E. Hunter Harrison

Hunter Harrison

Born

Ewing Hunter Harrison
November 7, 1944
Memphis, Tennessee

Died

December 16, 2017 (aged 73)
Wellington, Florida

Ewing Hunter Harrison (November 7, 1944 – December 16, 2017) was a railway executive who served as the CEO of Illinois Central Railroad (IC), Canadian National Railway (CN) and Canadian Pacific Railway (CPR), and served as CEO of CSX Corporation. He died on December 16, 2017, two days after taking medical leave from the company.

Born in Memphis, Tennessee in 1944,[Harrison began his railroad career in 1964 while attending Memphis State University when he worked as a carman-oiler for the St. Louis-San Francisco Railway (“Frisco”). Harrison was later promoted to railroad operator with Frisco and, later, with Burlington Northern Railroad (BN) following that company’s acquisition of Frisco in 1980. Harrison was consistently promoted at BN, eventually being appointed Vice-President – Transportation as well as Vice-President – Service Design.

Harrison left the BN in 1989 and secured a job with the executive team at the Illinois Central Railroad (IC), first as Vice-President and Chief Operating Officer, culminating with his appointment as President and Chief Executive Officer from 1993 to 1998. Following the acquisition of IC by CN in 1998, Harrison was appointed Vice-President and Chief Operating Officer by CN. Upon the retirement of Paul Tellier, he was appointed President and Chief Executive Officer of CN on January 1, 2003, serving in that position until his retirement on December 31, 2009.

During his time at CN, Harrison was named Railroader of the Year for 2002 by industry trade journal Railway Age as well as CEO of the Year for 2007 by the Globe and Mails “Report on Business”. On April 29, 2009, CN announced the company’s plan for succession in Harrison’s position by appointing Claude Mongeau as his successor effective January 1, 2010. Following his service at CN, Harrison retired to his estate in Connecticut where he raised and trained horses for show jumping. Bound by a non-competition clause with CN, Harrison maintained a low profile serving as a director for the Belt Railway of Chicago as well as Dynegy Holdings LLC.

In fall 2011, Harrison was approached by the hedge fund Pershing Square Capital Management led by activist investor Bill Ackman, who was undertaking a proxy battle with the board of directors of CPR. Ackman had offered at that time to appoint Harrison as President and Chief Executive Officer of CPR should his proxy battle in spring 2012 be successful, which would necessarily result in the termination of Fred Green as President and CEO. Ackman was ultimately successful in the proxy battle at the CPR’s annual shareholder meeting on May 17, 2012.[6] On June 29, 2012, Harrison was appointed President and CEO of CPR.

CN halted nearly $40-million in benefits to be paid to Harrison after launching a lawsuit alleging he may have breached, or intended to breach, several confidentiality agreements with the railway dating back to his retirement in 2009. In the suit, CN’s board of directors said it had grounds to believe Harrison may have violated his commitments to CN as part of push by activist shareholder William Ackman and his New York-based hedge fund, Pershing Capital Management LLC, to see Harrison replace Fred Green as CEO of rival CPR Ltd.

On January 18, 2017, Harrison abruptly resigned as CEO of CPR Ltd. Instead, he joined Paul Hilal in involving himself in the management of CSX Corp., a US competitor. On March 7, 2017, Harrison was named CEO of CSX.

Harrison died on December 16, 2017, two days after taking medical leave from CSX. He was 73 years old.

Hunter Harrison was described by one analyst as the US railway industry’s ‘all-time de facto change agent’ © Bloomberg

The death of Hunter Harrison, chief executive of CSX and a widely respected veteran of the US railway industry, after abruptly taking a medical leave of absence last week, has been described by the company’s chairman as a “major loss”. Mr Harrison, who was 73, died due to “unexpectedly severe complications” from a recent illness contracted at a training camp held for middle managers last week, according to an email sent to CSX employees by its new acting chief executive, Jim Foote. “We are immensely grateful for the opportunity to have worked with the railroad legend,” Mr Foote wrote. “Those of us who were fortunate enough to interact with Hunter daily had the opportunity to see first-hand his passion for the business, the depths of his railroad knowledge, and his desire to see this great company become even greater.” Edward Kelly, CSX’s chairman, said in a statement on Saturday that CSX had “suffered a major loss”, but that the board was confident that Mr Foote and his management team would be able to continue and build on the changes implemented by Mr Harrison. CSX is the largest railroad operator in the eastern US, and Mr Harrison had been poached from Canadian Pacific Railway by activist hedge fund Mantle Ridge earlier this year, snagging $84m up front to compensate him for awards forfeited by his departure as part of an estimated $300m four-year package. Anthony Hatch, an independent railroad analyst, said that it was “an understatement to say he was a giant of the industry”, describing Mr Harrison as a “two or perhaps three-time hall of fame railroader and the industry’s all-time de facto change agent”. The septuagenarian had long faced questions about his health after appearing in public using an oxygen tank to help his breathing. Mr Harrison had refused the CSX board’s request for an independent doctor’s examination or review of his medical records before he was hired. The company’s shares tumbled on Friday when the medical leave was first announced, falling 7.6 per cent to $52.93, wiping almost $4bn from the company’s market value. The stock had jumped more than 23 per cent in January when Mr Harrison left Canadian Pacific and looked set for CSX.

 

Developed ‘precision railroading’ to optimize efficiency

 

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.

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.”

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.

The brash, Memphis-born Mr. Harrison began his railroading life oiling rail cars for the St. Louis-San Francisco railway in the early 1960s.

He led Illinois Central from 1993 to ’98, when the company was bought by Canadian National. At CN, he rose to the top job before retiring in 2009 to breed show-jumping horses.

The retirement didn’t last. At the urging of Bill Ackman’s Pershing Square Capital Management LP, he came out of retirement to take the top job at CP after Mr. Ackman won a battle for control of the boardroom.

“He was the greatest railroader ever,” Mr. Ackman said by phone. “And he was a tremendous human being in terms of charisma, character, sense of humour. It’s a big loss.”

“You just sat back and watched him make magic happen,” Mr. Ackman said. “He commanded enormous respect from his team. You just knew whatever he said became law.”

CP’s share price more than doubled under Mr. Harrison, and the company posted record profit as it idled locomotives, pulled out unneeded tracks and shed thousands of jobs. The company’s unionized work force accused the company of fostering a toxic workplace, where harsh discipline and arbitrary firings created a culture of fear. A Globe and Mail investigation found dismissal grievances soared under Mr. Harrison’s reign. Most of the terminations were found by an arbitrator to be unjust.

A leader of the Teamsters Canada Rail Conference, which represents train crews, extended his condolences to Mr. Harrison’s family but declined to comment further.

Mr. Harrison led Calgary-based CP from 2012 until January of this year, when he shocked the railway world by quitting, at the age of 72, to seek the CEO job at CSX with the backing of investor Paul Hilal’s Mantle Ridge hedge fund.

It was a script that echoed his move on CP, but this time no battle for the boardroom was required. CSX investors, who saw their shares soar by 35 per cent on news of his intentions, threw their support behind him and he was named CSX’s head in March.

Anthony Hatch, a railway consultant in New York who first met Mr. Harrison in 1990, said the railroader was one of the industry’s revolutionaries – skilled at squeezing efficiencies out of a network of tracks, yards and customers that spanned thousands of kilometres.

While operations were his forte, dealing politely with politicians, customers and labour was not. That meant he had little inclination to explain how the changes he enacted would benefit shippers.

The U.S. regulator, the Surface Transportation Board, recently launched an investigation of complaints made by CSX customers and industry groups. The shippers say Mr. Harrison’s yard closings, layoffs and operational changes have led to poor service that is harming their businesses.

Mr. Hatch has seen it before at the other railways transformed by Mr. Harrison, whose changes create an efficient network that other, more customer-focused leaders can make the most of. That, he says, is what happened after Mr. Harrison left CN, and what is under way at CP and CSX.

“It wasn’t that he was on purpose trying to annoy his customers,” Mr. Hatch said. He would tell them, “‘Change is hard. It’s going to be better for you in the long run, but in the short run you may need to change the way you distribute goods, and start working seven days a week instead of five. You need to change as much as we need to change.'”

“He upset a lot of people, there’s no doubt,” Mr. Hatch said. “As he said, change is hard. And he doesn’t brook any BS. But he was a straight shooter.”

 

 

Ewing Hunter Harrison was born in Memphis, Tenn., on Nov. 7, 1944, and began his railroad career in 1964 as a 19-year-old rail car oiler for the St. Louis-San Francisco Railway while attending Memphis State University.

His modest start gave no hint that he would eventually serve as the chief executive of four major railroads: Chicago-based Illinois Central Railroad, Montreal-based Canadian National Railway, Calgary-based Canadian Pacific Railway and Jacksonville, Fla., railway CSX Corp.

Harrison joined the Burlington Northern Railroad in 1980 when it purchased the St. Louis-San Francisco Railway, and he was eventually promoted to vice-president of transportation and service design.

Harrison left Burlington Northern in 1989 to become chief operating officer at Illinois Central Railroad, rising to president and CEO in 1993. There, he was credited with initiating scheduled service for freight, a revolutionary concept for the industry.

 

E. Hunter Harrison is gone. Railway Age’s twice-honored Railroader of the Year (2002 and 2015) died on Saturday, Dec. 16, in Wellington, Fla., from what CSX, the railroad that ultimately became the last stop in a long and distinguished career, attributed to “unexpectedly severe complications from a recent illness.” He was only 73.

 

No matter. One does not measure a life solely in terms of “what have you done for me lately,” which I believe is the approach of the activist investors who positioned Hunter as their means to an end.

Preceded by
Edward Moyers

President of Illinois Central Railroad
1993 – 1998

purchase by Canadian National Railway

Preceded by
Mike Haverty (ATSFKCS)

Railroader of the Year
2002

Succeeded by
Richard K. Davidson (UP)

Preceded by
Paul Tellier

President of Canadian National Railway
2003 – 2009

Succeeded by
Claude Mongeau

Preceded by
Frederic J. “Fred” Green

President & CEO of Canadian Pacific
2012 – 2017

Succeeded by
Keith Creel

Preceded by
Michael J. Ward

CEO of CSX Corporation
2017

Succeeded by
James M. Foote (acting)

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