CSX/CN apologize for Hunter Harrison

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CSX/CN apologize for Hunter Harrison

Unread postby hoborich » Tue Feb 27, 2018 6:45 pm

Railroads Embark on Apology Tour to Make Amends for Hunter Harrison's Ways -- 2nd Update
3:47 pm ET February 26, 2018 (Dow Jones) Print
By David George-Cosh and Paul Ziobro

TORONTO -- Two big railroads are reaching out to customers upset by the late Hunter Harrison, a hard-nosed turnaround expert who led both companies during a five-decade career.

Canadian Pacific Railway Ltd. is turning to a charm offensive to woo back customers, a key part of its strategy after Mr. Harrison stepped down in January 2017 and went on to run Jacksonville, Fla.-based CSX Corp. He died in December at the age of 73 after a brief leave from CSX. That railway is also in the midst of an apology tour after suffering widespread disruption from implementing Mr. Harrison's turnaround strategy.

"I get on an airplane, go to someone's office with my hat in my hand and say, 'I'm sorry about last year, we screwed up and we didn't do a really good job for you,' " CSX Chief Executive Jim Foote said in an interview last month.

Mr. Harrison was best-known for revolutionizing the industry with his "precision railroading" strategy, used to reshape four of North America's major railroads throughout his five-decade career. The strategy aims to cut costs in part by having the railroad dictate deadlines for customers' cargo, instead of having railroads beholden to customers' schedules.

Mr. Harrison's efforts are still widely applauded for transforming the railroads he ran, improving profit and boosting share price. During Mr. Harrison's 4 1/2 years of leading CP, he cut the workforce to 11,700 from about 19,500, parked about 500 locomotives, sidelined 12,500 railcars and shut down rail yards in several of CP's U.S. and Canadian hubs. The railroad's share price more than doubled during that period.

CSX shares added about $10 billion in market value in January 2017 after he joined the company to pursue a turnaround. Shareholders also voted overwhelmingly to grant him $84 million to reimburse him for compensation he gave up in the move.

"In the longer term, the shippers are better served by a more efficient railroad than they would have been if that efficiency drive wasn't put in place," RBC Capital Markets transportation analyst Walter Spracklin said.

But while the changes Mr. Harrison implemented made him a darling of Wall Street, they also upset some customers.

At CP, where Mr. Harrison often worked from a home office enabled with screens and a computer that could monitor the railroad's entire network, he initially confused customers by demanding that trains be loaded seven days a week despite periods of low traffic, a feature of precision railroading.

"There were several bumps in the road," said Dan Mack, vice president of transportation and terminal operations at CHS Inc., an agricultural company that uses the railroad.

Mr. Harrison's approach was partly responsible for CP losing some key shipping contracts to its bigger rival Canadian National Railway Co. That pushed CP's 2016 revenue down 7% to C$6.2 billion (US$4.91 billion) despite improving its operating ratio, a measure of efficiency.

Mr. Harrison's family members didn't immediately respond to messages requesting comment.

To buck further declines, CP's CEO Keith Creel, who took over from Mr. Harrison, is looking to turn the railroad into a kinder company. He is crisscrossing the U.S. and Canada to meet customers personally and holds regular town halls to fix relations and regain trust with workers. CP's revenue in Mr. Creel's first year as CEO improved by 5% to C$6.5 billion at the end of its most-recent fiscal year.

"When you take the time to listen, it allowed us to connect in a way that we haven't in a long time given the changes that we drove [in the past five years]," Mr. Creel said in a recent interview.

About a year after Mr. Creel took over, CP held a special meeting for 16 customers. The event kicked off with dinner in a refurbished business car at the railroad's Calgary headquarters, where a sommelier paired wines with a four-course meal that included watermelon carpaccio, halibut, roasted lamb and gelato.

Several CP customers welcomed the opportunity to air their grievances. The day after the railroad's lavish meal, customers told executives about CP's past failures, including calls to customer representatives that went straight to voice mail, according to some customers who attended the meetings.

"It was critical where they need to hear where they're failing and not providing the right amount of help to us," said Josi Santia, a vice president for Brampton, Ontario-based intermodal shipper Maritime-Ontario Freight Lines Ltd.

At CSX, the task of mending relations with customers has fallen to Mr. Foote, who assumed the CEO position after Mr. Harrison died. An experienced railroad marketer, Mr. Foote has tried to smooth over frayed relationships with shippers in face-to-face meetings. Last week, he appeared before a regional gathering of shippers where he spoke during a keynote about "charting a new course" for the railroad operator.

CSX has also signaled some openness to return to projects that Mr. Harrison opposed. Soon after becoming CEO, Mr. Foote met with Maryland's congressional delegation about CSX's previous plans to back out of the expansion of a tunnel into the Baltimore ports. The company is now reconsidering the project.

Write to David George-Cosh at david.george-cosh@wsj.com and Paul Ziobro at Paul.Ziobro@wsj.com

(END) Dow Jones Newswires

February 26, 2018 15:47 ET (20:47 GMT)

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