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24 February 2006

CPR Awaits "Tough Guy" at Top

CPR's incoming chief executive officer is sticking to his no-nonsense strategy of letting more people make key decisions in order to help maintain the railway's momentum.
 
Fred Green said yesterday that Calgary-based Canadian Pacific Railway Ltd. will be granting more leeway to managers in the field offices to make train scheduling and railcar loading changes that would speed up delivery times. That affects operations in centres such as Toronto, Minneapolis, Vancouver, Winnipeg, and Montreal.
 
Canadian National Railway Co. already has a decentralized system, but CPR isn't "blindly following" its larger, Montreal-based rival, said Mr. Green, who is currently president and chief operating officer.
 
"While there may be some structural and market differences, we are in the same industry, and it's our aspiration to minimize the gap between ourselves and any direct competitor. That's just smart business," Mr. Green said yesterday in an interview, a day after CPR announced that he will replace CEO Robert Ritchie at the company's annual meeting in May in Calgary.
 
Comparisons with CN "don't bother me. They motivate me," said Mr. Green, who stressed he is committed to narrowing the gap between CPR and CN, which has a better operating ratio - a key indicator of productivity that measures operating costs as a percentage of revenue.
 
Like using a sports playbook, CPR has an "execution excellence" program, where the goal is executing corporate plans, he said.
 
"I want people to understand that we are not satisfied that the operating ratio we have today is as good as it needs to be. We are working very diligently to do everything we can to address that."
 
CN shares have outpaced CPR stock over the past four years, but investors have been warming to CPR's story in 2006.
 
CPR shares fell $1.24 or 2 percent to close at $59.25 yesterday on the Toronto Stock Exchange, a day after setting a record high of $60.85. The stock has surged 22 percent so far this year, bolstered by an Asian trade bonanza and a boom in commodities.
 
"Fred is decision-oriented and results-oriented, and he's already proved that. He will make tough decisions," said Roger Cameron, director of public affairs at the Railway Association of Canada.
 
Mr. Green is spearheading a cost-cutting program that includes slashing 400 office jobs, or 15 percent of white-collar positions, by mid-2006.
 
"It's the good-cop, bad-cop routine. Rob played the good, and Fred the bad," said an industry official.
 
However, David O'Brien, former chairman and CEO of Canadian Pacific Ltd., said it's an exaggeration to portray Mr. Green's role as always playing the "tough guy."
 
CPR was spun off from the old Canadian Pacific conglomerate in 2001. Mr. O'Brien remembers Mr. Green successfully overseeing the day-to-day details of CPR's move to Calgary from Montreal in 1996, and recognized his potential back then. "We would give an award to an up-and-comer across the CP group of companies, and that year, Fred was the winner."
 
When Mr. Green was promoted to vice-president of operations and marketing in early 2004 it served as a test drive for the CEO position, because it was known that Mr. Ritchie would be retiring, Mr. O'Brien said. "Fred earned his spurs in the move to Calgary. And once he was promoted two years ago, the CEO job was his to lose. He could have stumbled, but he didn't."
 
Mr. Green is looking forward to taking over the throttle at CPR. "We are running our trains more efficiently and more quickly," he said.

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