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

Welcome, everyone, to the CN 2023 Investor Day [Foreign Language] Please welcome our host, Janet Drysdale, Senior Vice President and Chief Stakeholder Relations Officer.

Welcome, everyone everybody here in the room as well as everybody that's joining via webcast. [Foreign Language] It's so great to see so many familiar faces. There's even a few of you out there who I remember being with when you first started covering the railways. For those of you that I don't know, I hope to have the opportunity to connect with you in coming month. In the meantime, I know that my IR team is going to take great care of you. At CN, every work assignment starts with the safety briefing and today is no exception. So I'm going to ask the head of our new Southern region, Nick Clark, to brief us.

Hello again, everybody. Again, my name is Nick Clark. I'm here to do a safety briefing this morning. It will be fairly short. And I do have to read some of it as it's very intensive to the Gwen here where we are today. We are located in the Galleria ballroom. This location is the Gwen Hotel, which is 521 North Rush Street in Chicago, Illinois. In case of emergency, I'll be the person that will call 911, and I will notify any hotel staff or the nearest hotel staff in the front desk. Mr. Pat Whitehead over here to my left is in charge of first-aid and CPR if required. Just as note, there are 2 defibrillators here on site, one on the fifth floor and then another in the basement. And if we need one, we can get a hotel staff to bring it here to this room. And if an emergency situation arises, I will follow any instruction by the hotel staff. In the event of a fire, we'll alert the hotel staff. If you need to, you can find some one of the red [indiscernible] of CN and we can find the hotel staff if needed, to find nearest fire extinguisher. And for some reason, we were needed to exit the building here. We will proceed down the corridor going south, which is out this way that we came in, proceed down the stairwell to Illinois Street and then where we will wait further in instructions as far as where to go for evacuation. If a nearest hospital is required, Northwestern is 0.3 miles away, and we can help guide you to that. We do ask that you'd be accountable for your neighbors. This is a large group, so look to your right and look to your left, those will be the buddy assistant if we were to have to evacuate here. Also note that inside your tables there, you will see plugs, USB for charging for your computers, your cell phone, so on and so forth. Be mindful if there's any cords dangling to tight quarters here, standing up trip hazards with bags, so on and so forth. You heard Janet say that we give one of these safety briefings for everything. And truly, we do it for everything. So right now, anywhere across the CN, there may be upward to 100 crews getting a safety briefing as they start their shift at 8 A.M. this morning. It is not unique necessarily to the industry, but we've taken a lot of pride in our safety briefings. We don't start a task. We don't start a shift. We don't start an assignment, but understanding the safety protocols and what's out there to do. It's something that we're very proudful of. It's really who we are. We have doubled down on that in the last few years. We're doing mid-shift briefings. We also empower our folks to pause work whenever necessary to have their own briefings, if anything were to change. So again, it's been a pleasure. It's an honor to give the safety brief here in front of all of you, and have a safe day.

Thanks very much, Nick. Before we get down to business and as is becoming customary practice, particularly in Canada, we will do a land acknowledgment. Land acknowledgments are undertaken as a way to recognize Indigenous peoples, the original stewards on the land in which we now live and work. Chicago, where we're gathered today is the traditional homeland of the Council of 3 fires, the Odawa, Ojibwe and Potawatomi nations. Many other tribes like the Miami, Ho-Chunk, Menominee, Sac and Fox also called this area home. Located at the intersection of several great waterways, this land naturally became a site of travel and healing for many tribes. I would also like to acknowledge that the CN network spans many treaty and tribal lands, [ Mati ] Homeland, unceded lands and traditional territories of Indigenous nations, tribes and governments across Turtle Island, what we call North America. All right. Let's get down to business. I would like to draw your attention to the forward-looking statements and additional legal information on the screens and online. Today's meeting will refer to certain projections and other forward-looking statements within the meaning of U.S. and Canadian securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied. We have a fantastic lineup of speakers for you today, starting with our CEO. But before I hand the mic over, I want to say a few words. I've had the opportunity to get to know Tracy over the last year. She is intuitive, balanced in her approach, demanding and strategic, rarely have I seen somebody who can so effectively engage at all levels of the organization and externally. I am very proud and pleased to introduce CN's President and Chief Executive Officer, Tracy Robinson.

Good morning. Thank you, Janet. That was very nice of you. You had your coffee this morning? Offset that sugar from late last night. That was quite a dessert bar, wasn't it? Thank you for being here with us today and for being here with the CN team. We know that you've spent and some of you have spent now where we're spending a couple of days with us. Those of you who were around yesterday got to do a little bit of railroading I hope you enjoyed that. I heard some great stories last night and some really good feedback. Let's spend some time with the cross-section of our team out there yesterday, and you're going to spend some time today with the whole other cross-section of our team. And today, we're going to talk to you a little bit more about how we're running the place and where we want to take this place. So I've now been in this role with CN for just over a year, and I couldn't be happier with what this team has accomplished. I'm really proud of the results that they've driven and I'm really proud of the way that they have come together as a team to drive those results. And a number of you, as I've mention you over the last year, have asked me or Ghislain or Ed or Doug, you've all asked us how we were able to turn this around so quickly, and I can tell you, it's 3 things. You have the right operating model. We got -- we drove some clarity and alignment so that everybody knew that their role. We've got the right leadership team in place. You're going to hear all about that today, but I can tell you as we stand in now -- here now, CN isn't just back I think we're better and we're excited. So let me tell you what I'm going to do up here today. I'm going to spend a little bit of time giving you some context on what you're going to hear today, how we're structuring our thinking, how we're organizing ourselves as we go forward. I'm going to touch base on all these 6 areas now that you see on the screen, they're all critical to the way that we're putting our plan together and you'll hear more of the detail in each of these areas as we go through today. So let's get started. As you heard Nick say, we start everything, every day, every activity with safety. It is the most important principle that guides all of our actions, and it is every day, every hour at the front of our minds as we come to our work and as we move in our personal lives. And today, it also rests very heavily on our hearts because we lost one of our own on Friday. We had a CN conductor trainee Mohammed Khan, lost his life while he was working on Friday. And Mohammed was just like the rest of us. He loved the railroading, he was excited about his career with CN, and we are devastated that his life was cut short. And it has reinforced to us the significance of our responsibilities to every CN employee into everybody who touches the railroad. Last Thursday, we finished 841 consecutive days fatality-free at CN, and that was a record for us. And today, we're at 4. And we're going to keep pushing, because we must, we have to continue to push towards 0 wheel that to Mohammed, we know that to every CN employee. And as I come back into the industry, I would say that we owe it as an industry. It's occurred to me over the last number of months since the derailment in Ohio that you'll all be familiar with. But in this industry, what happens to 1 of us happens to all of us. And so as we go down this journey to a safer future, we need to do it together. We need to take all the best ideas, all the best technologies and processes we need to collaborate. And I'm proud of what the industry did in getting together and doing that, all the information went on the table as we created new standards for ourselves for wayside detection. And that's a great start, but we need to continue that because safety in this industry is our social license to operate. So I hope when you were out in Homewood and Kirk yesterday, that you saw some of what we're doing. You saw some of the technologies that we're using, and we're developing so that we can be safer in the future. You probably saw the automatic track inspection car, you maybe saw some of the tools that we're using to collaborate with communities and first responders in those communities. You might have seen or I heard some of you were up on the 911 car. So these are all the things that we're doing as we try to advance and what I hope you felt out there was the depth of our commitment to building a values-based and safety culture because what happens to one of us happens to all of us and my personal commitment to our employees, to our union leaders, to our communities, to you, to the industry is that we won't stop until we find that point of 0 and that we were here to collaborate as we go through that process because that's the best path there. Okay. Over the last year, I've been in this job, some of the -- as I reflect back, the most important decisions I've made is who I gather around the leadership table with me. Those have been very intentional. And I know some of you have noted, but I've took my time on that because it's really important thing to get right. So I'm going to just tell you about a few of the people that are new to their roles, always new to the company but new to their roles that you're going to spend some time with up here today. So Doug MacDonald leads our commercial organization, and he is the right guy to lead our commercial organization right now. Doug has had -- spent a lot of his career in commercial, he knows our customers, he knows our markets really, really well. And he also feels as strongly as I do about the fact that scheduled operating model is the one that we need to use here. It's right for us at CN, and he's been instrumental in driving some focus and leading our commercial organization back to that kind of model and making the adjustment so that our book of business fits our operating plan. And he's worked with Ghis and with Ed in driving that alignment that we need across the organization because this is the plan. So our only plan is the one plan is the plan we're all running and everyone needs to understand their role. Doug's got a great team, and you're going to see a number of them up here with him today as he talks about what we see forward looking from a growth perspective. It didn't take long before I came in where I knew what operating model we needed to get back to. And I knew also that I needed the right leader to kind of help us do that quickly and was able to entice Ed Harris, it was not easy. He made me work for it, but I was able to entice Ed to come and spend some time, come back to CN. And Ed is a CNer, he knows our network well. He's run scheduled railroads and he has got this way about them that opens people up and that draws people to them. And what is -- if you talk to Ed and you will, it would tell you he's not here for long. It turns out my power is of persuasion only go so far. So while he's here, he's committed to coaching and mentoring that next generation of railroaders. And I'm really happy with the time that he's spending with our frontline supervisors, helping them to develop the perspective and the capabilities to run the plant. And so Ed also has a bunch of his team here today that you're going to meet. And 2 of them, we've put in new positions over the last year. Patrick Whitehead, Derek Taylor, are 2 of probably the most talented senior operating folks that I've met in a very long time. And they're working together. They both get it. They know what we're up to. They're working together to drive us towards this plan and they're doing a fantastic job of it. You're going to see them up here in just a few minutes. Behind that, I am really encouraged by the talent I see coming up in this organization. You saw some of them yesterday, you saw some of them last night and you're going to see another group of them today. And we're leaning in to accelerate their development because they are the next generation of this railroad. So as we think about the talent that we need, I would tell you, I'm a believer that, that old school culture is gone. That kind of top-down command and control, things move way too quickly now for us to work like that. So what we're looking for is people who understand, who want to accelerate who are willing to have the permission and the mandate to step into it and to act. And I think that the people that you've seen, I hope that you recognize that they embody that kind of spirit. So those are what we're hoping to draw into this organization and to build and what we believe is it's also the type of approach that is going to dry in the next generation as we go forward. So getting this team right is an absolute priority for me because they are the engine, they're the engine that's going to drive our success as we go day to day, and the engine that's going to drive our success in the future. They're also the engine that's going to drive the scheduled operating plan. So let me just spend a few minutes with you on this. I want you to understand why -- you're going to hear a lot, you've probably already heard a lot about the scheduled operating model and the fact that this is the 1 for us and we're pretty serious about it. I want you to understand why it's so important. Now you have this phrase around here that you may have heard and you're going to hear it a lot more today, the plan is sacred. And in this railroad over the past number of years, we moved away from this kind of a plan, and we move more towards a long train strategy in the search of what I'm told is a different kind of efficiency. My belief is the scheduled plan is the right one for us. Let me tell you why. CN is a single line network, right? If you think about how a single-line network works, let me do it this way for you. Imagine that you're an operations manager, and you're in a yard, right? And you're about to depart a train and say it's 7,000 feet, it's going to depart at 2:00 A.M., 1400. If you are in a long train model, right? You're looking at your inbound lineup. And you may see 2,000, 3,000 feet coming into that yard over the next number of hours that could go on that outbound train, but you want the longest train possible. So what you're going to do is delay that departure. You're going to wait til that traffic comes in, you're going to marshal it up and you're going to send out a 10,000-foot train, right. But no one knows when that train is leaving across the network and no one knows when it's going to get to the next yard. What you've just done is you've optimized for that terminal for your yard and for that train. If you're running a scheduled operating model, that train departs at 2:00 A.M., 1400 at 7,000 feet. And it does that because that power is expected in the next terminal to be turned and put on another train. And those cars are planned for connection so that they can get to the customer. And what you're doing in that model is you're running a much more consistent level of customer service, and you're optimizing not to the yard, but you're optimizing to the network. And so you're going to get more asset velocity, more consistent utilization of power and crews and more predictable service. So the way this model works in our railroad is that the plan is created at the center. That's Pat Whitehead's job, you're going to hear him talk about it. And when he creates this plan, he looks at all the volume across the network and all the parameters and he sets a plan that optimizes for the entire network. And he hands it over to Derek Taylor. Derek is the head of transportation. You'll see him in a few minutes. Derek's job is to run the plan. So what he does, the trains depart on time, they arrive on time, they have the right blocks, they make the right connections, right? And if Derek has trouble doing that, if there's something wrong with the plan, he doesn't revert to tactical measures to fix it, he gives it back to Pat. Pat fixes it at the network level. So this is what we mean when we say scheduled railroading. And we implemented this on April 1 of last year. We went back to scheduled railroading. And over the last year, this team has made some pretty impressive gains. I know that you've been watching our numbers. Our customer service has improved dramatically and is much more consistent. Our assets are moving faster. Our car velocity has gone up by more than 30%. And when your cars move faster, you create capacity, you can sell into that capacity at lower incremental cost, and you've seen us doing that. You've seen us moving more volume with less assets than ever before. So that's the power for a network like ours of the scheduled railroading model. Now we've lapped that April 1 implementation, and what you're seeing -- going to see from here on in is Pat and Derek will continue to refine this model. They'll make changes to it as volumes change as they are now. They will make changes to it for areas that aren't quite working. They'll make changes to it as we implement a new technology but always optimizing for the entirety of the network. Because running an operation like this, is what drives customer service. It's what drives efficiency. And for us, it's the platform for growth as we look forward. So over the last year, we've been working on this question of is there growth and where are we going to take this place? And as we stand here now a year and a bit in, I can't tell you how excited I am about the pipeline of growth opportunities that we have in front of us. And of course, it starts with this network. CN has a very advantaged network. I know how advantaged is this because I competed against it for a lot of years. And as they come back, I can tell you, it hasn't changed. It's still is strong. Let me tell you what I like about it. CN has optionality. 2 ports on the West Coast. We have 2 ports on the East Coast. We have 2 ports down in the Gulf, sole service provider to the Port of Prince Rupert sole service provider at the Port of Halifax, and we have this little gem that many of you actually were out on yesterday in EJ&E here in Chicago that allows us to move reliably and quickly around Chicago. You may have heard this yesterday, but 25% of the rail volume in North America touches Chicago. And we have this unique advantage of being able to move around it very, very efficiently and very, very quickly. So with this network over the past year, I wanted this growth opportunity things scrubbed. They were working on some stuff I needed to understand it. I wanted to know that we had turned every rock. So we pulled together the strategy team, with the commercial team, some finance folks, and we invited in some of the operations team, and we scrubbed it. We looked at business groups, we looked at every commodity line. We looked at every part of the network. We looked at how trade flows were changing, and they are and where they may go and how that may impact us. We looked at some of the market disruptors, think about the transition to a low carbon economy. We looked at our traditional markets, and we looked at our emerging markets, and we did a lot of thinking about the partnerships that we were going to need to develop in order to make us successful. We did that over about 6 months, 6, 7 months last year. And what has come from that is a really interesting portfolio of growth opportunities across the network, each one of them distinct based on where of the network that are happening. And so as a result of that, we're investing. We're investing in the western part of our network where we are close to capacity because of how compelling some of those growth opportunities are, and you're going to hear about these today. We are -- in the east and the south, we're working to create those opportunities to densify our network because we have capacity there, and there's some interesting opportunities there. And we are working through solidifying some of the relationships that are going to be really important for our collective success. And you started to see some of that work come out as well. As we build this up, our intent, what I want is for us to be the best option. So if you're bringing containers into North America, whether it's from the east, the west or the south, I want us, and we will be the best option. As service, most consistent performance into the Mid-Con. If you are exporting resources, think of all of the bulk commodities, whether you're sending them to world markets of the west, the east or the south. We will be the best option to managing your supply chain and the consistency of it and maximizing your asset utilization. This company has wanted to be in Mexico -- in that Mexico market for years. And I'm really happy that we are. And with our partners, we will be the best option if you're going from Mexico into the U.S. and Canada or the other way. If you're looking at some of the emerging markets, and you'll hear about some of them today, they're really interesting. We will be the best option for that as we will be for our traditional markets. So today, Doug's team is going to take you through what we call some proof points of what's in this portfolio that we're working on now and where we think it's going to go. And as we stand here, I am confident as I look at this portfolio, that we will drive volume growth that exceeds the pace of the economic growth on the continent into the future. Railroads [ Haman ] is working well. We're excited about the growth ahead, but we -- it's critical for us and it's critical I know for you, is that we drive that top line growth to our bottom line. And we're pretty focused on that. This growth is going to give us the opportunity to invest in our network to expand our capacity to build some new services like you're seeing us come out with. And the key to all of it is to do it productively. So you're going to hear Ghislain talked to us today more broadly about capital allocation and how we're thinking about that. But more specifically, how we're changing the way that we're going to manage our capital and the deployment of our capital and the implementation of our capital investments. We want you all comfortable and as comfortable as we are that we're going to drive the returns from those investments that we've targeted. And this means a different kind of focus to get the most out of every dollar we put in the ground. So we're deploying capital in our network. We're also investing in technology. You'll hear over the course of today, how we're deploying technology in some interesting ways to make us safer, make us more efficient, improve our service and make us easier for our customers to do business with. But the same rules apply to those technology investments. So our new approach to capital deployment covers every single investment. And so with this approach, we're going to continue to invest to make our business bigger to make it more efficient, to make it safer and more resilient. So Ghis is going to take you through that today. He's also going to do some wrapping up of what you hear today and give you a sense of the numbers and a little bit of guidance on what we see coming forward. You're going to hear a lot about today as you go through about build the plan, run the plan, sell the plan. You're going to hear a lot about where we're going to go and how we're going to drive value that way. But let me just make a personal comment on sustainability. This is important to me, I'm sure it is to you. We don't have a separate section on sustainability. We don't have a separate department on sustainability. Sustainability is not separate. In my view, sustainability is our business. We are a sustainable company. Safety, if you think about it, is our social license to operate. Climate change, kinding the defining issue of our time, you think about talent, who we can attract, who we can develop, who's going to power our growth. And the way that we engage and align with stakeholders is going to amplify, support everything that we do. A part of being a sustainable organization is keeping an eye and a steady hand on the future. And I understand all of the quarterly realities of leading a publicly traded company. But I've also watched and in truth have been part of railroads overreacting to changes in the near term to changes in volumes to changes in where we are in the economic cycle to third-party shocks. We overreact and we lose -- what makes us good at what we do and good at providing service to the industries and growing the economy in this country. So in this company, we're going to keep a pretty steady eye on the long term. We think it's the right thing to do, even if it means that we carry -- we get a little lower margin leverage in the short term. It will be there when the volumes come back. And I would tell you, we've done the math. We've looked at every cycle that this company has been through, and we are far better off to stay steady and be ready for when the rebound comes and it will. So let me just wrap up. When I came in a year ago, I was excited, how could you not be excited about coming into a company like CN, it's pretty iconic. And I lived around it and watched it, competed against it in my whole career. But I also had some trepidation because I didn't know what had happened to CN. And I didn't know for sure where we could take it. Now I'm a year and a bit in, and I can tell you I'm all excitement, no more trepidation because I know exactly where we can take this place. We've got the right operating model without a doubt. We have and are building the right team, and you can see who's coming up in that team. We've got a portfolio of growth opportunities that I hope you'll be excited about as I am by the time you leave. We are investing in the right way with the right discipline and alignment to push that growth to the bottom line to our benefit into all of yours. So I'm pretty excited about the future, and I can't wait to see how this team can lift into what comes next and continue to build our business but also support the growth of the North American economy. And there is a new energy around this team. And they know that they're back, they know they got this. They know what their role is and where we're going, and they're having fun. I hope you see it and I hope you feel it as well. So let's get them up here. Mr. Harris, I think it's your turn, my friend. It is my honor and my pleasure to introduce you all to our Chief Operating Officer, Mr. Ed Harris.

First time I've ever got a hug from a CEO. So that's a great start for me. Welcome to Chicago. It was great seeing a lot of familiar faces, familiar people that I've worked with in the past years. And she's exactly right. She's very persuasive. And I've enjoyed this opportunity more than you can ever imagine. Because for me, it was coming back home. For me, it was getting back into the operation that I helped build a couple of decades ago. I think you all realize that I had a lot of questions last night, how many times have you retired? I think it was 4, maybe 5. I'm not sure. Where are you going to go? I said, well, I'm here right now. But I've enjoyed every one of my retirements. I've enjoyed going back to work every time. Some not as good as the other ones. This happens to be a very enjoyable role for me, and I like it a lot. I was sitting in Florida in my condominium on the Atlantic Ocean, enjoying a very casual Sunday, the phone rang. And could you meet Tracy? Yes, I guess I can, but I'm not associated. I'm not working. Could you just talk to her? All right. You've got to come to Chicago, that's where I'll be next week. She flies to Chicago. We meet in the Peninsula, and we start talking railroad. Before I know, we've been talking railroad for over 2 hours. And I was excited to hear her view of the operation. I kind of knew what was going on here operating-wise because I still had a lot of associates here. I talked to everybody, and I knew what she was up against. And I knew the frustrations she was feeling, trying to get that message across. And as a consultant, I share a lot of those frustrations or when I was a consultant only because you can only suggest to the management team what they ought to be doing or where they ought to be looking. You can't tell them. You don't last as a consultant very long when you tell them. So when they hired me as a consultant, they send me a contract, the monthly retainer fee was blank. I got to fill in the number myself. That's never happened before. So I gave that a lot of thought. And I said, "Well, I don't want to overblow this thing, and I want to be conservative because I know they're watching their dollars, but I want to get rewarded for what I knew I could do." So I filled in the number. I got hired as a consultant. Tracy and I developed an operating relationship. They would send me turnovers, the daily turnover to my personal e-mail, I would look at the turnover, I would e-mail her back, ask him this, ask him that, push this, report this way. So we quickly understood between us where we wanted to be and what we needed to do. But quite frankly, it's been a labor of love. I've enjoyed every minute of it. It's been fantastic. I'll tell you something about her. She said she was persuasive. So now, I've got the opportunity to say that. We -- as we decided we needed to make a change, and it was a collaborative understanding and when she had me wrapped up, which took a few months. At my first day, she goes, where do you want to start? I said Edmonton. Why do you want to go to Edmonton? I said its operating headquarters. That's where I was. That's where I worked. That's where the focus needs to come from. She says, okay. So it was a very timed execution of a change of command. I fly to Edmonton, she says, I'll send you a car, I said no cars, I'll take a cab. So I take a cab to the yard, go up in the tower, she has a conference call. She introduces me to the operating team. So I'm there talking and trying to establish some momentum, finding out what was going on internally now that it's been announced and I don't have to ask for reports under the cloak of darkness. And I start digging into car management, crew management, things like that. I'm up there for about 3 or 4 hours and I get a text from my wife. Oh God. So I look, there's a picture of a dozen roses and my wife and flowers. Tracy Robinson, there's no other person. No other CEO in this industry that would ever think of a spouse before they think of you. I was sold and my wife was sold. Anyway, that's how I got here. From consulting, I knew exactly what needed to be done. I know where we should address our focus operationally and it really is nice to be back home again. Tracy and I never talk about PSR. That's not in our vocabulary. I don't even acknowledge PSR, what we do is run a scheduled operation based on the car with a strong level of safety and a strong level of commitment to our customers. The car is the driving mechanism. The velocity of that operation is what makes this thing home. I don't talk about precision scheduled or anything. I talk about car velocity. I talk about train speed. I talk about customer service. I talk about the spotting plan. I talk about the scheduled service. I talk about how we take the bulk trains and feed them in between the scheduled trains out of Edmonton going to the ports. It's all part of the plan. And as you were in Homewood yesterday and you went through the training center and you met some of the new hires, we drive that plan as soon as they walk through that door, whether it's Homewood or Winnipeg. They understand the importance of the plan and what's -- how we look at the sacred atmosphere that we're trying to develop from our working force. The lower that we can get within the organization to make decisions, the stronger we become. So whether you're a car man, whether you're driving crews, whether you're calling crews, whether you're a yard master, whether you're in the tower of Kirk yard, whether you're pulling cuts out of the classification yard to build a train. You know what on time means. And I too got that question, how did we change so fast? How do we turn so fast? One word, discipline. We all had discipline in the operating plan. It would be nothing for us to pick up the phone. Why are we 30 minutes late. Yesterday's on-time departures were at 94% for our 200-some-odd trains that we run. You're going to hear Pat and Derek talk about launch and land. So departure to arrival is an important metric for us. We never deviate from the plan. We always stay on target. We always stay focused. Today, I want to talk about safety what we do to address our safety operation and a safe railroading atmosphere. I'm going to talk about our version of schedule railroading in a little bit more detail, and I want to talk about the next generation of talent. So let's talk about safety. Zero is possible, and I shared the pain that we all felt a couple of days ago when we lost one of our team. It's a dangerous business. You always have to be aware. You always have to know your surroundings. You always have to be diligent, safety briefing, safety, briefing, safety briefing. It takes one second of not paying attention and you get in trouble. But it's more than just the injury for this company. We talk safety, we do safety in every form of operations that we have. The wayside detection technology. We have over 1,000 detectors across our mainline to measure things like bearing temperature, acoustic detection that measures the sound that's coming out of the bearing. Wheel impacts looking for flat spots. Dragging equipment. We have over 24 million data points a day from all the inspections we do. And I had to ask Dom, our Head of IT, what the hell is a data point. But all the different measurements, all the different things we look at as far as components, the portals, the inspection, the artificial intelligence, the trending analysis we do from detector to detector measuring temperature, engaging track. Our plan is to be preventive about our maintenance policy. I don't want to wait until something breaks on the main line. I want to get it into the RIP track, get it repair, change out the wheels on plan, not as a result of a disaster or pending disaster. That doesn't do this railroad any good. It doesn't do any railroad any good as we've learned recently. You saw yesterday at Woodcrest, the automatic track inspection equipment, the automatic track inspection car, ATIP as we refer to it. Track geometry, cross level, gauge, this thing now, they're developing some kind of radar mechanism to look down into the roadbed 6 feet, to look for any soft spots, any undercurrent activity going on, on the track bed. That thing runs over 1 million miles a year, and we've got 10 of them. And we usually attach them to our intermodal trains to try to check the track at the fastest speed that we have. You saw the air repeater cars. That allows us to run in minus 40, a reasonable train length to protect our customers' business when you have a hard time getting air through the cars. The repeater car in lieu of another distributed power engine, as another air source for us. That allows us to run longer in the winter when most companies just kind of shrink it down to 5,000, 6,000 feet. We're still through the tier of the temperature and the repeater car that we would add to the train allows us to keep it up to 8,000, 9,000, 10,000 feet to keep our service plan intact. It's hard to operating up here. It's a tough environment. A lot of things can go wrong, and the colder it gets, the more things seem to go wrong. 911 car, Tracy mentioned it, you saw the slide on it. That car travels through a lot of the communities we operate in, that allows the first responders and our first emergency response team to collaborate and work and develop relationships where we literally share what we're hauling through their neighborhoods, through their towns, through their cities. In case we did have an issue, and it could be something as simple as a leaking vent valve that prematurely releases a vapor in the air. But when we all understand the nature of our business and we all understand how to repair things and it's not as bad as it usually seems, especially when the press gets a hold of it. That's better railroading, that's smart railroading, that's good railroading. You also saw the electronic track authority verification system we have for our maintenance of way people. This allows a track inspector, to get on the railroad or a maintenance of way crew to get on the railroad with protection through the dispatching system to allow them to go from point A to B without picking up a telephone or making a radio call. It's all done electronically. You also saw yesterday, I think you would have saw the [ enabling ] system that we use for our crews and our personnel in the field to report hazards, report opportunities, things that they say, take pictures of it, send it to the safety center so we can address things that we see across the network immediately. That's just part of our railroad. The training centers in Homewood and Winnipeg are the best you've ever seen. We cover all crafts regardless whether it's a maintenance of way or a signalman or operating guy, operating role, new hire, brakeman, switchman, whatever the case may be. They get it ground up, then they go out in the field, practice what they learn, then they come back for another round of training. It's a very intense program, very intense process, but it's money well spent in line with the future of this operation. The old days, you used to get a rule book and a timetable and a pair of gloves and a ladder and say there you go, 3 trips and you're qualify. You don't do that anymore. But that's the way it used to be. I hope you were very pleased when you went through those training centers and you saw the signal room. You saw the waking simulator, you saw a locomotive simulator. Hopefully, you got a chance to get behind the stick and run a train for a little while. It's impressive. Next thing I want to talk about is the scheduled railroading plan. And I said it's disciplined. It's a disciplined approach. We spend a lot of time talking about the plan. We look for weak spots. We use a saying, we make the train, we run the train by the plan. It's always by the plan. Tracy used the reference whether it's 4,000 cars or excuse me, 4,000 feet or 10,000 feet. We're running on time, because of the connectivity throughout the network, whether it's power, whether it's crews, whether it's availability. if I'm a customer and I'm on a 4,000-foot train and you don't run me to build train length, what do you think I'm going to say? Where is my service plan? I'm paying you a lot of money to run this train on time, and you're holding -- you tell me you're holding it for longer opportunity. That don't fly. I was sitting with one of our marketing managers last night, and we started talking about scheduled service. And I didn't even think of this until last night. A lot of our petroleum and chemical customers have to lease their own fleets. That cost them a lot of money. The more velocity that we have in the network and the more car speed and train speed that we create, we've had customers that actually reduce their fleet, turned back their lease equipment. That's a savings I think we should be charging for, but we don't. But it's good for customer relationships. They dropped their expense from the benefits they see from running a scheduled operation because we do run everything on timing, we do run it in full. The plan is sacred. That's all we focus on. What do we do against the operating plan? How did we perform? We want Doug MacDonald's team to go out and sell the plan, show what we've done operationally. I mentioned earlier, we were 94% on time yesterday departing, sell to that opportunity. How did we improve so fast? Well, Tracy picked some pretty good managers, I think, although I gave her a hard time as she said, I just wanted to make sure one more time. But we started bottom up. We started to enforce the plan, enforce the operation from the basis of the operation, right? From the customer's gate right through the classification yard, right into the switch engine assignment, right into the terminal, right out to destination. And we proved to our customers. We can deliver service, and they can be proud of shipping on CN. I really think that was the answer that allowed us to be able to turn this thing around quickly, that seems so quick when you're doing it. But when you look at the metrics, you can tell month-to-month, quarter-to-quarter constant improvement. We've improved every quarter that I've been here. It's only been 2, but, we started in April, but we started with just start the trains on time, please. Do that. That was the first step and don't run anything longer than siding length. You go out there and run long trains and you don't fit in a siding what happens? You start holding trains back 10, 12, 15 miles, waiting for a meet. You can't do that. Every stop train costs this company money, costs us in customer service, costs us in our relationships with our customers. I made a commitment when I came here again in Montreal. And I told everybody we're done cutting heads. This company has gone through way too much head cutting and we've been paying the price ever since. The railroads, that's hard to say, the way railroads make their money, increase profitability, keep the things moving. Work on train speed, work on velocity, work on car miles per car day. We're handling more loading today with probably about 20,000 less pieces of equipment across this railroad. That's momentum. That's productivity and we start at day 1. I spent as much time with car management as I did with the operating crews because I wanted to see that improvement. I wanted everybody to be focused on the cost of the car. Somebody reminded me last night what I did when I was at Canadian Pacific, I came up with a form and said, cars are cash, they sure are. I was surprised somebody even remember that because I couldn't remember it. So we don't reduce heads. We work on operating efficiencies. That's what generates our profitability and what generates our expense savings. We focus on dwell, reduction in equipment requirements and money in the bank. We're data-driven. We measure everything. We continue to measure everything. As I said, we run trains at siding length. When we create velocity, that gives us capacity, the faster we are, the more capacity we have, the less opportunity we need to build sidings. We save capital dollars by using our available capacity first and foremost. Ghis won't give me any money unless I can prove them that this is what we need, but I better have my numbers right. Car miles per car day, as I mentioned, that was an important aspect for our -- what we measure as far as controlling the inventory and ensuring we're getting the velocity that we need. The first mile, last mile responsibility, we drove to our field officers. I was surprised how many customers didn't get service because lack of crews, lack of power, things were getting addressed in the terminals, we address that as well, too. We're working with engineering now as we're getting ready for work block season and spending some of those valuable capital dollars to build their work block plan right into the operating schedule. We want to give them undisturbed time. We don't want them jumping on and jumping off the railroad 3 or 4 times in the shift. Once we give them 6 to 8 hours, they get 8 hours, no more than 8 hours run but we give them 8 hours, undisturbed. That's a valuable opportunity for the railroad, and it's a good use of our capital dollars. I focus a lot with mechanical on the reliability factor I don't want the engines to fail. I want to make sure we do the proper maintenance and proper inspections, car inspections are vital to us. We've got all this technology. We still got to walk the track and look at the cars. You still got to ensure that the brakes are released. I'm going to turn it over to the next generation of railroaders. Two guys I've gotten very close with over the last few months. Tracy has already mentioned Pat Whitehead, our Senior VP of service design, system servicing or whatever the hell it is. I'm not sure what it is. And Derek Taylor, our Vice President and Senior Vice President of Field Operations. One guy plans, one guy executes. It's kind of a weird combination in this industry, but I'm telling you, it works, and it works very, very well. And you'll see the relationship these guys have. So one guy makes a plan. One guy runs the plan and I'm off the stage. Thank you very much.

Thank you, Ed. We are all very excited to have you back home at CN, we appreciate your experience and your leadership. For the record, my title is Senior Vice President of Network Operations, and I'm headquartered in Edmonton, Alberta. Joining me on the stage this morning is my good friend, Derek Taylor.

Yes. Thanks, Pat. And good morning, everybody. My name is Derek Taylor, Senior Vice President of Transportation. Believe it or not, Pat and I manage different teams, but we actually have a lot in common. We both cut our teeth here in Chicago were at and maybe had a few kind words for each other, maybe 20 years ago and didn't even know it.

I think we did.

But at the end of the day, one key thing with that is it gives us a unique perspective in Chicago. We both realize the EJ&E and the gift that has given us, and it keeps on getting you hear about Rupert, operationally, we feel that way about the J. So with no further ado, a little bit about myself. I've been in the industry for 23 years, actually, the May first, a few days ago. I actually worked for the South Shore railroad in the Steel Gang, Tie Gang and as a welder helper to try to pay for school. When I graduated from the DePaul University in May of 2000, I hired on with CN and have actually been here ever since. So during that 23 years at CN has all been in operations started here. I've worked in all 3 regions, I lived and worked in Canada twice. I was fortunate enough to serve as Vice President of 2 of those 3 regions and also oversaw the network as Vice President of Operational Excellence.

A happy railroad anniversary Derek.

Yes. Thank you, Pat. Wedding anniversary too, she is still with me after 13 years.

I was about to say that, but you beat me to it. As Derek said, we have a lot in common. We both started our careers right here in Chicago. We have each worked the other's job throughout our career and we both truly believe that the best way to run an efficient railroad is to run a disciplined scheduled operating plan. I have 30 years of experience in the railroad industry. I started my career with Conrail as a unionized employee, I worked as a conductor, locomotive engineer and a rail traffic controller. My father was a superintendent for Conrail in Detroit at the time that I started. My first management role with Conrail was in the coal fields of West Virginia. When Norfolk Southern and CSX acquired Conrail in June of 1999, I went to work for Norfolk Southern in Columbus, Ohio. My dad on the other hand, went to work for the CSX in Indianapolis, Indiana. So as you can imagine, this made for some really interesting Thanksgiving dinner conversations working for rival railroads. But it was okay because mom was there to a referee and b, remind us that we're not allowed to talk about railroading at the dinner table. I worked in a variety of leadership roles at Norfolk Southern of increasing responsibility across the entire system in transportation, mechanical and network operations. When I left NS, I was the Vice President of Transportation. I joined CN in Chicago in April of 2021. I worked as the Eastern and Southern Region Vice President from September of 2021 and so I moved into my most recent role in July of 2022 as the Senior Vice President of Network Operations. So today, Pat and I are here to tell you a short story about the dramatic operational turnaround in the past year and change. We're going to talk about the key results, how we got there and where we're going to go next. And that only gets it done with him and I being aligned between field operations and network operations. So with that, we'll now share some of our current operational metrics. As you can see on the chart, there's 4 different key metrics here. On the Dwellin 32-hour cars, you can see a consistent downward trend but also the big momentum we've had from 2022 to 2023. That's phenomenal work with our entire team across the entire network. There's been a clear pivot back to a scheduled operation. And as you can tell, we've regained clear operating momentum. These 4 key metrics on the screen give us a pulse of how the railroad is operating but that's also through compliance through the scheduled operating plan. This impacts the footage of our [ Maher ] process in yards when we speak about dwelling 32-hour cars, but also the serving yards of our customers. When we have less cars online that equates to faster turn times, less congestion, which all equates to eventually less cost. Adherence to the scheduled operating plan is what allows this to happen. So I'll start with covering Train Speed and Car Velocity. We'll review these 2 metrics. These are key indicators of the health of our network as a whole. We use these metrics for planning our assets, specifically cars and locomotives. As we speed up, we optimize our assets. The network operations team watches these metrics very closely and makes adjustments. I'll talk about a little bit of the improvement that you see on the slide. We captured a great deal of this free speed, I'll call it, simply by running a disciplined scheduled operation. So to say, we didn't spend money to pick up the speed and velocity, we unlocked it by adherence to running trains on time and running to our plan. I will say this, in our heavier corridors such as Edmonton to Vancouver, additional speed beyond what you see will require some capital spend. A lot of hard work has gone into achieving these results, and this clearly demonstrates the alignment between all of operations. We have clear vision, a solid plan and a disciplined execution of that plan. So let's take a look at how we got here. As you heard earlier, we still have solid operating people [Audio Gap] that was required for us to get where we're at today. That enabled everyone at CN to rally back around a schedule operating plan. So we started with alignment around the key principles of running a scheduled operation. Let's talk about those. One, run trains on time from origin. Number two, safely handle cars with urgency to make our planned scheduled connections. Put the right car on the right train in the right block every time and arrive our trains on time to destination. We started this focus at the 4 hump yards. We moved on to the large flat yards and finally, the Intermodal network. I'd like to use Kirk Yard as an example. It's been become our most productive hump yard over the past 5 years, as you likely heard on the tour yesterday. They take tremendous pride on executing and delivering key metrics such as on-time performance, connection performance and blocking integrity. But they also set the tone for the network and reintroduce a scheduled operating plan. As you know, with a critical location here in Chicago, we were able to see immediate operational benefits and impacts. I'll talk about Intermodal network example. This is a very simple example. We were looking at how do we better improve transit times of our intermodal product. So we looked at the service design. We looked at the West Coast ports, for example. We're running a train with half Montreal, half Toronto, stopping in Toronto, working and then moving on to Montreal. So what we did is gather density of traffic in the West Coast ports, redesign the train plan across the network, so that now we land a train in Toronto that wants to be in Toronto, and we land a train in Montreal that wants to be in Montreal, reduce the transit time for our customers and improve the service. Reduced line of road work events and sped up trains. As we made these changes and we look at our unique -- at our regions, we knew that each one is very unique. So let's take a close look at the 3 regions and the different characteristics.

Had the opportunity at dinner last night. Some of you had some very good questions. And it was a bit -- we went back to 3 regions from 2. What's the difference between each region. So that's what I'm going to touch on for a bit here. They are distinct. The Western region as you almost likely know, is our heaviest GTM territory, but it's very bulk train and unit train-centric. The Eastern region, although it has the least amount of GTMs, is very consumer-centric with both the domestic and international intermodal business. The Southern region is actually a bit of a hybrid of both. We've got a wonderful Gulf Coast bulk franchise and a solid intermodal franchise. But it's also our most manifest-centric and actually are most complex due to all the Class I interchanges throughout the U.S. Because of that, we can't have a one-size-fits-all approach. That's where the teamwork between Pat and I come in, as the plan gets designed for what's right for the network, but keeping in mind the unique characteristics of each region. I'd give you a couple of examples. The team put back in place a scheduled grand plan in the Western region. Another example we discussed a bit for some of us at the dinner last night, we also went back to siding length on our core train package in the Western region, which you heard Ed talk about. But bear in mind, context is important. Siding length in the Western region, depending on the corridor is 11,000 or 12,000 feet to meet trains in both directions fluidly. Understanding these 3 region allows us for a solid foundation to what a scheduled operating plan should look like when it gets built. Pat is now going to speak more in depth on making the plan.

Thanks, Derek. You've heard it a few times already. The plan is sacred to us. There is no backup plan. There is only the plan. And when we get off plan, we are all aligned around how do we get back on plan and move forward. The service design team is responsible for building the plan and monitoring the effectiveness of the plan. This is done, however, in lockstep with transportation, intermodal operations, sales and marketing and HR so that we make sure we have the appropriate amount of people to run the plan. So what is an effective operating plan look like? Let's take a look. A good operating plan is built to optimize train speed, car velocity and asset utilization. The plan is built to drive cars as deep into our network as we possibly can before we handle them again. Hopefully, we had an opportunity at Kirk Yard to see an example of this. They're very proud of this train. We gather a solid train, sometimes up to 10,000 feet of empty center beam cars used for lumber loading from Kirk Yard every day, and we send that train 2,100 miles to Prince George, British Columbia without ever touching those cars again for final distribution to our customers, a great plan. Core trains, that is our scheduled intermodal and our scheduled merchandise trains are the foundation of our plan. We slot our very robust bulk train franchise, bulk plan around those core trains to reduce conflicting movements and to optimize our train meets. This is particularly critical in Western Canada, where traffic volumes are the highest and our capacity is at a premium. The plan must also incorporate time. I see [ Mr. Lang ] right there for our production gains, our engineering production gains to get their work done within the plan. After we have collaborated to make the plan, now it's time for Derek's team to run the plan. Derek is going to talk about disciplined adherence to running our plan.

Thanks, Pat. The key to run the plan is truly sticking to the basics, starting with running on time. Sounds easy doesn't it? End of presentation, I'm going to give it back to Pat. But no, at the end of the day, we've even shared some pictures last night. We got 3 feet of snow lawns in Michigan and it's 80 degrees in Edmonton Fahrenheit with brush fire. So that's just some of the challenges we go through every day. But when it comes to running that plan, connection performance, blocking performance, industry dwell and as what's dwelling beyond standard are 4 critical metrics we look at on a daily basis. These 4 basic principles when done right equates to speed and velocity, but it also drives balance across the network, which you heard both Pat and Ed talked about earlier. It also equates to cost takeout when coordinated right. One thing to remember, you can always create the best plan in the world, but if you can't execute that plan, it really doesn't matter. And with that, it's a great opportunity being here in Chicago to talk about the opportunity with the EJ&E and how has it allowed us to leverage these key principles. So perspective. I actually worked in Chicago twice in the early 2000s in 2 different roles. That was before we own the EJ&E, so I can fully appreciate what it's done. And the transformation I've seen it do for CN. No exaggeration I have seen a CN train sit for 2 weeks before in the terminal and not turn a wheel, okay? With the EJ&E, that was a game changer in 2009 as it's evolved. But it's more than just getting through the terminal with 1 crew. For example, with another Class 1 interline partner, with the equivalent of 4 trains a day, we shaved up to 48 hours of transit time by using the EJ&E. Investments at Kirk Yard. Over time, it's allowed for a 15% productivity in our hump yard over that 5 years, which has allowed us to drive workload out of 5 other yards in Chicago, which are much smaller, which are here to really serve industry. But the benefit of that is not just about cost takeout. You heard Pat mention 347 and the center beams that allows us to build trains at Kirk Yard that can go deeper into the network without having to touch those cars again. Another benefit, it also allowed us to integrate our intermodal and automotive network. You didn't see that, but at Harvey, [ Markham ], Illinois,. that was the original flat switching yard in Chicago. But that allowed us to leverage that where we've now integrated our intermodal automotive package and allowed us to handle that traffic less, therefore, decreasing transit time at one of our most time-sensitive commodities.

Derek, having worked in and out of Chicago my entire career, I can tell you that when I was over there, I was sure envious of CN's purchase of the EJ&E. And I know that every other road that transits Chicago felt the same way. It is -- I had now get to see firsthand just what a competitive advantage that is for our transit time through Chicago.

Thanks, Pat. And it's a great perspective with both of our backgrounds as it just justifies and not the needed of that whole transaction. So with that, now let's talk about aligning the network. As you heard Pat mention earlier, we started in our 4 hump yards, which are Symington in Winnipeg, Mac Yard in Toronto, Kirk Yard in Chicago and Harrison Yard in Memphis, Tennessee as they touch approaching 40% of our [indiscernible] volumes. Then we rolled it out to major flat switching yards in places such as Thornton Yard in Vancouver, Walker Yard in Edmonton, Taschereau Yard in Montreal and then Battle Creek, Michigan. After that, the final piece of rolling out that plan together was with the intermodal team. That's when we focused on our inland intermodal terminals, but also the port terminals.

So a critical component of the turnaround was the focus on speed and velocity versus train load and train length. Accumulating inventory to run big trains in our terminals was delaying traffic and gave us the appearance that we were short of people, and in some cases, locomotives in certain corridors. The slower network train speed was driving that perceived shortage. We just needed to speed the network up. As we sped the network up and stuck to the disciplined scheduled operating plan, we can more accurately predict the actual resources we need and plan accordingly. We now know what we need from a resource perspective given the volume and given our desired speed.

As you heard earlier from both Tracy and Ed, alignment is critically important. This was not done in a vacuum what Pat and I did. All the key internal stakeholders were engaged with us to get that rollout done. Another key item was a muscle memory I discussed earlier. I've been here 23 years, as you know, and the 5 core principles have not changed: service, cost control, asset utilization, safety and people. And for those of you who may have been around a while, you probably have heard that before. That's the foundation to build up upon from everything we do. And as you heard too, we still have some seasoned operating talent around here, but there's also the new generation of railroaders that we've been able to come on board over the last many years. That was a great opportunity for us to show and teach them about the value of scheduled railroading. And interestingly enough, they quickly adapted and embraced the new plan and the alignment and structure it provided the entire team. As we aligned around a new scheduled operating plan, we needed some KPIs. There are 4 key feeder metrics that we'll review now.

So I'll start by reviewing origin train performance and destination train performance, whereas you've heard it referred to now a couple of times, launch versus land. Originating trains on time from terminals is the foundation of our scheduled operation. Destination train performance is how we feed the customers' cars at the final mile and we feed the assets to the terminating point to start the cycle all over again with launching trains. As we focused on these critical metrics, you can see the improvements that we made. And since Ed teed it up rather than refer to the numbers on the slide, I'll refer to yesterday. I was prepared to do last 28, but Ed teed me up here. Yesterday, we launched trains at 94% on time. We landed trains at 86% on time. Our goal in that process of launch versus land is to squeeze that delta as tight as we possibly can so that we are landing as close to what we launched as possible, getting trains across the railroad. We own that -- our teams own every bit of that jointly. This is the life cycle of a train across CN's network from launch to land. We own it together.

Connection performance and blocking integrity are 2 key metrics that measure the execution and health in the terminal. As you can see from the slide, these aren't even measured and created until 2022. You see the [ '68 ] and [ '73 ], that's when we first launched this new measurement to measure our terminals. Obviously, in 2023, so far, you see a further improvement. The definition of that for a connection performance is the right block on the right train, but is it done within the specific connection standard of that train. Lock-in integrity is do we build the right block on the right train and it wasn't the right sequence on the train. So each metric is really 2 items. If you fail in one, you fail the whole metric from a percentage point of view. So it is critical to comply with the plan that Pat and I work on together because that's what's right for the network. This is not about what's right for one individual terminal, division or region. The plan is sacred, and these metrics here allow for the accountability for measuring that terminal performance. And as you can see, as this has increased, our overall suite of metrics have also had great success. So these metrics here that we just discussed, along with a number of others that we won't cover today, are key components that enable the daily operating excellence when executed properly.

So what does everyday excellence look like in a scheduled operation. Let's start with running the longest distance on the network. We talked about that example. I'll use the center beam cars again. A plan that drives traffic is deep into our network without rehandling it to improve our transit times, minimize the handling events. The enemy of train speed and car velocity is unnecessarily stopping trains. So we minimize the number of handling events and reduce the asset dwell, keep the traffic moving. Classifying traffic within standards for connection. Back to what we talked about, if we must stop a train, Derek's team handles that traffic as efficiently as possible and gets the train moving again. Eliminate out-of-route miles. This is one of the network operations team's main goals. The plan is to send the traffic the most direct route. They measure to see how we are complying against that and tweak as needed. We do not want to backhaul cars, and we don't want to run cars around the network unnecessarily. Optimize our first mile, last mile service, do what we say we're going to do for our customers at their dock to grow our business together. We've talked a lot about how we got here. Now let's talk about where we're going. So you may be asking yourself, when do we think our performance will plateau? And I'll say this. We still have plenty of opportunity to improve our performance with disciplined execution of our plan. And we will hold ourselves accountable and we will push every day to continue to get better. I'll say it again, in heavier corridors like Edmonton to Vancouver, we will require capital investment in order to grow without impacting our network fluidity. We do have strategically planned siding extensions and double track projects over the next 3 years to accommodate the forecasted volume in this corridor.

And in line with Pat's comments, our ability to grow at a low incremental cost is there in most places in the Eastern region and the Southern region to bring on that profitable volume. The Western region in many cases is bumping up against that capacity. And it's so important that we have alignment with marketing, finance, engineering and operations. So we want to bring on that profitable growth. We have a good line of sight on what that's going to take in getting it done together. Also in the Western region, we need to be aware of our limits when it comes to bringing on that growth so we have an idea what it looks like. So we don't jump in head over heels without doing our homework first. We do a quarter analysis with Pat's team and that exercise is done by train and corridor. It shows which trains actually have incremental capacity to put more volume on, but also what corridors are at or potentially overcapacity. So when we coordinate with marketing, we can do what's right for the railroad and have that line of sight together as a team. So as we talk about where we're going next, customer centricity plays a key role. And when we talk about that, that's a critical value piece that will enable us to get that growth. One key question that we constantly ask ourselves internally, how does that customer fit into the plan and how do we develop the plan around the customer so we can provide consistent, reliable service. That is what they ask for. LSCP or our local service commitment plan, it measures 2 things. Did we give the right cars to the customer? But do we actually also do it in the proper switch window that we committed to? As you can see on the chart here, once again, the way this measure came about in 2022 was about 80%. And now in 2023, we're at 88%. That's a key touch point between us and our customer. When you couple that to an eventual trip plan rollout down the road, that's going to give a better product for our customer. We also have something called MRS, which is the mobile reporting services that enables us to give advanced notification to our customers before it arrives and also gives them better visibility to the traffic. It's also better reporting for CN because we get things more real time internally. So as technology evolves, we need to continue to be innovative and disciplined in our approach and how we implement that. And then overall, as a key partner in the supply chain, we've got to ensure we have a sustainable, repeatable operating plan as that's critical to everyone's success, not just CN's.

All right. So what are the ongoing benefits from a disciplined operation? As Derek outlined, customer centricity is key to our growth. We have must add value for the customer in order to grow. Internal facing metrics that we've reviewed in some detail are how we measure and monitor the health of our network. But to most customers, they don't mean very much. I'll use myself as an Amazon customer as an example. I'm not really concerned with Amazon's internal-facing metrics. What I care about is that my package was delivered on-time, as agreed when I made the purchase. Growing my use of Amazon services is based on my customer experience. And I would say that based on my lovely bride's use of Amazon service, that we are very pleased with Amazon's customer service. At CN, scheduled railroading is the foundation of how we provide our service at the optimal cost. However, we must focus on improving our customers' experience in order to continue to grow at the right cost. We have proven our ability to realize the benefits of what running a disciplined scheduled operating plan has done this past year. We've got to convert that discipline, that scheduled operation into a better experience for our customers that they're willing to pay for and grow with us. So to wrap up and summarize. If Derek and I were to show you the T-shirts that we wear, mine would say, my team makes the plan and Derek's T-shirt would say, my team runs the plan. We have a short video for you on some of the operating technologies that will help us take it to and find that eighth notch. After that, Derek, Ed and myself will take a few questions. Thank you very much. [Presentation]

At CN, we believe that technology unlocks value creation by powering operational efficiency, by easing the way to do business for our customers and partners, and by predicting CN and its customers with a solid cybersecurity foundation. Technology is a key enabler for operational excellence. And the reason is simple. It helps us maximize our asset utilization, optimize our network capacity and fluidity and increase safety with innovative solutions.

In the field, the technologies we deploy optimize our rail performance. These technologies improve our network safety, capacity and reliability. The evolution of our dispatching system will enable the benefits we are getting from movement optimization throughout CN's mainline operations. What we mean by optimizing train movements is removing unnecessary train meets, delays or stops as well as avoiding replanning while reducing fuel consumption. As we look to improve the safety of our employees and the reliability of our network, we continue to expand train protection through significant enhancements to our wayside infrastructure and telecommunication. The digitization of our Canadian network also contributes to the automation of our mainline. Our ongoing automated and autonomous inspections also help us run safer operations, while unlocking fluidity and velocity. Let's look at automated inspection portals. These modernize our railcar inspection process by pairing machine vision with artificial intelligence. They complement current manual inspections, helping our [ carbon ] maintain our fleet with a lot more efficiency. With portals, we are able to build preventive maintenance schedules, which improves safety for railcars using data analytics. This data optimizes maintenance work schedules and equipment shopping decision, which reduced as well. On the other hand, we have autonomous track inspection cars. Those inspect rail integrity on an ongoing basis by using state-of-the-art sensing technologies to capture track data. This data is analyzed by algorithms and AI to prioritize and schedule rail repairs. Sensor technology captures real-time pictures of geometry, shape, rail distance, cross level deviation, alignment, 3D assessment and component analysis. A radar-based technology is also under evaluation. We currently have a fleet of 10 inspection cars, which are running in regular freight service 24/7. They have helped achieve a 98% improvement in the number of unprotected geometry defects and all of this without disrupting train service. Thanks to new track and railcar inspection technologies like these, our employees can proactively prevent defects and keep us running to deliver for our customers every day. And last but not least, CN's award-winning innovative real-time navigation aid application gives precise location information to our engineering on-track operators, alerting them when they are closed or when exceeding main track authority limits. This tool called Electronic Track Authority Verification, increases safety for track employees and reduces main track authority violations, which is a main cause of injuries.

Technology is used in every single step of moving rail traffic safely our network. Our vision for CN is to become the safest, most carbon efficient and best operating railroad in North America.

Okay. So we're going to take a few questions with the operating team right now. I just want to remind everybody as well that there will be a full Q&A session after lunch, after all the executives have presented. But maybe I could just kick off as you're thinking about your question and see if I got the message right here, guys, I took some notes. The plan is sacred. Pat's T-shirt says his team makes the plan, Derek's team runs the plan, and it's the disciplined adherence to the plan that drives efficiency, capacity and more reliable service for our customers. And if I heard right, there's still more opportunity to take our game up a notch, technologies will help. I get it about right?

You don't need us, Janet.

All right. So I think some hands are quickly going up here. So we've got a couple of microphones in the room. We're just going to have those brought around. Fadi?

Thanks for the presentation. Fadi Chamoun, Capital Market, BMO Capital Markets. So you showed us some slides targeting improvement and some of the key metrics, car miles, train speed, et cetera. And you've talked about capital being one of the tools to achieve that. Are we getting to a point where the optimization coming out of the plan is coming to an end or you're starting to hit a ceiling there? And most of the progress going forward is going to be capital kind of driven? I just wanted to get a flavor of what's -- what are the key kind of KPIs to drive that velocity and the achievement on the car mile and the train speed that you're going to get going forward?

Fadi, not even close. We're looking at opportunities as we speak. And certainly, there will be some capital spend that will be required. But remember the comments made about reliability and service and dwell through the yard itself. I think we're just on the cusp of being able to really make a big difference in this industry for a service level at a very safe operation, which we just saw the video. I wish we had to play the video. I wouldn't have had to come up here. I thought that was great. But no, we got a lot of internal things we can be working on before we start throwing capital at problems.

Next question is there.

Chris Wetherbee from Citi. So Ed, we used to spend a lot of time in the industry talking about operating ratio, and I haven't talked about it yet today. I'm kind of curious as you think about CN today versus when you were here before, what do you think the opportunity is? Should we be thinking about it that way? Or is it more about incremental margin, profitable growth?

No, I don't think about operating ratio at all. I mean back in the Illinois Central days, it was a big jump for us to be able to break 60. And that's not a number that I even focus on. If we continue to do everything right that number will take care of itself. There's 2 sides of that ratio. Doug's got to do his job on the revenue side. We got to do our job on the expense side. And that's about as simple as we need to be to make it work. And as long as we do our job on the expense side, I know Doug will do his job on the top line.

[ Over ] here.

Ravi Shanker, Morgan Stanley. Ed, if I can ask you, go back to Tracy's example of the 7,000-foot train that now you're saying, hey, you should need to leave on schedule, and so you don't wait to add the 2000-foot addition to that. But now you're left with those stranded 2,000-foot kind of mini same thing, right? So how do you fix that going forward? Are there new tools like technology tools or operation tools that will prevent that from happening in the future? Or -- because it's a little bit of a chicken and egg situation, right? So how do you solve that problem?

Well, I mean we know what's going to cascade up to a train, and we know what our maximum train length allowable that we can run over any subdivision. And these guys will tell you exactly how we do that and how we protect that additional 2,000 feet to run 9,000 feet. Our average siding length is like 12,000 feet, I would think, especially in Western Canada. And we've got a lot of double main that allows us a lot of flexibility in expanding train length and maintaining the train length across the network. You guys want to add anything?

That's where Pat and I come in together. If we see that only 3,000 feet, we change the plan to ensure maybe as a 10,000-foot train, right? So it's got to be a constant adjustment. You don't just focus on one thing. You got to run the plan. But as that plan runs per schedule, to your point, you may see the opportunities, and that's we adjust the plan together so we can maximize the efficiency.

Good. Ken?

It's Ken Hoexter from BofA. Just talk about the CapEx requirement in the Western region. I think in the last couple of minutes, you both mentioned higher CapEx a couple of times. It seems like you've raised your CapEx target about $0.5 billion to $1 billion. So can you dig into kind of -- is that onetime? Is that ongoing?

Well, I'll let Pat add to it, but I know we're going to do 2 sidings between Jasper and Rupert, for sure, right?

Yes. So what we do in coordination with marketing, we get the forecast, we look at these are the desired metrics, where we're at currently and to maintain that fluidity and that speed and velocity here where we will invest using our smart network tool, and we invest accordingly. We stay very close with Doug's team in making that infrastructure capital plan based on volume that we see.

That being said, and I just want to add, Halifax is as important to us as Rupert is. And we will be doing one siding on that corridor as well.

But we'll make it as [indiscernible] later. How about that? All right, Tom.

Yes. So Tom Wadewitz from UBS. Volumes are weak today, they'll get better at some point. How do you think about the leverage in the current schedule? So if you say the carload average train length is x, it could be 10% or 15%, 20% higher likewise with intermodal. So just trying to think about what's the kind of latent capacity in the current schedule. And then, I guess, constraints for expanding that schedule is a [ cruise ] or other things.

We feel there's a lot of capacity available. And yes, you mentioned that loading is down somewhat. What we'll do is shrink our train size or shrink our train count to be able to adapt to the loading requirements that we need to cover. But I'll tell you, we hear from customers, a lot of our bulk customers want to fill a slot. I mean, it's a daily opportunity. Just talking to the marketing folks this morning, I mean we're getting some big opportunities on the other side of the merchandise.

The lights are a little bright on my eyes on that side. I think there's somebody has got the mic over there.

Amit Mehrotra with Deutsche Bank. Ed, how long do you expect us to ground as COO of the company, number one? And number two, service and volumes tend to be inversely correlated and where RTMs are down 7%, 8%, 9%, something like that. Can you just talk about maybe, Pat, Derek, the confidence you guys have to be able to -- it's related to Tom's question, execute on the plan in an environment of much higher volumes over the next couple of years?

We should -- with the capacity we have today that I'm not worried about the volume increase. I mean we run a lot of GTMs every day. We watch our GTMs very diligently to make sure that we are getting the biggest bang for our buck that we can. As far as me staying, it's as long as needed to be here. I think you met 2 of the all stars that we have following up. And these guys will be running the railroad one day and I'll be gone back to Florida. So I'm looking forward to that again. Do you have anything to add?

Yes, just to the service question. It's a great question. You talked about the inverse relationship, but that's when it gets back to us having that schedule plan. You heard me mention LSCP. That's a new metric we've put in place. The one thing we haven't talked a lot about today, people are more important asset, [indiscernible] called an asset, but people are the most important thing you have, how we train them, how we bring them up together. And when you look at some of our past service challenges, it's actually been based upon people, right? And you heard Tracy mentioned earlier, you heard Ed mentioned earlier, how we're going to handle our people situation is a bit different than in years past. And that's going to be a key thing to enable continued good service, but also be ready for the rebound when it comes back.

I think we have maybe time for just 2 more in the front here. I see Dave and Brian kept having your hands up. Okay. Just hold on to it. Yes.

It's Konark Gupta from Scotiabank. Just one question. So you mentioned about capacity increasing, obviously, and growth comes down from a volume standpoint, you can take it with the capacity. How do you see the incremental margin evolving over this 4-year plan? And would the regions Western, Eastern, Southern, one of them would be sort of the key driver of that incremental margin?

Well, I'm not much on numbers, but I will tell you if we all do our jobs correctly, the margins will increase with the additional traffic that we take on and the more we watch our expenses, especially the stop train expense, the opportunities that we see across the network, and we're getting better every day. And I'm very proud of the work that these guys do and making the operation move fluidly and safely. So margins will be there. I'm not worried about that side at all. I don't ever get into it to begin with. But I know on the expense side, we're doing our job and that will protect the margins.

Okay. We'll take Brian and then Dave will get to you, and then we're going to take a break. But go ahead, Brian.

Brian Ossenbeck from JPMorgan. So I just wondered if you could offer some comments on consistency of the service you're getting to the point where you feel like you can sell that truck competitive product. I'm sure we'll hear more about that later in the afternoon. And then just on the other side, resiliency. You talked about the 3 feet of snow in Michigan, like these things happen all the time. Last year, you had some issues as everybody did, a supply chain with drayage. So where do you feel you are on that level of resiliency of the network as it ties to consistency and being able to sell that?

So when you look at some of the new services we've implemented, I mean, I'm sure Dough will talk about with the UP and FXE, for example, right? We're up in our game with certain things. We've got a great network and great opportunities. I think when Doug and team come up, you're going to hear about a lot of those things. And resiliency, people have a lot to do that resiliency. You heard me mention that earlier, right? That allows you to do certain things you can do otherwise. And listen, as weather continues to change in these challenges, that's going to be a key thing for my side of executing the plan, but Pat has done a great job in terms of building that plan. It doesn't happen in a vacuum. We've been successful last year for what him and I have done together. And Pat, jump in a bit.

Yes. I would say you mentioned weather. And one thing we did look at is as we approached winter -- this past winter, we looked at what does the operating plan need to look like. And it was a little bit different than what it looked like in spring and fall, and we stuck to that. Again, a disciplined adherence to that plan. We tweaked some things that we needed to tweak and I think it demonstrated our resiliency through the winter.

Dave?

David Vernon with Bernstein. Pat, could you talk a little bit about how dynamic the plan is, how often you're updating it from a forward-looking basis, how you're responding to customer needs? And then if I look back over the last couple of years, one of the biggest disappointments I think around the company, was the overselling of the network that led to a huge CapEx budget. Can you, as a team, kind of talk to the guardrails that are in place around not letting the commercial guys get too far over their tips in terms of what we're loading the network? And what you think that upper limit is on growth in a 3-year period?

Okay. I'll start with the plan is sacred. We'll say it again, and there is no backup plan. That being said, we look for trends in the plan, and we look at it every day. We also trend it, are there trains that are not the size we want them to be, not that we're looking to run, over siding length trains to Ed's point, but we also don't want to be running 2,000-foot trains. So as we see volume shrinking, we look at are there opportunities to put trains together. It doesn't change every day, but it does change as we see the trends, and we need to make that change.

I think the second part of your question, David. It's good that you noticed that because that's exactly what I noticed before I came back to work here that they oversold on the capacity side. And we don't need to do that. We use a capacity map. Doug knows where to sell. He knows what our opportunities. We've got capacity all over this railroad. Maybe some regions are a little bit heavier than other regions, but we'll certainly gain opportunities if we do sell to that capacity, and we will spend a little bit of capital, not a lot, but we'll restrictively grow the operation through a good sales program and a tight expense plan.

All right. I just want to say thank you, Ed, Pat, Derek. I really appreciate your time today. For those in the room and online, we're going to take a break now. We will resume at 10:15 sharp. [Break]

All right. Welcome back. If everybody could take their seats, and we'll get back underway here. It is now my pleasure to introduce Doug MacDonald, our Executive Vice President and Chief Marketing Officer. Doug has been with CN even longer than I have. He's hard to miss. He has a deep knowledge of CN, our operations, our customers, our technology and the broader supply chain. So please welcome, Doug.

Thanks, Janet, and thank you all for being here and everyone online. It's a pleasure to be here and we got lots to talk about. We have a great growth story that we're going to go over everyone for you today. So -- and I know some of you have already seen it online, which is good, but we'll talk about some of the details now. First of all, we'll go over the history of CN. So we've had a great history at CN of growing. I don't think that's ever been our problem. And some of you alluded to it in some of the questions with Ed is that what happened when we oversold our capacity, which is what we did a couple of years ago? And when that happens, you can't move your traffic as fast, right? So we had -- okay, now we've got to add capacity and we have to have more capital and you try to catch up, but we're out selling again. So you're in this never-ending spiral of trying to catch up to what you've sold. So how do we fix that? Well, you come along and you can use one of Tracy's words, which is curate, and we sat there and said, okay, we have to match our capacity to actually what we've sold. And we did that. We went and took some of our least profitable business, I'll say, and we just raised price to say, you have to earn your right on this network. And that's what happened, right? Some of it went away, and all of a sudden, we were balanced. And when you're balanced, you see what the operating team can do. They have done a phenomenal job on the service that they're providing. This slide has got a long statement in it, but I'll take a couple of words anyway. Integrated. I think what you'll see is how integrated we are as a team. And you see that coming up. Outside of what Derek and Pat and Ed had already spoken about and Tracy, you'll see these -- the team come up here, and it's a combo of both sales and marketing team and the operations team because that's how closely we all work together. Just to give you a little example, every Friday at noon Eastern Time, right at lunch hour for me, we have our top 100 sales and marketing and operations people on a call, every Friday. And we go over every piece of business that we have in the company. We go over the car supply, how that's going to work. We go over any of the customer issues that need to be highlighted that we need to take on. And then we sit around and say, okay, what about next week? What are the opportunities that we have to deliver on and also for the next month? So it's very operationally focused, but it's hard to imagine the interaction we have on those calls with all those people really all on the same page for the first time. So it works really well. Sustainable -- now different -- sustainable, Janet and I will differ sometimes on the definition. Where I will tell you, sustainable is the business we are looking for to make sure that we have a consistent supply or consistent demand across our network. A good example I use is a lumber customer. A lumber customer generally makes lumber, Monday to Friday, and ships their 10 cars or 12 cars, whatever they're loading rack is, every day. And that allows us to take that volume and plan for it. So we have a daily switcher that goes out and services the person. And it brings it into the yard. We have a yard plan to make sure that is always moving onto the next train. We have a train plan that takes that as far as we can to go to destination. That is the type of business we like because it's easy to plan for. That's where Pat's team comes in and then Derek's team is moving in. So very sustainable allows us to move forward. And then obviously, everything has to be profitable on how we drop that to the bottom line. We'll get more into that, though. We're going to spend the next hour with myself just going over a few of the higher-level details on what we're doing, then the team is going to come up one after another and go through our top growth areas. So you'll get to hear from them directly. And then I'll just wrap up on a couple odd items, and then we'll have a short video, and then we'll do some Q&A. It all starts with a great network. So you'll hear us say that over and over again because it does. Now we have a network that's geared for growth, a network that's also able to grow and add capacity. So we'll see some more of that as we move forward. It all starts with our ports, as an example. So we have great access. We have our crown jewels in both Prince Rupert and Halifax. Lots of ability to grow in both of them, very un-congested. Those will be moving forward. You'll see great growth coming out of those, I think, for years and years to come. But we don't want to forget about the other ports, and Dan will give you a lot more with respect to Vancouver is expanding. We have Montreal that has an expansion plan. We also have Saint John, which we have historically been the serving railway way. And we're -- that's expanding. So we'll hopefully get some more business there. We have our 2 ports in the Gulf Coast, which Mobile has an expansion plan and New Orleans has a big expansion plan coming up in a few years. So it starts just there. But at the same time, we have that great market diversification. Our biggest commodity line only has 20% of our revenues, and that's really our big international intermodal side. So even when the economy is up and down, it's usually only impacting a little bit of our network. And that's even what we're seeing today where we're in a mild recession. We see our bulk franchises just still doing really well. And some of our other manifests, right, is just doing good as well. Not growing as much, but at least it's not down. So that's excellent. The one thing I really want to highlight is our Northern network. So when you talk to the operations team, they're going to say, man, it sucks operating in the North, especially in the winter. But what you're going to see is that's where all the development is. So when you talk about a lot of development in Canada coming up, you have -- where is all the fiber coming? The fiber is going to come -- is moving up Northern for forest products. Where is all the mines being developed? It's all in the Northern part of the provinces, and we'll get to that in a second on the map. You have the met coal projects. Once again, they're all moving up North. Our gas drilling, same thing. It's all up in Northern BC. And even the grain is moving gradually further North, where they can have more arable land and do more planting. Another thing about the grain now, 85% of our products originate on us that we move, our shipments. Hard to beat that. So it allows you to plan and then commercially, 65% terminate on us. So when it comes to Pat and Derek and the team trying to plan around how we're going to move our products, when you're originating it or terminating that much, it allows you to actually have that full plan on how that car is going to move right through the entire cycle. So where do all these new projects show up on our network? So I won't be able to keep up with how the map is being populated. So we'll go one by one. So grain and fertilizers. You can see we have expansions right across Western Canada but also in the South, right? Then you have our coal. So coal has got 2 mines starting up in Northern BC over the next few years. And Sandra will kind of give you a hint about that. Petroleum and chemicals. So that's one of our most robust areas for expansion. So it's both in our franchise areas of Northern Alberta, Northern BC. You got the U.S. Gulf Coast, and you're also sitting with Eastern Canada, and Buck and the team are going to be able to go through that. And when they talk about our Northern network, you really see the metals and minerals. And all of the new mines are sitting in the North, right adjacent to our networks. We have a couple of automotive plants coming on, sitting in Michigan market. Forest products, not as prevalent as it was over the years when the pine beetle kill was giving a ton of fiber for the sawmills to be able to make lumber out of. But as the allowable cut in BC comes down, the fiber allowance is going up in the Northern BC right along our network. And lastly, intermodal, which Dan and Carrie are going to talk about. Tremendous expansion plans, both at the ports but also in land, that they'll be able to go through. So how are we going to move these projects on our network? So I got asked a lot of questions last night. What are you going to do differently, Doug, from a sales perspective? And we're already doing it. And then a lot of the team was doing it before, but now we're doing it right across the board. We're being very disciplined. One of the questions we had was, how do you control that it doesn't happen again? Everyone on the team is very focused around selling to what our capacity is, and we actually have different -- an operating plan that we sit down, where we're adding capacity. We have to go through with the operating team and we have to do all that planning around expansion. So historically, I'll give you a good example. When frac sand came on, we just sold. And it was like here it is, move tons and $1 billion worth of frac sand over a few years. That was tough for everyone to do. We did it so quickly. It was tough for the operating team to actually come together and move it. But they did a great job, but it did impact the network. What do we do now? It still starts with the customer. We sit down with the customers, we plan, but we say, okay, here's what we can move now. And the customer goes, I need to move a lot more into the future. Okay. So we put that plan together. And that comes with great conversations, not with just the customer, with our operating team, Pat's team, Derek's team on how we're going to plan it and move it. And then we actually sign a contract with our customer that gives us the commitment to do it. So it's very highly integrated. The map here is really something very simple that we use to explain, both internally and externally, where our capacity is. So the first ones really are more the yellow, lots of it overcapacity from Quebec City down to New Orleans. Basically, the sales guys can sell there and know even if they add a train on to the network, it's not going to have an impact. We still coordinate with everyone, but they have free rein to sell. Now in the blue areas, okay, it's a little bit -- there's a moderate capacity issue there, where we can actually -- with an added train, we got the capacity. But we may have to watch how it's going to affect us into the future. So we still sit down with them, but there's more planning requirement. That's all. And then when you get into the really -- it's we're near capacity, I'll say from Edmonton West and a little bit between Winnipeg and Chicago. That's where we have a very big conversation with everyone. We have to plan the capacity additions we have to do. Do we need more sidings? Do we need more double track? How are we going to handle it? It gets into a very detailed operating plan, which we then sell to the customer. We don't sell in advance. It's like here's what they want to move. Here's what we can do. And that way, we are not going to oversell the network ever. A good example I'll just use is we're moving grain in a new elevator from Saskatchewan, let's say, to Vancouver. We sit down with the customer. He goes, okay, I want to ship about a train a week. Well, that doesn't seem a lot, except we're constrained between Edmonton and Vancouver. So we sit down and say, okay, how does it fit into the network plan once a week? What's the right day to service them? What's the right day to pull through that? When do we have an available slot for them to move in that corridor? And do we have the crews and the power to do it? And we give that plan to the customer. So it's a highly integrated way of selling. So with that, we're going to get into some of the numbers. And we're going to bring up the team. So I'm going to first start off with Sandra Ellis, our VP of Bulk Products; and James Thompson, our Vice President of Western Canada.

Good morning. I'm Sandra Ellis, the Vice President of Bulk here at CN. I'm a farm girl from Saskatchewan. So growing up, dinner table conversation was about grain prices and fertilizer costs. And now these are my customers and my team is helping them make their markets. I'm joined here today with my partner in growth, James Thompson, Vice President of the Western Region for the transportation team. And as you'll see as we go through our story today, the bulk growth story has 2 chapters: the growth in traditional commodities and the impact of the energy transition, which we'll see manifesting in renewable fuels. So let's start with the traditional commodities of grain, potash and coal. We moved record volumes in 2022 and again in the first quarter of '23. We do that because our network offers optionality. What that means is in the United States, our grain customers can ship to the river or to the Gulf wherever their netback is highest. The growth in grain products is being matched by increased containerization capacity near our Chicago terminal, and we can better penetrate the animal feed markets of the U.S. Midwest through our transload network moving north to Canada. Our Western Canadian network. We have over 70 high-throughput elevators already, and we have a few more coming online in time for harvest. This is matched by the optionality of export capacity through Vancouver, but Prince Rupert, the gem, moving East to Thunder Bay, Montreal and North to Quebec City. So as grain yields grow because of technology-enabled farming practices, we have the network that can move it more effectively and more efficiently because our customers are investing to expand the capacity at origin and destination. Now pivoting to potash. This technology enables yield. It requires more fertilizer and our customers are investing to grow along that capacity. Nutrien has announced that they will be expanding to 18 million metric tons through 2026 and the new BHP potash mine is coming online in Saskatchewan mid-decade. We are poised to move more potash for decades to come through our tri-coastal network. And closing with coal. We've again moved record volumes in '22, and metallurgical coal remains very strong in '23. And our customers are investing for more productive capacity, including the Conuma mine, that is called Quintette, that is expected to come online again before the middle of the decade. So we look forward to moving that to export. And with that, I'm going to turn it over to James to let you know how we're going to do it as partners.

Thank you, Sandra. So as Sandra highlighted, over the last 12 months, we've broken basically every record we count as it pertains to the movement of grain, coal and potash in Western Canada. And how do we do it? Well, sure as heck wasn't by accident. It was done through our network. It was done through our people, and it was done through collaboration with our partners. Many have talked today about our network. Sandra even highlighted the great tri-coastal reach we have. I won't spend a lot of time talking about that. Pat and Derek talked very intently and articulately about what we were doing with capital expansions as far as double track requirements and siding expansions needed West of Edmonton. I want to take a minute to talk about our people. And Derek and Pat talked about this a lot during their presentation. Our people are really what drove that success. They're the ones who build the plan. They're the ones who integrate with the customer. And they're the ones who drive that execution and discipline to the plant. Why was grain successful? We brought structure back to it. We started spotting at -- by 7:00 in the morning when our customers want to work. They load through the day, and we pull in the evening. That means we use the same crew and the same locomotive to move that grain train in and out of the customer facility. Where in the past, without that discipline, sometimes that was 2 crews and 2 different sets of power on different days. That creates efficiency, and it's our people that create the plan that drives that efficiency. The collaboration piece, that's done in partnership with our customers. I'll highlight a couple of stories on that and really focused on the North Shore in Vancouver. G3 is the newest high-throughput elevator on the North Shore in Vancouver. And they've leveraged technology at that facility in the form of tower control. What tower control is, is an automated process for moving the locomotives around while they unload or they cycle the grain through the facility. What that gives the facility is the fastest turn time throughput and most efficiency on the North Shore. But where we're the partner in this is we build the set sizes, we have the network that allows them to run the trains that they need to run, and we coordinate with them to make sure that the power going in and staying on the sets is capable of utilizing tower control to maximize that efficiency. Again, on the North Shore, Richardson. Sandra talked about 70 high-throughput elevators being built in the Prairies over the last several years. Richardson expanded a number of those elevators to 140 and 150 cars. That, in turn, matches our network and our capability of running trains across the network. The last piece was the receiver piece. We were down in Vancouver just a month ago and met with Richardson and went through the entire design for the site, how it will be serviced, what it will look like and our operating plan and their operating plan to run the site. That's before a spike is in the ground, a tie is in the ground or rail is in the ground. That's how we leverage our relationship with our customers and collaborate to move this profitably and efficiently. With that, I'll turn it back to Sandra to talk about renewables.

Thank you. So the second part of the growth story for bulk is the impact of the energy transition. Renewable fuels are important to CN for 2 reasons: they're going to help us reduce our carbon footprint, and the supply chains needed are going to result in carload growth. So let's talk a little bit about the carbon footprint. You met [ Francois ] yesterday. So you already know we have an effective and capable locomotive fleet. New technologies are coming, but we need renewable fuels to reduce our carbon footprint, and they unlock the capability to move freight and reduce our carbon footprint at the same time. So the supply chain that's needed to do that is what's going to drive carload growth. It starts in a field of canola in Northern Alberta. You're standing amongst the yellow flowers. When that is harvested, that little brown seed, it's full of protein and oil. It's going to be loaded in a railcar to begin its journey. I want to draw your attention to the green dots on the map. These are oilseed crush facilities, and this is where the first rail movement is going to go to from the elevator to those oilseed crush facilities in Saskatchewan, in Western Canada, and in the U.S. Midwest. At these facilities, it's going to be turned into meal and oil. The meal will be reloaded in those railcars that delivered it, and they'll go off to their markets. And the oil will continue its renewable fuels journey. Its next stop on the road is going to be the blue and the yellow, the gold dots that you see on the map. The blue dots are the refineries we serve today. These aren't new facilities. But what happens is the canola oil is co-processed alongside crude oil and results in a lower carbon intensity fuel. Or it can go to a gold dot. In that gold dot, it will fully transform the canola oil and the soybean oil into renewable diesel and sustainable aviation fuel. And some of that might be out of Tidewater Renewables, Prince George, BC, or we are already taking canola oil down to Louisiana to Diamond Green Diesel's facility there. And then we have another railcar movement because some of this renewable diesel and sustainable aviation fuel is once again loaded in a railcar to go to its final destination, including a terminal project Buck will talk about in a few minutes. So as you can see, growth comes from that canola seed being touched 4 times by the railway. And now I will turn it over to James to wrap up how we do this effectively.

So I talked for a minute about collaboration with our customers as it pertained to the bulk franchise. And really something I'd like to point out here on the map, and Sandra went through what the color of each of the dots means on the map, to me, the success in this map is the tight grouping of those dots. Pat talked about density at origin as it pertains to train load, running a plant and operating efficiently. This coordination with our customers that sales and marketing and business development have done have created an opportunity where we can create volume out of a serving hub for us with multiple customer sites being served out of 1 location versus serving these customer sites over 100 miles of railroad, spotting in each one, lifting in each one and delaying traffic in the process with ultimately more touches. This provides an option where we run to a serving hub, the train arrives, we paddle it out to the customers. And within a day, we can have it back on a train loaded and turned around. It's about the efficiency and it's about the leveraging the density of our network. Pat talked about train stops, train touches. I think Ed touched on that as well. The big key piece to this is once a train leaves that origin hub, it's going to destination. The other thing that's very interesting about the way this grouping has come together is, if you followed Sandra's story about canola coming from Northern Alberta into this area, canola generally moves in hopper cars, same hopper cars that we can handle grain or other canola in. If we're loading canola and shipping it to a facility in, say, Toronto or Vancouver across some of the congested points in our network and then trying to run empty cars back into the Prairies to gain another load, that's inefficient. That's out-of-route miles so that's backhaul, as Pat talked about. This plan and this coordination with our customers has created an environment where we can run loaded canola in to a serving hub, unload the canola, and then within 100 miles of that facility, spot those cars for another load. That's a key to success to me. With that, I'd like to introduce Buck Rogers, our Vice President of Petroleum and Chemicals to the stage.

Thank you, James. Good morning, everybody. I'm Buck Rogers. I'm the Vice President of Petroleum Chemicals here at CN. I'm going to be highlighting you for some major wins at CN. As we continue to collaborate with our customers, leveraging our brand-new scheduled service, which literally provides the conduit for the petrochemical hubs in Alberta, Ontario and the Gulf Coast. The global demand for secure clean energy continues driving significant growth along our robust energy corridors. Right now, I'm going to be highlighting for you the incredible market potential that we have. And then I'm going to turn it over to my partner, James. He's going to be walking you through the benefits of our strategic alliance with our LPG producers and the benefits of the new ACE terminal. We continue to see significant NGL growth to Japan, Korea and Hawaii. AltaGas's Ridley Island export terminal and Pembina's Watson Island terminal continues to see significant growth. It was just 3 short years ago, we were averaging around 34,000 carloads of NGL exports. This year, we are on target to do over 55,000 carloads of NGL exports. Just this last week, we saw another announcement in the export space. AltaGas and Vopak have announced a joint venture to build a large LPG and liquids terminal at Prince Rupert. As significant gas supply continues to come online from Northeast B drilling, we see other announcements of fracs and plant de-bottlenecks across Alberta in the next 3 years. We continue to work with our midstream producers in order for us to make sure that our capacity on growth is in lockstep with our plant capacity as well to ensure effective egress for all of their volumes. Another great proof point. Pembina just recently announced a new propane-plus fractionator expansion at their Redwater facility. This facility will now be capable of adding an additional 20,000 carloads of propane and butane by the year 2026. I'm pleased to announce that we recently put together a majority share long-term agreement with a major LPG exporter out of Northeast B.C. and East Edmonton, to the ports of Prince Rupert and Ferndale, Washington. The new ACE terminal in the Alberta Heart -- excuse me. The new contracts drive ratable year-round export, which in turn reduces seasonal NGL supply chain stress. This improves profitability for CN as well as its customer, and it drives additional carloads. Last fall, we announced the signing of an MOU with Keyera that will leverage our joint expertise to build a new clean energy terminal in the Alberta Heartland. The new infrastructure would aggregate conventional and clean energy from multiple sources. I'm now going to turn it over to James to let him speak to this.

Thank you, Buck. So I guess the LPG franchise, the best way I would start this off, when we talk about oversold, I had this territory as a general manager at the time when we were very oversold here. And it created an environment where we had to get creative, collaborative and come up with new ideas and ways to move traffic with our partners, our customers. This brought forward an opportunity. And to me, something that differentiates CN in the marketplace, which is our pipeline management team. This team coordinates with the customers to make sure that we have the right number of cars on our network, meets the forecast of the customer. But most importantly, that things are moving fluidly in the supply chain. They have daily calls with customers where they talk through what's needed for vessels to them, how the vessel lineup is looking, making sure that we're not staging equipment on our territory or on our network, and making sure that when we introduce a train, it runs A to B, end-to-end, without stopping or being touched again. So that pipeline management team was very effective at helping us de-bottleneck the LPG supply chain, really as we moved out of '17 into '18. But they didn't have any real tools to use in the shock absorber -- or to use as a shock absorber in the system to stage cars, move cars around or make effect that was moving cars in and out of storage locations effectively. And one of those storage locations was a Cando facility in the Alberta Heartland where customers were contracting storage sites. We saw this as an opportunity to partner with Cando to leverage that to create, again, density at origin, control our destiny and launch trains from one point to the endpoint on a network that can move continuously. So we've partnered with Cando and Scotford at their facility in Redwater adjacent to the Pembina Redwater facility and launch trains from there today. However, what differentiates the ACE terminal and where the ACE terminal to me becomes the future of where we're going is we control all inputs to that, and there is no first mile-last mile component. We pull a train into a large terminal, 100, 120, 140 cars. The terminal works the train. And 8, 10, 12 hours later, that train comes back out. That means we don't pull power off the train. That means the set stays intact. And that ultimately means, as we alluded to today, we can have less cars on our network and run more efficiently because of that. And with that, I'll turn it back to Buck.

Thank you, James. In our 10-year growth model, we have the possibility of 9 new plants being built in the Alberta Heartland alone. All of these have the potential to be hyper-connected to the ACE terminal. By steering the aggregation of all of these commodities into one central rail loading terminal, CN can reduce crews, capital and locomotives. Our customers see a great benefit to that as well. They can actually reduce fleet sizing, which is a significant cost outtake for them. The reduction in fleet also helps out Ed, as he spoke to earlier. This creates fluidity and capacity at no incremental cost to CN. We continue to have discussions with anchor tenants, ports and destinations in order for us to see how we can move all of this volume through Prince Rupert, which has been the choice where most of these export volumes are going to go to is Prince Rupert. Taking a quote from one of my favorite actors, Cousin Eddie from Christmas vacation, Prince Rupert is like being a member of the jelly of the month club. It's the gift that keeps on giving all year long. I'd now like to call to the stage Martin Guimond, who is our Vice President of Eastern Operations. Now moving to an incredible growth story for our Eastern assets. Today, CN transports approximately 85% of all the refined fuels manufactured across Canada. We have seen our refined fuels franchise RTMs grow by more than 7% annually over the last 3 years in the Eastern side of our business. The shortage of fuels is now being recognized in Ontario. What is driving that? It is the systematic downgrading and increased cost of the Trans-Northern pipeline and the much talked about decrease in refinery assets in the East. The good news is CN will fill this ever-growing demand with additional carloads at great pricing and minimal capital. We are selling into the already available capacity that you heard about in the Eastern corridor. In addition to the marketplace short, we have seen a surge demand for renewable fuels. We see a significant shortage of fuel supply that can only be supplied by water to rail and rail to truck. And that brings me to the brand-new GTA terminal that's being built in Toronto's Mac Yard. If I could draw your attention to the drone footage that is now getting ready to be played. This footage was just shot a couple of weeks ago. What you see there in the middle of that is where the brand-new rail-unloading cars will be done. And to your left, those are brand-new storage tracks for the cars coming inbound. You can already see in the middle there where the brand new tanks have already been constructed and are ready for fuel. Where you see that haul truck running on the left and that tractor running at the bottom right there, it will be a brand-new state-of-the-art fully automated truck-loading system that will be capable of loading a truck in less than 15 minutes gate to gate. This facility will have 24/7/365 access for both the rail and the trucking. I'm now going to turn this over to Martin and let him walk you through some of that.

Thank you, Buck. Good morning, everyone. My name is Martin Guimond, Vice President, Transportation of the East region. Well, I guess this is great news, fantastic story, and I think a great opportunity for us to move more traffic in the East. So located in Toronto at our MacMillan Hump Yard, this facility will allow us to increase our volume while leveraging our actual operation. This high-throughput rail to tank to truck terminal will have the ability to unload string of railcar in less than 2 hours. In regards of our operation, we will leverage the expertise of our CN transload group who will provide the switching and the unloading of the railcar on site. The transportation team will provide the switching of the inbound and outbound train on the holding track. The customers who will use that facility will have the opportunity to ship in larger block, which, of course, for us mean less switching requirement and by default also, reduced costs for handling that extra volume. This facility will also complement our actual jet fuel franchise that feed the Toronto Pearson Airport. The new sustainable aviation fuel will ship in the same corridor then on actual jet fuel shippers. This will allow us to marry up shipment and serving yard, giving us the ability to ship in larger blocking. When I was talking earlier about the ability to leverage our actual operation, this is the type of example that I was referring to, so being able to ship larger block while using our same resources. So that's the example I was referring to. So there's no doubt that this site within Mac Yard will help us or provide us with great flexibility and efficiency on our actual operation. In fact, that strategic location, combined with our scheduled railroading approach, will allow us to work with the customers to maximize the use of asset with a goal to grow their volume while minimizing the requirement to invest in a car fleet, which, of course, helps us to maintain a fluid network. This is fully aligned with the strategy to grow in the East, where we have capacity and the resources to take on more volume. In collaboration with Buck, our marketing colleague, working closely with our customers and combined with the key -- the capacity that we have in those key corridor, this will allow us to grow our volume but at lower incremental costs. In fact, what we're doing is we're adding volume on a network in a very, very efficient way. And we're ready to do it. Buck told me, we'll see some of that volume coming on the network by the second half of 2023. When I look at that project, I think this is a great example of what I call our ability to look at the global supply chain, where we work closely with the customers to define what's the best location and also what's the best operating model for us and for them. And now we're in great position to be able to support the growth of those customers on CN network. So to me, this is a great story, fantastic opportunity to be able to handle more volume in the East region. Buck, back to you.

Thank you, Martin. The new rail terminal will be backstopped with a long-term contract that will not only help with the shortage of fuel supplies over the next 3 years but also help us transition to the cleaner fuels that we'll be moving. We're working with a lot of our shippers and producers to move a lower-carbon fuel like sustainable aviation fluid, lower CI ethanol and renewable diesel. CN will also be participating in the supply chain for our own renewable supply. We have a significant forecasted carload growth for this terminal. By the year 2026, we will see this terminal doing over 20,000 carloads of unloading. The marketplace for petroleum chemicals continues to thrive across CN's network. Our newly minted scheduled operating plan has allowed us to once again become the carrier of choice for all of our customers. Thank you.

Thanks, Buck. And now to talk about our next great opportunity, I'd like to invite on the stage my colleague, Kelly.

Good morning. My name is Kelly Levis, and I'm Vice President of Industrial Products. And in my 25 years at CN, I cannot remember a more exciting and fast-paced industry change than what we're seeing today as we shift to electric vehicles. Did you know that one in every 7 vehicles that was sold in 2022 globally was an electric vehicle? And this compares to just one in 70 only 6 years ago. Today, Martin and I will talk through the current environment, CN's network, our customers, the real opportunity for growth and how we're going to get there operationally. The landscape in North America is favorable right now, and the government is focused on creating ecosystems to sustain this new growth. CN has a unique footprint with our network that reaches to the far North regions, where we can access and create hubs, conglomerate and gather products and put them on rail to further into the market on this new electric vehicle. Whether it's access to mines, transform materials, electric batteries or finished vehicles, we are working with every part of the supply chain. CN is at the forefront of creating these long-term sustainable supply chains. And as we talk about mining, there's not enough lithium currently in the world to supply all of the projects that have been announced. But I'm excited to say that at CN in the coming weeks, we will have our first lithium shipments starting coming from the Northern parts of Quebec. There are over 20 projects in the works right now. And they're mostly in the Eastern and Southern parts of our network where CN has the capacity to grow. If you look at Bécancour, Quebec, that is a great example of a location where there continues to be development in that battery space. There's a new processing and new manufacturing announcements that are happening all across the network. Umicore, GM and POSCO as well as Volkswagen have all announced and they're all along CN's network. And there's going to be more and more announcements coming as we get into 2024 and 2025. But the opportunity isn't just about mining. The opportunity is about taking the raw materials and moving them further and further in the supply chain. $30 billion of announcements have been made in Canada and the United States. And CN is working to continue to expand its product offering on the finished vehicle side by adding in more railcars to be able to handle that volume growth. As the market continues to unfold, there's also going to be the need for recycling of batteries. And as we continue to work towards the new low-carbon transition and the circular economy is going to become more and more important and a fantastic opportunity for CN. CN continues to remain focused on our customers, our stakeholders and the industry as a whole, piecing together the different parts of the supply chain, working internally with our operating teams and our service design network strategies team to make sure that we are aligned for this future growth. And with that, I'll pass it over to Martin, who will talk through the operational side.

Thank you, Kelly. Well, this is another exciting opportunity, another great project where we can move more traffic. As we said earlier during Doug slide, the East region is well set up to handle more traffic. It has the infrastructure and the capacity right now to put more freight on a network. So with the development of the electric vehicle supply chain with some of the origin loading point being the mines in the northern area of the region, this will allow us to increase the traffic on our existing train. What I mean by that is we don't need to add more train departures. We don't need to put more train on a network to be able to handle that volume. All we have to do is take the cars from the customers and add it on to do our existing train plan. So -- and the beauty of it is we're ready to do it right now. We have the resources. And as we heard from Kelly, we even expect that the first shipment from Northern Quebec will be on our network by the end of this quarter. This is also fully aligned with our strategy of growth that we have in the East region. And as I said earlier, will also help us to grow volume at a lower incremental cost. But the electric vehicle supply chain is not about moving the min only -- it's not about only moving the minerals from the mine. It's also about moving the minerals from the mine to the transformation plan, which could be in Becancour or in Ontario, where their own finished product, which could be electric battery or any other electric vehicle component will then further move on CN network, so we can supply the new electric vehicle factory across North America. And once the finished vehicles are produced, while we've been positioned also to move them to their final destination. With two really large Canadian markets like Toronto and Montreal in the East region, we will have the capacity and the ability to take on and move that vehicle to their final destination right now. Our scheduled railroading approach, our ability to look at the global supply chain, our collaborative approach with the customers. When you combine all of that with the key capacity -- the capacity that we have in those key corridor will allow us to build a very efficient supply chain for the electric vehicle. So really, when I look at those opportunity, the East region is ready. We have the capacity. We have the resources, and we get to start moving those traffic. Thank you.

I'd like to invite James Thompson to join me back here on the stage as we talk about our next opportunity. The Northeast region of British Columbia is CN's backyard. And the energy transition is a key factor that is helping this growth opportunity and driving this opportunity in this region. Today, James and I will talk through the drivers of growth, the diversity of projects and the collaboration that we have both internally and externally with our customers and key stakeholders to make sure that we set up a proper long-term sustainable supply chain to help with the growth in this area. The global energy transition is happening, and there's a geographic shift. Fort St. John is well situated to become a region where we can establish rail, both in and out of that region. There are 17 different opportunities today with different customers, different commodities, different probabilities and different timing. And what different means is that CN is not reliant on any one customer, industry or market. LNG Canada is expected to start in 2025. And the infrastructure is being built now. And when we look at Phase 1 of this LNG, it's estimated that an incremental 1.5 million tons of frac sand will be required just to meet the drilling requirements in the area, and that will produce the outbound liquids that Buck talked about a little bit earlier. When we talk about mining, there's ores like copper and zinc that can be found in the Yukon as well as other northern parts of British Columbia. There's also metallurgical coal that Sandra talked about a little bit earlier. That market remains strong and is continuing to grow. And if you turn it over to Forest Products, I think everybody in this room has heard about the lack of fiber and the supply issues that there are in British Columbia. But north of Fort St. John, there has been a 75% increase in the allowable cuts in this region. And that is driving more and more opportunities for pellets and logs. And with that, it's creating a long-term sustainable fiber supply in the BC region that's been lacking in other parts of BC. At CN, we're continuing to work closely together, sales and marketing, working with network strategies, working with finance, engineering and operations to make sure that as we're investing and as we're moving and as we're growing the business, that our timing is also aligned with our customers. There is potential to double the volume in this region. And with open lines of communication, and proactively working with our customers, seen us at the forefront of creating these supply chains, but it will create the platform for multi-decade sustainable growth. And with that, I'll pass it back to James to talk through how we're going to do this efficiently and safely and make sure that we're aligned with this growth. James?

All right. Thank you, Kelly. The best way I can describe this line, is it truly is a diamond in the rough. One we've started to Paul is just a little bit and are starting to see some shine on. But to talk about where we're going with this line, I've got to take it back a little bit. Prior to 2018, this line produced less than 4,000 carloads annually for CN. Not a very big, robust development. This is part of an acquisition we had taken on from the BC Rail and really, at that point in time, because of the allowable cut south of there, there was not the Forest Products demand, there was not the demand in the area that we're seeing or started to see back in 2019. So in 2019, we began to invest in the area. And really, it was -- the best way to highlight this is, it wasn't done as a capacity improvement. It wasn't done as we put in new sidings. We started with resiliency. We started with safety. We started with ties, rail, we're able to increase our speed, we're able to increase the resiliency of the line. And that's really how we've started to unlock the capacity of that corridor is through speed and efficiency. The next tranche will be through some capital investment, which will go on through 2023 and 2024, adding 2 sidings to the line to be able to handle the business we see on the horizon. As Kelly put it, there's 17 potential opportunities up there. There's a lot going on, and we need to be ready to capitalize on them. The biggest piece and the biggest challenge for my lens is the people piece in that corridor. It's very demanding right now as far as the labor market goes. Everybody is growing up there. The First Products producers are growing, frac sand is growing, drilling activity is taking off. And at the same time, we need to hire people to support all that. So what have we done to be able to address that from 2019 to today, and we will be able to continue to do that, we've used shortage employees. And what shortage employees are surplus employees in other locations across Western Canada that the collective agreement allows to move into the areas that have a shortage of employees. But that's not the sustainable approach we want to take over the long-term. So what we're doing is partnering in the area with local First Nations, schools, and the small communities. We're present there. We're meeting and doing career fairs. My superintendent was up in Fort St. John, not too long ago doing a career fair, trying to get CN's brand out there and being good neighbors in our community. This visibility will provide line of sight to people, to bring people into our organization in the location, where the growth is taking place. We're bringing volume as our customers are in Northeast BC. We want to show that to the people living in Northeast BC that we're an employer of choice, and this is a great opportunity for them to come and work for the railroad. Bringing the right people to the right location on our railroad will be key to our future. With that, and speaking about the right people, I'd like to introduce Carrie Crozier and Dan Bresolin, VP, Multimodal Operations and VP Intermodal.

Okay. Thanks, James and Happy Birthday. My name is Carrie Crozier. I'm Vice President of Multimodal Operations. I have -- I'm a fourth-generation CN railroader, and I'm very proud to be working for this company. I have a long, diverse background in operations across both field operations, as well as network operations prior to embarking into this role a little more than 9 months ago. I am honored to be here today and to talk to you about our plan that has been entrenched as both disciplined and resilient. What I'm going to talk to you today, is I'm going to talk to you about why our discipline plan matters. I'm going to talk to you about the resiliency that has been established as a result of our disciplined plan, and how it's created new opportunities, including growth. My colleague Dan is just -- is then going to talk to you about some of the really exciting future growth opportunities ahead of us. So let's first talk about discipline. Our disciplined plan has yielded some really positive results. We've seen betterments in our car utilization. We've seen betterments in our car velocity as well as in our car hire. Those betterments has resulted in a benefit to our cost in a per unit basis of over 5%. Our service has also improved, measured by left behind in terms of left behind to a plan, so that's left behind units to a plan. We're more than 98% compliant. We work collaboratively. We work integrated with all the functions across the end. Derek and Pat did a great job talking about how the team has come together to be able to create the right plan. and how we've executed to become disciplined and create the opportunity for resiliency. So let's talk about resiliency next. Our customers have asked us for resiliency in some key markets, including Toronto, Montreal, Vancouver and Chicago, and we've created it. In Toronto, we have the second largest in-land container terminal in North America. That's measured by size, by throughput, sorry, definitely not by size. And our disciplined plan has allowed us to create the capacity, has allowed us to continue to create capacity and find solutions. We have established some very exclusive partnerships with some container yards in Toronto. Those partnerships allow us to be able to surge volumes up, when required, including supply chain disruptions without jeopardizing the capacity or the fluidity on our CN network. In 2022, our resilience was tested when there was an industry supply chain challenge. We were able, through the resiliency that was created to be able to outpace our peers, to be able to write the ship pun intended. Building on the partnerships that we've created, we've also established new partnerships with boutique terminals to be able to service some key market growth areas, including Southern Ontario, in particular, Hamilton. These partnerships allow our customers to be able to reach their market closer as well as allow our customers an alternative to be able to improve their carbon footprint, which is a growing necessity. One intermodal train takes more than 300 trucks off of the road. Our technology advancements are tied into our discipline and resilience as well as our growth. Our intermodal terminals operating system, which is really the brain of what it is that we do in the intermodal systems is being replaced currently with a new system called Smart Terminal. The Smart Terminal system will allow us not only to have better work order optimization, better inventory management, but it also allows us to build for automation into the future. A second terminal that we have in -- a second application that's in place right now is we're rolling out a system called Mobile Express Pass. How I can explain that to you best is that how you check-in at the airport right now, where you use your phone to be able to check-in in advance at arriving at the airport. That application and that access to airports now has changed the way that we access the airport as well as improve our flight experience. That's what our customers and in particular, their truck drivers will be able to experience when they come into our terminals. So that all being said, we've got a lot of integrated approaches as well as our discipline and resiliency is helping us to be able to shape the way for the future. Intermodal growth is happening. We are ready for it. And with that, I'll turn it over to Dan to speak to.

Thanks, Carrie. One thing I wanted to say is intermodal is ready to grow, and we're ready to do it. We've got a big ambition of growth over the next 2 to 3 years. I'd like to just say to the operating team, it's a lot of fun for our sales folks to come to work every day, knowing exactly what we're selling, where we're selling and have pride in our products. So I just want to thank them for that. I'm going to talk about 3 things today that are going to help with our growth. Port capacity coming on in the next 2 to 3 years. Inland capacity coming on in the next 2 to 3 years and partnerships that we're going to continue to develop existing and new. Port capacity. In the next 2 to 3 years, about 3.5 million TEUs of existing and new capacity will come online at the ports that we serve. What's great about it is that almost half of that is that terminals we're seeing as the sole serving carrier. Prince Rupert and Halifax. Prince Rupert still, I think, the best service to the Midwest, and I think our customers see that. And Halifax, we just set a record and the momentum is there with all of the changing trade patterns for them to catch more. The next tranche of capacity is about 800,000 TEUs of capacity that's going to come in through the Gulf, okay? New Orleans has capacity to grow today. Mobile just announced a $65 million expansion plan to increase their intermodal yard. What's great about that capacity coming online? We have the best route to the Midwest, and that's what's going to help with that capacity. The last tranche capacity is about 1 million TEUs that's going to come online in Vancouver and St. John. That's jump ball capacity, but we're going to win the jump ball by jumping higher. We're going to have fast, reliable trains. We're going to have a focus on low dwell and we're going to have best-in-class customer service, which is through a digital platform, or just answering the phone. So that's -- it's quite exciting. Now ports pitch inland terminals cash. And if you can't catch it, it's not worth moving it. So on the inland side, our 3 core terminals in Montreal, Toronto and Chicago, touch about 70% of our intermodal involvement every single day. Montreal with a very minor cost, we can double the capacity there. In Toronto, we're breaking ground, and we're quite excited to add another 450,000 units of capacity for both domestic and international by 2026. In Chicago, we're even more excited about our new footprint in the southwest suburb of Chicago. That's going to put us right in the heartland of our Class 1 U.S. rail competitors. So we're going to have great service from the West Coast. It's also going to put us in a great place for us to compete against East Coast rail providers, as we're going to be already in the neighborhood where all of the newest, latest distribution center capacity square footage is being built. So we're extremely excited about that. Further to that, we're going to continue looking for new storefronts that we can work on, whether they're in Northern Quebec, Southwestern Ontario, Carrie mentioned Hamilton, U.S. Midwest, anywhere we can look to partner with someone to help us to develop the menu and up the menu of options that we can provide to our customers is going to help us grow inter markets as well. Last is partnerships. Doug is going to talk a little bit about our EMP partnership and our Falcon Premium. But we're going to continue to grow with our existing partners, New York, New Jersey and the Port of Philadelphia with CSX. We're going to continue to push to do more volumes into the Ohio Valley with NS and CSX. Indianapolis is adding a lot of capacity at their terminal. We've got room to grow there. It's been a phenomenal partnership with a best-in-class regional railroad. We have projects that we're working on with the Port of Prince Rupert as we develop the Ridley Island export logistics park, and I think they'll do imports there, too. We will also be looking at -- we're also working -- we announced a few weeks ago working with Montship, the Canadian name, but Captain Logistics on a new 30-acre transload within our Calgary Logistics Park. I think Alberta is the transload future. So with that, I just want to recap that the capacity is there for us to sell both from a port level and from an inland level. We've shown that we can sell, and we can fill this. And last, we're going to continue to work best-in-class partnerships to try and hit that number and grow -- the growth number that we projected. So thanks, everybody.

Thanks, Dan. We're going to welcome Doug back up to the [ table ].

All right. Thanks, everyone. So we'll kind of get through the wrap up here pretty quickly. I had a lot of questions last night about what we're doing with our new Falcon Premium service. So we'll touch on that first. Actually, we'll touch on a second because it goes in order. So first thing we did is last October, we actually announced a partnership with the EMP service with the UP and NS. So now we're the sole Canadian carrier for the service. Now what that is, is it's an interline service that we didn't have before for intermodal. So historically, our intermodal boxes would move to Chicago, and that would be the end that we'd see them. The customer would have to -- we get them off the train, they drew over to another terminal. They go on another railroad; we'd have no idea where they're going. Lot of work for the customers. With the EMP service is -- it's an interline product. So the customer builds it from origin all the way to destination and we take care of all that in between, between the CN, the NS and the UP. So the customers love it, and we've been able to really grow it quickly. So Dan and the team have done a great job selling it, but we're also selling it for all of our products, including Forest Products. Then we get to the Falcon Premium service. So working with the UP, we said, how do we expand on the EMP? How do we get into Mexico? We've been meeting with the UP on and off for, I'll say, 5 years. So this isn't anything that's come up very over time. But -- with changes in the marketplace, I'll say we've all come forward and said, "Hey, we need to get into Mexico better. " And just over the period of 2 weeks, we were able to put together, I'll say is going to be a world-class service between Mexico and Canada and Detroit for us, that's going to move product between there that's moving over the road. A lot of people ask me, what are the numbers, right? So we did a lot of work on this when we were looking at buying the KCS. Listen, there's about an equivalent 4 trains a day northbound, 2 trains a day southbound that moves over the road today. You need balance in the rail industry to keep your cost down. So you sit there and say the balance is 2 trains each way a day. And then what are we looking at taking it? We'll be really happy getting the one. So that's taking one train a day with the UP and the FXE off the road. And we think we can do it. We think the service will be there to do it. You'll see yesterday, we also announced a partnership with Crowley. And what that is, is really the new service that we're going to be doing short-sea shipping into the Mexico City market. It will move on CM to Mobile. Mobile gets transferred onto a Crowley ship that's actually a high-speed ferry that moves down to the port of Tuxpan. Tuxpan is not served by rail. It's actually a truck port. It will go off and it will get trucked into the Mexico City market. And that's something we don't really touch on yet today with our UP partnership. So it's an additive to it. It's not competing against it. So we're looking forward to that, that will be starting up, I believe it's in September, Dan, right? Yes. So you can hear from our interline partnership, it's all about taking trucks off the road. We're not trying to take trucks off other carriers, we're really going for that. The railways have always talked about, we're going to take trucks open. These products are designed for that. So we expected that we'll also say, "Hey, how do all these projects add up? " which I know you guys want to see what the final numbers are. It's a big number. So 800,000 to 900,000 carloads or units per year of growth by 2026 annually. So how do we get there? Like this is just big the project growth that we've talked to you here today. We have a lot of small, medium-sized projects that we don't have. So it's easy to fill in any gaps that we have. Big projects come up, big projects don't always come through, but we have a lot more we're working in the background anyway. Just to give you a quick recap in bulk, we have 80,000 to 90,000 carloads of growth. In renewables, we have 70,000 to 80,000 carloads. Just in NGLs, we have 55,000 to 65,000 carloads of growth. In the EV market, Northeast BC, Kelly and the team talked about 130,000 to 145,000 carloads on our existing network. Intermodal is the big kicker and Dan talked a while that would carry 465,000 to 520,000 units of growth over the next 3 years. Like it's just a big, big number. And how do we get there? It's disciplined growth and with the support of our customers. So I think you've heard that a lot is that we're going to be very focused with the operating team on bringing us all onto the network, not impacting our existing service. So really trying to drive that growth, and we will right to the bottom line. And just to finish up, we can't have a presentation here without talking about pricing. So I know you'll be asking about it. So that's good. So listen, we continue to see moving forward, we'll be able to price rail inflation and above. So we continue to see strong markets for that. How do -- the easiest thing we can do though is have good service, so it allows us to get us. The service that Ed, Pat and Derek and the team have been providing over the last year, make it an easy conversation with our customers. Ed alluded to the fact that, "Hey, the private car shippers are actually don't need as many cars so they're seeing some savings." The other part of that is that the inventory carrying costs of customers are way down when they're shipping with us. So they have less products in the pipeline. So they're happy about that as well. It's eased us for more price when you're able to actually show them justifiable savings. And from all this, what CN really needs to do is really bring this to the bottom line. And I know a lot of you have said, how are you going to bring that growth to the bottom line? It's a team effort. You see that today between our salespeople and our operating people, all working together, I don't think there's anyone that can come out of this and say, we're not aligned right across the company. We have significant growth opportunity moving forward, and we're going to deliver on it. It's that simple. Next, we actually have another video coming up, short video, and it's all about the technology that we're doing with customers, featuring a Dominic and Mohit again, and you'll get to see some of the stuff for there, then we'll do a quick Q&A after that. [Presentation]

So thank you, Doug, and the team. That was a really helpful discussion. I mean it's obvious, this is not new material for me per se, but I was -- as I was sitting over there stage left, there was 3 things really struck me. One is the significance of the growth opportunities. Two is the deep integration between the commercial team and the operating team. But the third thing was also the supply chain integration, and the way that we talked about the EV supply chain and the renewable fuel supply chain, that's a real new level of integration with our customers and supply chain partners to really lift our game up and be able to take on this next level of growth opportunity. So we have time for a couple of commercial questions. I have my glasses on. So hopefully, I can see you all a little better. And we've got Greg and Marius that have got the mic on. So I think over here, Marius, Steve got the mic there.

Jon Chappell, Evercore ISI. Doug, two parter for you, that 800,000 to 900,000 carload growth potential. How much of that is in the outlook that you laid out earlier this morning, the 10% to 15% earnings growth? And then the second part is, a lot of that growth comes in James' territory, where you had 2 big green boxes of near capacity, west of Edmonton and between Winnipeg and Chicago. How much of that 800,000 to 900,000 could be met with the capacity you have today, and the capacity that Ed and his team are creating versus what you need to invest to chase some of that new capacity -- that new potential?

So firstly, we'll talk about the fact that it's pretty much all in the plan, but it's also not just those projects, right? We have other projects going on like I said, some will drop off in the end, they just won't happen, but other ones will add in. So overall, those are the numbers we're using that we're pretty confident that we can deliver on. Now being in James' territory, all of these projects, because there is some tight capacity there have a plan against them for adding capacity every single one of them. They wouldn't be up here if we didn't have a plan for it. That's the nice thing. So we can deliver all on that in the time frames asked for by the customers. So we're set.

Walter, go ahead.

Walter Spracklin from RBC Capital Markets. So my question, I guess, first one is for Sandra. Second one for Dan. Sandra mentioned Quintette, Jansen and the Canpotex opportunity. I'm just curious, I haven't heard anything from tech about Quintette, is that deal -- is that mine going ahead? And Jansen, are we -- have we had a decision on that one yet? I'd love to hear whether that's going ahead. And then for Dan, of the 800,000 to 900,000 carloads ported to 450 as you mentioned, Doug, is all in that area. I think, Dan, you mentioned 3.5 million TEUs coming online. How much of that 3.5 million is in that -- is in that 400,000 to 450,000 carloads?

So do you want to go ahead and Sandra first or.

Here, I can take that. So Walter, on the Quintette opportunity, so the transaction was published a little bit a while ago about how the transaction itself has closed and they move -- U.S. continuing to move forward in terms of the final work towards bringing that project online. And we're working with them closely to understand what that's going to mean in timing, so that we're all aligned when we bring it online. With respect to BHP, they continue to expect to bring that mine online, and they publicly have stated in 2026. And so we continue to be very close to them in Saskatoon a lot as we work with all of their teams across all of the functions to make sure we understand what their needs are going to be and how we can work with them to move some of their potash in the future. That is still under discussion, yes. We will both be connected, and it is the generational opportunity. Dan?

Yes. Thanks for the question, Walter. So I'll break down that 3.5 million TEUs of capacity. 2 to 2.25 of that is really capacity that's there today, okay? So for instance, Prince Rupert, we've got a 900,000 TEU run rate, and there's 1.6 million TEUs of capacity there. So that's room to grow in, and there's a train plan against that. There's also a plan against that extra million coming online afterwards, which is 200,000 more new TEUs capacity at Rupert. It's Halifax, it's working with PSA so that they can optimize their operation in order to do more there as well. Maybe one thing I could have mentioned was long-term, 2028 to 2032, there's probably another aspirational 8.5 million TEUs of capacity across all the projects. And just to mention, we're in good shape for a good share of that as well.

Question on this side?

Yes. Justin Long with Stephens. When you think about the growth opportunities going forward and compare intermodal to everything else, how would you say the incremental margin and incremental returns compare intermodal versus everything else, better, worse, about the same? And then second question, just on pricing above inflation. Is that something you think is achievable across all businesses? Or could it be a bit more challenging in intermodal, given the heightened level of competition from both truckload and some of the other rails?

Well, we'll start with the pricing question. So honestly, in almost all areas, the pricing environment is still very robust for us. We're providing a great service and we're able to actually price above inflation. Intermodal has gotten a little bit tougher recently with respect to the capacity available in the trucking market. But we're still working with that. But we don't have contracts that come up every day in intermodal, right? Those are long-term things; trucking capacity is going to tighten up. So I don't expect any time of long-term inability to price above rail inflation in intermodal either. So I'm trying to remember what the first question was.

Intermodal margins.