CALGARY – Canadian Pacific Railway named Hunter Harrison as its new president and chief executive officer on Friday, drawing the long-time railroader come out of retirement to lead what was once his biggest rival.
Harrison, 67, is the former CEO of Canadian National Railway (TSX:CNR) and is credited with turning CN into one of North America’s most successful railways — a track record lauded by Canadian Pacific’s (TSX:CP) largest shareholder in its push for change at the top.
“I know you, your colleagues, and the company have been through unsettling times lately. Let me assure you, I recognize great potential lies within CP,” Harrison said in a letter to employees, obtained by The Canadian Press.
“I am completely committed to working with you to build a stronger CP. Change is never easy. But we will get better at what we do for our customers, our colleagues and families, and to drive shareholder value.”
New York hedge fund Pershing Square Capital Management became the largest shareholder of Canadian Pacific last year, touching off a bitter months-long battle that resulted in the departure of the railway’s chief executive, its chairman and several directors.
Pershing Square CEO Bill Ackman placed the blame for the railway’s underperformance squarely on then-CEO Fred Green.
The appointment of Harrison, who was Ackman’s preferred candidate to replace Green and had expressed no reservations about returning to the corporate world, was widely expected.
Paul Haggis, who became CP chairman after the departure of John Cleghorn, said the new board appointed Harrison after a thorough selection process. The railway said he has been given a four-year contract.
“The board welcomes Mr. Harrison’s experience and leadership to CP. We look forward to benefiting from his strong track record of service reliability, efficient asset utilization and strategic capital expenditure,” Haggis said in a statement.
In his letter to staff, Harrison said there’s no “magic formula” for fixing the railway.
“It will come down to a mix of the strengths of the railway and CP people working hard to execute the plan for service excellence. Simply put, you should expect that together we will deliver unprecedented service to our customers,” he wrote.
In an interview with Business News Network, Harrison said he’s “anxious” to begin work — likely in the middle of next week, once the Tennessee native sorts out his Canadian work permit, which expired since he left CN in 2009.
He said he expects to take the next four months or so formulating a comprehensive plan to get CP back on track.
“We’re working on that as we go and there’s some decisions that need to be made,” he told BNN. “But it will start to take real shape at that point in time when I think people can clearly understand the direction we’re going.”
Harrison’s former employer has argued that he continues to have contractual obligations to CN, which he appeared to be breaching in mulling a jump to CP.
CN issued a statement Friday congratulating Harrison on his appointment, but warning it will be watching him carefully.
“CN is concerned that it will be difficult, if not impossible, for Mr. Harrison to perform his new duties for CP without drawing upon his broad knowledge of CN’s confidential information, which he is not permitted to do,” the railway said.
“CN intends to monitor events, and, if it appears that Mr. Harrison is using confidential CN information, CN might seek injunctive relief at that time.”
Desjardins Securities analyst Benoit Poirier said he wouldn’t be surprised to see Harrison cut CP’s 16,000-person workforce by between 2,000 to 3,000, with most of the cuts coming through attrition.
In a research note, the analyst also said he expects Harrison will resolve CP’s labour issues. For nine days in May, some 4,800 locomotive engineers, conductors, yardmen and others walked off the job before Ottawa forced them back.
And Poirier expects Harrison will sell some locomotives and remove some cars from the fleet as a means to cut costs though major asset sales as unlikely.
On the Toronto Stock Exchange, CP shares were up $1.20 at $74.72 Friday. CN’s stock was off 16 cents to $86.10.