is making gains — and in some cases is ahead of schedule — in its four-year turnaround strategy, Chief Executive Officer E. Hunter Harrison said earlier this week in a speech to the J.P. Morgan Aviation Transportation and Defense Conference in New York City.
Harrison talked about the "fast track of change" the Class I has been on since he took over as CEO on July 1, 2012, following a "spirited" proxy contest that prompted the resignations of several CP executives, including President and CEO Fred Green, and board members.
"One thing that's marked this nine months or year is change, and if you don't like change at Canadian Pacific, it's not the place to be," said Harrison, according to a recorded version of his speech posted on CP's website.
Change at the top is continuing. The board is in the process of a total turnover, he said, and by the company's annual meeting in May CP probably will have three directors remaining of the original 15 board members who were in place prior to the proxy contest.
"So we've got a new group that's coming together, that's developed a certain chemistry, and we look forward with that guidance and leadership in taking the company forward," Harrison said.
Also, seven executive vice presidents on down to the vice president level have left the organization. Perhaps the most significant change on the executive side since Harrison's appointment was the naming of Keith Creel, formerly of CN, to the president and chief operating officer post a few weeks ago as part of the company's succession plan.
So far, the company's three major constituents — employees, customers and shareholders — appear to be "pretty happy" with the progress made to date, Harrison said. Over the past several weeks, he has been holding "town hall" face-to-face meetings with employees to explain why change is necessary at CP. While cultural change at CP will take some time, he has been impressed with the employees' embrace of change, he said.
Other points Harrison made about the turnaround plan include:
• CP is "ahead of schedule" on its goal to reduce headcount by 4,500 employee and/or contractor positions by 2016. "As we speak, that number is 3,000-plus," he said, later acknowledging the reduction could amount to closer to 6,000, depending on potential business growth.
• The Class I has improved customer service by revamping intermodal and merchandise train service to run faster trains. It cut a day off of intermodal service and reduced dwell times at terminals.
• CP's revenue growth is on target to increase in the high single digits this year.
• The railroad closed four hump yards in an effort to cut costs and improve operating efficiency, and is evaluating other real estate options to save on costs.
•The Class I likely will reach an operating ratio in the low 70s this year. "But, if things come together and everything hits their target, is there a probability of being lower than that? Certainly," Harrison said.
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