ATLANTA – Norfolk Southern today urged shareholders to back its board and management team in its proxy battle, saying that the plans touted by activist investor Ancora Holdings amount to a “slash and burn” strategy that would hurt service and safety.
Ancora wants to gain control of the NS board and name former UPS executive Jim Barber Jr. as CEO and former CSX operations boss Jamie Boychuk as chief operating officer. Absent a settlement, NS shareholders will determine the matter at the railroad’s May 9 annual meeting.
In a 12-page letter to shareholders, NS took aim at Ancora’s plan to reduce the railroad’s operating ratio to 60% within 14 months.
NS said the cost-cutting necessary to reach the operating ratio target would require the furlough of 1,500 to 2,000 employees, which would “compromise and reverse our safety improvements” and result in increased regulatory scrutiny from both the Surface Transportation Board and the Federal Railroad Administration.
Ancora’s “reckless approach,” NS said, would lead to poor service, missed growth opportunities, and damaged customer relationships.
“It is not surprising to us that Jim Barber would endorse these targets, as he has never been a CEO, has no railroad experience, and doesn’t know enough about our industry to see the risks of Ancora’s slash-and-burn timetable,” NS said.
NS said Shaw’s long-term strategy – which reduces the emphasis on the operating ratio over the short term and relies on not furloughing train crews during downturns – will “capture outsized gains during an economic upcycle.”
NS said Shaw is a “proven, decisive leader, and the right CEO to take Norfolk Southern forward. John Orr’s appointment as COO will accelerate our operational improvements.”
Orr, a former Canadian Pacific Kansas City and Canadian National official, was named chief operating officer on March 20. NS’s letter to shareholders sought to burnish Orr’s Precision Scheduled Railroading credentials.
NS touted the Orr-led effort to turn around CPKC’s Mexico operations last year, as well as the operations, productivity, and safety improvements Kansas City Southern made while Orr was its chief operating officer.
“John is a firm believer in our strategy and, in the nearly two weeks since his appointment, has spent time in the field assessing our network firsthand and identifying key operational priorities,” NS said.
At NS, Orr has initiated a safety blitz to reinforce best practices, assembled a task force and war room in the railroad’s Network Operations Center, and completed a heat map that identifies bottlenecks that are draining resources.
Orr has identified two major hump yards as “high performance terminals where he has line of sight to 33% improvement in dwell time in the next 60 days.” NS did not identify the yards.
Ancora has been critical of Norfolk Southern’s lagging operational and financial performance, as well as the railroad’s response to the disastrous Feb. 3, 2023, hazardous materials derailment in East Palestine, Ohio.
NS said it remains open to compromise with Ancora, and said it has offered settlements on multiple occasions that included “significant board representation.” But the Cleveland-based activist investor has rejected those offers, insisting that Shaw must be replaced.
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