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Report On Business Magazine Is SNC-Lavalin worth saving? ‘Big time,’ says former government insider and CN Rail ex-CEO Paul Tellier

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Some interviews take longer to arrange than others. This one took two decades. Back in 1998, Paul Tellier was famous for being the quintessential civil servant who remade himself as a turnaround CEO. As deputy minister of energy under Pierre Trudeau, Tellier helped usher in the National Energy Program. As Privy Council clerk under Brian Mulroney, he ran the government bureaucracy with ruthless efficiency. Then he jumped aboard the failing Canadian National Railway, slashed 11,000 jobs and pulled off the largest privatization of a Crown corporation in Canadian history. But Tellier, a dedicated fitness buff, was as good at dodging interviews he didn’t want to do as he was at whipping railroads into shape. When this writer was assigned to profile CN’s saviour, Tellier (or his staff) refused to co-operate. Now on the cusp of 80, still fit and active—he’s a director of GM Canada and Harnois Énergies, and an adviser to NLG Quebec—Tellier has finally agreed to talk. We met at his office in the chairman’s suite at CN’s Montreal headquarters.

Well, here we are.

I’m sorry it took 20 years!

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Your office is here at CN. What is your role at the company now?

None. When I was the CEO of CN, I said, “Listen, I’m not going to be a CEO all of my life, and there are some companies that provide space for their former CEOs when they leave. I would really appreciate that.” So they put that in my contract. When I got fired from Bombardier, I phoned my successor at CN, Hunter Harrison, and said, “Hunter, you’re not aware of this, but you owe me an office.”

I wanted to ask you about Hunter Harrison. You brought him to CN.

When we privatized CN in 1995, we had to transform from an east-west railroad to a north-south railroad. So we bought Illinois Central. Hunter was the CEO. Funny story: He and I negotiated that deal during the ice storm in Quebec, and we shook hands on the transaction in Montreal by candlelight. And Hunter said to me, “When do you want me to leave?” I said, “Hunter, we just paid too much for your company. (1) You’re part of the asset. You’re coming on board.”

The Rachel Notley government plans to lease 4,400 railcars to ship oil to customers. What are your thoughts on the problem of moving oil in this country?

I deeply deplore, as a Canadian, that we cannot find ways to build pipelines. They are badly needed. It’s very unfortunate that Energy East was not built.

What’s the underlying problem?

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The regulatory burden is extremely heavy. I’m very much for a sound environment. But we’ve got to create jobs. The other thing I deplore is that we don’t seem to think about these issues as Canadians. We think about them as Quebecers or Ontarians or Albertans. It’s a question, very often, of ignorance. In this part of the country, people know Florida better than they know anything west of Ontario.

You were at Bombardier for a couple of tumultuous years, and it’s in another bad period. What’s at the root of its troubles?

Laurent Beaudoin is an outstanding entrepreneur, and he succeeded in making a very small snowmobile company into a global company. The rate of expansion was very fast. And there is always a danger in not making the distinction between revenues and earnings. Earnings are sometimes neglected. Secondly, the company had difficulty living with outsiders. As long as I was focusing on the transportation side, fine. As soon as I started to make decisions on the aerospace side, they had difficulty living with me. (2)

Let’s talk about SNC-Lavalin. You’re a former government insider. Was the Prime Minister’s Office right to try to influence the prosecution against the company?

I’m not going to take sides for or against the PMO. But people don’t look at the big picture. SNC-Lavalin is not a Quebec company. Last year, it had $9 billion in revenue and 50,000 employees—that’s a global company! How many does this country have? As Canadians, we should feel very proud that it is competing with giants like Bechtel, Fluor and so on. Yeah, some mistakes were made by the previous management, at every level, and they should pay the price. Make sure the mistakes are not going to be repeated. But if you don’t find a way of giving them a chance to continue to compete internationally, like the Brits and Americans are doing, that company is going to be destroyed. Shall we try as Canadians to save a company like this? Yes. Big time.

The clerk of the Privy Council, Michael Wernick, testified about the justice minister being pressured by the PMO (3). As a former Privy Council clerk yourself, why is he in the middle of this?

Over the past 10, 12, 15 years, there has been too much centralization of power in the Prime Minister’s Office. In my days, when I worked as a deputy minister under the senior Mr. Trudeau, my minister was not getting phone calls from the PMO. When I worked as Privy Council clerk for Mr. Mulroney, he was not phoning his ministers, and he didn’t have his chief of staff telling them what to do. But there has been an evolution. Under Mr. Harper, it became the trend that the PMO was involved in a great many files. I deplore that centralization of power.

What’s the effect of all this for corporate Canada?

If there is a perception that the buck stops there, corporate Canada will be calling on the Prime Minister’s Office. I’ll give you an example. When I was deputy minister of energy, Arden Haynes was the CEO of Imperial Oil, which wanted to build a pipeline from Zama Lake down to Edmonton. He wanted access to the Prime Minister to get support for this pipeline. I said, “You know what? You’re going to talk with the Prime Minister, and he will turn to an aide and say, ‘Can you follow up on this?’ The aide will not have a clue what it’s about. Why don’t you go to the proper director-general in the department? You’re going to be well-received, and you will get action.” But it’s a vicious circle. If word gets out that, in order to get your way, you have to go to the PMO, everybody will converge there. That’s the culture that has evolved.

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Looking back on your roles in government and as a CEO, is there a qualitative difference in the skill required in each field?

Not really. When I talk to management students, I tell them, “Whatever you do in your career, you should spend a couple of years in government.” In business, when you have a beautiful business plan and you know what you want to do, the biggest uncertainty in delivering that plan is what governments can do to you through legislation, regulation and taxation. I say to young people, “Spend two years, five years, in the Department of Finance or Transportation or the Environment to get a feel for the place. You’ll learn a lot about the processes, you’ll develop a network of people, and whatever you do next, it’s gonna be helpful.”

How do you view the working relationship these days between Canada and the United States?

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I think the government has done a very good job of rolling with the punches. Chrystia Freeland, in particular—I don’t know her, but I’m a fan. Am I concerned? Yes. I’m concerned.

How can Canada succeed at a time of trade hostility with both the U.S. and China?

We have to build relationships as much as possible, and we must refrain from lecturing other countries. Mr. Mulroney’s approach with apartheid—he was not lecturing anybody. He built support with his colleagues around the Commonwealth table, putting pressure on Mrs. Thatcher. (4) There are many countries doing things we don’t like, but it’s preferable not to use the confrontational approach.

Back when you were CEO of CN, someone told me you motivated through fear. If you see any truth in that, do you regret it?

I cannot think of anything more false than this. When I was 27, my boss was Jean-Luc Pépin. (5) His office was next to mine on the Hill. One day, Mr. Pépin asked me for a briefing note for question period, and the assistant deputy minister responsible did not deliver the note on time. So I phoned him and gave him shit. The door was open between my office and Mr. Pépin’s office. He stuck his neck in and said, “Paul, I heard you. You just made a fool of yourself. You’re young enough to learn that 99% of the people perform much better with a smile than a kick in the ass.” If there was one point of divergence between myself and Hunter, Hunter never understood that. There were three guys, and Keith Creel was one, that Hunter did not scream at. We had a profound disagreement on this. But he was too old to change. I suppose that because I came in and terminated three VPs within three months, the message got out, “The guy is serious.” But that’s not fear.

Brian Mulroney said that if somebody you were dealing with wasn’t completely above board, you were “lethal.” Someone else said you were “constantly at war.”

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Well, I am very driven. I’m very intense. And my philosophy is that if you don’t do your job, somebody else will. But there is no banging on the table.

Maybe it wasn’t your demeanour so much as your willingness to make hard decisions.

Yeah. I remember a very senior official who had the bad habit of having too many martinis at lunchtime. I heard that people would avoid raising tough issues with him after two o’clock. One day, I brought the guy in, and he didn’t have a chance to sit down. I said, “I’m going to be very brief. If it happens again, before the end of the day you’ll be out. Of the government. Meeting is over.” Yeah, this I have done.

Thanks so much for your time.

That was fun. I must say, I’m a bit shaken, you know—“managing by fear.” Because I have been trying to practise just the opposite.

This interview has been edited and condensed.

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1. CN paid $2.4 billion (U.S.) in cash and stock for 75% of Illinois Central. Harrison was made COO of CN and succeeded Tellier in 2003.

2. During Tellier’s reign, from January 2003 to December, 2004, he cut Bombardier’s workforce by 16,000. He left with a $5.8-million severance package.

3. Michael Wernick has since resigned as clerk of the Privy Council.

4. At the Common-wealth meeting in Vancouver in 1987, Margaret Thatcher refused to back sanctions against South Africa.

5. Pépin was a Liberal cabinet minister from 1965 to 1972 and again from 1980 to 1984.

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