E. Hunter Harrison, CSX president and chief executive officer, remembered as legendary railroad manager

E. Hunter Harrison, president and chief executive officer of CSX Corporation, died Saturday. He was 73.

CSX is the nation’s third largest railroad and the largest in the east. Harrison took over the Jacksonville-based railroad earlier this year in a highly publicized move. In May, reports came out that he had a health situation that required him to use oxygen and work from home several days a week.

In a statement Saturday, the company said Harrison died in Wellington “due to unexpectedly severe complications from a recent illness.”

Harrison was considered a legend in the industry – respected by many but also deemed controversial at times. He is credited with turning around three railroad companies over a span of 50 years before coming on board at CSX.

“It is, of course, an understatement to say he was a “giant of the industry” … He was a multi-time Hall of Fame railroad manager. I always used to say he was a two-time Hall-of-Famer – likely on his way to a “three-peat,” railroad analyst Anthony B. Hatch of ABH Consulting, told the Times-Union.

Harrison “was always a straight shooter,” said Hatch, who had known him since 1990.

“He changed three railroads and really the whole industry and was in the process of changing his fourth [CSX] and really leaving his mark on the industry when he had to take the leave of absence that turned out to be even more serious than I thought,”

Hatch said Harrison, “the industry’s all-time de facto change agent,” will be missed.

Harrison focused on a strategy of cutting costs and streamlining procedures in an effort to improve efficiency throughout railroad operations.

“In terms of a railroad operating manager, he’s about as good as there ever has been. His record is extremely strong,” Larry Gross, a rail expert with FTR Transportation Intelligence, told the Times-Union in February.

“He’s a formidable presence in the industry,” Gross said. “He’s not a shy individual. But the rail industry is replete with people like him, throughout its history.”

However, Gross said Harrison hadn’t demonstrated the ability to grow the business. Harrison could increase profitability in an existing portfolio, but not grow it, Gross said.

“But no other railroad is growing either. The challenge of the next generation of railroaders is that they have to figure out a way to reverse decline in volume,” Gross said. “It’s not just a matter of increasing efficiency. That is not what you’d look at someone like Hunter to do.”

In a statement Saturday, Chairman Edward J. Kelly III of the CSX Board of Directors said the company has suffered a major loss.

“Not withstanding that loss, the board is confident that Jim Foote, as acting chief executive officer, and the rest of the CSX team will capitalize on the changes that Hunter has made,” Kelly said.

Kelly also said the board will “continue to consider in a deliberative way how best to maximize CSX’s performance over the long term.”

On Thursday, the company announced Harrison had taken medical leave. The company said only it was due to “unexpected complications from a recent illness.” The CSX board then named Foote, the chief operating officer, as acting CEO.

CSX’s stock was under $37 a share in mid-January when word of Harrison’s interest in the company first hit the news. It rose to over $47 in the next week.

It closed above $57 Thursday but lost 12 percent in premarket trading on Friday after the company announced his medical leave on Thursday night. It closed at $52.87 on Friday.

Harrison took the top position at CSX in March after hedge fund Mantle Ridge Capital bought a share of the company and pushed Harrison as president. He was head of Canadian Pacific at the time and a well-known in the railroad industry for turning around companies with what he called precision railroading.

Since then, the railroad has often been mired in controversy. Harrison had removed hundreds of locomotives, tens of thousands of rail cars and laid off at least 2,300 people with predictions of more.

The federal Surface Transportation Board has stepped in, saying it received complaints from companies about poorer service. Harrison said his strategy simply needed fine tuning, and that more changes were coming.

CSX’s stock had responded positively to Harrison’s reign. It was at $38 when word of his interest first arose and closed at $57.31 Thursday, though it saw a slight drop during that day. .

Rumors about Harrison’s health surfaced again in October when three top executives left CSX and Foote, who had worked with Harrison at Canadian National Railway, came on board as chief operating officer.

At a recent Credit Suisse conference, Harrison hinted a succession plan, saying that he was “trying to stay back a little bit” and let other executives take more control.

“I am there to help if they need me,” said Harrison, according to news reports. “But at the same time … this company’s got to be ready to deal, and it is going to be ready to deal, without Hunter Harrison. And that’s one of the steps in the succession.”

Hatch said Harrison passed away at a time when he had more to do and more he wanted to do.

“I think he had not quite accomplished what he wanted to do at CSX, clearly. But he has effected a lot of change and put somebody [Foote] in a position of power there that he trusted,” Hatch said.

Hatch also said CSX might not get as smoothly to the end of where they expected to be with Harrison at the helm, but they will get there.

“If his successors do a good job, we can say he installed a philosophy, a plan and a way of thinking about railroading that transcended the U.S.-Canadian border and is really good for freight railroading around the world. And that will be his ultimate legacy,” Hatch said.

Harrison had a four-year contract estimated at more than $300 million if he reached all his targets.

The CSX board also agreed to pay him the $84 million he was said to have forfeited when he left Canadian Pacific. That money was guaranteed even if he quit, according to reports.

Harrison owned a 32.5 acre equestrian estate in Wellington. Recently, Harrison paid $14.13 million to buy out his partner in the property and assume full ownership. Harrison had spent $12 million for 50 percent owners in 2010 and 2011. Last year, the partners listed the property for $45 million but did not sell it.

In extending its sympathy to Harrison’s family, the railroad said “he was a larger-than-life figure who brought his remarkable passion, experience and energy in railroading to CSX.”

Teresa Stepzinski: (904) 359-4075

Roger Bull: (904) 359-4296