think we've been deploying this kind of detection technology for many, many years. So we're certainly interested in complying with the regulation, but we go well beyond the regulation. And when we assess the network, this is on a risk-based approach, and it obviously correlates to the traffic flows that we have. So -- that is what informs us about where these technologies should be placed. And we've seen the emergence of technologies. As Ghislain mentioned, we have the hot box, hot wheel detectors, but the newer technology, the acoustic bearing detectors, this is something that we've deployed, and we will continue to deploy these across the network. We have...

We're actually in the market. And I think other railroads are in the market as well to get more of these acoustic bearing detectors and put them -- and put more of them on our network. We have some of them now. And that's the newer technology. And that's the point I'm making about technology is not just about productivity, technology in our view, at CN is first and foremost about safety. The productivity and the economic benefits is a side value of it. But really, it's about safety.

And the density of our detectors is about every 10 to 15 miles. So we're I think...

It's well within, yes exactly.

You've suggested, we'll see if it gets further regulated. Just saying one thing that I think most people would agree, as you usually said some conservative financial targets to begin the year and then usually tell us they're conservative than we wonder how conservative. But maybe in this case, there's clearly a lot going on even since we last spoke on the earnings call, but it does feel like maybe there's not as much conservatism in there as it has been in the past. I mean there's a lot of moving parts. You've got fuel inflation, accessorials, we talked last time about the additional sick pay and the headwind from that. So maybe we can just revisit that and go through some of those -- there's moving parts. You gave an outline of where you're more confident, not based on end markets, but what else should we be thinking about?

Yes, you're right. I mean hopefully, our guidance has been conservative. I think -- I don't know, to your point, it's tough to call. I think that we have some headwinds as you -- as we alluded to during our call -- our earnings call in terms of headwinds, in terms of new rules in Canada and in terms of paid sick days, and we've totaled that to about $100 million. We're still looking to industrial production to be negative. And as I said, we're calling for a mild recession. So -- you can't really call for a mild recession and then call for double-digit EPS growth. I think the math, my 14-year-old son came with me, and he thought it was pretty cool to go from Florida to come to this conference, and he would tell me that, that math doesn't work. So like I said, we've got good visibility on the first half of the year. The second half is a bit murky. Tough to call the economy because there's different factors. I mean you saw yesterday, again, Facebook let go of another 10,000 people. So -- but unemployment is still quite tight at 4%, 5% in the U.S. and Canada, a little bit higher than that. Interest rates have continued to rise, but people continue to buy. So it looks like it will take time like people that have mortgages, for example, some of them I was talking to, they were saying, "Well, I'm okay because my mortgage only expires in 2 years." So they continue to buy. They're not being hit, but they will eventually get hit. So I think the interest rates and the rising of interest rate, it's taking time to get its toll on inflation. So -- and we're calling for volumes to be slightly better than industrial production, which is negative at 1.5. So there is a lot of moving parts to your point. If volumes do better, we will do better. But if volumes do worse, we're very well positioned to go through whatever the economy will give us at CN. We've got the strongest balance sheet in the industry. We've got a good game plan. Our operations are humming. And like I said, we've started the year quite strong. But again, that's in light of the fact that we had easier comps. And the market assumes that we will have a very good Q1. I think when I look at consensus forecast, I think that the market expects CN to have EPS growth of 27%. So we'll see. But -- and as you know, Brian, when we get to the earnings call after Q1, we will -- typically, we typically give a little bit of visibility on guidance at every earnings call. So stay tuned on that one. But at this point, it's -- we're still assuming that we'll have a low single-digit EPS growth for the year.

Okay. And then in terms of the -- the offsets for the sick pay and the work rule requirements. I think that's a larger number than I was expecting in terms of the $100 million. It seems like that's the worst-case scenario and Ed on the call talked about how you might be working against that. It's been a little while now. Has that gone sort of according to plan, he would be able to find the offsets and work through kind of the nuances of this -- of the new regulation? And I guess on top of that, the different work rules.

So we're working on it big time. I think -- so the 2 components just to make sure that people understand, so the new work rest rules therefore, would force us to have more employees to move the same amount of volume because people need to take more rest. So that's one piece of the equation and then the paid sick days, and it's called paid sick days for a reason. So people typically use to call in sick when you're sick. But in the past, we would not pay for those. So now we pay. So that's a pure cost. So -- our best estimate when we started the year was $100 million on those 2 things. I think that to your point, we're working very hard with Ed, but also with Derek Taylor and with Pat Whitehead to try to offset some of those through productivity, through scheduling, through a lot of different initiatives. I'm pushing them. It's early on. So stay tuned on that one. But -- but we're trying to offset some of this. Obviously, I don't think we'll be able to offset the entire amount. $100 million is a big number. But we're working hard. We're not just sitting on our roles and say, well, we're going to get hit, and we're not going to do anything about it. We're pushing the team to try to reduce that impact.

If there's any questions in the audience, raise your hand, we'll get you a microphone. Imagine one that would -- someone would probably ask is if I've snuck a look at my phone and got it correct, the STB just approved CP-KCS. I don't know what conditions there would be. That's always the devil in the details. Coming out of the surprise in terms of what you would have expected, at least one of the possible outcomes. Again, we'll see what the concessions are and everything else related to that. But just from an initial reaction perspective, I mean, I think even on the last call, you mentioned your making some changes based on what could potentially happen. So what's your view as assuming that goes forward? What are some of the areas that you're now going to focus more on with that seemingly being the reality, again, waiting to see what the actual carve-outs or concessions might be?

So Janet can jump in. I can start here. First of all, I want to congratulate Keith and the team to get the approval. Congratulations. And for us, I think that, first of all, we're very focused on our network. We have a great network, 3 coast network that we're focused on. I think that we're not overly concerned about this transaction. I think that we haven't really -- we were not a big interline partner with KCS in the first place. And when we -- when this transaction was moving forward or before it started moving forward, we protected some of the business that was competitive with. And frankly, we're focused on our network. We're very pleased to be part of the E&P program with our partners, UP and NS I think that this is starting to get traction. We're starting to actually move truck traffic that actually comes from Mexico, going to Chicago, interchange with us and then going to Detroit, Michigan, Toronto, Montreal. So we're happy with the partner the UP to have access to Mexico. I think this is good news for us. And I think that, to your point, we don't know what conditions. I mean you just brought it up. I was expecting that this was going to come up this morning. So we'll review the result. And if there's anything we need to do from a CN standpoint, we will. But again, I want to congratulate our Canadian competitor for this approval. Janet, anything?

Yes. I would just add that we feel very good about the pipeline of growth opportunities that we have, which we will be discussing in more detail at the Investor Day in May. Among those, does include some gains from truck-to-rail conversion. The key there is really the reliability of service and the ease of doing business. I think across the board in the rail industry, we've struggled with meaningful conversion because of those 2 factors. So the progress we've been making on the scheduled railroading and the reliability improvement in the capacity and fluidity improvements that it's giving us are really important. And we've also been really digging into technology support in the context of how we interface with our customers and making really good strides in terms of ease of doing business. And we think that this work that's already well underway will support us in those efforts for modal conversion. But again, that's just one of the various growth opportunities that we have, leveraging the strength of the diversified franchise that we have and more to come on that in May.

Okay. So I do want to ask a couple of questions on that. But just to come back to what we're seeing just saying about the Unifor contract negotiation. There's some areas you can protect and some of that it sounds like you can't. Is that -- is that expected to be a headwind that we're going to see in numbers? It sounded like you got most of the major ports covered, but maybe it's a little early to tell and of course, it could still come in and be resolved, but if it doesn't, is that something that you think you'll see -- show up as a bit of a headwind until it does get resolved?

Like it could. I mean it will depend on how long it lasts.

Okay.

So I mean if it's hopefully, like I said, we will get a negotiated settlement before next Tuesday. If we don't, unfortunately, then -- it depends. I mean if it's short in nature, then I don't think -- I think it'd be fair to say that maybe the impact will be not that big. But if it lasts longer, then yes, it could be a headwind. I mean, you cannot have a major union be on strike and not have any financial impact, especially if it's for a longer time. So we'll see. But as I said, hopefully, we'll get a negotiated settlement before next Tuesday.

So I had the opportunity to hear Tracy speak at an industry conference a couple of weeks ago. And he was talking about this integrated supply chain, which I think is probably a lot more important than it was -- not that it wasn't important before, but with all the congestion and issues that we've encountered in the industry. So it's not necessarily new, but there's maybe more emphasis on trying to get it done is -- I'm assuming that's going to be part of the Investor Day conversation, but how does that take place? How do you get all those people and different stakeholders to really work because when you think about industry trying to grow that collectively hasn't really grown? A lot of it seems to come from visibility and better predictability. Again, the date of the integration. But again, that hasn't really come to fruition. So I guess what's -- what's going to move it forward at this time? And what are you specifically trying to do there?

Yes. I think -- and Janet, I'll start, and again, you can jump in on this one as well. So I think it's about sharing information and sharing data. I think that the supply chain -- its named a supply chain because there are many actors. So we deal with shipping lines, we deal with port operators. We deal with grain elevators when you talk about grain. We deal with different players. And typically, in the past, when issues happen, then if you don't have the right information, then there's fingerpoint.. And then everybody has a tendency to point the railroads because we're a big player in the supply chain. We're big in Canada and whether it's us or whether it's not. So I think what Tracy is talking about, and we started talking about this, by the way, Brian, as you probably remember, when Claude Mongeau became CEO in 2010, when we said, we need to look at the supply chain. And if you remember, we implemented service level agreements with terminals, exactly for that. I think now it's more about data interchange moving forward on how quickly we interchange that data so that we have the right information so that we can continue to enhance the supply chain, improve it but also when there's an issue that there's -- there can be some constructive discussions to resolve the issue based on facts and not just based on hearsay and not knowing exactly what's happening out there. So I think we have ways to go. So like I said, it's a bit like safety. There's been improvement on the supply chain since Claude was CEO in 2010. But to Tracy's point, I think we're not where we need to be. And we saw the issues last year. And it will -- and it got into congestions in some of the inland terminals that we had to live with last year. So I think it's about data interchange and it's about enhancing those capabilities and then being able to use it in a constructive manner to improve it. Janet?

I think supply chain is only as good as its weakest link. And the perennial challenge in railroading is the ability to really align supply and demand as much as real time as possible. When you realize the long lead times that railroads have in terms of adding crews, cars or even locomotives, the ability to have more information sharing with customers is critically important. So the more we can understand how their business is evolving, what their future demand looks like, the better we are at enabling that demand. I think the approach that we've had in terms of working in an integrated fashion within the organization, is a foundational step in then being able to go out to the broader ecosystem and work in a more integrated fashion across the supply chain, leveraging data sharing and just really embracing how we all work together.

So on the screen here, we have the 3 Coast rail map and it never gets old. But the -- I think we've talked about it in the past, but the Northeast and the South, I guess, we referred to them as a little the anemic arms. Clearly, the other ones are very strong. So you want to balance that out a bit. And it's probably going to again come up at the Investor Day, but I mean there's only probably so much you can do to get traffic to want to show up there. It's going to go where it's going to go. So how do you think about balancing out the rest of those areas? Is that more investment? Is it more partnership with Halifax and other things, but it seems like it does take a bit of time to really fill out those other quarters and make that map look even better?

Yes. I think obviously -- absolutely, I think that we do have capacity in Eastern Canada going to the South. You're right, we will highlight some of the key projects that are CN-specific, that are over and above the economy that we'll get on that territory, and we will highlight that during our Investor Day. I think we're -- Doug and the team is pushing hard on filling up that space. I think I'm very pleased to report that Halifax is working very, very well. If you remember, they used to be owned by Macquarie financial institution, didn't operate the terminal exactly the way that it needed to be operated now with Singapore.

PSA.

PSA, one of the best terminal operators in the world, I think that we can see Halifax growing. It will take some time. I mean it took some time to grow Rupert. In fact, I think at one point, we grew Rupert probably faster than we would have liked. So it's going to take some time, but it is growing. And right now, Halifax is running just 50% to 60% of its capacity. And it bought the other terminals. So it's got like 1.2 million, 1.3 million TEU capacity. And this, again, is to take market share away from the ports of New Jersey, New York to bring it to Halifax. We've got the best transit time from Halifax going to Toronto, than Detroit, Chicago, than our Canadian competitor by quite a bit. And so we are going to be very aggressive in growing that piece of our business because we can grow with very little CapEx of zero CapEx. On the Western front where you see the very thick line because that's density. So we will be very intentional about how we sell this because as you know, Brian, and as I just said, I think if anything, we've grown our business in Western Canada probably a little faster than we may have liked. And when you look at the last 2 years, we had the largest top line growth of the industry, but we couldn't bring that top line to the bottom line because we took on too much, and we grew over our capacity. And therefore, our cost just went naturally up. So we are selling to our capacity in Western Canada. We are going to continue to invest in sidings year in, year out, like even this year with a potential recession. We have a plan to put some sidings and double track in Western Canada. And the way we do this is through a lens of capital efficiency. So we know that if you try to build too much in one given year because remember that some of these territories, the construction period could be just a couple of months if you don't want to build it under snow. So we are focused on capital efficiency, making sure that the engineering team has got the work blocks that we don't pay -- undo over time because they're paid 1.5 that we're not paying premium to contractors. And we do that capacity year in, year out with a view of capital efficiency. And then what we do is we sell to that capacity. So you may see us grow a little less in Western Canada than we've done in the past but more of it will fall to the bottom line. That's the key here. And when -- and like we saw in 2022, if demand is more than supply, then we use this as a tool to get better pricing because that business needs to earn the right to go on our precious network. So quite aggressive on bringing volumes on Eastern Canada to South, very intentional on how we bring volume to the West with a view of selling to our capacity. And I think that's the proof of the pudding. But to your point, there are some very exciting specific growth projects we have oriented towards Eastern Canada. We have some in Western Canada as well that we will walk you through at Investor Day, and we're looking forward to it. Janet, anything?

You covered it well.

Let's ask one more quick one for Janet and I'll turn it back to you, Ghislain to wrap things up. On the ESG front, obviously, there's more and more focus. It doesn't feel like it's going away. But from a business perspective, commercial decisions, are those being made with ESG at the forefront? Is it component like or is it just nice to have? It's kind of -- I guess asking for the tipping point when you see that be more of at the table as opposed to, well, this is just something we want to focus on. We need it, but it's not really driving the economics. Imagine a lot of that ties back to service and you can't really get away from that. But where are those conversations at this point maybe relative to where they were a couple of years ago?

They've ramped up tremendously. I would say, especially over the past 18 months or so. So customers now -- they expect price and they expect service, but they also want to understand their own footprint. And many of our customers have climate targets as well. So they're looking through their supply chain to see how they can reduce their emissions. And the greatest source of our customers' emissions is actually the transportation supply chain. So it does matter. CN is proud of its track record in this regard. We are about 15% more fuel efficient, so more carbon efficient in terms of our locomotive performance than the industry average. And we know that we do very, very well as an industry. If we can convert more long-haul trucking to rail, we have the potential to reduce GHG emissions by up to 75%. So that's a tremendous value that we can provide to our customers. We are getting more and more requests for detailed carbon calculations. We're getting more requests in terms of customers that are in the process of making decisions about where to locate or how to establish supply chains and how the GHG impacts may be related to where they put their facilities and what mode of transportation they use. So we see it absolutely ramping up, but we're in a great position in terms of being more fuel and carbon efficient industry as a whole. And amongst that industry, I think CN is in a great position in terms of the performance that we've established in this area.

So maybe some closing comments, we have a minute left. So listen, I'm extremely excited to be at CN. I've been there for 25 years, so got to be excited though and I've seen different CEOs. I'm very excited to work with Tracy and some of you will meet her. I think that CN looks very bright under her leadership. Very excited to go back to scheduled railroading with a focus on car velocity. As I said, our car velocity quarter-to-date is summer like. As we get into the work season and the maintenance season and work block, maybe the improvement in car velocity will slow down a little bit because people -- the engineering forces need to get their work blocks. But the team -- what the team is producing is phenomenal. And I've seen it years ago. And unfortunately, we lost it a little bit, but we're back to it. And you can see people have smiles on their face and people are proud to be at CN. And I think that we have a great network. We love it, and this is what we sell. And our customer service is as good as it's ever been in the past, and that's what it's all about. It's about customer service, and it's about continuing to really focus and have part of our DNA as safety as your question alluded to, Brian. So -- thanks for taking interest in CN. Hopefully, we'll see you at Investor Day on May 2 and May 3. If not by physically, you'll listen to webcast, hopefully and it's going to be exciting 2 days. So thank you, and have a safe day.

All right. Thanks, Ghislain. We'll have to end it there, but we will see you in May in Chicago. Thanks a lot for being here.

Thank you.