CAD Railway Industries: Gathering Steam for the Long Run

Supply Chain Digital learns this Quebec company that repairs and refurbishes railcars and locomotives is a key link for both freight and transit rail industry...

CAD Railway Industries specializes in the repair, upgrading, and refurbishment of locomotives and railcars for both the transit and freight rail transportation industries, as well as distribution of diesel engines and components. The company was formed by the 2007 acquisition and subsequent merger of CAD Railway Services, Canada Allied Diesel and ESDC by Global Railway Industries, a public company (TSX:GBI) with subsidiaries in Canada and the United States.

CAD Railway Services, Canada Allied Diesel and ESDC were located on the same site in Lachine, QC, on Montreal Island. The one million square foot location is accessible by rail from both major Canadian railways, Canadian Pacific and Canadian National, and houses a large facility for emissions, performance and fuel consumption testing for locomotive and diesel engines.

“One of our main goals was to merge the three companies and generate substantial overhead cost savings,” says Jean-Guy Bergeron, Vice President of Corporate Strategies for the new CAD Railway Industries and the founder of the original CAD Railway Services in 1993. “They were all managed as individual companies with their own payroll, accounting, purchasing, quality assurance and so on.”

Employee relations after the merger were a priority. Salaries, holidays, and even uniforms had to be standardized across the three companies. CAD Railway’s administration worked hard to keep open communication with their employees and maintain a healthy work environment despite the challenges of the merger.

“The first year, we had a luncheon once a month with each department,” says Bergeron. “We would have a small presentation, which would be followed by questions. We [have] managed to give the employees two raises since the merger, and we unified the salaries to the best of our ability in the current economic situation.”

ECONOMIC RECOVERY

The economic crisis has affected the railroad business. Equipment utilisation and carloads are down by 20 to 30 percent, but Bergeron is optimistic about the upswing in recent statistics that suggests that the recovery is beginning after months of decline.

Bergeron explains. “The good news is that, for the first month in about a year, it looks like a trend is starting. The railways had thousands of locomotives and freight cars in storage. They are now slowly putting some back into service. We hope that it’s a sign that recovery may occur faster than earlier trends suggest.”

“The transit and passenger rail business segment has been different,” he explains. “The Canadian and American governments are investing and promoting greener transportation throughout the rail industry. They are putting money into Via Rail, the AMT (the transit system in Montreal), Go Transit and of course several Authorities in the U.S. Those agencies have money to spend, and that’s good news for us because we’re versatile enough to do both freight and transit.”

DRIVEN BY QUALITY ASSURANCE

The refurbishment and overhauling of locomotives and cars is a low-volume, high cost task, and quality assurance is an important part of the business at CAD Railway. The company is certified M-1003 compliant by the Association of American Railroads, a quality assurance standard similar to the ISO 9002. In conjunction with its clients, the firm develops and adheres to a quality assurance program for every facet of its operation.

“Both [ISO 9002 and AAR M-1003] have similar provisions and requirements covered in 27to29 modules, and we have applied those to every division of the company,” says Bergeron. “Every department has its own QA, as they each have their own special process. Out of 280 employees, we have 16 people involved full-time in quality assurance.”

Bergeron points to a contract with VIA Rail that CAD Railway signed shortly after the merger for the overhaul and upgrading of 53 VIA locomotives as a sign that the company has a solid future. Because of technological challenges and the development of a new, greener method for providing power to the passengers, the rebuild of the first locomotive took slightly longer than was scheduled. Despite the setbacks in the process, Bergeron says that the shipment of the first units—and the lessons learned during the overhaul—gave his company a much more positive outlook for the next year and beyond.

“The past year and a half has been filled with challenges but the thing that we’re focusing on is [getting] the most out of this project. We’re going from delivering eight locomotives this year to 16 next year. “

CAD Railway Industries is currently working to complete the VIA locomotive contract on schedule for December 2012, and Bergeron believes that the company will expand both its client list and its revenue stream in the coming months.

“We have been fortunate that there are a few companies like VIA Rail to whom we are submitting tenders,” he says. “They’re large contracts, and we’re counting on getting some of that business. Also many of the programs on emissions and fuel consumption have been cut because of the economic crisis, but we continue to have business since the standards are changing continuously and railways have to comply.

We went through some difficult times, but now we’re going to capitalize [on our existing contracts]. The economy is slowly picking up, and we’re in a very good position.”

FACTS AT A GLANCE

Company: CAD Railway Industries

vice president : Jean-Guy Bergeron

Operations: CAD Railway Industries specializes in the repair, upgrading, and refurbishment of locomotives and railcars

Established: 1993

Employees: 280

Revenue: $40 million

CADIndustries in SupplyChain Digital November 2009