Nov. 9 (Bloomberg) -- Amtrak's board fired Chief Executive David Gunn, who clashed with the Bush administration over plans to end losses at the U.S. passenger railroad that have totaled more than $1 billion a year.

Gunn, 68, said in an interview that he was asked to resign this morning and refused. He had led the government-subsidized railroad since May 2002, after heading transit systems in New York and Toronto. Chief Engineer David Hughes will serve as acting president and chief executive during a national search for a new leader, Amtrak said in a statement today.

``Amtrak's future now requires a different type of leader,'' David Laney, the Washington-based railroad's chairman, said in the statement. ``The need to bring fundamental change to Amtrak is greater and more urgent than ever.''

The railroad, which uses government aid to cover 40 percent of its costs, has relied on congressional support to counter pressure from President George W. Bush for changes such as giving states authority over parts of its route system, increased funding from states and competition for service. The Amtrak board's four voting members are appointees of Bush, a Republican. Congress in 2003 and 2004 rejected Bush's proposals.

Gunn said he declined the request today from Laney and board member Floyd Hall to step down because ``if I resigned it would have looked like I abandoned'' the railroad.

``I was not on board with destroying the company,'' Gunn said. ``I think that's what they're about.''

`Very Disappointed'

``I am very disappointed'' with Gunn's firing, said Senator Trent Lott, the Mississippi Republican who chairs a subcommittee that oversees Amtrak operations. ``Today's action is a step backward,'' he said in a statement.

The firing may not be legal because it was done by a board that has vacancies and two members serving without Senate confirmation, said Senator Charles Schumer, a New York Democrat, at a news conference held by Gunn supporters at the Capitol. Senator Frank Lautenberg, a New Jersey Democrat, said Gunn expanded Amtrak service, attracted new riders and cut payroll.

``They can't get their way through Congress so they try an end run,'' Schumer said.

The board's four voting members are Laney, a Dallas lawyer and former head of the Texas Transportation Department; Hall, a former Kmart Corp. chief executive; Enrique Sosa, a former BP Amoco Chemicals president; and Transportation Secretary Norman Mineta. Jeffrey Rosen, the U.S. Transportation Department's general counsel, has served as Mineta's designee.

Three board seats are vacant, Amtrak spokeswoman Marcie Golgoski said.

Subsidies, Losses

Amtrak got $1.2 billion in federal subsidies in the year that ended Sept. 30. Bush has proposed just $360 million this year unless Amtrak makes the changes he has sought.

Congress hasn't yet decided on an amount. The Senate approved legislation that would provide an annual subsidy of $1.45 billion this year, while a House version includes $1.2 billion for Amtrak. A House-Senate conference committee may reconcile the two bills as early as tonight.

The Senate separately approved $1.9 billion in Amtrak annual subsidies and capital funds as part of broader budget-cut legislation. The House version of that legislation doesn't include the Amtrak language.

The railroad's losses have totaled $29 billion in its 34 years. The net losses were $1.31 billion in the fiscal year that ended in September 2004, $1.27 billion the previous year and $1.13 billion the year before that, according to reports on its Web site. Amtrak hasn't reported results yet for the year that ended this past September.

Funding Dispute

Gunn, faced with Bush administration pressure for changes, sometimes countered that many of the railroad's problems resulted from inadequate funding. After the administration's proposal for $360 million for Amtrak, Gunn continued to insist that the railroad needed a $1.8 billion subsidy.

``The company will become insolvent'' if Congress only matched last year's aid amount of $1.2 billion, Gunn told a congressional panel in April.

When the administration proposed in 2003 to turn over rail service to private operators and let states decide routes, Gunn said Amtrak ``wasn't asked to work on developing the plan and hasn't been consulted.''

``No matter how good a CEO is, if the chemistry between the board and CEO is not right, the board has the option to fire him,'' said Ross Capon, executive director of the National Association of Railroad Passengers, a nonprofit advocacy group for rail travelers.

The board in September backed a Bush proposal to create a separate unit to control tracks between Boston and Washington, telling Amtrak management to submit a plan by January.

Labor Response

``It's no secret that Amtrak workers have strongly disagreed with some of David Gunn's management practices and antics at the bargaining table,'' said Edward Wytkind, president of the AFL-CIO's Transportation Trades Department, in a statement. ``But it is outrageous that the Bush administration would fire anyone who does not take a blood oath to break up and sell off our national passenger rail system.''

Bush is trying to persuade Congress to create separate entities to manage terminals and track, encourage cost cuts by letting multiple companies run trains and require eight Northeastern states to take over tracks from Maine to Virginia.

The Government Accountability Office, a congressional investigative agency, last week criticized Amtrak's operations, prompting Mineta to say he would tighten financial oversight of the railroad.

Mineta in a statement today said he is ``confident in the board's judgment and its belief that different leadership is needed to address the serious challenges facing the company.''

The GAO's Nov. 3 report said the railroad ``lacks effective operating practices.'' Amtrak lost $80 million a year on food and beverage services and omitted information from reports to make losses seem smaller, the agency said.

To contact the reporter on this story: John Hughes in Washington at jhughes5@bloomberg.net

Last Updated: November 9, 2005 17:45 EST