Mongeau to step down as head of CN, leaving a powerful legacy to uphold

Claude Mongeau, who over more than 20 years helped transform Canadian National Railway Co. (CN) from a ward of the state to arguably the world's best-run railroad, will step down as CN's president and CEO at the end of the month due to health reasons, the company said today.

Mongeau, 54, returned to the helm at Canadian National in January following a six-month leave of absence in the second half of 2015, during which time he underwent surgery to have his larynx removed after doctors found a rare tumor on his throat. In a statement, Mongeau said he "gradually came to realize that it is difficult to fulfill such a demanding ?role" given his medical condition.

Montreal-based CN named Luc Jobin to succeed Mongeau as president and CEO, effective July 1. Jobin, 57, joined CN in 2009 as executive vice president and CFO after a long career in the food and tobacco industries. Jobin headed CN's leadership team during Mongeau's medical leave.

Mongeau, a Montreal native, joined Canadian National in 1994, the year before the formerly state-run railroad was privatized through an initial public offering. He served as vice president, strategic and financial planning, and as assistant vice president of corporate development before being named executive vice president and CFO in 2000. He was named president and CEO in October 2010 upon the retirement of the legendary E. Hunter Harrison.

CN is Canada's largest railway and operates the only Canadian transcontinental network. Through a series of U.S. rail acquisitions over the last 20 years, notably the Illinois Central (IC) Railroad in 1998 and the Wisconsin Central Transportation Co. in 2001, it operates an extensive north-south network from the Great Lakes to the Gulf of Mexico, as well as track running from Canadian maritimes into New England.

The IC purchase, which connected the already-existing lines from Vancouver, British Columbia, to Halifax, Nova Scotia, with a line running from Chicago to New Orleans, is considered to have changed CN's mindset from that of a Canadian east-west carrier to the attitude of a north-south continental railway. For example, CN today feeds Canadian raw-material exports into the U.S. Midwest and into Mexico through a partnership with Kansas City, Mo.-based Kansas City Southern Railway Co.

In 1999, CN and Fort Worth, Texas-based BNSF Railway Co. announced plans to merge. However, the railroads subsequently abandoned the effort after they determined that new merger rules developed by the U.S. Surface Transportation Board (STB), the federal agency that oversees U.S. railroads, were too onerous to comply with.

Since its privatization, CN has become almost legendary in its efficiency. In CN's first quarter, its operating ratio—a company's operating expenses as a percentage of revenue—came in at 58.9 percent, meaning that expenses accounted for less than 60 percent of its revenue, an impressive feat for an asset-based provider.

However, John G. Larkin, lead transport analyst for investment firm Stifel Financial Corp., said Mongeau's legacy goes far beyond CN's operating ratio. Mongeau's strengths lay in establishing strong collaborative customer relationships, Larkin said in an e-mail today. CN personnel were assigned to specific customers, and often reported for work at the customers' offices, Larkin said. The goal, the analyst said, was to "fine tune CN's operating interface with the customers, and to explore mutually beneficial growth opportunities."

Mongeau recognized that "a true growth company needs to grow volume and revenue and, by definition, couldn't drive the operating ratio down ad infinitum," Larkin said.