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September 2012
— by Pat Foran, Editor
John Fenton has spent the better part of 30 years serving the rail industry as a turnaround specialist. Now, he wants to turn his lifelong dream of operating a railroad holding company into a reality.
After a two-year stint in the transit world working to change the safety culture at southern California's Metrolink, Fenton returned to the freight-rail realm this spring. In mid-May, he signed on as president and chief executive officer of Patriot Rail Corp. after SteelRiver Infrastructure Partners acquired all of the short-line holding company's capital stock through infrastructure investment vehicle SteelRiver Infrastructure Fund North America LP.
Fenton's career route would fill in a North American rail map nicely, with stops at four Class Is (six if you count Class I predecessors), a commuter-rail agency, one large non-rail company and, now, two short-line holding companies. His pursuit of "total safety culture" resonates beyond railroading. His tendency to leave organizations in a better place than he found them does, too. Now that Fenton has taken his talents to Boca Raton, Fla.-based Patriot Rail, the presumption among those who know him best is that he'll help the owner and operator of 13 short lines become a bigger player on the freight-rail scene.
"He's hard driving, intelligent and able to think strategically," says longtime railroader Ab Rees, a colleague and friend of Fenton's for 30 years. "He's able to think beyond the clutter and the noise, and he treats people properly — he's never forgotten where he came from. I've been a mentor for many young men over the years because when I started out, that was what the older officers did for me. Basically, John's the best manager I've ever seen."
Fenton fans suspect the root of his success resides with, well, his roots. Fenton was born and raised in Bloomington, Ind.
"John bleeds ‘Hoosiers,'" says Metrolink Chairman Richard Katz, who worked with Fenton the past two years. "In L.A., we weren't used to that Midwestern charm. If they make a promise or commitment, they cut off their arm before they go back on it."
In 1977, Fenton enrolled at Indiana University in Bloomington. For three semesters, he majored in accounting, but it wasn't for him. Fenton opted instead to study transportation.
"I'm more operationally oriented," he says.
Fenton put that orientation to good use at a part-time job at nearby Crane Naval Base.
"They had a base railroad there that hauled ammunition," he says. "It was my first experience working on the railroad."
That hands-on work, plus a regulatory environment that was in flux thanks to the passage of the Staggers Rail Act of 1980, made a career in rail that much more appealing. When Fenton graduated in December 1981 with a B.A. in business administration and transportation management, he was ready to ride the new rail frontier. In 1982, he entered the Missouri Pacific Railroad's management training program. Fenton's first assignment was to serve as manager of train operations in Longview, Texas.
"He impressed me right away," says Rees, who was a Dallas-based Missouri Pacific general manager when Fenton was in Longview. "He was very hard working. He learned everything he could when he was there."
Fenton subsequently held a series of the proverbial "increasingly challenging" positions during the next several years at Union Pacific Railroad, which acquired the Missouri Pacific in late 1982, including a four-year stint as manager of train operations in Los Angeles.
"Cajon Pass, the Basin — L.A. is an extremely challenging place to run a railroad," Fenton says. "It was a wonderful learning experience."
While he was in L.A., learning was a 24/7 gig. In 1990, Fenton earned a master's degree in systems management from the University of Southern California.
"Unless you've been a trainmaster, you don't understand how hard that would have been," says Rees. "To be working 12 to 14 hours a day, and get a master's at night, that's an impressive accomplishment."
Adds Art Shoener, a Patriot Rail board member who met Fenton in the early 1980s when Shoener was a Missouri Pacific assistant GM in Dallas: "He's an out-of-the-box thinker, a very organized guy and a good leader. He knows how to work with people, even on the political side, with all the work he did in the L.A. Basin."
The L.A. experience also helped shape what Fenton, whom colleagues call as keen an observer of the human condition as they've ever been around, termed his "philosophy."
"It's all about people — you build your success through safety performance," Fenton says. "If you're managing safety well, you can't help but have the rest of the business follow suit. I learned a lot about managing people, about managing safety. And when you provide an environment where people feel valued, you're going to have a lot of success."
During the next two decades, Fenton would have many opportunities to put that approach to the test.
In 1990, Rees, who'd left UP to become vice president of operations for the Santa Fe Railway, asked Fenton to join him. Ready for a new challenge, Fenton signed on as the Santa Fe's assistant superintendent in Amarillo, Texas. By 1992, he'd been named director of safety, which required him to relocate to Chicago.
"Railroads do a tremendous job around safety — they all have great numbers," Fenton says. "But to take safety to the next level, you need to focus on system safety and safety leadership. It's about total safety culture."
During the next two years, the Santa Fe experienced a "dramatic turnaround in safety" in terms of numbers and the harder-to-quantify measure of safety culture improvement, Fenton says.
Rees wasn't surprised.
"In every organization I've seen him in, he's had a huge impact on the safety process," Rees says. "He also improved the operation financially."
When Rees left the Santa Fe in 1995 to join Kansas City Southern, he recruited Fenton again — this time, to serve as VP of transportation. Rees wasn't the only railroader who recognized Fenton's talents. In 1997, Canadian National Railway came calling, asking Fenton to be the newly privatized Class I's vice president and general manager of U.S. operations. But three years into his CN stint, Fenton pressed the "pause" button.
"It was right after CN's Illinois Central acquisition, and there was a push to start the integration process," he says. "That was not something I wanted to do at the time."
What did Fenton want to do?
"I was going to get my Ph.D. and decompress," he says.
Nine months into his doctoral pursuit, Fenton says he discovered he was more of a hands-on "practitioner" than an academic. He certainly hadn't given up on his quest to find the right rail company to help build.
It didn't take long for him to find his next opportunity, or for it to find him. But it wasn't in rail country.
In the early 2000s, an accounting scandal led to the ouster of most of the leadership team at Waste Management Inc. and Fenton was recruited to help right the ship. From 2001 through early 2007, he was vice president of the 10,000-employee company.
"It was very entrepreneurial at Waste Management, as big as Waste Management is — it was more like managing a stand-alone business," Fenton says. "The experience I got there rounded out my operations background. I learned about marketing, sales and finance, and pricing."
He knew, though, he'd get back into rail, and in 2007 he did: He was named president and CEO of OmniTRAX Inc. Owned by The Broe Group, OmniTRAX is a player in a range of transportation businesses, from short-line railroads to terminal services to bulk transloading. OmniTRAX also has a real estate unit.
"What makes railroads such a good investment is all the development potential on a rail line," Fenton says. "OmniTRAX gave me another way to look at things."
In 2009, he saw an opportunity to broaden his horizon once again. He became an operating partner in CIH Capital Partners, an investment banking group founded by former CSX Transportation Chief Operating Officer Al Crown.
"Al was putting together a management team to go out and do rail acquisitions, and I was very interested in being part of it," Fenton says. "It was a way to learn and open up doors. It helped me refine my ideas about business growth and acquisitions, and to think about what it would take to build the right type of [railroad] holding company."
Fenton spent a year refining those ideas. Then, as he puts it, "the Metrolink thing came up."
The incident that ultimately led Fenton to the southern California commuter-rail agency occurred two years earlier. In September 2008, a Metrolink train collided head-on with a UP train in Chatsworth, Calif., killing 25 people and injuring 135. The collision prompted a federal investigation into Metrolink's safety and operating practices. It also led to the passage of the Rail Safety Improvement Act of 2008, which mandated that more than 40 U.S. railroads implement positive train control by 2015's end.
The incident led to Metrolink management changes, too. By this time, Fenton's safety and turnaround reputations preceded him. Once again, a recruiter called. Agency officials wanted someone who'd help reshape the organization's culture, and that's what they got in Fenton, says Metrolink's Katz, who in 2010 was the agency's vice chair.
"When he came in for the interview, he was the only one that presented a plan on what we needed to do and how he'd handle it if he were the CEO," Katz says.
In April 2010, the Metrolink board asked Fenton to serve as CEO.
"Metrolink was one of those unique situations, so I took time out from what I was doing from the rail acquisition standpoint," Fenton says. "I wanted to be part of it."
As CEO, he plunged right in, launching an agency-wide reorganization, putting new leadership in place, boosting ridership and initiating PTC implementation.
"Before he got here, we had put together a review committee punch list of about 160 items, which we thought was pretty detailed," Katz says. "John told us we were just scratching the surface, that it was not a ‘deep dive,' which is a phrase he used a lot."
Fenton enlisted a series of safety consultants and conducted audits. And as ever, he preached the total safety culture gospel.
"We all thought we had been thinking that way until John came in and showed us what it really meant," Katz says.
Last year, Fenton also helped forge a Metrolink-University of Southern California Viterbi School of Engineering partnership. The idea: create an advanced rail system safety certification program designed to standardize safety leadership principles. On March 20, Metrolink hosted a "Leading Organizations Safely" workshop to foster dialogue about the importance of aligning and standardizing safety leadership principles and techniques. Two months later, the pull of the Patriot Rail post prompted Fenton to pack up and move once again.
"It wasn't an easy decision," he says. "I probably spent two of the most gratifying years of my career at Metrolink."
Fenton expects his Patriot Rail years to be even more gratifying. As the leader of a short-line holding company that owns and operates 13 short lines totaling 500 rail miles in 13 states, Fenton believes he can make that dream of building what he calls "the right kind of railroad holding company" come true.
"It starts with SteelRiver," he says. "One thing that was important to me was their interest long term. These guys have a 20-year investment horizon. Who else is doing that, other than Warren Buffett?"
"They aren't flippers, as some private equity firms are," adds Patriot Rail board member Shoener.
Moreover, Fenton believes the SteelRiver team shares his core values.
"When you talk to SteelRiver, they talk about safety. They talk about culture. They talk about treating people the right way. They talk about making long-term investments," he says. "That is the kind of company you want to do business with."
Delivering that message to Patriot Rail's 200 employees is a top near-term priority. On the heels of SteelRiver's buy-in and the management changeout — as part of the transaction, Patriot Rail Founder, Chairman, President and CEO Gary Marino retired after the transaction closed — Fenton says one of his aims is to "calm down the organization and get them refocused back on what you're about."
Fenton also needs to make sure Patriot Rail's customers and five Class I partners — BNSF, CSXT, KCS, Norfolk Southern Railway and UP — know what SteelRiver's support means.
"Today, it's all about the supply chain and with SteelRiver, we have a logistics part of the business," he says, citing SteelRiver investments Portus, a terminal lift operator in Jacksonville, Fla., and Seaonus Group, which offers stevedoring, terminal services and warehousing in Jacksonville, Mobile, Ala., and New Orleans. "Now, when we go to talk to customers, we can talk about that 20-year investment horizon and we talk about being able to generate value."
They also can talk up Patriot short lines' service, which Fenton says was top notch before he got there.
"Patriot has great relationships with their customers and Class I partners, and we need to continue to create value for them," he says. "I'm a firm believer in blocking and tackling. It's like Vince Lombardi and that famous [Green Bay] Packers sweep — everybody knew they were going to run it, they still ran it and they still won."
Patriot Rail's "sweep" is more of a play with multiple options.
"What are we going to be good at? Service. Safety. Business development," Fenton says. "We're well capitalized. We've got good locomotive power. We've got a great management team with a lot of Class I experience. We can provide what customers need to be successful. It's all about how you grow and build your business."
Acquisitions, too, are part of the growth plan. Fenton says he'll be on the lookout for deals, characterizing himself as a "strategic" buyer.
"One thing I will focus on is building out what we have and making sure that we attract industry on those lines," he says.
About that, Rees, who's serving Patriot Rail in a consulting capacity, has no doubt.
"[Fenton is] a hands-on CEO who will grow the company," says Rees, who in mid-August accompanied Fenton on trips to visit three Patriot properties and the customers they serve in Temple, Texas; Columbus, Miss.; and Mount Pleasant, Tenn. "This company will be much larger — and much improved — in a short time because of his leadership."
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