Scott Group: Thank you guys.
Operator: Our next question will come from Benoit Poirier with Desjardins Capital Markets.
Benoit Poirier: Yes, Thank you very much. Good afternoon, everyone. With respect to the situation in Mexico with the decree now being enforced and given the fact that you’ve submitted your feasibility study to the Mexican government, what are the next steps? And if you could talk a little bit about the benefits of the second bridge in Laredo and kind of the benefit of positive impact we should expect on volume dwell velocity? That would be great. Thanks very much.
Keith Creel: Hey Benoit, great to hear from you. Let me — at a high level, I’ll start the Laredo Bridge. Obviously, doubling our capacity and the ability to essentially create a double track across of the border point that allows trains to pass and not trains to stage a wait in queue. We’ve driven a lot of improvement, John and team prior to our acquisition and even in trust. We took one of those where they used to that to be in 12 hours or eight hours, cut them down to four hours. So, there’s been dramatic improvement, but four hours in queue versus no hours in queue, it’s material. I don’t know exactly what number has been on it yet. We’ll see, but I can tell you it gives us — again, it adds to the unique structural and strategic advantage that our network represents to our customers that ship over that border.
Shifting to the faster rail, I’m a bottom line upfront guy, let me say this. I have zero expectation lease that Mexico’s ambitions and intent to integrate and initiate passenger rail service in concert with freight rail service will impact our ability to hit our synergies or any of the targets of our multiyear guidance. I think that’s an important place to start. Number two, we speak with a bit of experience. And I’m saying this from a place of the outlook senility, we didn’t always get this right at CP. We made a commitment shortly after I came to CP, I don’t know, probably two, three years into it. Quite frankly, I got tired of being kicked in the tail, but Amtrak complaining about their service. And I said, listen, we can do both. As long as you’ve got the right infrastructure, you have a schedule, we’re scheduled railroad, those faster trains don’t just show up, get them on time and get them out of the way and they don’t become a problem as long as you have the infrastructure, you’d be able to handle both.
So, that said, when I first became the CEO of this combined entity, I knew that Mexico, different nation, different expectations, completely autonomous, sovereign, the important part to me was to understand and learn what I didn’t know about Mexico. So, I made it an initiative, an important initiative to get in front of the President of Mexico right out of the gate. Patent team have built a phenomenal relationship of respect based on performance and in years of history with the Mexican government regulatory environment. So, I said, let’s go to Mexico, listening the President Amlo. In that initial meeting and I shared this, he told me his vision about creating prosperity in the country, and he explained the need for passenger service in Mexico, and he also said to me that your concession requires it.
Well, obviously, I’ve done a little bit of homework, I had a lot of time preparing to get this merger, number one, get it accomplished. Number two, get it approved, that did a lot of reading. And of course, I read about this concession. And it said that, that’s part of the concession, if they say they want to run faster trains, you got to figure it out. So, with that said, when he told me that, I said, listen, President, I get it, I understand it. There’s a way to be both and be successful. We need to define and understand what capacities need to be able to succeed at both. So we automatically, and this is May of last year, said, you know what? I’m going to pay for the study. I’m going to get an industry expert that knows how to define what capacity is required for both.
And I’ll let you know what the results are, and we can talk more at a later time. Well, we did that. We initiated an RFP. We selected HDR, which are industry experts in determining the rail capacity that’s needed. We engaged in that and started that well before that decree came out in November of 2023. So we were not surprised now the decree expanded the scope of bit. That said, it had a date of your point, Benoit. We had to submit January 15, what our intentions were. And our intentions were to do exactly what we said we would do. We’ll work with you Mexican government to identify the capacity needed so that we can protect our growth today as well as the future growth that’s planned for the country of Mexico that brings proximity to everyone and great paying jobs, and our customers are investing in this capacity and we’ll figure out what we need to run faster train successfully.
So, that was submitted January the 15th, and essentially, that’s what it says. We’re going to include in the additional scope after we finish this initial study, those additional lines they’d like to look at. But I felt again, it was important to make sure that not by the written word that was submitted by our interaction with the President to make sure that, that was represented in its best possible light. So, no better way to do that than, again, requesting a meeting with the President. So, a week ago yesterday, myself, John Orr, Oscar, who is the President of our CPKC Mexico property. We met with President Amlo at the Presidential Palace with President Amlo, we had the Minister of the Secretary of Interior & Infrastructure, SET. We had the Secretary–
Mark Redd: Economy.
Keith Creel: of Economy. We had the Secretary
Mark Redd: Of the Interior.
Keith Creel: Of the Interior overall. So, we had three Secretaries and the President, hour and a half meeting. It was our meeting to explain to the President what we intended, what we expected. So I gave him an update on the merger, and we spent an hour talking about what they needed, maybe in Mexico, relative to passenger trains, what it would take to get it done. And I explained to the President that we had engaged into a study. We gave him the timeline. We expect results, which will define that infrastructure in May. I explained to him that it’s important to Mexico to establish passenger service. It’s also important to Mexico and our customers to make sure that we protect freight service and we need to do both, and we both will.
He committed to me that he’s aligned with exactly what my expectations are. They want to do well in passenger. They want to do well in continuing their economic growth and prosperity and the middle class great paying jobs they’re creating, the manufacturing that’s coming to Mexico. He does not want to jeopardize any of that. So, these are two complementing initiatives that will get executed. And that said, one of the last points I’ll make, and I said this to the President Amlo, I said, not only can we create a great passenger service of the right infrastructure and right investment, we also protect that great freight service. And you’re not only going to get passengers out of cars on passing their trains, you’re going to get trucks off the road or the freight trains.
And I said that is a win-win, if I could ever put one together for the environment, for the people of Mexico, for the rail network in general. That’s serving all stakeholders’ best interest and that resonates. It resonated with the President then he’s committed. I’m going to go back. I’m going to meet with them again. We’re going to go back and represent the results of the study before the administration changes likely in June, so again, to me, it’s just more of what we plan for. We’re not surprised. We’re going to be able to do both well. We’ll protect our customers’ interest. We’ll protect the nation’s interest. And we’ll get it done and we’ll be proud of the results when it over.
Benoit Poirier: That’s a great answer, Keith. Thanks for your time.
Keith Creel: Thank you, Benoit.
Operator: Our next question will come from Jon Chappell with Evercore ISI.
Jon Chappell: Thank you. Good afternoon. John, you mentioned doing a little bit better than the $350 million of revenue synergies. I assume that it’s not completely linear. There’s, probably some areas where you’re doing better than you originally thought. And some or maybe there’s been a few challenges. Can you speak to the latter part, where there may have been some challenges? And do you think you eventually get to the initial projections? Or is there something structural that may have kept you from hitting that point? Or is it more just kind of the macro headwinds that we keep hearing about?
John Brooks: Let me just first say its macro and timing, Jon, I feel good about the synergies in hitting them. Certainly, I think I mentioned earlier, I thought we would see a quicker ramp-up on Lázaro, but it has been an education process of the steamship lines, it’s been an education process with beneficial cargo owners. And frankly, it’s been a lot of work around making sure that we have a seamless border of seamless product for those shippers. I can tell you that there’s been a ton of work, and I sit here today with a lot of confidence that the team will deliver and you’re going to see that begin to build itself, in 2024. As much as I’m super proud of the service, the safe board on 180/181, the overall environment on the macro trucking to prices and that have made that a little bit more of a challenge.
