Changes happening at CP

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Changes happening at CP

Postby JayBee » Fri Oct 28, 2011 8:56 pm

Late Friday afternoon, just before the Stock Markets closed, activist Investor Bill Ackman, through his Pershing Square Capital Management company bought 12.2% of Canadian Pacific Railway Ltd. stock. Mr. Ackman has a reputation for shaking up companies whose stock he feels is undervalued. I expect that Fred Green is not having a good night tonight, and the troops in Calgary will be huddled tomorrow even though it is a Saturday to try and come up with a strategy to deal with this.

http://www.businessweek.com/news/2011-1 ... stake.html

John Beaulieu
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Re: Not Good CP News Tonight

Postby Engineer Spike » Thu Nov 10, 2011 1:20 am

This is not the first time. There was a hostle takeover attempt a few years ago. We don't need cuts, just someone who will put the company's long term future in mind.
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Changes happening at CP

Postby JayBee » Fri Dec 16, 2011 12:22 am

Some of the changes sought by William Ackman have begun to happen at Canadian Pacific. Today two new members have been appointed to the Board of Directors, both have significant experience in railroad operations;

The first is Mr. Ed Harris, who was until his appointment a consultant to CP. He briefly was the Executive Vice President of Operations at CP, but left after less than one year in the position. He had previously held the same position at CN.

The second is Mr. Tony Ingram. Like Mr. Harris, he has experience as the Executive Vice President of Operations at two previous companies, CSX and NS, where he is credited with instituting programs that increased fluidity and streamlined operating practices.

http://www.cpr.ca/en/news-and-media/new ... rtise.aspx
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Re: Changes happening at CP

Postby rhodtpr » Sat Dec 17, 2011 10:45 pm

Yes, changes are happening at CPR...but perhaps not quite what one would think.

IMO Ackman has invested in CPR for one reason only - to make money for he and the investors at Pershing Square. His takeout value for CPR stock is $90/share. Why wouldn't he just invest in another Class 1 railway with a better operating ratio?

Four reasons;

1. Ethanol...trains 666 - 667 - 626 - 627 and those in the future to come from the D M & E railroad systems;

2. Bakken Shale with both inbound supplies and outbound crude for refinement in the USA ably served by both CPR US & Canadian operations;

3. Marcellus Shale - again well served by D&H systems and CPR SOSA rail networks;

4. Powder River basin coal...again served by the D M & E network that has secured trackage into the basin.

Ackman is going to push for his own members from Pershing Square to sit on the CPR Board of Directors...he'll get it based upon recent decisions involving the CSXT railroad and general business practises that are common to both the US and Canada.

The latest two appointments to the CPR Board of Directors are CPR's checks to Ackman's soon to be established pawns...it will be business as usual, even with Ackman's proxies sitting on the board but this time watch the company's stock value grow as the play on energy takes hold.

I wish I had the money to invest in CPR stock but I'm just a simple locomotive engineer who is looking to retire in less than 5 years.

Cheers!
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Re: Changes happening at CP

Postby JayBee » Tue Dec 20, 2011 4:00 pm

rhodtpr wrote:Yes, changes are happening at CPR...but perhaps not quite what one would think.

IMO Ackman has invested in CPR for one reason only - to make money for he and the investors at Pershing Square. His takeout value for CPR stock is $90/share. Why wouldn't he just invest in another Class 1 railway with a better operating ratio?

Four reasons;

1. Ethanol...trains 666 - 667 - 626 - 627 and those in the future to come from the D M & E railroad systems;


Continuing income, but not a lot of growth, no plants under construction along CP's lines


2. Bakken Shale with both inbound supplies and outbound crude for refinement in the USA ably served by both CPR US & Canadian operations;


The potential inbound supplies look good for 5 to 6 years, but then they will drop off. Outbound traffic depends on what happens with the XL pipeline.

3. Marcellus Shale - again well served by D&H systems and CPR SOSA rail networks;


Looks good as far as inbound supplies, I would like to see CP get its US carload network in order, they have lost several sand loadouts due to their poor reputation for carload service.


4. Powder River basin coal...again served by the D M & E network that has secured trackage into the basin.


Deader than "Dear Leader" (Kim Jong Il ) The Powder River Basin is past its peak, particularly towards the US Midwest, East, and Southeast. Also Ontario is proceeding to close coal-fired powerplants. Any recovery in PRB shipments will depend on exports to Asia, which the DM&E concession is not suited towards.

Ackman is going to push for his own members from Pershing Square to sit on the CPR Board of Directors...he'll get it based upon recent decisions involving the CSXT railroad and general business practises that are common to both the US and Canada.

The latest two appointments to the CPR Board of Directors are CPR's checks to Ackman's soon to be established pawns...it will be business as usual, even with Ackman's proxies sitting on the board but this time watch the company's stock value grow as the play on energy takes hold.


My take was that the elections of Mr. Harris and Mr. Ingram were done to appease Mr. Ackman. He was concerned that the Board was too dominated by Mr. Green as none of the Outside members had any railroad experience. That has certainly changed. I think that it is likely that we will see a change at the EVP Operations position, and Mr. Franczak will be replaced or reassigned.
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Re: Changes happening at CP

Postby CPF363 » Fri Dec 23, 2011 7:51 pm

In the 1980s and 1990s, CP Rail was moving aggressively forward with system investment through acquisitions of other railroads. Examples of these were the purchase of the eastern end of the Milwaukee Road in the mid 1980s and then the Delaware & Hudson in the early 1990s. Why did CP management stop there? CP had the opportunity to acquire the western end of the Southern Tier Line when Conrail offered to sell it to them, but could not close that deal. Looking at a map, it is logical to connect the D&H to the TH&B via the western end of the Southern Tier through Niagara Falls. During the early 1990s, CP could have gone after the NYS&W giving them more of a direct line to the Port of N.Y. over eastern end of the Southern Tier. In 1997, they sold their lines in the Upper Mid West, only to re-acquire them plus the DM&E in 2007. Instead of selling these lines, could CP have looked at merger with Kansas City Southern when CN was merging with Illinois Central? Then, during the Conrail split between CSX and Norfolk Southern, could CP have received ownership of the old Michigan Central line verses trackage rights between Chicago and Detroit to connect their Southern Ontario lines with the Soo Line in addition to the entire Southern Tier Line and Croxton Yard in N.J. for improved access to N.Y. City? CP could have even tried to get one of the four lines across Ohio and Indiana to connect the Soo with the Southern Tier. While CP Rail is in pretty good shape physically and by no means a broken system, it just seems that CP management could have done more to when they had a chance to do so, and now they are in the position that they are in with reference to operating ratio and now takeovers. Will Mr. Ackman's purchase of 12.5% of the railroad and influence in their board bring new innovative ideas to top management in the future? We shall see.
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Re: Changes happening at CP

Postby JayBee » Sat Dec 24, 2011 1:57 am

Purchase of the Milwaukee was strictly a Soo Line initiative. Purchase of the D&H came after the CP decided to purchase full control of the Soo Line. Sale of the Corn Lines (IC&E) happened following the loss of friendly connections at Kansas City and before the Haverty Era began at KCS. The SP got their own access to Chicago, and BN and Santa Fe merged, resulting in much less traffic for the Soo via the Kansas City gateway.
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E. Hunter Harrison for President?

Postby JayBee » Fri Dec 30, 2011 1:45 pm

Mr. Bill Ackman has proposed a new man to the CP Board of Directors to replace current CEO Fred Green, the candidate is familiar to you all, Mr. E. Hunter Harrison. Mr. Harrison is reportedly interested in a new challenge, but cannot talk to CP until his non-compete agreement expires at the end of this month.
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Re: Changes happening at CP

Postby Minneapolitan » Wed Feb 15, 2012 9:40 pm

JayBee wrote:
4. Powder River basin coal...again served by the D M & E network that has secured trackage into the basin.


Deader than "Dear Leader" (Kim Jong Il ) The Powder River Basin is past its peak, particularly towards the US Midwest, East, and Southeast. Also Ontario is proceeding to close coal-fired powerplants. Any recovery in PRB shipments will depend on exports to Asia, which the DM&E concession is not suited towards.


Any proof coal is past its peak? As far as we on the DM&E know, CP is still buying property in Wyoming.

Here's another thing that really pisses me off about CP: They're ending business with small shippers along the line, apparently because while they make money, they get in the way from moving much bigger money. But right now, this winter, DM&E traffic is incredibly slow. We haven't seen it this slow in years, and that's business that could be putting guys to work. Take Del Monte Foods in Sleepy Eye, Minnesota, for example. Here's a place that sends out six boxcars every weekday full of canned vegetables. That's still 1,560 carloads a year (give or take) that is revenue! And it only takes about a half hour to serve (I know because I've done it). Correct me if I'm wrong, but the folks running CP are capitalists, right? Isn't their goal to maximize revenue? Yet here they are ending shipping relations with steady industries. Furthermore, this makes Del Monte reliant on trucks - which are simply too expensive given that Del Monte is shipping to points nationwide, and that's dangerous to a town in which Del Monte is the largest employer.

So the theory is that these smaller businesses - and the daily wayfreights that serve them - get in the way of higher priority trains. Maintenance certainly isn't an issue, because most of these industry tracks haven't been maintained in years - and are no more than fifty yards in length. It comes down to good railroading. Before CP started changing how the DM&E operates, the daily wayfreight crews were largely the customer service agents to the company! They decided what needed to be done each day, and communicated directly with the industries. It made money! But when CP initiated its way of operating, crews were no longer allowed to do these things, but were rather dictated by "MYPM"s (managers, said as 'MIPP-em') who are miles away on the phone and have no experience with these things - let alone easily accessible to CP customer service agents and dispatchers. Additionally, there's dramatically decreasing faith in CP dispatchers. The rumors we've heard is that these guys are hired off the street - and it shows! Allegedly, some of them are former air traffic controllers. Trust me, that doesn't help.

Anyway, they're all completely disconnected. It's a damn crime and a shame. CP is actively creating a lose-lose situation. The industries suffer, the crews suffer, and the company suffers!

And people wonder why CP has a poor operating ratio??
Nickel Plate Road should have merged with ERIE.

Duh.
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Re: Changes happening at CP

Postby CPF363 » Mon Feb 27, 2012 7:28 pm

Regarding the DM&E, what have been the overall benefits to CP since they purchased it? Has it produced any significant traffic to the rest of the system? Would the Powder River Basin be worth it for CP to go to and what would it cost? How much of DM&E is prepared to handle these heavy trains or does it have to be upgraded? If CP were to sell the DM&E, who would be interested in getting it? Would CP be able to effectively compete with BNSF on the Kansas City line if it were in better shape possibly gaining Chicago bound KCS traffic?
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Re: Changes happening at CP

Postby Tadman » Mon Mar 12, 2012 6:08 pm

Changes in ownership mean changes in policy and operation every time. They're experiencing the same thing at Marquette Rail, the formerly employee-owned shortline that just sold out to Rail America. It looks like a bad thing, but that's because the feet on the ground don't necessarily have the big picture, and maybe even the mid-level managers don't. In reality, management must get something for their purchase dollars - they generally don't buy another railroad just to buy it. They buy another railroad because they feel they can make more money somehow, either by changing operations, focusing on different traffic, moving things differently, etc...

Sounds like CP is moving three steps in advance to get its fingers into Powder River coal. While it sucks that they're turning away traffic short-term, it maybe necessary in order to implement long-term growth.
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Re: Changes happening at CP

Postby CPF363 » Thu May 17, 2012 8:13 pm

Here are the results of CP's 2012 annual meeting of shareholders:

http://www.cpr.ca/en/news-and-media/new ... 2-agm.aspx

Significant shakeup today at CP with John Cleghorn, Fred Green and four other directors are leaving the railroad and Ackman’s Pershing Square Capital Management getting all seven of their nominees to join the 16-member board. Begs the big question: What is next for Canadian Pacific under the new board?
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Re: Changes happening at CP

Postby toolmaker » Thu May 17, 2012 8:46 pm

Hunter Harrison wasn't mentioned or is that coming when the new board meets?
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Re: Changes happening at CP

Postby JayBee » Fri May 18, 2012 8:56 am

toolmaker wrote:Hunter Harrison wasn't mentioned or is that coming when the new board meets?


Mr. Harrison wasn't mentioned specifically, but as Mr. Ackman noted the pool of potential Candidates isn't very large. Mr. Stephen Tobias has been named interim CEO. Mr. Tobias was COO but never CEO at Norfolk Southern. I would expect the process to find a new CEO to take about one month. Interestingly in my opinion Mr. Tobias just gained a leg up on the possibility of becoming the permanent CEO. Successful resolution of the potential strike will be his first test. The question is, does Mr. Tobias want to be the CEO, I find it hard to believe that he wouldn't.
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Re: Changes happening at CP

Postby KEN PATRICK » Fri May 18, 2012 11:21 am

i believe the new management will raise prices. it's an unavoidable short term fix. what bothers me is cp's non-use of the jua with csxt on montreal to albany traffic. it is a no-brainer. csxt's avoided costs make for a nice profit to be shared by both railroads. why anyone is confused on this is beyond me. ken patrick
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