Canadian Pacific Railway (CP-T 83.04 -0.36 -0.43%) shareholders will have to wait until the first week of December for details of the new CEO’s plan for improving profitability at the railroad, BNN has learned.
A source familiar with the situation tells BNN that the changes will be “sweeping” and will include a plan to relocate CPR’s downtown Calgary headquarters to a less expensive location at a yard on the outskirts of the city. Other measures are expected to include a reduction in headcount, terminal downsizings and yard closures.
At the end of June, former CN Rail CEO Hunter Harrison was appointed CEO of CP after a contentious proxy battle launched by the company’s largest shareholder, Pershing Square Capital Management, which is headed by Bill Ackman.
The showdown saw Fred Green ousted as boss of the railway and the departure of former CP Chairman, John Cleghorn as well as several other board members.
Among the six major North American railroads, CP Rail has been the worst performer. Harrison has pledged to reduce the company’s operating ratio-- a key financial measure in the industry -- to 65 percent or better. The ratio is derived by dividing operating expenses by revenue, which means a lower number is better.
At of the end of the second quarter, CP’s operating ratio was 82.5 percent. Industry leader CN Rail reported an operating ratio of 61.3 percent in the second quarter. Hunter Harrison retired as CEO of CN at the end of 2009 after leading it to become the most efficient railroad in North America.
On the day his appointment was announced, Harrison told BNN he expected to have a “comprehensive plan” in place within 120 days, which would have put it at the end of October.
According to the source, the presentation of a detailed plan by CP Rail, now scheduled for early December, will take place in either New York or Toronto.