Veteran railroader and cost-cutter Hunter Harrison is taking charge at CSX Corp.
The Florida-based railway said Monday night Mr. Harrison is the company’s new chief executive officer, effective immediately.
Backed by investor Paul Hilal’s Mantle Ridge fund, the Memphis-born Mr. Harrison, 72, had been in talks with Florida-based CSX since shortly after leaving his CEO job at Calgary-based Canadian Pacific Railway Ltd. in late January.
CSX provided few compensation details for the four-year contract, but earlier had said Mr. Harrison was seeking a total of $300-million (U.S.), including $84-million to replace stock and benefits he forfeited on leaving CP. The company said on Monday it will let shareholders decide at its annual meeting if Mr. Harrison will get the $84-million and a related tax indemnity from CSX.
Mr. Harrison said he will quit his new job if shareholders vote against the package, CSX said.
CSX said its CEO and chairman, Michael Ward, will retire after 39 years at the company.
Mr. Harrison and Mr. Hilal also won five board seats, two of which they will occupy. Mr. Hilal also becomes vice-chairman. As part of CSX board shakeup, three directors will retire by the spring annual meeting. CSX said it has appointed three new board members, Dennis Reilley, Linda Riefler and John Zillmer.
CSX’s share price has risen by 32 per cent since Mr. Harrison’s plans were reported in January as investors bet he would implement his strategy of parking locomotives and combining railyards to improve efficiency.
Walter Spracklin, a stock analyst at Royal Bank of Canada, said Mr. Harrison’s so-called precision railroading model should be able to improve CSX’s operating ratio, a comparison of costs versus sales, by 12 percentage points by 2020. He expects the CSX’s stock price will rise to $65 in 12 months, aided by “meaningful” share buybacks of about $3-billion a year.
Mr. Harrison began his railroad career as a car oiler in 1964 while in university. He worked his way up through the ranks and is credited with turning around three major railways: CP, Canadian National Railway Co., and Illinois Central.
He arrived at CP in 2012 after a battle for boardroom control led by Bill Ackman’s U.S. hedge fund, Pershing Square Capital, of which Mr. Hilal is a former partner. At CP, he turned what was the worst-performing railway in North America into one of the most efficient. Profits nearly tripled and the share price rose by 150-per-cent on his watch, as he slashed costs.
However, CP’s unionized train crews complain the gains came at their expense. They point to soaring numbers of dismissal for seemingly minor things – most of which were rejected by arbitrators.
Doug Finnson, president of Teamsters Canada Rail Conference, the union that represents CP’s 3,000 engineers, conductors and traffic controllers, said Mr. Harrison’s departure from CP offered Mr. Creel a chance to put an end to the “bullying” of his members by management. He has one message for CSX workforce: “Thank god that you’re unionized.”
Keith Creel, CP operating chief and a long-time understudy of Mr. Harrison, was named Mr. Harrison’s replacement.Report Typo/Error