Canadian Pacific, CSX Seek to Woo Back Customers Upset by ex-CEO Hunter Harrison
February 26 2018 - 9:22AM
Dow Jones News
By David George-Cosh and Paul Ziobro
TORONTO -- Canadian Pacific Railway Ltd. is turning to a charm
offensive to woo customers back to its fold after many felt
alienated by what they called the hard-nosed style of the former
chief executive, the late Hunter Harrison.
CP's focus on improving customer relations has been key to the
railroad's strategy after Mr. Harrison stepped down in January 2017
and went on to run Jacksonville, Fla.-based CSX Corp. He died in
December at the age of 73 after a brief leave from CSX. That
railway is also in the midst of an apology tour after suffering
widespread disruption from implementing Mr. Harrison's turnaround
strategy.
Mr. Harrison was best-known for revolutionizing the industry
with his "precision railroading" strategy, used to reshape four of
North America's major railroads throughout his five-decade career.
The strategy aims to cut costs in part by having the railroad
dictate deadlines for customers' cargo, instead of having railroads
beholden to customers' schedules.
During Mr. Harrison's 4 1/2 years of running CP, he cut the
workforce to 11,700 from about 19,500, parked about 500
locomotives, sidelined 12,500 railcars and shut down rail yards in
several of CP's U.S. and Canadian hubs. The railroad's share price
more than doubled during that period.
The changes upset some customers, but Mr. Harrison's efforts are
still widely applauded for transforming the railroads he headed,
improving profit and boosting share price. CSX shares added about
$10 billion in market value in January 2017 after he joined the
company to pursue a turnaround. Shareholders also voted
overwhelmingly to grant him $84 million to reimburse him for
compensation he gave up in the move.
"In the longer term, the shippers are better served by a more
efficient railroad than they would have been if that efficiency
drive wasn't put in place," RBC Capital Markets transportation
analyst Walter Spracklin said.
At CP, where Mr. Harrison often worked from a home office
enabled with screens and a computer that could monitor the
railroad's entire network, he initially confused customers by
demanding that trains be loaded seven days a week despite periods
of low traffic, a feature of precision railroading.
"There were several bumps in the road," said Dan Mack, vice
president of transportation and terminal operations at CHS Inc., an
agricultural company that uses the railroad.
Mr. Harrison's approach was partly responsible for CP losing
some key shipping contracts to its bigger rival Canadian National
Railway Co. That pushed CP's 2016 revenue down 7% to C$6.2 billion
(US$4.91 billion) despite improving its operating ratio, a measure
of efficiency.
Mr. Harrison's family members didn't immediately respond to
messages requesting comment.
To buck further declines, CP's CEO Keith Creel, who took over
from Mr. Harrison, is looking to turn the railroad into a kinder
company. He is crisscrossing the U.S. and Canada to meet customers
personally and holds regular town halls to fix relations and regain
trust with workers. CP's revenue in Mr. Creel's first year as CEO
improved by 5% to C$6.5 billion at the end of its most-recent
fiscal year.
"When you take the time to listen, it allowed us to connect in a
way that we haven't in a long time given the changes that we drove
[in the past five years]," Mr. Creel said in a recent
interview.
About a year after Mr. Creel took over, CP held a special
meeting for 16 customers. The event kicked off with dinner in a
refurbished business car at the railroad's Calgary headquarters,
where a sommelier paired wines with a four-course meal that
included watermelon carpaccio, halibut, roasted lamb and
gelato.
Several CP customers welcomed the opportunity to air their
grievances. The day after the railroad's lavish meal, customers
told executives about CP's past failures, including calls to
customer representatives that went straight to voice mail,
according to some customers who attended the meetings.
"It was critical where they need to hear where they're failing
and not providing the right amount of help to us," said Josi
Santia, a vice president for Brampton, Ontario-based intermodal
shipper Maritime-Ontario Freight Lines Ltd.
At CSX, the task of mending relations with customers has fallen
to Jim Foote, who assumed the CEO position after Mr. Harrison died.
An experienced railroad marketer, Mr. Foote has tried to smooth
over frayed relationships with shippers in face-to-face meetings.
Last week, he appeared before a regional gathering of shippers
where he spoke during a keynote about "charting a new course" for
the railroad operator.
"I get on an airplane, go to someone's office with my hat in my
hand and say, 'I'm sorry about last year, we screwed up and we
didn't do a really good job for you,' " Mr. Foote said in an
interview last month.
CSX has also signaled some openness to return to projects that
Mr. Harrison opposed. Soon after becoming CEO, Mr. Foote met with
Maryland's congressional delegation about CSX's previous plans to
back out of the expansion of a tunnel into the Baltimore ports. The
company is now reconsidering the project.
Write to David George-Cosh at david.george-cosh@wsj.com and Paul
Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
February 26, 2018 10:07 ET (15:07 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Canadian Pacific Kansas ... (NYSE:CP)
Historical Stock Chart
From Apr 2024 to May 2024
Canadian Pacific Kansas ... (NYSE:CP)
Historical Stock Chart
From May 2023 to May 2024