Thank you, Mr. Chairman. We appreciate the opportunity to meet with your committee today. We apologize that we were not able to meet with the committee sooner, but we trust you understand the challenges that a recent strike put on our operations.
I want to start by stating that safety is extremely important to us at CN. We welcome the chance to give you an overview of the measures we undertake to ensure that we do run a safe railway. I know that most of you are familiar with CN; however, given some of the information that has been circulating recently, I want to take a few minutes to make a few key points about our company.
CN was privatized in November 1995. In the intervening years, CN has acquired a number of railways in both Canada and the United States, including the BCRC, the Illinois Central, and the Wisconsin Central. We are a widely held company, with approximately 60% of our shares currently held by Canadian-based shareholders. Our chairman and the majority of our board are also Canadian. Our CEO, Mr. Hunter Harrison, is American and works out of our head office in Montreal. Our operations centre for North America is located in Edmonton, Alberta.
Safety is one of the five principles that guide CN's business, together with service, cost control, asset utilization, and people. They are the constants in our planning and operating decisions. They are both the business and the cultural context of this company. We're never satisfied with our safety record. I am, however, pleased to report that CN's Transportation Safety Board, or TSB, main track accident ratio decreased by 30% in 2006--110 in 2005, reduced to 75 in 2006.
Overall, when we include yards as well as main track, we experienced an 18% decrease. We also improved significantly with regard to the severity of the accidents. Half of these main-track accidents involved only one or two cars. This improvement had a dramatic effect on our bottom line as well, because derailments are expensive. In 2006, our derailment-related costs plummeted from $91 million to $48 million, as compared to the previous year. In addition, and most importantly, employee injuries in 2006 were down by 25%, which also represents a very significant improvement.
While there have been fluctuations from year to year and from quarter to quarter--for instance, there's no question that 2005 was not a very good year for CN--the trend line shows a clear improvement in CN's safety performance.
Our safety program is based on three pillars: people, process, and technology. The first pillar of CN's safety program is focused on people initiatives. These are programs aimed at transforming the way people work in developing a safety culture through training involvement, communications coaching, and recognition. An example of this is the introduction in 2006 of our employee performance scorecard. This is a system that ensures each employee's performance is graded and that he or she meets with his or her immediate supervisor at year-end and reviews performance as it relates to safety and other measures. This provides an opportunity for a two-way discussion; it provides an opportunity to identify and discuss together any areas of concern.
The second pillar is process. The key area here includes trend analysis, safety auditing, risk assessments, and contractor safety. Trend analysis allows us to identify top causes of accidents so that resources can be mobilized in the most effective and focused manner possible. Audits and efficiency tests are performed across our system by supervisors and audit teams. More than 300 efficiency tests are conducted each day across the CN system.
The third pillar of our safety program consists of technology initiatives where CN takes full advantage of technology to reduce risk. On the engineering side, we focus on rail flaw detection, track geometry testing, and slide and washout detectors. Ultrasonic rail testing has increased by over 60% over the past four years to about 120,000 miles per year, which means we inspect our core route four to ten times per year. This is much higher than the minimum regulatory requirement, which is once per year. Track geometry testing has also increased, and we are acquiring a new $5-million track geometry test car to further increase testing. We also use a wide range of state-of-the-art technology on the mechanical side of our business, which includes hot bearing detectors, hot wheel detectors, dragging equipment detectors, cold wheel detectors, wheel impact load detectors, and wheel profile detectors.
CN has one of the highest densities of these detectors of any railway in North America. For example, across North America, the six major railways have about 75 wheel impact load detectors. CN alone has 30 of these 75. All detectors are connected to a central location that monitors the data continuously on a 24-hour, seven-day-a-week, basis and enables us to spot developing trends and take proactive actions before incidents occur.
CN is also an industry leader in the safe handling of dangerous goods. In 2006, we hired one of the leading experts in North America to head up our department. This has led to the establishment of 11 new dangerous goods officer positions across our system who are fully trained and outfitted to respond to any dangerous goods situation.
We have also taken the initiative in setting up many joint exercises with local and provincial police, fire, environmental, and other responders.
The rail business is extremely capital intensive. This year CN's capital investments are increasing to $1.6 billion. About half of this investment goes toward track safety, with the replacement of rail, ties, bridges, and other items. We've been making this scale of investment in our system year after year to ensure that our plant is in top condition.
While we can make these investments because we want to protect our employees and the public at large, there is no question that at the end of the day they are good business as well. Operating a safe railway ensures that we can serve our customers efficiently, protect their products, keep our systems fluid to avoid service disruptions, and at the same time it saves the company and our shareholders a great deal of money. Starting at the top, our entire company is dedicated to running a safe railway.
Yes, absolutely, we've had some very high-profile derailments, accidents that understandably have raised public concern. However, overall, our record has been good, and the trend lines we'll share with you today indicate it's headed in the right direction.
We understand and appreciate your interest in these issues, and we'll be pleased to answer your questions.
Gentlemen, thank you for coming. As you can appreciate, when this committee was formed, one of our prime goals was safety in marine, air, and rail. We were aware of problems that were developing in terms of an increase in the number of derailments in 2005. The minister at that time under the Liberal government, Jean Lapierre, as a result of the spike of incidents that you acknowledged in 2005, Mr. Creel, ordered two studies. One was the phase one study, which was the targeted inspection of your operations in terms of the details of the safety incidents. The second was phase two, which was the audit of the safety management system you had implemented to determine, as you mentioned, the difference between employees and process.
In the concerns I have in phase one--and I'll go through the questions and you can take note and then decide who wishes to respond. A lot of my questions will be related to western Canada, so, Mr. Marshall, it may be more appropriate for you to respond.
On page 6 of the phase one report it refers to the contributing factors to your main-line derailments. It talks about two of the major contributing factors having been track and equipment. It says, for example, that 37% of the main-line track derailments were identified with equipment being the contributing factor. This is where CN is both the track owner and the train operator. It also refers to track conditions as being the contributing factor in 27% of the derailments listed.
When we get into page 14, a little farther up, and then page 16, we're talking about two of the issues relating to equipment. One is on page 14; it talks about freight cars. They're talking about a defect rate of 20.6% of a little over 3,000 freight cars that were inspected. They talk about a variety of things, but some of those are defective breaks, break issues that create additional risk.
The other issue on page 16 refers to locomotives, and 53.9%, almost 54%, of the 232 locomotives again had safety defect rates assigned between 32% and 68.9%--again, misaligned break shoes, breaks being head worn, excessive piston break travel. They're not all extremely serious, but what concerns me in having read the report is that even with the significant number of what might be called relatively minor issues, it indicates perhaps a lack of attention overall. If the little things aren't being attended to, then it reflects that likely the big things aren't being attended to.
The other issue that was mentioned there, on page 17, was the consists. In the presentation you provided for us today, in the background material you talked about wanting to work with local authorities, municipal authorities, hazmat teams, and the fire and police services that have to respond when there is a serious derailment. One of the issues is there's a 14% violation rate in having accurate or inaccurate consists. The consist, as I understand it in this context, is saying what's in the train and where it is in the train, so that if there is a derailment, local authorities are able to determine are there particular products they should be concerned about, and where are they located within the train. And we've got a 14% inaccuracy list, or incomplete list. That's worrying to me, for example, as a former mayor for a community in north Vancouver, where we have hazardous goods going through our community very close to residential properties on a daily basis.
When we go into phase two, which is the safety management systems, there were a number of things that were of concern to me. You're familiar with them. I've heard you talk about in your presentation the commitment to safety that you have as a company. But it talks here about a disconnect between senior management and front-line supervisors and employees in understanding management's commitment to safety. So there was the commitment, there was the talk being made, but the question is whether that was being walked--if you want to call it that--at a track level. The responsibility of the management of a company if they have policies, if they have goals, is to ensure that they're not just articulated but in fact are being enacted and being followed through by employees. It talks about the need for a comprehensive review of safety performance by senior management, and one that's not primarily based on American standards, but Canadian standards.
It says here:
...it was found that the evaluation of safety performance at the senior management levels is heavily focused on accidents that meet the United States Federal Railway Administration (FRA) reportable accident criteria. The FRA accident numbers only represent a small portion of the actual number of CN accidents in Canada.
That reflects back onto the evaluation of the standard of the monetary level, which I think in the U.S. is $7,700, so items that are below that are not reported, yet they can still be significant as to safety. It could be the handles, the gradings the workers stand on, the locomotives. So I have concerns about that.
It talks about how data from day-to-day operational monitoring systems could be used more frequently to trigger formal risk assessments. What they suggest is that the data is being gathered but it's not being used to trigger the required assessments that should be ongoing. It talks about how more thorough tracking of details is necessary to improve the management of risk mitigation strategies. Again, it says, “the audit team could not find documented details describing the risk mitigation controls”. This is contrary to the intent of CN's corrective action, safety and measurement plan--SMS plan. It also says, “The effectiveness of CN’s safety culture improvement initiatives needs to be reviewed”.
Again, it's the question of the focus on training, involvement, communications, and coaching were reported as not being effectively implemented. This was raised most predominantly in the mechanical services department, and we have written testimony and information contained in these reports that indicate that this is a concern of employees being penalized in fact for reporting injuries, for example, that they may have as a result of equipment that is not up to level--
I will get to it, thank you.
The report was damning in that what appears to happen is that there has been the application of water grade railways, flat level railways, basically, like you may have in the U.S. and in parts of Canada, and I'm speaking now from British Columbia, being applied to B.C., where we have some of the most significant grades and some of the tightest curves in North America, and that when you took over BC Rail, there were locomotives that, for example, had dynamic braking, which is a back-up system for braking and could have resulted in saving, perhaps, the lives of those two gentlemen who died in Lillooet, yet those engines were either sold and moved away or else the dynamic braking was taken off or deactivated.
I would like to know, where did those engines go and why were they taken out of the B.C. market in particular? Is it true that in fact employees, in your understanding, feel intimidated when reporting injuries and in fact working within the safety culture you want to create?
I think your questions could be answered by any three of us on the panel, to be honest with you. We're all in the front-line operating roles. The phase one and phase two audits were effectively a cross-section of the Canadian system. So any one of us could answer, and I think we'll probably all end up addressing some of the questions.
I tried to take quick notes here, as best I could, so hopefully we'll cover the points off.
I think the safety management system exercise, phase one, was very comprehensive, and we worked with the regulators. Through the course of the audit we exchanged views and notes, and at the end there was a draft report put together. This is true for phase one and phase two. I believe that many of our thoughts and ideas were incorporated. I wouldn't say they were all incorporated.
Some of the interpretation and the judgment I think is from their view, and that's fine. We learned from that, and we continue to work with the regulators on all the aspects you've talked about, and I will address some of them here individually.
I think it's important to recognize that we are governed by Transport Canada and the Transportation Safety Board in Canada. Yes, we have operations on both sides of the border, and yes, it's a different regulator in the U.S., but we are governed by very good regulations here in Canada and we work with the regulators on a daily basis. There's an extremely good exchange between the railways, not just CN, but CP as well, and the regulators.
In regard to some of the references you noted about the number of cars being defective or the number of locomotives, I think a good analogy might be a vehicle. You buy a brand-new car and in a few weeks you might have a bulb burned out and that's considered a defect in the regulations. Things like brakes--we could have a brake shoe that needs to be replaced on 100 cars. That doesn't make the train defective, but the brake shoe needs to be replaced, and we recognize that. And we have, again, processes to address the defect points. On the locomotives—they have some systems in there—the microwave could be not working, and that is considered to be a defect. We adhere to the regulations. Yes, there are things that need to be repaired and fixed as they go from point A to point B, and we have a regular inspection process for that.
We have good processes and good technology that support the safety items you've raise, and I think, again, it's an ongoing exercise. As Mr. Creel pointed out, nothing is more important to us than safety. We work very hard on the safety role and we are disturbed when we have safety incidents. It is a service disruption, it is an injury to an individual, it is a disruption to the community. These are things that take us away from what we do best, and that's to move traffic efficiently and for our customers. So safety is something that we're not going to back away from, that we need to continue to improve, and that's in everybody's interests--ourselves, the unions, the communities. As Mr. Creel pointed out, we spend a lot of time with communities; we spend a lot of time with the unions.
In regard to the comment about the disconnect, I think in phase two we have an improving and a very solid base for involvement with employees. We have local health and safety committees, we have regional health and safety committees. The three of us today, actually this morning, came from our policy, health, and safety committee meeting, which the three of us sit on with union leaders from across the country. And we address issues such as these. We talk about the safety audit, the SMS audit, phase one and phase two. Those are things that are important to us as an organization, not just management, not just union, but us collectively.
As Mr. Creel pointed out, we introduced an employee performance scorecard last year, which is an opportunity for us to review with every individual employee--not just management employees, but every individual employee on the railroad--what their contribution is relative to their craft, whether they're a locomotive engineer or a clerk or a conductor. We take them through areas of safety, productivity, attendance, and we have a good frank exchange about things they're doing well, and the majority of them are doing an outstanding job. And there are exchanges of information, and fact-based exchanges where we say we might need to improve there, and we ask for ideas.
So I believe there is a very strong penetration of communication to the individual employee. Can we do better? We can always do better, and we encourage contributions and ideas from everybody in the organization.
Just quickly on the FRA versus TSB in phase two, the Federal Railroad Administration, FRA, in the United States is the governing body. We keep statistics for both the Transportation Safety Board, TSB, and FRA. The reason we keep FRA is that we're a North American company, and we need to be able to compare our performance against North American railroads. The TSB criteria are different. They're actually more stringent in many cases. We keep that data as well. Mr. Creel referred to some of the Transportation Safety Board statistics, which improved from 2005 to 2006.
We could exchange a lot of information, a lot of factual information, that would be helpful. We will try to do our best today to answer those questions for you.
I didn't catch all the notes, and maybe Keith or Jim Vena can answer.
You sent us your brief on rail safety. You're making a nice speech; you're paid to come and tell us that things are going better.
I'll tell you from the outset that I put the question to the representative from the Transportation Safety Board, who appeared before our committee on SMS in the air industry. I asked him directly whether he had observed a reduction in the number of accidents since SMS had been implemented in the rail industry. He was unable to confirm that for me. It is too soon for the Transportation Safety Board to confirm that the Safety Management System has a direct effect on accident reduction.
I'm quite willing for you to tell me that things are going better and that you are performing well and have a business culture. The problem is that, in Quebec, in Montmagny, among other places— and that wasn't in 2005, because you had an increase in the number of accidents in 2005—in 2004 and 2007, there were derailments. You're telling us today that these events were given extensive media coverage. Following the 2007 derailment, you could see a tanker a few feet away from a house. I can understand why it got media coverage. These weren't minor derailments that occurred in Montmagny.
I wonder how you can manage this situation. You know that the mayor came and told us about the mood in his community: people in Montmagny no longer believe Canadian National. There was a major accident in 2004. You said that everything would be fine, and another major accident occurred in 2007. A psychosis has arisen in the community over rail transport. I'm willing for you to talk to us as you are doing today, but you've understood that you have a confidence problem in the communities where there have been repeated accidents, like Montmagny. The population doesn't believe that your safety, equipment maintenance system. or whatever, is effective after two accidents: in 2004 and 2007. These weren't minor derailments: we're talking about 26 cars in 2004 and some 15 in 2007. Those aren't minor derailments.
I'd like you to try today to give me back, to give the community of Montmagny back a feeling of safety.
Again, I think we all need to respond.
You're very correct that we have had a number of high-profile incidents, and we are not happy about these. They are very disconcerting to us.
One way we will rebuild the confidence is to continue to invest in our infrastructure and our people, and continue to demand that we, as an organization, get to a better place. We feel good that 2006 was a good start on a journey.
Regarding Montmagny, while I'm not from eastern Canada, I was aware of those incidents, though I'm in the west, because any incident in the system at CN is reviewed and discussed. And when Montmagny came up a second time, we stood back and said, is there something systemic here? I think the particular issues in Montmagny—which I think Mr. Vena should probably respond to because it's his territory—were different issues. That doesn't mean they weren't high-profile ones, and we're not happy about that.
But again, I think what we need to do is focus on the future and focus on what we are doing today. The results we have had in the last 12 months show us we are on the right track to improving that trend. And we need to continue that, because we need to gain the confidence of the communities and the media and our constituents out there, because this is critically important to us.
Jim, do you want to respond?
Just bear with me for a second here, as I take you back. You talked about the confidence of the people who live in and around Montmagny and that area—and I met with the mayor. Any time we have an incident happen, it's an issue. As far as we're concerned at CN, if there's one incident, we have to find out what happened. We have to find out if we have to do something differently than we're doing today, to make sure.
We were concerned, just as other people were, to make sure that the residents and people in and around Montmagny understood what was happening. That's why I personally went with a small group of people. We had people who work on the track, we had people who work with cars, and we had the public affairs people with us to review with the mayor, and a group of people he had invited, what we were going to do about it.
We put in some interim steps right away, I think on January 11, a few days after the derailment, to make sure we took it step by step before we returned service there at the normal pace. So what we did was to review it.
Do we have a cause? Yes. It's from our own internal investigation, but we're waiting for the TSB to give the final review of the accident and tell us what happened.
But I think we took it one step at a time to make sure we did the right things.
So the question is whether we are prepared to allow the speed to stay at 40 miles an hour until we get the findings from the TSB report. That's certainly something we can take under advisement.
First and foremost, we feel strongly that speed had nothing to do with that derailment. We understand the sensitivities of the public. We understand the sensitivities of the citizens of Montmagny. Mr. Vena was not here at the last derailment at Montmagny. I was here. I personally went to where we had the derailment, east of the bridge. We had an issue with a truck component in a car that derailed before the bridge, and then the train dragged the car out onto the bridge. So I was there at that derailment.
This derailment occurred in January. I too got on a plane, and I was there and met with the mayor. I was part of the fact finding and got to the cause of that derailment.
So we feel strongly that speed was not an issue. The facts indicate, when you look at the report, and I have a copy of a report that has been developed by an independent research firm and submitted to Transport Canada as well as TDG--Transys Research. The science says—and this can get technical—that speed has nothing to do with the lateral forces of train derailments. Speed has something to do with longitudinal forces as far as how far they travel when they do derail, but side to side, typically, is not an issue. That being said, we will take it under advisement, and we will strongly consider keeping the speed at 40 miles an hour.
We have been very cautious. We have gone in and eliminated every potential issue. When I went to the first derailment, and when I went back the second time, I myself, being concerned, just as the citizens are concerned, asked what I could have done to prevent this derailment. The answer was that because of the cause, there was nothing I could do. However, the thing I learned and took away from that was that the cause was a defect in the switch we derailed on in January. Behind the bolt hole there was a crack in the steel that ultrasonic testing could not detect, that the visual eye could not detect, unless we were to take the entire track infrastructure apart to inspect it. That was the cause.
So if I ask myself if three years ago I missed an opportunity to prevent this derailment, the thing I walk away with is this: Did we need the track there, did we need the switch there, in the first place? The answer is no. We had a switch in Montmagny that was put there some years ago for a business reason. It was a team track where you typically transfer goods to a particular customer. But the reality is that we do not use that team track anymore, other than for our own equipment, sometimes. So we took the switch out of service. We took it out completely. The switch is gone. So we have mitigated the likelihood that it's going to happen again.
We've kept the speed. At this point, we will take it under advisement, and we'll get back to you quickly about whether we're willing to.... I can tell you now that my gut reaction is that we will keep that speed. It all depends, though. I don't know how long TSB is going to take to come back with its findings. I don't know if it's going to be a year or if it's going to be two years. But we will take that request under advisement.
I come from British Columbia, gentlemen, and I appreciate your coming here today. People in B.C. obviously are very concerned about the safety record of CN.
I saw the report you tabled with us and I listened attentively to your presentation, but it seems to me it's very much what we've heard each time there's been a major accident, each time there's been environmental devastation, each time there's been loss of life.
I want to start by asking, do you not admit that there is a real perception among the public, and I'd say particularly in British Columbia, that safety is not a concern at CN and that it's going to take more than public relations to address what is a very legitimate public concern when they see loss of life and environmental devastation?
We understand there is a perception in B.C. and in other locations, and we don't take that lightly. We want people to have confidence in the railroad. Again, I have to express our view that we take this extremely seriously and we are working very hard to change the perception and change the results. We don't feel it's of value to debate in the media. We feel it's important to work with facts and continue to invest in our business through people, processes, and technology, and demonstrate through results that we are making a difference.
I appreciate that 2005 is not that long ago; in the minds of some of us it feels like yesterday. But we have made some very solid progress, in B.C. specifically. I work in Edmonton but look after western Canada. I spend a lot of personal time in British Columbia and speak to a lot of communities, and I get the concerned citizens, just like Monsieur Laframboise is speaking about Montmagny. We understand this. We don't take it lightly, and we are working very hard to change the perception and change the results. In B.C., the results are changing.
There has been some testimony before the committee that refers to the former BC Rail and CN. There is lots of documentation that we have examined and been through. I think it's important to recognize that the former BC Rail was a good railway, yes, but it had its share of accidents too. Until it became part of the CN system it did not have to report in the same fashion as a national railway does. So the statistics we see from BC Rail are not all that public. We've had to recreate some of the statistics to make sure we had an apples-to-apples comparison. We did the best we could.
As an example, on an FRA basis, because we didn't have TSB data from BC Rail, we've reduced the amount of FRA accidents in BC Rail between 2003 and 2005 by almost two-thirds. Those are things that don't get communicated. We're not going to go to the media and put that in play. We want to spend time here with the committee. We spend time with the Railway Safety Act people. I will be with them tomorrow in Edmonton. Mr. Vena has already spoken to the committee. We have, again, ongoing dialogues with the TSB, with Transport Canada. They spent a lot of time out west, as we have incorporated and merged with BC Rail, the Savage railway, Mackenzie Northern, and two other short lines, one in 2006 and one in the beginning of the year. We spend a lot of time, and we take to heart what they are feeding back to us.
Again, I understand there is a perception out there. And I would not disagree--none of us would disagree--that we have work to do on the perception side. The way to get through it is with results.
I understand that Mr. Rhodes has provided testimony here, and I recognize the SMS, the safety management system. You refer to them as facts. I think that is documentation. People are entitled to their opinions, and the collection and conclusions that Transport Canada has...again, we respect that.
We're not happy about how we started off in 2007. Unfortunately, we've had the most severe weather conditions that we have experienced in many, many years, and weather has an impact on the operation.
What have we done as managers? As a senior leadership team, we spend a significant amount of time on safety. It's built into our goals and objectives at the highest levels. It is, as Mr. Creel pointed out, one of the five core principles, and we do not go into the business without thinking about safety, without looking at it. We are confident, again, that what we are doing today is a lot better than what we were doing last year, and two years ago, and three years ago, and I think the statistics over time will show that. Since privatization, there has been a significant amount of improvement in rail safety at CN in terms of accidents and personal injuries.
I'm going to repeat myself here, but on the issue of people feeling pressured for productivity, etc., we set policy and we have standards—safety standards, I'm referring to. We have expectations that no job is done without it being done safely. That is an expectation. That's in our rule book. It is absolute. You do not do anything on the railroad unless you know it's going to be a safe operation. We need to continue to drive that culture, and again, we've been seeing improvements.
If I could elaborate for just a minute, you have to take in context, number one, that the improvement in 2006 versus 2005 represented about a 30% reduction in main-track accidents. Granted, if you compare year-to-date 2007 numbers versus 2006 numbers, you would think, if you don't understand the data, that there may be an issue.
The reality is 2006's numbers were phenomenal numbers. If you compare 2007's numbers to 2004 and 2005, they are 40% better. In 2006 we had a very mild winter, and as much as I understand your comments about weather, weather plays a huge impact when it comes to steel wheels, steel rails. If we have extremely adverse weather conditions, the likelihood of an incident occurring when it comes to rail failure increases. We can't change the metallurgical components of steel; that's what happens.
If you look at the trend now, from March 1 through to yesterday, and I'll tell you through the first quarter, if we compare 2006--keeping in mind that was a phenomenal quarter--the improvements exceeded much more than 30%. Annually, we improved 30%.
If I go back and look at the first quarter of 2006, we had a total of 67 TSB accidents on the CN railway compared to 76 in 2007, and the gap is growing closer. Today, through April 24 or 25, we've had 85 in 2006 versus 89 in 2007. As I've stated before, 2007's numbers are still a 40% improvement over 2004 and 2005.
While if you don't understand the data, it could raise a concern--and you may think the focus is not there that was in 2006--you have to take into account that 2006, number one, was phenomenal. The year 2006 had a very admirable winter in that we had temperatures not even coming close to what we just experienced this year. So the trend or the concern is going to dissipate; the momentum is going to continue.
The focus is still there. The numbers? We still feel very confident that 2007 will generate the same types of improvements year over year versus 2006. It's simply not fair to take a look at the first three months of 2006--when there are so many differences between 2006 and 2007--and make your assessment based on just that.
This is on page 2, and I'll refer you to two statements.
First of all, in the second paragraph, in the second to last sentence, the statement is, “That is why, at CN, we view safety as every employee's responsibility, and work diligently to create and improve a culture of safety awareness and safe practices”.
Going on to the fourth paragraph, the first sentence says that “CN has always placed the highest priority on safety. Safety is one of the five Core Values of the company.”
Yet what I've heard from two witnesses and what I've seen in the audit report seem to indicate that you're willing to accept a lesser standard when it suits you. Unless you're challenging the findings of the audit report, I believe what I'm saying is correct.
Let me approach it a little differently.
The safety management system, or SMS, is used in the airline industry, in aviation, and apparently it's being applied within the railway system in Canada as well. It's a new level of accountability, a new level of safety that's imposed under existing regulation.
I will go back to the comments made by our witnesses. We asked them to compare the safety environment within CN versus CP. Mr. Rhodes responded, after stating that CP apparently had changed their management style and was finding out that they were much more successful, that:
No, CN has gone in the opposite direction. They're very adversarial. I call it the poisoned work environment, because that's what it is. Nobody wants to go to work there. Everybody's counting the days, the months, and the years until they're gone, until they're out of there. That's not the way it was, and that's not the way it was at B.C. Rail.
So here it's very clear. We're dealing with safety management systems where the front-line employees are supposed to be involved in identifying deficiencies, finding safety defects. And yet the response from the employees is not, hey, we're working together with management here. Instead, they're afraid for their jobs.
In fact, the same witnesses confirmed that they're afraid of getting fired if they identify deficiencies in any of the rolling stock you have.
I can't make that assessment. I can just tell you what I've dealt with in the past five years. I've been an integral part of trying to change this culture.
I'll take you back. I came to Canada in 2002. I came off a position in Michigan. I've been in operations my entire career. I was the vice-president of the prairie division. The very first week I was there, I knew then, going into that terminal, that I had concerns about safe work practices, about our ability, our employees. Do they truly understand that we expect them to live up to the rules, that we expect them to comply with the rules that protect their lives and protect the communities that we operate through?
So from my past experiences, the way I used to make sure, as an operating officer, that the message got delivered to the employees pulling the throttle, to the employees switching the cars, as well as to the direct, front-line officers who supervise those employees.... We have something in the industry called efficiency testing. In America the FRA mandate it; it's regulated. The government makes you do efficiency testing. There's a certain criterion that you have to meet for every employee. When I say “efficiency testing”, efficiency testing is when we as operating officers go out to the field and we either simulate, by setting up conditions of controlling a train movement, or we observe employees to make sure that, number one, they understand the rules, and number two, they're applying the rules.
When I came to Canada, we didn't have regulated efficiency testing. So one of the first initiatives I implemented myself, coming into the territory, was an efficiency testing blitz. Literally, over one weekend--Mr. Vena was in Winnipeg when this happened back in 2002--we went out and we started at 6 o'clock in the evening and we worked until 6 o'clock in the morning. We went out across the entire territory, from Saskatchewan to Manitoba, and we observed employees operating by the rules to make sure they were doing that. We conducted efficiency tests, and the failure rate was alarming, to the point that even the dispatchers we had, who worked for us in Edmonton....
The dispatchers control the train movements. When you test a train--those signals--it's no different from running a red light on the street. If you run the red light, you risk your life and you risk someone else's life. That's the way the signal systems work on the railway. So to test them, typically the dispatchers had to be involved. What you do is you talk to the dispatcher and you ask the dispatcher to control the signal. Give them the red light--hold the right light, for lack of a better term.
When we did that, I had the officers who worked in the dispatch office explain to the dispatchers what we were doing. We were out ensuring that our running trades employees were complying with the rules. We need them to hold the signals at a particular location, because once they do, the rule book tells that employee what they're supposed to do. So we were going to be in the field and we were going to be observing to ensure that this employee did do that. What happened as a result? When we did that, the dispatchers refused to do it. This is what I'm talking about: the culture.
The dispatchers felt that instead of ensuring the safe operation of our railway by engaging in these efficiency tests, they were entrapping the employees who were out operating the trains. It was all in the context that they looked at. As a result, the dispatchers walked out.
I say this so you understand the culture. We have a situation where we want to get people to ensure we have a safe operation and they won't even engage with us and won't even allow us to do that.
I'll tell you why this is so near and dear to my heart. Every time we have a major derailment in my territory, I get up out of my bed and I go to it. I unfortunately have dealt with “Lillooets” before. I was at McBride. I've dealt personally with the deaths that have happened in this region. I dealt with a death, with a head-on collision, that I had in Michigan, just six months before coming to the prairie division, when we had these efficiency tests. So these are near and dear to my heart.
When I have employees who don't understand, and the culture says we're entrapping employees because we expect them to follow the rules, I can't accept that. That's what this is all about; it's about change. It's trying to create an environment where employees in the past may have been confused because, yes, we had permissive practices, yes, we allowed them to maybe not work by the book. Today, we expect them to comply with the rules. When you expect employees to comply with the rules, sometimes you have to take corrective measures. It would be no different from having the OPP expecting you and requiring you to adhere to the speed limits. If you don't have them out there, effectively checking every once in a while, then you're going to have mass chaos and people are going to do what they want to do.
We're out there checking now. We're out there trying to educate our employees, and as a result, some of these employees who Transport Canada may speak to...they listen to these urban legends, to these stories. They don't have direct knowledge. They don't understand that we have an issue with employees who may go by those red signals. That's part of those notice and orders that you talked about.
We had an issue in Ontario where our running trades employees were going by red signals at an alarming rate. Did we get a notice from Transport Canada? Absolutely. But did I need Transport Canada to tell me that this cannot and will not happen on our railway? Have we already implemented efficiency testing to curtail and control employees' behaviour so they don't engage in that activity? Absolutely. We did.
Much of what we are talking about is change. It's not that upper management says one thing and lower management doesn't understand what we expect. We, as senior managers, have processes in place with our operating officers. Their compensation is tied to these efficiency tests. They're required to do safety blitzes; they're required to do train riding. Do they like it? Even with our own officers the change has been so fast that they don't understand sometimes. We have to explain to them, “You're ensuring the safe operation of our railway. You're ensuring the safety of the communities we operate through.”
It's not that there's a disconnect; it's that we're in the middle of changing a culture. And changing a culture is not easy, especially in an industry that has been around.... Many of our employees have worked the first 30 years of their career with an attitude of when it's convenient, they'll comply with the rule book. But for the last five or ten years it has been a condition of employment. They have to comply with the rule book.
I'm only going to take a moment.
Mr. Marshall and Mr. Creel, I have just an observation, and then you can comment.
I'm always impressed with locomotives, with trains, and with the technology of today. So I was really surprised that the weather would play such a role in the accident and incident rates that you referred to. It would have been my understanding that you would have already factored in the weather when considering, technically, how to address that variable. You'll forgive me if I come away with a sense that perhaps you hadn't taken those measures.
Secondly, Mr. Creel, you gave me a detailed response on the non-compliance of employees. I think initially all three of you agreed that if there's a safety management system in place, one that you helped to put in place, you'd buy into it, and then everybody would buy into it. So if someone deliberately does not comply with an order, a regulation, or an indication that's geared to safety, that person is negligent, at the very least.
Are you suggesting to me, Mr. Creel, that your employees were negligent before, or were not negligent until you made them aware that they were being negligent, and that there is no consequence to negligence and that's why we have this continued high rate of accident? And does that negligence go all the way up the line to you and to, I dare say, Transport Canada through the minister?
We all know what was going on. The audit tells us. You knew. The minister knew. Your employees knew. What's missing?
Let me elaborate a bit.
First and foremost, let's go back to the question, do we consider and take into account severe winter weather? We have processes in place that effectively do that.
When we have extreme winter weather, when we drop below certain temperatures, especially in the areas where we operate north of the lakes, in very extreme cold climates, we reduce our train speed. We have much more restrictive policies for these detectors that we talk about, these impact detectors.
When steel hits steel and you have cold as a multiplier, the likelihood that you're going to have a break in the rail increases—in cold weather. Effectively, for these machines, the tolerances, which they measure in kips, the measure of the steel hitting the steel, those systems are turned to a point that the standard in the wintertime is much more stringent than the standard in normal operating temperatures. So, effectively, we have more bad orders during extreme winter weather in an attempt for us, proactively, to take these cars out of trains that could potentially break a rail, which would ultimately end in a track-related derailment. So yes, we do take that into account, but still, the best system cannot predict each and every one of them.
On the other issue, about accountability and about efficiency testing, we have human beings who are required to comply with the rules. Unfortunately, human beings at times rationalize. Some employees, through experience, may have taken a shortcut, or they may have not gotten off a piece of equipment. We may have employees who are out there who get off equipment at six miles an hour, and in their mind they're convinced they can safely do that, but the reality is that the rules say you can't detrain at any speed greater than four miles an hour.
Through these tests, we go out in the field and validate that what they're doing versus what they should be doing is the same. And yes, that's what causes a lot of the frustration with the employees. When we find a difference, we do hold employees accountable. We do have statements. Unfortunately, we do have to implement corrective measures through discipline.
If you stepped back into this company 10 years ago, the occurrence or the chance that an employee would have been disciplined for violating an operating rule was not there, certainly not to the level that it is today.
So I participate in these efficiency tests—and Mr. Vena, Mr. Marshall, and our general managers. We're at a very senior level in this company. We go out and we ride trains. We go out and we efficiency test with our operating officers. We go out and we interact with the running trades employees who are required to comply with these rules. So absolutely there are checks and balances, and absolutely there's a consequence, but as much as we implement those consequences, I can't guarantee that I'm always going to have 100% rules compliance. That's my standard and that's what I'm striving for, but the reality is that as long as I'm depending on a human being to comply with a rule, there are going to be times when they make a mental error, either consciously or unconsciously. They're not going to comply with the rule and we're going to have a derailment, we're going to have an injury, or we're going to have a death.
I find it interesting that you call them “efficiency” and not “safety” tests, by the way.
When you talk about these efficiency tests, you say it's alarming how many problems show up, and then you go on to explain how it's a worker problem. You know, I worked on the line for a major auto assembler, a multinational corporation. I was in assembly, and if you had an individual problem with workers not buying into the safety culture, it was pretty easy. But when you have that many workers who are having problems with the safety culture, I would suggest that's a systems problem, not a worker problem. So it's higher up the pike.
I want to ask a couple of questions, in light of some of these problems at CN. I'd like to know how many workers have been disciplined over these issues. How many managers, more importantly, are disciplined? As a worker, you're a cog in a wheel. I'd like to get a sense of how much of the discipline has fallen on management--the system that manages all the cogs, the folks higher up--versus the workers. I think Canadians would be interested to know how you've handled these issues. I'm hearing a lot of blame for the workers. I'd like to hear some numbers on this, or is that proprietary information you don't want to share with me?
I want to ask one question, and you can you provide information....
What happened to the dynamic brakes that were in B.C.? Where did those engines go? How many of the engines that you have in B.C. right now have dynamic braking? That's technical information, and I'd appreciate getting it, because B.C. has unusual geography, as I understand it.
Mr. Marshall, you've referenced perception several times. I spent a number of years in a major Canadian corporation at an executive level. The theme we dealt with was that perception is reality. Within our company we would hear things, and I'd have managers saying it wasn't so and I'd tell them that's what we're hearing in complaints from our customers, so as far as they're concerned, it is so, and therefore it is so; it affects our business.
What I'm interested in, Mr. Creel, is that you were working for a company in Michigan when there was a head-on collision. If that's the head-on collision I've heard of, I understand that the fault in it was attributed to fatigue of the crew. In fact, the crew that was assigned--it may not have been yours, but another one--was theoretically a fresh crew. I'm curious about the issue of fatigue. It was brought to us earlier that you work 12 hours and you can be called back very quickly. There isn't an adequate rest period between times, whether you're at your home station or away. I would appreciate getting an understanding of that.
Finally, I'll go back to a point raised by Mr. Watson and some others. Mr. Fast questioned this as well, and others on my side have asked the question. It is the concern we had from Mr. Rhodes. We requested these people to come as witnesses, you need to know. We went out looking for people. We saw, obviously, stories that appeared in the media and we contacted these people. I don't think they were formally summoned, for want of a better term, but they were invited, and if they hadn't come, we could have summoned them.
I don't think it's right when a company can fire you for what they call “conduct unbecoming of an employee”. When you're not at work and you speak out and try to say something is wrong, they fire you because of that and they call it, in their generic terminology, “conduct unbecoming of a CN employee”.
Do you consider that someone who comes and tells us there are problems here is guilty of conduct unbecoming of a CN employee? Would someone like Mr. Rhodes or Mr. Holliday, for example, run the risk of being fired for appearing before this committee?
The last time, there were different feelings within our side, the Liberal side, on it.
We wanted to have an opportunity, Mr. Fast, on this side to have a discussion among us as Liberals, because Mr. Bélanger had a particular point of view and there was a split point of view within our side.
I would say that from my position, I am, to quote CN, perceptually inclined to the issue you raised. But I would like the benefit, number one, of having it in front of me again, and I would like the benefit of having a discussion with my colleagues before we get into it. It may be appropriate, as Mr. Laframboise has said, to bring back those people.
I also appreciate and am cognizant of the point you made, and, again, I'm perceptually inclined to believe there is some urgency because of the actions being taken by Canada Post. I understand this. Therefore, I don't want to see it dragged out any longer than necessary, but I don't think today is the time to deal with it.