Rose, 54, will be executive chairman of the railroad and work with managers over the next decade on long-term organizational planning and public policy, according to a statement yesterday from Fort Worth, Texas-based BNSF.
Buffett’s 2010 takeover of the business was his largest acquisition. The 83-year-old Berkshire chairman and CEO frequently praises results at the operation, which is among the biggest contributers to earnings. Rose’s leadership at BNSF could prepare him to take an expanded role at Berkshire and its more than 80 units spanning the manufacturing, retail, energy and insurance industries.
“He’s eminently qualified,” Anthony Hatch, an independent rail analyst, said in a phone interview. “He’s spent time trying to understand his customers’ businesses that range over every aspect of the economy. And when you talk about running Berkshire, it’s a company with that kind of breadth, so he’d be well positioned.”
The railroad has benefited as new drilling technologies boosted oil production in states including North Dakota and Montana. Rose’s operation contributed $989 million to Berkshire’s third-quarter earnings, compared with $937 million a year earlier.
“BNSF’s performance has far exceeded the high expectations I had at the time of Berkshire’s purchase,” Buffett said in the statement. “The combination of Matt’s and Carl’s talents is the perfect arrangement for the future.”
Ice, 57, the president and chief operating officer, will become CEO effective Jan. 1, according to the statement. He has been with BNSF for 34 years, and in 1995 led a team that orchestrated the merger of Burlington Northern Railroad and Santa Fe Railway.
“Carl runs a very good ship and it was clear for some time that he was going to be the next guy,” said Hatch. “That merger went pretty well, even though it was incredibly complicated. The integration of two big railroads like this is very difficult and it’s a big feather to have in your cap.”
Rose began his railroad career as a management trainee at Missouri Pacific Railroad in 1981, a year before that carrier merged with Union Pacific Corp., BNSF’s main competitor in the western U.S.
He joined Burlington Northern in 1993, was appointed chief operations officer in 1997 and succeeded Robert Krebs as CEO in December 2000. His 13-year tenure leading the company included building up its business hauling intermodal freight, which can be carried by train, truck or ship, and then overseeing rapid growth in crude-by-rail volumes as U.S. petroleum output surged.
Rose was appointed in 2011 to President Barack Obama’s Council on Jobs and Competitiveness. The committee counts General Electric Co. CEO Jeffrey Immelt as chairman and is responsible for recommending policies to revive the American economy after the worst slump since the Great Depression.
“We previously highlighted Mr. Rose as a potential successor to Warren Buffett as CEO of Berkshire,” Jay Gelb, an analyst at Barclays Plc, said in a note to investors. “With the BNSF succession plan now firmly in place, we would still view Mr. Rose as a likely candidate.”
The new assignments echo a transition in 2008 when Gregory Abel was promoted to CEO of Berkshire’s MidAmerican Energy Holdings Co., replacing David Sokol, who stayed on as chairman. The switch allowed Sokol to take on new responsibilities, such as scouting for acquisitions.
Investors will be better able to draw conclusions about Rose after his new role is more clearly defined, said Richard Cook, co-founder of Cook & Bynum Capital Management LLC, which oversees about $300 million, including shares of Berkshire.
“Is he really stepping back and effecting a transition at Burlington Northern,” Cook said. “Or is he stepping up and taking more responsibility?”
BNSF didn’t make Rose or Ice available for comment.
Buffett wrote in 2010 that he and Vice Chairman Charles Munger viewed Rose’s role as a benefit of buying the railroad.
“Charlie and I decided that the disadvantage of paying 30 percent of the price through stock was offset by the opportunity the acquisition gave us to deploy $22 billion of cash in a business we understood and liked for the long term,” Buffett said in a letter to shareholders. “It has the additional virtue of being run by Matt Rose, whom we trust and admire. We also like the prospect of investing additional billions over the years at reasonable rates of return.”
The railroad had $2.8 billion of capital expenditures in the first nine months of this year, according to a Berkshire regulatory filing. The plan included spending on the rail network of about 32,500 miles (52,300 kilometers) and the purchase of locomotive and freight cars.