Canadian Pacific Names Harrison President, CEO
06/29/2012| 12:15pm US/Eastern
-Harrison will focus on bringing greater efficiency to CP
-Harrison forfeits some CN pension benefits; contests others
-CN won't try to block Harrison's appointment to CP
Canadian Pacific Railway Ltd. (CP) said Friday it has named Hunter Harrison as president and chief executive, capping off the successful proxy battle waged by U.S. activist investor Bill Ackman who wanted the former Canadian National Railway Co. (CNI) chief executive at the helm of the Calgary railroad.
Mr. Harrison fills the position left vacant by CP's former chief executive, Fred Green, who stepped down earlier this year as part of the big management shakeup that also saw the departure of John Cleghorn as chairman. Paul Haggis was named chairman earlier this month.
Mr. Ackman, whose Pershing Square Capital Management LP is the railroad's largest shareholder with a 14.1% stake, had blamed Mr. Green and other former board members for Canadian Pacific's lagging efficiency and stock-market performance over the last six years.
Mr. Harrison is credited with turning Montreal-based Canadian National into one of the best-run railway operators during his seven years as its chief executive. He retired from Canadian National in 2009.
Still, Mr. Harrison is joining CP at a time when a large part of the company's unionized workforce is disgruntled over protracted labor negotiations. In May, 4,800 unionized engineers, conductors and rail traffic controllers walked off the job, shutting down the railroad for a week before the Canadian government forced employees back to work. The government estimated the CP strike was costing 500 million Canadian dollars (US$484.1 million) a week. A government-appointed arbitrator has been mandated to resolve the issues between CP management and the union.
Analysts have also lowered their earnings estimates for CP's second-quarter due to lost business during the strike. Further, CP has failed to regain some of that business since the railroad resumed operations.
"The recovery in CP's volumes, post strike, has been slower and leakage to Canadian National Railway -- CP's main rival -- and trucks has also been higher than our earlier expectations," Scotiabank said in a note.
CP is scheduled to report its second-quarter financials July 25.
In an interview, Mr. Harrison, who will be based in Calgary, declined to comment on the second-quarter results. But he said he doesn't see any reason why CP can't recapture "quickly" any lost business resulting from the strike.
Mr. Harrison said he would initially focus on controlling costs at CP with a "heavy emphasis" on using fewer railcars to deliver the same amount of goods.
In February, CN cancelled Mr. Harrison's future pension and other benefits totaling close to $40 million and sought U.S. court approval to declare the action valid. CN alleged Mr. Harrison's interest in the top job at CP breached his CN employment agreement.
Mr. Harrison's lawyer has called CN's lawsuit frivolous.
CN said Friday that at this time it doesn't plan to try to block Mr. Harrison's appointment to CP, but if the company believes Mr. Harrison is using confidential CN information it might take legal action.
"That's fair," Mr. Harrison said. By taking the CP job, Mr. Harrison forfeits his CN pension payments, but he continues to contest the $18 million worth of CN restricted stock units that he received when he retired.
-Judy McKinnon in Toronto contributed to this article.
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