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Hunter Harrison has stressed the need to change the company’s culture. (Scott Eells/Bloomberg News)
Hunter Harrison has stressed the need to change the company’s culture. (Scott Eells/Bloomberg News)

RAILWAYS

Harrison vows to change tracks on CP culture Add to ...

When he started on the job five months ago to streamline Canadian Pacific Railway Ltd., Hunter Harrison gave his characteristic straight talk to his employees.

“I said to people on the first day, ‘If you’re here and you’ve been here 25 years, and you don’t like change, then you’re probably not going to enjoy this,’ ” the railway veteran remembered saying. And he made sure to tell this to many of the CP workers eye to eye.

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As a result of the fierce proxy battle waged by the hedge fund Pershing Square Capital Management to renew CP and improve its stock price, Mr. Harrison was brought in as the new chief executive officer, given his industry track record, most notably as the former head of Canadian National Railway Co.

On Tuesday and Wednesday, he and the company’s top executives outlined to the financial community in New York their restructuring plan, which includes cutting 4,500 jobs over four years and dramatically reducing costs.

While undoing many of the choices made over the last decade, such as eliminating numerous management positions and looking for potential buyers for the Dakota, Minnesota & Eastern railroad which CP acquired five years ago, Mr. Harrison stressed the need to change the company’s culture. Ninety per cent of employees are involved in its operations, and so controlling operating costs, and “getting that in line,” is key, he told analysts in his Tennessee drawl.

The second priority is to make those operations more efficient and speedier, with fewer trains and locomotives and fewer switching yards. “We’re going to do more with less. We’re going to make those assets really sweat,” he told analysts.

After the presentation, on the way to airport, he responded to whether he could be perceived as a hatchet man, brought out of his own retirement to trim the company. His contract officially stipulates that he will only be with the job for four years.

“I was asked to come in here by representatives of the shareholders,” he replied. “The shareholders have clearly been vocal that they were not satisfied or pleased with the returns that they had received from their investments from CP for the last, effectively, 10 years.

“The organization had slipped from one of the top positions of the industry to the bottom. The customers weren’t pleased with the service offering. The employees, the shareholders, the customers were begging for change,” Mr. Harrison added.

William Brehl, president of the Teamsters Canada Rail Conference Maintenance of Way Employees Division, said Wednesday that CP hasn’t given the unions details on job losses for their members. “We will vehemently oppose any job cuts which affect the safety and integrity of the track. Now our people maintain the track. With the average of three train accidents across Canada every day, I don’t think it’s a wise move to reduce on maintenance side.”

“And he hasn’t said he is going to. We’re in bargaining at the moment. We’re looking at restructuring the maintenance of ways department in certain ways. But not job cuts,” Mr. Brehl said. The larger, umbrella Teamsters Canada union said Wednesday that it will wait until getting more details of the job cuts before commenting.

Still, CP is already beginning its sharp cuts, such as reducing its locomotive fleet over time by 30 to 35 per cent and closing four switching yards. When talking about change, Mr. Harrison often harkens back to older railway days, such as noting to his dismay how crew changes take an average of 30 minutes. “I don’t buy that,” he said. Crews used to grab on and swing aboard while the train was still moving slowly.

However, Mr. Harrison will soon be looking for his replacement, possibly as soon as the first half of 2013. “Barring some unforeseen circumstances, we’ll have someone selected and will be able to negotiate an agreement with them before mid year.”

In the meantime, he is optimistic about the change he sees so far. “I’ve been in this business a long time now, 48 years, and this group overall has embraced change and been willing to accept better than any group I’ve worked with.”

Follow on Twitter: @Guy_Dixon

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