March 5, 2018

Jobin resigns as CN president, CEO, effective immediately

Board hints at increase in operating ratio as reason; Ruest, top marketing executive, takes over in interim role.

By DC Velocity Staff

Railway giant Canadian National Inc. (CN) said today that Luc Jobin, its president and CEO since July 2016, has resigned, effective immediately.

The Montreal-based railway has named Jean-Jacques Ruest, a 22-year CN veteran, interim president and CEO until a permanent replacement is in place. A global search is underway for a successor, the railroad said. For the last eight years, Ruest has served as CN's executive vice president and chief marketing officer. Jobin joined CN in June 2009 as executive vice president and CFO, positions he held until he was promoted to the top job in 2016.

In a statement, CN's board said the company has experienced strong shipper demand since last fall, but has also demonstrated "insufficient network resiliency" during that time. Severe winter weather was a complicating factor, the board said. There was no mention of any extenuating circumstances that may have led to Jobin's departure.

"The board believes the company needs a leader who will energize the team, realize CN's corporate vision, and take the company forward with the speed and determination CN is known for," said Robert Pace, CN's board chairman.

CN has long been considered North America's best-run railroad, with an operating ratio-the ratio of operating expenses to revenues-in the mid-56 to 57 percent range for some time. This meant that for every US$1 of operating revenue, it would cost only 57 cents or so to run the railroad.

Last year, operating ratio crept up to 57.4 percent, a 1.5-percentage-point increase from 2016 levels. In the fourth quarter, the period highlighted in the board's announcement, operating ratio jumped 3.8 percentage points to 60.4 percent, while operating expenses rose about 9 percent.

Lee Clair, a rail industry consultant, said he was surprised by the move in that it is unusual for such a high-performing company to undergo such an abrupt change at the top. Clair, noted, however, that under Ruest CN has been the only major railroad to experience significant volume growth without being forced to cut rates. "The (operating ratio) actually got better as they grew," Clair said in a note. "To do this requires significant knowledge of the operations."

Ruest, like other executives to work under the late E. Hunter Harrison while the legendary railroader ran CN from January 2003 to December 2009, is well-schooled in operations and finance, as well as possessing superb marketing skills, Clair added.

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