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Rail News: Canadian Pacific

CP has 'clear plan' to lower operating ratio and drive growth, Chairman Cleghorn tells shareholders


Today, Canadian Pacific announced that Chairman John Cleghorn sent an open letter to shareholders that reiterates the Class I’s plan to achieve a low-70s operating ratio in the next three years, and provides an update on the Class I’s multi-year plan and other developments.

In the letter, which is dated Jan. 9, Cleghorn stresses that:
• the multi-year plan endorsed by the board will drive volume growth, expand the railroad’s network and control costs;
• the board fully supports President and Chief Executive Officer Fred Green and the management team;
• Pershing Square Capital Management L.P. advocates a change in management, but has not presented any “detailed, credible” plan;
• Pershing Square “does not fully take into account” structural differences between CP and its peers, as well as rising annual pension costs associated with the railroad’s legacy pension plans;
• Pershing Square suggests an “unrealistic” operating ratio reduction at a pace never before achieved by any railway management team; and
• the board is open to shareholders’ views and encourages Pershing Square leader William Ackman to accept an offer to join CP’s board and participate “with full knowledge of the facts” in the execution of the multi-year plan.

The board is working closely with management and monitoring CP's performance, and will continue to hold Green and senior managers “fully accountable” for delivering the multi-year plan, Cleghorn wrote.

“This plan has been specifically designed to generate the best possible operational and financial results from CP's unique assets and circumstances,” he wrote.

Board members are confident in the company’s ability to reach an operating ratio in the low 70s in the next three years, Cleghorn says.

“[And] we will not stop there — as we achieve our goals, we will set new targets,” he wrote.

On Dec. 30, a news item published in Toronto’s Globe and Mail claimed board members were under mounting pressure from Pershing Square to shake up top management and had approached former CN President and CEO E. Hunter Harrison about assuming CP’s top post. However, Cleghorn said the board hadn’t requested a meeting with Harrison.

Contact Progressive Railroading editorial staff.

More News from 1/9/2012