Omaha, NB —The weekend death of CSX CEO Hunter Harrison less than a year after he took the railroad’s top job raises questions about the future of his reforms.
But CSX officials say the 73-year-old Harrison did enough since taking over in March to change the direction of Jacksonville, Florida-based railroad, and executives he trained will carry out the plan.
Harrison previously led turnarounds of Canadian Pacific and Canadian National railroads with a tightly scheduled operating model that he refined throughout his career.
At CSX, Harrison changed the way trains are assembled at eight of its 12 railyards, idled hundreds of locomotives and the railroad eliminated roughly 4,000 jobs.
The changes led to severe service problems over the summer, and three top CSX executives departed last month. But service has been improving through the fall.
Two days before Harrison died on Saturday, CSX named Jim Foote acting chief executive. Foote arrived at CSX two months ago, but had worked with Harrison for more than a decade at Canadian National.
“Once joining CSX, I realized just how much progress has been made replicating the transformation we effected at Canadian National some years ago. I believe that the battleship here has turned,” Foote said in a call with investors Friday after Harrison went on medical leave.
Foot said more than 150 mid-level managers at CSX have been trained in Harrison’s operating model.
CSX’s stock fell almost 8 per cent Friday after it was reported Harrison was taking a medical leave. The stock recovered about 1.3 per cent Monday, rising 66 cents to close at $53.59.
Stifel analyst John Larkin said he thinks Foote will carry on with Harrison’s plan without many issues.
“Mr. Foote has roughly 40 years of experience in the industry and was instrumental in ably assisting Mr. Harrison in the dramatic transformation of the Canadian National Railway which largely took place between 1998 and 2009,” Larkin wrote to investors.
JP Morgan analyst Brian Ossenbeck said investors need to know more about the executives who will work with Foote and the railroad’s succession plan. But he predicted that Harrison’s legacy will endure at CSX.
CSX plans to outline its strategy for investors at a conference in March.
Raymond James analyst Patrick Brown said Harrison’s death and last month’s departure of CSX’s chief operations officer and chief marketing officer raise questions about whether there is enough expertise on hand to implement his operating model.
Harrison was hired at CSX after the Mantle Ridge hedge fund bought a stake in the railroad and began urging changes.
After shareholders approved it, CSX agreed to pay $84 million to cover compensation that Harrison lost by retiring early from Canadian Pacific.
CSX operates more than 21,000 miles of track in 23 Eastern states and two Canadian provinces.