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Illustration of Canadian Pacific Railway CEO Hunter Harrison. (ANTHONY JENKINS/THE GLOBE AND MAIL)
Illustration of Canadian Pacific Railway CEO Hunter Harrison. (ANTHONY JENKINS/THE GLOBE AND MAIL)


CP’s Hunter Harrison: ‘There is a new sheriff in town’ Add to ...

It has been 16 months since Hunter Harrison, the crusty, Memphis-born railway legend hauled himself to a New York museum he can’t remember for a business lunch he’ll never forget.

The locale was the Museum of Modern Art and his dining companion was Bill Ackman, master of the modern art of shareholder activism. Mr. Harrison had only just met Mr. Ackman that morning, in August, 2011. But when the 2 1/2 -hour meal ended, the gruff railroader and the blunt hedge fund mogul shook on a deal that would culminate in a humiliating boardroom coup at Canadian Pacific Railway this May and hand Mr. Harrison the controls at the struggling carrier.

Earlier this week, Mr. Harrison sat down in yet another museum he has never heard of – the Art Gallery of Ontario – to revisit the “godawful” lows of the CP proxy battle along with the early triumphs of his first six months at the Calgary-based railway.

Before that, however, there is the tricky business of food-ordering at Frank, an austere maple-panelled restaurant named after AGO architect Frank Gehry. It’s a proposition that Mr. Harrison, a hard-core red-meat man, now finds taxing because, in addition to fixing CP, Mr. Ackman is trying to make over Mr. Harrison.

“He’s got me on to a trainer and his personal nutritionist,” says Mr. Hunter, shifting his well-upholstered, 68-year-old frame into his chair.

“I lost 12 pounds in the first two weeks.” How? “I have that Greek yogurt stuff with berries, power bars, protein shakes and sugar-free popsicles to fight the munchies.”

As for alcohol, the man with the bourbon-soaked southern drawl says: “I have cut it out completely.” Pausing to offer me a toothy grin, he adds, “Except when I drink.”

And so, as he scans the menu, Mr. Ackman’s newest fitness disciple looks past the beet salad, vegetarian pozole and chestnut soufflé and exclaims: “My eyes are drawn immediately to this.” A beef burrito.

Which is to say that, even though Mr. Harrison is backed by Mr. Ackman (“a real player”), has negotiated the richest salary of his career (“I said, ‘I don’t think you can afford me.’ He said: ‘Don’t kid yourself.’”), and commutes on his private jet (“one of the little things I bought for myself,”), he is still essentially the same hard-nosed railroader who began his career 49 years ago squirting oil at the underbellies of trains.

He rose through the ranks by impressing his bosses as a driven train operator, and cemented his reputation as a brass-knuckle fixer when he transformed Illinois Central Railroad. The near-bankrupt company, later purchased by Canadian National Railway Co., emerged as one of the industry’s top performers in the late 1990s after he slashed costs and prodded a moribund work force with a canny mix of fear and inspiration.

“My story hasn’t changed,” he says. To rebuild what he calls the “spoiled, bad, horrible culture” at CP that suffered from “a total lack of leadership,” he is ripping up just about everything except for the railway’s tracks to shake off what he calls a “permissive” work ethic, a head office “where bureaucracy was king,” and a demoralized work force at one of North America’s most inefficient railways.

“There is a new sheriff in town. … He may be mean and ugly, but he knows about railroading and he is going to make this company successful.”

Mr. Harrison has set an ambitious agenda at CP, promising shareholders who backed Mr. Ackman’s proxy contest that CP’s operating ratio would come close to matching industry leader Canadian National Railway by 2016. In 2011, CP spent about $81 for every $100 it earned in revenue, an operating ratio of 81 per cent that significantly lagged CN’s ratio of 63.5 per cent last year. While some critics have scoffed at the ambitious target, investors have become believers, pushing the stock to new highs this week of $99.92 on the Toronto Stock Exchange, nearly double last year’s low of $52 a share.

Investors are pumped because they remember how Mr. Harrison transformed CN from a bloated railway into a low-cost leader by doing many of the same things he did at Illinois Central. His blueprint for recovery at CP won’t differ very much from the plans he followed there.

“The success or failure of a railroad is not based on the economy. It’s based on how you control the costs,” he says.

Mr. Harrison rolled out the first stage of his strategy at CP this week with the announcement of 4,500 jobs cuts, a more-than-30-per-cent reduction of the company’s fleet, yard closings and potential asset sales. About 80 per cent of the job cuts will be eliminated through retirements and other forms of attrition, and the biggest relative hits will be felt at the company’s Calgary head office, which is being shrunk and moved to a rail yard on the city’s outskirts.

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