Harrison Sees ‘Long-Term’ Role as Ackman’s Pick to Lead Canadian Pacific
Hunter Harrison, William Ackman’s choice to lead Canadian Pacific Railway Ltd., said he would be willing to stay in the job for as long as it takes to turn around the least efficient railroad in North America.
Harrison more than tripled net income during seven years running Canadian National Railway Co. (CNR), using an approach known as precision railroading, before retiring in 2009. Now, hiring the 67-year-old as Canadian Pacific’s chief executive officer is at the center of a turnaround plan by Ackman, whose 14.2 percent stake makes him the company’s largest investor.
“If the opportunity presents itself I am ready to be in there for the long term,” Harrison said today in a telephone interview from his home in Wellington, Florida.
A tenure of three to five years “is reasonable,” Harrison said. “Could it be seven and could it be four? Yeah. My commitment would be that I would be there as long as I’m needed to turn the organization in the right direction and build some sustainability. This is not some kind of one-time shot to go in there, do something overnight and then get out.”
Ackman, the founder of New York-based Pershing Square Capital Management LP, invests in companies he deems undervalued and seeks changes to improve shareholder returns. He disclosed his stake in Canadian Pacific (CP) in late October and has since sought to oust CEO Fred Green.
Canadian Pacific Chairman John Cleghorn rebuffed Ackman’s push to replace Green with Harrison in a letter released Jan. 9. Ackman told Bloomberg News that day he would seek a proxy fight and that Harrison would be CEO “once we are successful.” Ackman told the Wall Street Journal earlier this week he will hold a meeting for shareholders next month.
Harrison said he’s looking forward to the challenge of turning around Calgary-based Canadian Pacific if Ackman succeeds in his bid.
“I tried other things, and I missed the work,” Harrison said in the interview. “This was an opportunity that came along and was unforeseen. It’s where my focus is, and only there. Clearly I have made some commitments to Mr. Ackman, and I intend to live up to my commitments.”
Harrison declined to say how long it might take for Canada’s second-largest railroad to boost earnings, pointing to his tenure at Canadian National and Illinois Central Corp. Montreal-based Canadian National, Canada’s largest railroad, bought Illinois Central in 1998.
When Harrison retired from Canadian National, the operating ratio, a measure of efficiency, had been cut to 67.3 from 76 at the end of 2002, filings show. Canadian Pacific’s ratio was 75.8 in 2011’s third quarter, and 77.6 for all of 2010, according to Bloomberg Industries data.
“If you look at IC in the past, and CN in the past, and you look at the timeframes in the improvement, it should start to give some indication” of how long Canadian Pacific might need, Harrison said. “I’ve always said that scheduled precision railroading is applicable to any railroad. It’s a little premature” to make more specific comments, he said.
Canadian Pacific’s U.S. shares rose 0.5 percent to $67.97 at 4:02 p.m. in New York, while Canadian National gained 0.9 percent to $78.57 in its third straight advance.
Harrison said he’s “bullish” about railroads, which he predicted will take market share from trucking companies as consumers grow more conscious about factors such as energy costs and greenhouse-gas emissions.
“As an outsider over the last couple of years watching what has taken place, I think the industry has gotten stronger,” he said. “The industry will continue to grow. From an energy standpoint or an environmental standpoint, all those things lead to rail. In my view, railroads will play a bigger part in the future.”
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