Monday, December 18, 2017

Railway legend Hunter Harrison dies

Written by  David Briginshaw

E. Hunter Harrison, president and CEO of CSX, died Dec. 16 due to unexpectedly severe complications following a recent illness.

"Hunter was a larger-than-life figure who brought his remarkable passion, experience and energy in railroading to CSX," the railway said in a statement.

"With the passing of Hunter Harrison, CSX has suffered a major loss," said Edward Kelly III, chairman of the CSX Board of Directors. "Notwithstanding that loss, the Board is confident that Jim Foote, as acting Chief Executive Officer, and the rest of the CSX team will capitalize on the changes that Hunter has made. The Board will continue to consider in a deliberative way how best to maximize CSX's performance over the long term."

"Harrison was named chief executive officer of CSX in spring 2017 after successfully leading the turnaround of three major railroads over the last 25 years through his Precision Scheduled Railroading (PSR) model," CSX said.

Prior to joining CSX, Harrison had been president and CEO of Canadian Pacific Railway (CP) since 2012. He also served as president and CEO of Canadian National Railway (CN) from 2003 until 2009 and as the executive vice-president and COO from 1998 until 2002. During his long railway career Harrison also worked for former railways Illinois Central Railroad (IC) and Burlington Northern.

CSX was the latest North American Class 1 freight railway to succumb to the crusade by Harrison and his financial activist backers to spread PSR across the continent, to reduce operating ratios and return better value to shareholders. Harrison perfected scheduled freight train operation at IC, before moving on to CN, and then coming out of retirement to do the same at CP.

Harrison's model certainly worked as he has managed to improve the financial performance of every railway he ran. CP, for example, achieved a 58.6 percent operating ratio in 2016, which was a vast improvement over the 81.3 percent operating ratio recorded in the year preceding Harrison's appointment as CEO. But PSR comes at a price with aggressive cost cutting and asset stripping.

Speaking shortly before Harrison's death, Foote described him as "an icon in the industry."

"I have been following the CSX story very closely since January, but did not realize just how much progress Hunter and CSX's able team have made replicating the transformation we effected at Canadian National some years ago," Foote said.

"I believe that the battleship has turned, the PSR framework has been put into place, and the company has amassed the critical talent - through education of the internal team and supplementation with a complement of strong PSR operating veterans and a strongly supportive Board - sufficient to follow through and execute on the PSR operating plan. Because the team has implemented a foundation consistent with Hunter's vision, I do not see any reason to diminish our expectations concerning the pace and magnitude of our future progress."

CSX reported third-quarter net earnings of $459 million on October 17, a one-percent increase on the $455 million recorded for the third quarter of 2016. However, CSX's share price plunged 10 percent in opening trading on the New York Stock Exchange when CSX announced that Harrison was on medical leave on December 14.