Equities
Cleveland-Cliffs supports Ancora's bid for leadership change at Norfolk Southern, nominating seven directors and a new CEO.
By Alex P. Chase
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Cleveland-Cliffs Inc., a prominent US steel producer and major customer of Norfolk Southern Corp., has publicly backed Ancora Holdings Group's campaign for significant changes at the railway company. This support includes the installation of seven new directors and the appointment of a new chief executive officer at Norfolk Southern. Lourenco Goncalves, CEO of Cleveland-Cliffs, emphasized the company's belief in shareholder activism, particularly when the activist has a clear plan and the capability to execute it. Despite this stance, Goncalves assured that the outcome of this proxy fight would not affect Cleveland-Cliffs' business relationship with Norfolk Southern as either a customer or supplier.
Under the leadership of CEO Alan Shaw, Norfolk Southern has been working to enhance relationships with customers and unions. This initiative came after years of aggressive cost-cutting measures that, while improving profit margins, led to inconsistent service quality and dissatisfaction among workers. Shaw's strategy included maintaining a buffer of workers during periods of reduced freight activity to ensure service levels could be quickly restored when demand returned. However, these plans faced setbacks following the derailment of a chemical-carrying train in East Palestine, Ohio, in February 2023. Ancora Holdings Group has nominated Jim Barber, former COO of United Parcel Service Inc., as a replacement for Shaw in the CEO position.
The market's response to the unfolding situation at Norfolk Southern has been relatively muted, with shares increasing just over 1.5% since the beginning of the year. This performance gives Norfolk Southern a market valuation of approximately $54.2 billion. The modest stock movement reflects investor sentiment and the market's current evaluation of Norfolk Southern's operational and leadership challenges, as well as the potential impact of Ancora's activist campaign.
"We believe in shareholder activism when the activist has a plan and knows how to execute the plan."
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