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Hunter Harrison takes proven rail model to CSX

Hunter Harrison, then-chief executive officer of Canadian Pacific Railway Ltd., speaks during an interview in New York, U.S., on Friday, Nov. 20, 2015.

Chris Goodney/Bloomberg

Hunter Harrison has laid out his plans to reshape CSX Corp., issuing confident declarations about upcoming cost-cutting moves and productivity gains for the Florida-based railway.

Mr. Harrison, who left Canadian Pacific Railway Ltd. in January to pursue the top job at CSX, said he sees plenty of opportunities to streamline the U.S. railway with the same model he has used at three other carriers: fewer terminals, faster trains, and job cuts.

"This is going to be more of the same, maybe at a more rapid pace," Mr. Harrison said. "This is not the first time this model has played out."

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CSX's share price jumped 5.6 per cent on Thursday after the company posted better-than-expected financial results and Mr. Harrison predicted he'd guide CSX to record productivity this year.

"We view this as a very solid start to Hunter Harrison's tenure," said Christian Wetherbee, a Citigroup analyst.

"There might be a little shift in direction but this company is going to do things you didn't think it could achieve," Mr. Harrison said.

He became CSX CEO in March but has warned he will quit if shareholders do not agree at the June annual meeting to give him the $84-million (U.S.) he forfeited when he left CP in January.

Company executives cautioned analysts not to ask about the issue on the call on Thursday, but at least one said he did not doubt Mr. Harrison's demands would be met.

"I'm back," an upbeat Mr. Harrison said.

In nearly five years at Calgary-based CP, he transformed an industry laggard into a railway with rising profit and lower operating costs. He is also credited with turning around Illinois Central and Canadian National Railway Co.

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"How long do you have?" he quipped when asked by an analyst what opportunities for improvement he saw at CSX. "I don't think this franchise is significantly different than others that we've overlaid this model on."

He pointed to Atlanta, where the company has several yards that could be combined into one and the surplus land sold. Under his leadership, CSX has already closed four of its 12 hump yards, which use sloped tracks to sort cars using gravity. Mr. Harrison said hump yards are outdated at a time many trains are single blocks of cars carrying the same goods.

A key part of Mr. Harrison's strategy is job cuts through attrition or layoffs. At CP, unions say Mr. Harrison oversaw a confrontational management style that demoralized some employees and led to labour conflict.

His successor at CP, Keith Creel, on Wednesday said he is taking steps to smooth the work force's "ruffled feathers."

When asked about Mr. Creel's statement, Mr. Harrison joked he needed to "do a little coaching to my former sidekicks."

Shortly before Mr. Harrison's arrival, CSX said it was cutting 1,000 management jobs. Mr. Harrison on Thursday did not specify how many more cuts were on the way, but said CSX's 9-per-cent attrition rate meant they could be made "without adversely affecting anyone."

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Mr. Harrison said he didn't expect a "brass band welcome" from CSX's largely unionized staff, and predicted there would be some battles implementing his vision.

"We're going to have some squabbles," he said. "They don't like to see their people disrupted. Nor do I, but you gotta do what you gotta do."

He said he would get rid of the 250 to 300 contractors the company employs in India, and bring their jobs to the United States. "I can't worry about India right now. I'm worried about CSX and Jacksonville and made in America," he said.

Mr. Harrison pushed for rail mergers while at CP, and said he still believes they are needed to improve customer service and solve the congestion that plagues the main interchange hub of Chicago. But he signalled he has little interest in mounting another campaign.

"I got a four-year contract. I want to go out at CSX with a blue and gold jersey running under the goal posts, okay? If anyone wants to do something after that, it's up to them," he said.

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