Hunter Harrison, Famed Railroad Turnaround CEO, Dies at 73

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  • The CSX chief also ran Canadian Pacific, Canadian National
  • Developed ‘precision railroading’ to optimize efficiency
Bloomberg’s Erik Schatzker reports on the death of CSX CEO Hunter Harrison and his legacy.

E. Hunter Harrison, who turned around three railroad carriers during a five-decade career before being tapped by CSX Corp. to improve the company’s lackluster performance, has died days after taking medical leave. He was 73.

Harrison died in Wellington, Florida, on Saturday from complications from a recent illness, the company said in a statement.

“Hunter was a larger-than-life figure who brought his remarkable passion, experience and energy in railroading to CSX,” the company said. “The entire CSX family mourns this loss.”

Harrison, who had heart bypass surgery in 1998, occasionally used a portable oxygen tank to treat shortness of breath. The company announced on Dec. 14 that he would take time off from his duties as chief executive officer -- news that sent shares down almost 8 percent -- and named Jim Foote as acting CEO.

“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,” CSX board of directors chairman Edward Kelly said in a statement.

Efficiency Drive

By relying on a strategy of cutting costs and implementing procedures to make all parts of the operation more efficient, Harrison transformed Canadian Pacific Railway Ltd., Canadian National Railway Co. and Illinois Central Corp. into rail industry leaders. His reputation among analysts and investors was so strong that CSX shares jumped 23 percent on a single day in January 2017 when reports emerged that Harrison was in talks to take the helm.

At Illinois Central, Harrison gained fame for developing an approach he called “precision railroading,” breaking with the standard industry practice of holding trains until they were full. The approach, which involves running shipments on fixed timetables to ensure reliable deliveries, was a novelty in the North American industry at the time.

Required Reading

“Hunter is a legendary railroader, and for good reason,” Lee Klaskow, a Bloomberg Intelligence analyst, said in a 2017 interview. “The Canadian railroads have some of the lowest operating ratios, which is driven by his philosophy -- precision railroading. He wrote the playbook on efficiency.”

In his 2005 book, “How We Work and Why: Running a Precision Railroad,” Harrison laid out his core principles for running a rail carrier: service, cost control, asset utilization, safety and people. The volume is still required reading for anyone getting into the industry.

“This book is about running the best damn railroad in the business,” he wrote. “Run a tight ship, and you can expect a reasonable return; manage it badly, and the sheer weight of assets will sink you.”

Precision railroading “is applicable to any railroad,” Harrison told Bloomberg News in a January 2012 interview.

Harrison more than tripled net income during his seven years as Canadian National CEO. When he left the company at the end of 2009, it spent a little more than 67 cents on expenses for every dollar of sales, down from 76 cents at the end of 2002. Harrison was “ transformative,” Luc Jobin, the company’s president and CEO, said in a statement.

‘Best Railroader Ever’

In his four-and-a-half years as CEO of Canadian Pacific, Harrison transformed the carrier from the worst-performing major North American railroad to the second-best -- trailing only his former employer, Canadian National. When he left Canadian Pacific in January 2017, the company’s market capitalization stood at about C$28.2 billion ($22 billion) -- about C$15 billion more than when he took over.

“We’re going to do more with less,” Harrison told investors at a presentation in December 2012, less than six months after taking over Canadian Pacific. “We’re going to make those assets really sweat.”

Harrison cut staff and pushed the railroad to run longer and faster trains to reduce fuel and labor costs. He also revamped the executive team, while closing several hump yards -- used to separate and sort rail cars -- and inter-modal terminals in cities including Chicago and Milwaukee to set the stage for potential land sales.

Flags Half-Mast

“Professionally, Hunter was unmatched in this industry. He will go down as the best railroader ever, plain and simple,” Keith Creel, president and CEO of Canadian Pacific, said in a statement. “His legacy will be felt at our company forever.”

CP will lower its flags to half-mast across its network to honor Harrison, said Creel, who worked under Harrison at three different companies.

CSX, spurred on by its shareholders, hired Harrison two months after he quit Canadian Pacific and approved picking up the $84 million payout that he left on the table.

Ewing Hunter Harrison was born in Memphis, Tennessee, on Nov. 7, 1944. He began his career in 1963 as an 18-year-old carman-oiler for St. Louis-San Francisco Railway Co., lubricating train wheels while attending the University of Memphis. He moved to Illinois Central in 1989 as chief operating officer, joining Canadian National when it acquired the Chicago-based carrier in 1998.

Harrison was twice named “Railroader of the Year” by Railway Age magazine -- in 2002, while serving as Canadian National’s chief operating officer, and in 2014 for his role at Canadian Pacific -- becoming one of only a handful of executives to win the award twice.

Medical Issues

His health emerged as a concern for investors after he joined Canadian Pacific. In 2015, Harrison contracted pneumonia and missed several weeks of work after undergoing surgery to have stents implanted in his legs. In 2017, before being appointed by CSX, he turned down the company’s request that an independent physician designated by the board review his medical records. Even so, Harrison sometimes required “supplemental oxygen” to combat shortness of breath, CSX Chief Financial Officer Frank Lonegro said at an investor conference in May 2017.

For all his successes as CEO, Harrison never managed to pull off a mega-merger that would have created a truly transcontinental railroad. While at Canadian Pacific, Harrison twice tried, and failed, to buy CSX, first in 2014 and again in 2016.

“I’m not worried about my legacy of creating some lasting merger,” Harrison told analysts about railroad mergers in April 2016. “That’s not what I’m about. I’m much more about creating shareholder value.”

The World as Seen by Ackman’s Trophy Hire

After his retirement from Canadian National in 2009, Harrison spent two years raising and training horses at his farms in Ridgefield, Connecticut, and Wellington, Florida. He also served as chairman of the National Horse Show Association of America.

Still, when activist investor Bill Ackman approached him in late 2011 to run Canadian Pacific, the opportunity proved too tempting to turn down. Harrison was eventually hired by Canada’s second-largest railroad in 2012 after Ackman engineered a boardroom coup to oust then-CEO Fred Green.

“I tried other things, and I missed the work,” Harrison said in the January 2012 interview with Bloomberg News. He pledged to stay at Canadian Pacific “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 do something overnight.”

Disgruntled Shippers

While Harrison’s efficiency drive rewarded investors, many shippers felt it did so at their expense. Inconsistent service, poor communication and a lack of available railcars were among the most frequent complaints in a 2015 survey of shippers by RBC Capital Markets. Thirty seven percent of respondents in the RBC poll that year said service at Canadian Pacific was poor, while only 16 percent deemed it to be good.

Harrison’s signature Tennessee twang and sometimes blunt language made him a favorite of analysts and investors. In 2013, describing his first few months as CEO of Canadian Pacific, he likened his progress to that of a U.S. Civil War general, saying he “kind of went through Canada maybe like Sherman went through Atlanta.”

Harrison and his wife, Jeannie, had two children. “We grieve with them in the tremendous loss of a one-of-a-kind railroader and even better person,” said CP’s Creel.

— With assistance by Thomas Black

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