Orr Moves East from CPKC to NS (Updated)
Written by William C. Vantuono, Editor-in-Chief
Norfolk Southern Executive Vice President and Chief Operating Officer John Orr
Veteran railroad operating officer John Orr has departed Canadian Pacific Kansas City as Executive Vice President and Chief Transformation Officer and joined Norfolk Southern as EVP and COO, effective immediately. Orr replaces Paul Duncan, who departed NS “to pursue other opportunities,” NS said.
CPKC agreed to a waiver of Orr’s non-competition agreement to allow him to work for NS “in exchange for certain considerations,” CPKC said. The CPKC/NS agreement includes a one-time waiver fee of US$25 million payment from NS to CPKC plus certain operational and commercial considerations related to the Meridian Speedway and the Meridian Terminal “that will expand competition and unlock additional value related to CPKC’s proposed Meridian & Bigbee Railroad (MNBR) acquisition,” CPKC said. “NS has also agreed to temporally limited no-hire and non-solicitation restrictions for a short list of employees of CPKC. Orr will remain subject to his non-solicitation restrictions. The role of Chief Transformation Officer will not be replaced, and Orr’s portfolio will be integrated into CPKC’s existing operational structure.”
Orr was appointed CPKC Executive Vice President and Chief Transformation Officer on April 14, 2023, the day the Canadian Pacific-Kansas City Southern merger was completed and memorialized with driving of the ceremonial Final Spike in Kansas City. Prior to this, he served as Executive Vice President Operations for KCS from 2021 through 2023. Orr began his career at CN in 1985 as a conductor. Over the years, he held various operating and network positions at the company, ultimately being promoted to Senior Vice President and Chief Transportation Officer. Orr holds a Bachelor of Arts in environmental studies from the University of Waterloo and completed the Advanced Management Program at Harvard Business School.
“Throughout his four-decade career, John Orr has earned a reputation as a proven leader in applying scheduled railroading principles to drive sustainable long-term value creation,” NS said. “He spearheaded the turnaround of CPKC’s Mexico operations by successfully implementing a high-efficiency operating model, shaped and guided the execution of KCS’s service-focused scheduled railroading initiatives and drove significant improvements in CN safety and operational performance. He rapidly remediated CPKC’s challenged Mexican operations by restoring service levels and resiliency, which resulted in significant operating improvements across train speed, terminal dwell time, car miles, locomotive productivit, and service experience for the customer. He is an award-winning expert and author in PSR operations, having worked under Hunter Harrison at CN, and was honored as one of Railway Age’s 2023 Readers’ Influential Leaders.”
Reporting directly to NS President and CEO Alan Shaw, Orr will oversee NS’s railway operations, including safety, transportation, network planning and operations, engineering, and equipment maintenance. He began his career as a CN conductor and served as a union representative for 15 years. During his tenure at CN, Orr held a variety of positions including chief safety and sustainability officer and “was recognized for driving numerous process improvements, mentoring programs and progressive safety culture initiatives,” NS noted. “His experience as a frontline railroader and an executive informs his approach to team building, employee development and engagement with regulators. Ultimately, this enables him to drive new levels of safety, service, growth, and operating efficiencies.”
“On behalf of the Board of Directors and the CPKC family, I would like to thank John for his contributions and impactful leadership,” said CPKC President and CEO Keith Creel. “I have had the pleasure to serve and lead with John directly or indirectly for over the past two decades. His strong operating acumen and leadership capabilities has enabled him to build the strong team currently leading our CPKC Mexico operations. As a result, the team is ready to take the reins and continue to build on the operational momentum generated since this historic combination took place last April. As leaders we are charged to leave our organizations better. John has undoubtedly impacted KCS and CPKC in a positive way, for which we are grateful.”
“John Orr is one of the most respected railroaders in the industry, with decades of hands-on experience leading successful operating plans,” said former KCS President and CEO Pat Ottensmeyer. ”He was instrumental in executing a scheduled railroading strategy at Kansas City Southern that significantly improved service and productivity, and led to sustainable performance improvement. Having worked side by side with John, I am confident that his strategic vision, steadfast commitment to safety and deep expertise, will make him a tremendous addition to Norfolk Southern’s team.”
“I have great admiration for Norfolk Southern and am honored to join this iconic railway at such a pivotal time in its history,” said Orr. “I have deep respect for Alan and the transformation he is leading through the pursuit of an industry-changing strategy. The company has an extraordinary network and I want to build upon the strength of the franchise. I am excited to work with the full leadership team and the company’s dedicated craft railroaders to enhance operating performance and strengthen Norfolk Southern’s industry leadership for years to come.”
“John is a deeply respected and accomplished leader, and is the right COO to ensure execution of our strategy of balancing safe service, productivity and growth,” Shaw said. “He has a proven ability to build strong relationships with customers, regulators, unions and industry partners. His performance history as a disciplined and thoughtful operator makes him an ideal fit as we look to execute our balanced strategic plan that will deliver top-tier earnings and revenue growth at industry-competitive margins. John recognizes a high level of service is critical to delivering for our customers and for sustaining growth. I have full confidence Norfolk Southern is positioned to execute our ground-breaking strategy, leveraging our unique franchise strengths. I want to thank Paul Duncan for the leadership, passion and dedication he brought to Norfolk Southern throughout his tenure. His contributions were instrumental in enhancing our safety culture and improving our service product. On behalf of the management team, I wish Paul all the best in his future endeavors.”
NS Board Chair noted that Shaw and the Board “took decisive action in recruiting John, an exceptional talent who will help accelerate the execution of our strategy and deliver results for our shareholders. John is a proven railroad operator, and we are confident he brings the right skills and experience to drive profitable growth over the long term. Importantly, he shares our commitment to the critical cultural transformation at Norfolk Southern that values our employees, customers, shareholders and communities.”
NS Boad Member and former CN CEO Claude Mongeau added that Orr “has a solid track record of operational excellence and, with four decades of broad industry experience, is clearly one of the most effective operating leaders in the rail sector. I worked closely with John at CN as we first implemented scheduled railroading with a more customer-centric agenda, and I can vouch for his unwavering commitment to safety. I’m confident that he will help the NS team deliver on its balanced strategy to drive top-tier revenue and earnings growth at industry-competitive margins.”
TD Cowen Insight
“CPKC’s Mexican operations were heavily congested when the merger closed in April 2023, but have shown notable improvement since then, based on the efforts of a Mexican task force of more than 100 employees led by John Orr,” notes TD Securities Inc. Managing Director Institutional Equity Research Cherilyn Radbourne. “CPKC’s Mexican operations moved the highest GTMs/day in its history during the month of February, and as such, we believe that now is a natural time for Orr to depart CPKC, with the heavy lifting complete. CPKC will not be replacing the role of Chief Transformation Officer and will integrate Orr’s responsibilities into its existing operational structure.”
“In exchange for releasing Orr from his non-compete agreement with CPKC, the railroads negotiated a US$25 million payment from Norfolk Southern, and certain operational and commercial considerations related to the Meridian Speedway and the Meridian Terminal. The latter are expected to unlock further value associated with CPKC’s pending acquisition of Genesee & Wyoming short line Meridian & Bigbee and a related agreement with CSX to create a new service linking the Southeast with Texas and Mexico.
“We do not expect to get much further detail on the Meridian Speedway-related concessions, but they could be slightly positive, particularly if they relate to Norfolk Southern’s exclusive right to interchange intermodal traffic with CPKC at Meridian, Miss., which CSX objected to during the CPKC merger approval process, and Norfolk Southern’s assertion that it has an option to acquire the Meridian Terminal in 2024, which CPKC has disputed. The Meridian Terminal is located in the strategically important Dallas area (Wylie, Tex.).
“Norfolk Southern has also agreed not to hire or solicit a short-list of key CPKC employees for a limited time period, which protects CPKC’s bench-strength.”
“NSC hired John Orr from CPKC as COO effective immediately,” noted TD Cowen Managing Director, Industrials – Airfreight and Surface Transportation and Railway Age Wall Street Contributing Editor Jason Seidl. “We are encouraged by the strong addition to the exec team, but he did not come cheap: (1) $25MM cash, and (2) several operational concessions. NSC updated 2H OR guidance that is better than consensus forecasts, and LT guidance that is 140bps better than previous LT outlook, at a minimum. PT to $253 and reiterate Market Perform.
“Amid a proxy battle with activist investor Ancora, NSC announced the appointment of John Orr as COO and offered updated financial targets in a proxy filing earlier today. Orr, who is well known to anyone in the rail space, joins NSC from CPKC, where he was most recently EVP and Chief Transformation Officer, by way of an agreement between the two Class I’s that waives his non-compete. His background in the rail industry started with the CN where he worked in various positions including SVP & Chief Transportation Officer. Indeed, Orr is a well-respected PSR executive, and we view NSC’s move to enlist him favorably. We do note, however, that his addition did come at a price for NSC as the Atlanta-based railroad forked over a $25MM cash payment and gave up several operational concessions to CPKC.
“Specifically, NSC’s agreement with CPKC includes a stipulation that allows for greater operational flexibility with CSX on the MNBR line, which CPKC seeks to acquire. Recall that CSX has an intermodal partnership with CPKC and the two Class I’s propose to jointly operate the MNBR line. There were also agreements by NSC to allow certain CSX traffic over the Meridian Speedway and improved access to the terminal in Dallas.
“NSC provided updated margin guidance that called for (1) OR of 64-65% in the second half of ’24, and (2) a sub 60% OR in the next three to four years. 2H margin guidance came in worse than our previous forecast, and we adjust our model accordingly, though we note consensus 2H avg. OR was ~65.3%, so 2H consensus should be revised upwards. Just last quarter, management provided LT OR guidance of 100-150bps annual improvement (off of 67.4%), and run rating that an extra year (to compare to updated LT guidance), new guidance suggests 140bps better than old guidance (using high end 150bps annually for four years). Recall previous LT guidance was one of the core reasons we downgraded NSC earlier this year, as we believed LT margin expectations were not closing the gap with peers. That said, we are incrementally more positive about the addition of Mr. Orr, as well as management’s apparent stronger focus on margin improvement.”
