A Tale of Two Jims — by Tony Hatch

Union Pacific’s new CEO Jim Vena — the railroad’s former COO and longtime, well-known CN veteran — took the reins on Aug. 14. He started with a nice letter to UP stakeholders, not all of whom were initially enthusiastic.

Vena’s appointment was something of a “Dewey Defeats Truman” moment: It came as a shock to me and, judging by the +10% market reaction, I wasn’t alone. After all:

• Jim had been vetted before, by UP in 2019 and CN in 2021 (and 2016) — and, I would have to believe, by CSX last year.
• Instigating investor Soroban Capital Partners proposed the arrangement in February. If this was to be the conclusion, why take so long?
• Jim is 64. Was one issue the naming of UP veteran Beth Whited as president (and, as of now, heir-apparent) a key negotiating point/stumbling block?
• Many, me included, have taken UP’s public remarks as suggesting that they — like CSX — would look outside the industry. But new UP Chairman Michael McCarthy said they needed a CEO with “extensive railroad operating experience.”

Vena’s appointment bucks the recent trend of younger, growth-oriented execs (often former CMOs) installed as CEO, as we’ve seen named at Norfolk Southern, BNSF, CN and CSX — the new leaders of what I have been calling The Great Experiment.

Which brings us back to the great philosophical question: Who should run a railroad — COO or CMO? My position should be well known.

One COO has proven that he can be pro-growth, whereas others — notably, of course, Hunter Harrison — were known best (and appreciated by investors) as margin-enhancers (the high priests of the Cult of the OR). I have called Vena’s attempts backed by big investors (TCI, Soroban, etc.) existential questions for the future of the railway(s).

To be clear, I am talking about the COO title, not Jim Vena, personally. Some COO/CEOs cut costs, then step aside to let others take the railway to the next level. Others (think: Keith Creel) do both the cost cutting and the growth pivot.

But who will he prove to be: Hunter II or Keith II? And, boy, I know he will not like that comparison. That JV’s UP will go head-to-head with Keith I’s CPKC in what is shaping up to be a big battle adds a little more spice to the salsa.

Vena, of course, will say, no, he is Jim II (to honor the legacy of the late and former CEO Jim Young, who led UP from 2005 to 2012).

Not all stakeholders have been supportive; some saw this move as not being pro-shipper, pro-labor and pro-regulator (already an issue for UP). While the Street wants to see Hunter II, others are leery. But let’s wait to see who Jim II is.

He can point to the fact that the announcement of his appointment drove up UP’s stock by 10%. The last time he joined UP, as COO, he was the “$8B Man” — this time, he upped it to ~$13B. To be fair, investors in 2018 weren’t sure UP was really implementing PSR (remember the “get me a Canadian — stat!” movement?), so part of that — perhaps a large part — was reassurance. This time, a likely small to refute it. As I wrote above: Hunter II? Keith II? Or Jim II?

Boychuk, considered

Meanwhile, some rail observers were shocked by the Aug. 4 CSX announcement that Jamie Boychuk had resigned as EVP of operations. Others said they’d been waiting for it for months. Regardless, the announcement followed the pattern at CN (and their then-new CEO had rail experience): You can’t change-out a rail CEO without experience at a railroad. It’s been a year.

Again, the Street was in dismay; their love of the COO and the OR hasn’t diminished. The CSX downgrades were ... bonkers. Yes, CSX is running well now, and Boychuk left the railway at its recent peak. A job very well done. But since he took over, CEO Joe Hinrichs has been saying he’s all about culture change, so how come the shock?

(Editor's note: On Sept. 8, CSX announced the appointment of Mike Cory as executive vice president and chief operating officer to succeed Boychuk.)

Tony Hatch is an independent transportation analyst and consultant, and program consultant for Progressive Railroading’s RailTrends® conference. Email him at abh18@mindspring.com.