CSX agrees to hire Hunter Harrison as CEO

[thelakelander]

CSX Corp. has agreed to hire Hunter Harrison as its next chief executive officer, giving the railroad veteran a four-year contract.

The hiring of Harrison brings closure to weeks of negotiations between CSX and investment firm Mantle Ridge. Paul Hilal, the founder of Mantle Ridge, won CSX approval to nominate five new directors to what is now a 12-member board — Harrison, Hilal, Dennis Reilley, Linda Riefler and John Zillmer — bringing the board to 13 members.

Full article: http://www.bizjournals.com/jacksonville/news/2017/03/06/csx-agrees-to-hire-hunter-harrison-as.html

[BridgeTroll]

Wow... sooo what next??

[BridgeTroll]

http://www.cnbc.com/2017/03/06/csx-names-veteran-railroad-executive-to-be-new-ceo-in-deal-with-activist-investor--.html

"Together, we will implement Precision Scheduled Railroading — a model proven to improve safety, create better service for customers, produce a proud and winning culture for employees, and generate exceptional, lasting value for shareholders," Harrison said.

[camarocane]

From what I've heard within CSX, they are moving all employees from the South Point location into the HQ downtown... however with the recent layoffs, its still a net loss downtown.
Apparently today is the big "reorganization" and we should know more at the end of the week. 

[BridgeTroll]

One of the two SP buildings is nearly empty now...

[Lunican]

Interesting excerpt from http://www.bizjournals.com/jacksonville/news/2017/03/06/changes-on-track-for-csx-is-a-leaner-more.html

Moving CSX to a more efficient system might just be the first step in Harrison's transformation of the company.

His ultimate dream might be bigger.

Harrison wants to be the head of a company that creates a transcontinental railroad to be a part of his legacy, said Vantuono.

In Harrison's attempt to merge railroads and build a transcontinental network, Harrison tried to acquire Norfolk Southern last year and CSX in 2014 and 2016.

"Everyone is wondering if the equilibrium that exists in the industry is going to be disrupted if a carrier like CSX makes a major move," Schwieterman said. "We have two big players in the East (CSX and Norfolk Southern) and two in the West (Union Pacific and Burlington Northern Santa Fe). If one of the four carriers makes a major move to change this, the others may feel compelled to follow suit. If he does become CEO, there could be some fireworks ahead."

Bill Vantuono said that Harrison believes strongly in the value of a transcontinental railroad and there are efficiencies to be gained and that the operation would be smoother. Vantuono also said Harrison thinks service and cost structure would improve with a transcontinental railroad.

While pursuing mergers at Canadian Pacific, Harrison said he believes the creation of a new transcontinental railroad could improve congestion around Chicago, where east and west-based railways meet and hand off cargo — a process that can now take days.

That's in the future, though. For now, the focus is on the next step: Will CSX's shareholders agree to a pay package that the company's board has argued is outsized? Will shareholders be OK with major changes to the board?

The answer will come in two weeks (if not sooner), when shareholders make their views known at the special meeting.

What's not in doubt is if the former oiler turned chief executive officer makes the First Coast his new home, his presence will be felt quickly and widely across CSX's network.

"The first sign [of Harrison] is going to be in operating revenue, more revenue, less expense," said Blanchard, who has known Harrison for over two decades. "Hunter Harrison's reason for living is running a railroad."

I'd say that CSX and CP want to merge as of yesterday afternoon.

[thelakelander]

It seems like things will get pretty interesting over the next couple of years. I assume CSX is a "buy" stock now?

[FlaBoy]

Cross your fingers folks. This could be good or really bad.

[remc86007]

It seems like things will get pretty interesting over the next couple of years. I assume CSX is a "buy" stock now?

I wouldn't bet on it. I think "his" gains are already priced in.

[acme54321]

It seems like things will get pretty interesting over the next couple of years. I assume CSX is a "buy" stock now?

I wouldn't bet on it. I think "his" gains are already priced in.

Yeah, already big gains over the last couple of months.

[BridgeTroll]

https://www.forbes.com/sites/antoinegara/2017/03/06/hunter-harrison-csx-mantle-ridge-canadian-pacific/#376941a66b14


According to Forbes...

Like Norfolk Southern, CSX is considered to be one the least efficient railroads in North America. It's EBITDA has barely budged over the past four years and its profits are below 2011 levels. From 2011 to present, by contrast, Canadian Pacific's profits have tripled and its EBITDA has doubled, mostly due to the efficiencies implemented by Harrison and in partnership with Pershing Square.

[spuwho]

There is still some technicalities to work out.

While HH's retirement agreement with CP allowed him to go few railroads (CSX was one), if he becomes the CEO, he has to repay CP for his $84 million retirement agreement.

The reconstituted board has to vote to agree to have CSX pay HH the $84M, so he can repay CP.

It's was CP's "poison pill" to keep HH from shopping himself too freely post retirement (a lesson CN learned the hard way). His no compete clause forbids him from working at UP, BNSF and CN.

If the board doesn't agree to reimburse HH the $84 million, he will resign.

All I have to say is this, yes, some CSX shareholders are going to do well if HH has his way, but the $84 Million would have covered a lot of heads that recently rolled. For CSX to cashier that much strictly based on the hubris of one CEO makes me ask myself, surely there are other, less expensive people in the RR world who can implement a similar plan at less of a cost?  Good grief, railroad CEO's are now sports free agents and owners will pay anything to get them. Seriously?

The naysayers are saying that HH has had it easy reforming railroads that have long run times (like CN and CP), but that reforming CSX with mostly shorter hauls with your leading revenue producer (coal) on the decline will be a bigger (and harder) nut for him to crack.

[jaxjags]

Interesting excerpt from http://www.bizjournals.com/jacksonville/news/2017/03/06/changes-on-track-for-csx-is-a-leaner-more.html

Moving CSX to a more efficient system might just be the first step in Harrison's transformation of the company.

His ultimate dream might be bigger.

Harrison wants to be the head of a company that creates a transcontinental railroad to be a part of his legacy, said Vantuono.

In Harrison's attempt to merge railroads and build a transcontinental network, Harrison tried to acquire Norfolk Southern last year and CSX in 2014 and 2016.

"Everyone is wondering if the equilibrium that exists in the industry is going to be disrupted if a carrier like CSX makes a major move," Schwieterman said. "We have two big players in the East (CSX and Norfolk Southern) and two in the West (Union Pacific and Burlington Northern Santa Fe). If one of the four carriers makes a major move to change this, the others may feel compelled to follow suit. If he does become CEO, there could be some fireworks ahead."

Bill Vantuono said that Harrison believes strongly in the value of a transcontinental railroad and there are efficiencies to be gained and that the operation would be smoother. Vantuono also said Harrison thinks service and cost structure would improve with a transcontinental railroad.

While pursuing mergers at Canadian Pacific, Harrison said he believes the creation of a new transcontinental railroad could improve congestion around Chicago, where east and west-based railways meet and hand off cargo — a process that can now take days.

That's in the future, though. For now, the focus is on the next step: Will CSX's shareholders agree to a pay package that the company's board has argued is outsized? Will shareholders be OK with major changes to the board?

The answer will come in two weeks (if not sooner), when shareholders make their views known at the special meeting.

What's not in doubt is if the former oiler turned chief executive officer makes the First Coast his new home, his presence will be felt quickly and widely across CSX's network.

"The first sign [of Harrison] is going to be in operating revenue, more revenue, less expense," said Blanchard, who has known Harrison for over two decades. "Hunter Harrison's reason for living is running a railroad."

I'd say that CSX and CP want to merge as of yesterday afternoon.

Interesting. This may be like the President of Willamette Industries leaving to be the CEO of Weyerhaeuser several years ago. The next year Weyerhaeuser bought Willamette. The story was Weyerhaeuser bought Willamette using Willamette dollars.

[spuwho]

Interesting excerpt from http://www.bizjournals.com/jacksonville/news/2017/03/06/changes-on-track-for-csx-is-a-leaner-more.html

Moving CSX to a more efficient system might just be the first step in Harrison's transformation of the company.

His ultimate dream might be bigger.

Harrison wants to be the head of a company that creates a transcontinental railroad to be a part of his legacy, said Vantuono.

In Harrison's attempt to merge railroads and build a transcontinental network, Harrison tried to acquire Norfolk Southern last year and CSX in 2014 and 2016.

"Everyone is wondering if the equilibrium that exists in the industry is going to be disrupted if a carrier like CSX makes a major move," Schwieterman said. "We have two big players in the East (CSX and Norfolk Southern) and two in the West (Union Pacific and Burlington Northern Santa Fe). If one of the four carriers makes a major move to change this, the others may feel compelled to follow suit. If he does become CEO, there could be some fireworks ahead."

Bill Vantuono said that Harrison believes strongly in the value of a transcontinental railroad and there are efficiencies to be gained and that the operation would be smoother. Vantuono also said Harrison thinks service and cost structure would improve with a transcontinental railroad.

While pursuing mergers at Canadian Pacific, Harrison said he believes the creation of a new transcontinental railroad could improve congestion around Chicago, where east and west-based railways meet and hand off cargo — a process that can now take days.

That's in the future, though. For now, the focus is on the next step: Will CSX's shareholders agree to a pay package that the company's board has argued is outsized? Will shareholders be OK with major changes to the board?

The answer will come in two weeks (if not sooner), when shareholders make their views known at the special meeting.

What's not in doubt is if the former oiler turned chief executive officer makes the First Coast his new home, his presence will be felt quickly and widely across CSX's network.

"The first sign [of Harrison] is going to be in operating revenue, more revenue, less expense," said Blanchard, who has known Harrison for over two decades. "Hunter Harrison's reason for living is running a railroad."

I'd say that CSX and CP want to merge as of yesterday afternoon.

Interesting. This may be like the President of Willamette Industries leaving to be the CEO of Weyerhaeuser several years ago. The next year Weyerhaeuser bought Willamette. The story was Weyerhaeuser bought Willamette using Willamette dollars.

Or the CEO of Greyhound Bus using its fully funded pension fund as leverage to buyout Dial Soap. Then underfunded the pension to pay off the acquisition debt.

When it paid off, spun off Greyhound Bus with small debt, underfunded pension and no capital.

Meanwhile Dial Soap blossomed and made millions, while Greyhound limped along for many years.

Its probably important for HH to get is $83 million because he might have combined that with Mantle's offer to acquire leverage. If he doesnt get it back, it has to come out of his hide.  He recently sold his mega ranch in central Florida, so maybe the guy is a true gambler and was going "all in" on CSX thinking he can double his money through stock value.

If he doesnt, he can still fall back on his $83 million from CP and play golf outside West Palm the rest of his life.

[thelakelander]

Wow. You have to layoff a ton of people just cover the costs for getting this guy in the door:

OMAHA, Neb. — CSX railroad agreed to pay its new CEO Hunter Harrison a $2.2 million salary and offer a target bonus of $2.8 million, but those are some of the smaller pieces of his compensation package.

The Jacksonville, Florida-based railroad also tentatively agreed to reimburse $84 million that Harrison forfeited when he retired early from Canadian Pacific railroad in January.

Full article: http://jacksonville.com/business/metro/2017-03-08/jacksonville-based-csx-will-pay-new-ceo-harrison-5-million-salary-and