Tuesday, November 6, 2007

TCI Addresses CSX Management Statements

TCI came out with a hard hitting letter is response to statements made by CSX (CSX) management after theirtheir initial letter on October 16th.

Calling management statements both "reckless" and "irresponsible", TCI contrasted statements both CSX and the CEO's of both Norfolk Southern (NSC) and Burlington Northern (BNI).

TCI, in its letter goes as far as calling CSX management "incompetent".

When one reads both letters it is clear the the management at CSX at best misunderstood the TCI letters and at worst purposely misstated it in a effort to discredit it. When your now adversaries own 8% of your stock (TCI, Atticus & Icahn) and you have a board meeting coming in May, this is not the tact to go. When you add to the equation that the entire board except for current CEO Ward stands for election then, making these folks enemies is just a real bad idea. We also cannot forget that this has gotten to this point due to CSX management simply not returning phone calls and refusing to meet with TCI.

TCI claims "Over the past year we have repeatedly, but unsuccessfully, attempted to engage in a constructive dialogue with the Board and top management of CSX on concerns we have about the business. Except for a single ‘one-on-one’ meeting with Oscar Munoz, top management and the Board have refused all our offers to meet privately. Over the past few months, CSX has refused even to return our calls or to allow us to attend meetings at CSX with an analyst and other investors." CSX has not denied these claims.

Also consider that TCI is also a shareholder in other US railroads and they have been willing to engage in an open and constructive dialogue with TCI. Through this, TCI has gained confidence in their abilities and strategies.

When TCI calls CSX's relation with both labor and suppliers "confrontational", based on what we have seen here, one must give that claim credence.

Of the major US railroads, CSX ranks at or near the bottom in velocity, dwell time, accident rate, labor /sales, cost inflation and cost per unit inflation. In short, TCI has a point in questioning why despite this, CSX CEO Ward is the highest paid in the industry.

In short, Ward has put himself on a CEO "death watch". TCI and its partners will gain board seats and their first act will be to eliminate the person who has push this situation to this point.

Doesn't anyone else wonder why Berkshire's (BRK.A) Warren Buffet bought shares in almost every railroad around but CSX? Buffett places a huge emphasis on management and his lack of action on CSX is yet another indictment of Ward & Co.

Enjoy this winter Micheal, it'll be a bad spring...

Read the new letter here

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