Canadian Pacific Railway Ltd. chief executive officer has mounted a blistering attack on a former rival who’s after his job, saying his opponent is misguided in thinking there’s a speedy route to making CP more efficient.
Fred Green, who has been CP’s CEO for nearly six years, painted an unflattering portrait Tuesday of Hunter Harrison, who retired at the end of 2009 after serving seven years as boss of Canadian National Railway Co .
Skipping the niceties that he is known for in the railway industry, Mr. Green said Mr. Harrison is the wrong candidate at the wrong time to become head of Calgary-based CP.
Mr. Green, 55, said he doesn’t mind being criticized, but it should be based on facts. He said Mr. Harrison’s cost-cutting proposals aren’t realistic, notably a “flawed plan” to shed unnecessary locomotives to help chop CP’s maintenance expenses.
“It’s a little dumbfounding to think about how an individual, never having set foot on the property, can make such a bold statement, but then again, there have been a lot of bold statements,” Mr. Green said at CP’s presentation in Toronto – held in response to sharp criticisms levelled against CP by activist investor Bill Ackman during a town hall for CP shareholders last month.
About 145 institutional investors, analysts and other observers attended CP’s investor day, while another 600 people tuned into the webcast.
Mr. Ackman is the CEO of hedge fund Pershing Square Capital Management LP, which is CP’s largest shareholder. He argues that CP is a laggard and wants to install Mr. Harrison, 67, as the new CP CEO.
Mr. Ackman and Mr. Harrison envisage reducing CP’s operating ratio to 65 per cent by 2015. The operating ratio is a key indicator of productivity that measures costs as a percentage of revenue, and CP is striving to reduce its ratio to the range of 70 to 72 per cent for 2014, compared with 81.3 per cent last year.
A lower number is better, but Mr. Green said his critics are aiming too low. “It’s for the shareholders to judge. If people want to believe that – wishful thinking – then they’re entitled to,” he said.
Ed Harris, a former CN executive vice-president who joined CP’s board in December, described Mr. Harrison’s goal for chopping CP’s operating ratio as a “shot in the dark.”
CP provided further details Tuesday of its multiyear improvement plan, saying it’s now targeting an operating ratio of 68.5 to 70.5 per cent for 2016.
Mr. Ackman dismissed the attacks from Mr. Green and CP chairman John Cleghorn. “The facts speak for themselves. Under Hunter’s leadership, CN had a better service record than CP,” Mr. Ackman said in a statement issued by New York-based Pershing Square. “Under Fred Green’s leadership, CP lost market share to CN. As Mr. Green reminds us, customers vote with their feet. Hunter looks forward to competing hard for and earning customers’ business.”
Pershing Square said Mr. Ackman’s remarks also served for now as the hedge fund’s defence of Mr. Harrison, who didn’t return requests for comment.
Mr. Green said CN CEO Claude Mongeau deserves credit for enhancing relations with freight customers. “Claude Mongeau and his CN counterparts have been doing all they can to de-Hunter CN. They have moved and migrated away from the style that seemed to be appropriate in that world when Mr. Harrison was there,” Mr. Green said.
In interviews after CP’s presentation, Messrs. Green and Cleghorn hammered home their arguments about how CP under Mr. Harrison would be a mistake because it would prompt some key customers to switch to CN.