Canadian Pacific announced early this morning that Fred Green has resigned as president and chief executive, along with seven current board members. Moore later, I'm sure.
Well if this doesn't signal the end, nothing will. Blood in the water and investors have the sharks on a spagetti leash. These companies will get a whiff of the capital railroads generate and they will begin the rape and pillage. I'm gonna be sick.
There are hedge funds and then there are hedge funds. The guys who raided CSX a few years ago wanted to leverage the company for all it was worth, pay themselves a huge dividend, and then leave the carcass to be devoured by some other predator. Pershing Square has not asked for anything but better management. It has brought in acknowledged experts to run CP and it appears prepared to keep its investment in place for a few years and expects to make its gains out of the improvement in financial performance of CP. No, I don't think the signals the end of anything other than the primacy of Canadian Brahmins. If anything, it signifies the beginning - of effective management.
Larry,
I must admit...when I first saw the announcement, I had the same sick-to-my-stomach feeling as Systemsnut.
Getting 'hold of "the capital railroads generate" was quite a temptation a half-century ago, when so many roads were forming holding companies and diversifying themselves right out of the transportation business.
Thankfully, there are many differences between then and now.
I've been wondering when something might happen with/to Canadien Pacifique. Now that it's begun, I'm wondering how far it will go.
Your reasoning is sound - and I find it it reassuring.
GBL
Thanks, Garl, for the kind words. I must confess that I think too many rail advocates are hung up on the nostalgia and neither acknowledge that railroading is a business that must earn the cost of its capital if it is to survive nor to they understand fundamental economics. Sad.
I too appreciate your comments. Although I have to admit that I didn't expect that perspective from you! It is very refreshing! Thanks!
Blaine: Now you've piqued my curiosity. What perspective did you not expect from me? And why didn't you?
First let me make it clear that I was attempting to pay you a compliment.
I just assumed that all people with a long history working with a major Class 1 railroad would rise to defend the actions of their colleagues without giving it a second thought. I gathered from your earlier comments that you welcomed a management shake-up. I find that refreshing, not from you in particular, but in general, from a respected member of an industry that has, in my opinion, all too often resisted change; "the way we've always done it!"
Not to worry, Blaine. I took your comments as the compliment you intended, but couldn't figure out why you were complimenting me. Yes, I'm a long-time rail advocate, but that doesn't prevent me from being a realist. And that explains my view that CP could not continue as it has in recent years and a management change is in order. Blindly defending failure is not a good idea, and I don't think I'll get much disagreement with that. Oh, and thanks for the compliment. That's always appreciated.
By now, only Rip Van Winkle is unaware that E. Hunter Harrison has named president and chief executive of Canadian Pacific Railway this morning. Now, the change begins. All sorts of CP workers, relying on their friends and colleagues at CN, are expressing fear and trepidation at what they believe is an about-to-begin reign of terror and abuse on Harrison's part. CP is the third Class I to be run by Harrison and he has been spectacularly successful at the first two. He expects the railroad's people to operate in a methodical disciplined manner. For example, iIf a train is scheduled to depart a yard at a certain time, the appropriate power had better be attached before that time. He is a quite pleasant man for those who know him to talk with him. His biggest accomplishment - and controversy - at CN, where he retired as president and CEO three years ago, was the change in business relationship between CN and CN shippers. Shippers had become used to having it their way going back to when CN was a crown corporation derisively known as "the people's railway" by CP people. That, of course, was when CP was a pretty well-run business and CN was not. Harrison actually studied the volume of business from various shippers and then informed them how many switches they would get each week, all based on volume. Shippers pushed back hard, but you don't hear the horror stories ever since shippers learned that a disciplined railroad provided them with better service.