Shareholders demanding changes in CSX managment!!

www.strongercsx.com
to read the letter sent to CSX by shareholder TCI

http://www.forbes.com/2007/10/17/csx-ea ... r=yahootix

CSX 3rd Q earnings beat estimates.....

TCI? Now were they not the ones several months ago demanding that CSX increase share price by raising shipper rates, increasing the share buy-back program and reducing capital outlays? I think that even now, they want a "re-evaluation" of the capital program. Don't think that means spending more money on track and equipment.

I saw this first on the UTU website., with the UTU all in favor. These guys are the kind of people the Snowman likes, despite their piety in saying that labor relations need to be improved. These people would stab you in the back as soon as they can for a higher stock price. I will take Ward over this crowd anytime.

matthewsaggie wrote:TCI? Now were they not the ones several months ago demanding that CSX increase share price by raising shipper rates, increasing the share buy-back program and reducing capital outlays? I think that even now, they want a "re-evaluation" of the capital program. Don't think that means spending more money on track and equipment.

Yep - in fact, the letter expresses the group's concerns about CSX's "reckless spending" on capital improvements. If these guys gain control of CSX, look out below.

There is more to it than those phrases. They note that spending on track and ties have suddenly jumped upward, after years of being assured that spending on the physical plant was adequate. This suggests either management is erratic, incompetent, or dishonest.

They also cite statements to stockholders of CSX's stated plan to spend more - seemingly for the sake of spending. Not mentioned was CSX's purchase/lease of new motive power...but it has to be affecting the books after at least eight years of reliance of "rent-a-wreck" locomotives from HLCX and others.

They are claiming management is "overcompensated." In support, they notice that Michael Ward is far and away the highest-paid CEO while CSX is in the bottom third of industry measurements of performance.

TCI claims there position is that they have no problems with generous pay for management - only unearned generous pay. Mike Ward's pay is but a drop in the bucket - but TCI seems to believe that waste and rewards for incompetence run throughout the system.

I don't know what kind of spending-cutback would come to be - probably I would not like it, given CSX's recent history. But there is MUCH fat that could be cut - the pretty new buildings being rushed up; the silly signs; the stupid movies-of-the-month; the exercise rooms for management; the whole top-heavy management structure.

I am mostly with TCI on this one.

Watch the move 'Wall Street'. I view TCI as a corporate raider, attempting to secure enough control of a company to loot any and all cash reserves and turn all other capital assets to cash which is then looted. Then they leave the company as shell with no financial resources to stave off a collapse into bankruptcy.

I have seen the movie.

There is no track record of these people conducting corporate raids - unlike Carl Icahn or George Soros. It's tough for an institutional investor to stage those sort of raids - unless it's a disciplined organization set up for the purpose, the chances of individual investors' revolting is high.

Be that as it may, raids occur when a business's current management is inept or can be made to seem so. Does CSX as presently operated seem like a well-run organization? Or does it seem like a bunch of guys at the top gaming the investors and shippers?

Four percent of a company, while it makes TCI the biggest single shareholder, is far from enough to gain control. And an institutional investor would have a hard time finding resources and justifying to its shareholders, buying heavily into only one company.

A corporate takeover only becomes approachable with twenty-plus percent control. And to actually take control, 51 percent of voting stock needs to approve it.

They're a long way from that. They've never tried that anywhere else; and I don't see them doing it here.

I for one am glad to see someone speak up to the Management at CSX, M Ward seems to be a shiesty ass crook in my opinion.
And they have alienated their labor force, how do you put your workers so far down and try to intimidate daily....screw M. Ward and the management at CSX.



Here is an updated letter from TCI.
http://strongercsx.com/CSXBoardLetterOct22.pdf

Ward fires back!

Hello, this is Michael Ward.

This week we announced another quarter of outstanding financial performance. Earnings per share from continuing operations were up 24 percent from the same period last year when you factor out insurance recoveries and tax settlements that affect the comparison.

At the heart of this performance? YOU. Safety and service are at an all-time high. In spite of some challenging short-term economic conditions - you are delivering a service performance that supports better pricing from our customers and better productivity in our operations.

As I told the investors during our conference call this week, we are no longer just satisfied with being better - we are aiming to be the best. I firmly believe that is entirely possible.

Just prior to our press release announcing this great third quarter performance, some of you may have seen the disparaging comments by TCI reported in the media. TCI, is a foreign-based hedge fund that claims to own less than five percent of our shares. It-s been in existence for less than five years, but promotes itself as being a long-term investor of CSX and other companies.

Over the past several months, TCI has offered a wide range of often inconsistent suggestions for our company. These suggestions appear to be part of a broader campaign to do what activist hedge funds do - fight for changes in a company to help the hedge fund achieve its specific short-term investment goals. Our strong third quarter performance helped put their complaints in the proper perspective. In fact, our performance over the past three years has been outstanding, as you know.

The Board of CSX will thoughtfully review TCI's ideas, as we would for any other shareholder. And you can expect that we will continue to emphasize a balanced approach to managing our capital - one that aggressively rewards shareholders while allowing our company to invest in tracks, trains and facilities to help us meet America's pressing transportation needs.

When we do that, we will continue to provide our customers with great service, create new opportunities for our employees, and build shareholder value for many years to come.

Thanks for listening, have a safe, productive day and I'll talk to you again next week.

Browns Town wrote:Ward fires back!

Hello, this is Michael Ward.

This week we announced another quarter of outstanding financial performance. Earnings per share from continuing operations were up 24 percent from the same period last year when you factor out insurance recoveries and tax settlements that affect the comparison.

At the heart of this performance? YOU. Safety and service are at an all-time high. In spite of some challenging short-term economic conditions - you are delivering a service performance that supports better pricing from our customers and better productivity in our operations.

As I told the investors during our conference call this week, we are no longer just satisfied with being better - we are aiming to be the best. I firmly believe that is entirely possible.

Just prior to our press release announcing this great third quarter performance, some of you may have seen the disparaging comments by TCI reported in the media. TCI, is a foreign-based hedge fund that claims to own less than five percent of our shares. It-s been in existence for less than five years, but promotes itself as being a long-term investor of CSX and other companies.

Over the past several months, TCI has offered a wide range of often inconsistent suggestions for our company. These suggestions appear to be part of a broader campaign to do what activist hedge funds do - fight for changes in a company to help the hedge fund achieve its specific short-term investment goals. Our strong third quarter performance helped put their complaints in the proper perspective. In fact, our performance over the past three years has been outstanding, as you know.

The Board of CSX will thoughtfully review TCI's ideas, as we would for any other shareholder. And you can expect that we will continue to emphasize a balanced approach to managing our capital - one that aggressively rewards shareholders while allowing our company to invest in tracks, trains and facilities to help us meet America's pressing transportation needs.

When we do that, we will continue to provide our customers with great service, create new opportunities for our employees, and build shareholder value for many years to come.

Thanks for listening, have a safe, productive day and I'll talk to you again next week.

that was to the first TCI letter, the link i posted today is in response to what you just posted

MistahQ wrote:I for one am glad to see someone speak up to the Management at CSX, M Ward seems to be a shiesty ass crook in my opinion.
And they have alienated their labor force, how do you put your workers so far down and try to intimidate daily....screw M. Ward and the management at CSX.



Here is an updated letter from TCI.
http://strongercsx.com/CSXBoardLetterOct22.pdf

Obviously you never had any dealing with the MASTER CROOK....John Snow!

TCI Fridays Blog
May we live in exciting times…Last week certainly proved to be (for us at least). In fact so much so that if we hadn’t published our first letter early in the week, all of the material CSX provided over the week would have resulted in several more pages of letter. So we have decided to introduce our own blog – TCI Fridays. Yes, we realize today is not Friday, but in honor of our investment we thought it fitting that we not be on time.

We were not expecting a red-carpet reception to the CSX Board room, or to be added to Michael Ward’s Christmas card list, but we were not expecting ‘scorched earth’ either. CSX responded to our letter of October 16th in a way so potentially damaging to CSX and other railroads that we found it necessary to send another letter to the CSX Board. Michael Ward and his management team went just short of calling CSX a non-profit (calling it a ‘public service company’) and denied the use of returns on replacement capital, only to be corrected a few days later by a fellow railroad CEO.

Michael Ward “What industry looks at the ROIC on a replacement cost basis? I don’t know of any industry that does that.”
Jim Young, CEO of Union Pacific, two days later “We look internally at replacement costs when we're looking at how we approach a business segment in terms of the cost numbers.”
We wouldn’t have thought it necessary to provide a $36 million CEO with an accounting lesson, but if that what it takes, that is what we will do. This second letter is available at http://www.strongercsx.com/CSXBoardLetterOct22.pdf

Now to set the record straight – CSX has NOT had “numerous meetings with TCI” unless you count our attendance at CSX presentations, group meetings, or (unintentionally) running into CSX management in a New York elevator bank. If you consider, as we do, a “meeting” to be a one-on-one meeting with real dialogue, there in fact have been no meetings between CSX and TCI. If you exclude the criteria of real dialogue, then there has been only one meeting with any CSX senior executive – a “listen only” meeting with Oscar Munoz (CFO), who was accompanied by both his internal and external legal counsel. We have had no meetings (by any definition) or even phone contact with the CSX Board.

Despite CSX’s unwillingness to engage in constructive dialogue with us, we have tried hard to share ideas with CSX management that we thought would enhance CSX’s long-term value. Under every layer we peeled and around every corner we turned in our research of CSX and the US rail industry, we found an opportunity. Opportunities ranged from improving safety to bettering service to reducing the cost of capital. Only CSX would criticize one of its shareholders for having too many value-creating ideas.

Is it unreasonable for a shareholder to question whether management should not take advantage of cheap debt to finance investment, or whether it had even considered whether a private equity transaction at a 50% premium made sense? Is it unreasonable for a shareholder to question why management doesn’t implement ECP brakes, a technology which could cut braking distances by up to 60% and thereby reduce accidents, increase capacity and generate 50% returns on capital? Similarly, is it unreasonable for a shareholder to question why management isn’t more aggressive about implementation of positive train control, or other technologies used around the world to enhance rail service and safety? The United States is a global leader in technology adoption, why should our railroads be such a glaring exception?

We do not think it is unreasonable to ask these questions. Nor do we think it is unreasonable to question why CSX shareholders should tolerate poor corporate governance and poor operating performance. These issues are not new, and neither is our raising them.

“The CSX management and Board have been unable to properly answer or, in some cases, even unwilling to engage with us on the tough questions. They seem to think it’s inappropriate for shareholders to challenge them. Well we must ask the tough questions because it’s not clear that the Boards are.”
We said this over five months ago in a public speech. Among the questions we asked then were:

Why does CSX seem to consider it an accomplishment that its operating metrics are better than last year? Shouldn’t it focus more on the fact that the gap in operating ratio between them and the leaders (CN and NSC) is actually widening?
Why doesn’t CSX have explicit operational targets when it’s clear that its operations are under-performing? The targeted operating ratio can be accomplished just with price, so does management not believe there is opportunity on the cost side?
Why does CSX say safety is a capex issue when it has 50% more human caused accidents per mile than NSC, and when 17 of the 20 safety faults the FRA highlighted were human errors or management failures? You don’t need capex to put up the hand-brakes in railcars.
Why despite this performance, did the Board of CSX make Michael Ward the highest paid CEO in the industry ($36m in two years)?
Five months later, we are still waiting for answers. (We now understand how shippers feel…)

One question has however been answered, by CSX’s third quarter results. For the first time since we have been asking management whether there was an opportunity to improve productivity, CSX management showed some signs of focus on productivity and cost discipline. However, as Union Pacific’s results proved only two days later, whatever CSX is doing it can be done better. CSX’s volumes fell 4% in the quarter, and in that context they managed to keep their operating costs (ex-fuel and depreciation) roughly flat (a marked improvement versus prior quarters where volumes also fell and yet costs rose). Union Pacific not only managed to grow volumes, but despite volume growth they managed to cut costs by 2%. That is real productivity. Over the past twelve months UP’s operating costs per unit have only grown 2.5%; CSX’s have grown by a whopping 6%. With numbers like these, can anybody argue we shouldn’t expect more from CSX?

Interesting times indeed…