Hunter Harrison had barely served nine months of his four contracted years at CSX Corporation CSX before taking a medical leave mid-December. On Saturday, the company announced his death.
The CEO’s significance to the firm was seen in an 8-percent stock pullback, representing a $4-billion value concession.
"With the passing of Hunter Harrison, CSX has suffered a major loss,” Chairman Edward Kelly III said in a press release. “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."
The Industry Agrees
Harrison’s loss was felt industrywide, with his former Canadian Pacific Railway Limited (USA) CP crew, a recent competitor, lamenting his passing.
“Professionally, Hunter was unmatched in this industry,” Canadian Pacific President and CEO Keith Creel said in a press release. “He will go down as the best railroader ever, plain and simple. What he has done at multiple railroads and for our industry the last 50-plus years is incredible, which includes bringing CP back to its rightful place among leaders in the Class 1 space in what some have called the greatest corporate turnaround in history.”
The Harrison Heritage
Harrison began his industry leadership as vice president of Burlington Northern Railroad. He joined Illinois Central Railroad in 1989 and was named CEO four years later.
After orchestrating the firm’s sale to Canadian National Railway (USA) CNI in 1998, he became CEO of the united entity in 2003 and led Canadian National to effect budget cuts and accelerate deliveries to better compete with emerging transportation rivals.
With the help of activist investor Bill Ackman, Harrison joined Canadian Pacific in 2012 with the intention of leading a low-cost turnaround. He brought the rail’s operating ratio down from 81.3 percent to 56.2 percent before retiring in January ahead of schedule.
“His legacy will be felt at our company forever, not only by shareholders, but by employees and customers who have all benefited from his leadership, foresight and tenacity,” Creel said. “The foundation he built at CP, and at all the other railroads he led, serves us, and the industry, well for the future.”
A CSX Turnaround
At the time of his death, the 73-year-old was attempting to lead a turnaround at CSX, one not unlike those he accomplished at previous rail lines.
Harrison had secured leadership of CSX — a former takeover target of his while at Canadian Pacific — in March after having provoked shareholders to oust CSX’s preceding CEO, Michael Ward, with activist investor Paul Hilal. The mere potential of his intended involvement in CSX prompted analyst upgrades and a 32-percent stock spike that drove shares to six-year highs and the company market value to $10 billion.
His plan for CSX involved a buyback program and complete redesign of the network: pre-blocking traffic, reducing labor, increasing sidings and transitioning from bump to flat switching yards.
Despite pushback from customers and regulators, by the end of August, Harrison had cut 2,300 employees, pulled 900 trains, improved terminal dwell figures and realized stability in speeds.
His brief tenure had driven a 16-percent stock run — a generous testament to his previous success and prolific career.
“IC, CP, and CN each improved operating ratios up to or beyond 1,000 basis points — ending in the upper-50's to low-60's when done implementing Harrison’s model — a revolutionary level for the 100-plus-year-old rail industry,” Bank of America Merrill Lynch analyst Ken Hoexter said in a Sunday note. “CSX was 10 months into its turnaround, leading to what appears to be his fourth overhaul. He was, in our view, the best railroader of our time.”
Related Links:
Should CSX Shareholders Reimburse New CEO Hunter Harrison For Lost Pay From Canadian Pacific?
Canadian Pacific's Pivot To Growth Will Take Longer Than The Market Thinks
Screenshot from a Railway Age interview with Hunter Harrison.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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