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OMAHA, Neb. (AP) — Union Pacific introduced plans Sunday to interchange its CEO later this yr after a hedge fund that holds a $1.6 billion stake within the railroad went public with its considerations about his management.

The managing accomplice of Soroban Capital Companions, Eric Mandelblatt, stated in a letter that the Omaha, Nebraska-based railroad has lagged behind its friends throughout Lance Fritz’ tenure over the previous eight years and {that a} management change is overdue. The hedge fund has been privately pressuring Union Pacific to oust Fritz a minimum of since final yr.

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“UNP (Union Pacific) has repeatedly and considerably failed to achieve its potential below Mr. Fritz’s management,” Mandelblatt wrote. “UNP has ranked the worst in security, quantity progress, income progress, value administration, EBIT progress, and complete shareholder return. These are extremely underwhelming outcomes regardless of UNP having the premier railroad franchise in North America.”

Mandelblatt urged the railroad to rent former Chief Operations Officer Jim Vena, who helped overhaul Union Pacific’s operations a number of years in the past. However the railroad’s board stated in an announcement that it has been working with a management advisor since final yr to establish the perfect inner and exterior candidates for the job.

Vena was introduced in to Union Pacific in 2019 from Canadian Nationwide to assist the railroad change to a brand new working mannequin that depends on fewer, longer trains and considerably fewer workers and locomotives to maneuver freight, however Vena left after lower than two years on the job.

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Almost all the main U.S. freight railroads have adopted that mannequin since CSX first started utilizing it in 2017 after it was pressured by a distinct hedge fund to make adjustments though rail unions have expressed considerations that this “precision scheduled railroading” mannequin has made the business riskier as a result of employees are unfold so skinny after almost one-third of all rail jobs have been eradicated over the previous six years. The unions say these practices make incidents like Norfolk Southern’s fiery derailment in Ohio earlier this month extra doubtless, however the railroads have defended their security document.

UP’s lead impartial board member Michael McCarthy praised Fritz in an announcement Sunday for serving to develop the railroad’s income via the unsure occasions of the pandemic — and thru the challenges of final yr’s bitter contract negotiations with its 12 unions.

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“He has capably led our firm throughout a time of serious problem and alter, positioning Union Pacific to ship long-term sustainable worth for shareholders and clients,” McCarthy stated. “We’re immensely grateful to have Lance’s persevering with management and assist and know he’ll guarantee a easy transition.”

The railroad did put up a $1.6 billion revenue within the fourth quarter, however over the previous yr it has struggled at occasions to deal with all of the shipments firms requested it to ship. Twice regulators ordered Union Pacific to ship emergency shipments to livestock producer Foster Farms to make sure that firm wouldn’t run out of feed for the tens of millions of chickens it raises.

The U.S. Floor Transportation Board additionally held a particular listening to in December to look at the way in which Union Pacific places short-term limits on shipments to attempt to clear up congestion on its rail community as a result of the railroad has been utilizing that tactic rather more than different main freight railroads.

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Union Pacific has been steadily enhancing its efficiency since final spring because it employed a whole bunch of further workers to function its trains.

Fritz stated in an announcement that he has been honored to steer the railroad he’s labored at for the previous 22 years. He praised Union Pacific’s workers and touted the railroad’s efficiency with out immediately addressing the hedge fund’s criticism.

“Union Pacific has launched into a transformative journey that can end in stronger, extra constant service for our clients, with enhanced earnings progress and worth creation for our shareholders,” Fritz stated.

Union Pacific is likely one of the nation’s largest railroads with a community of 32,400 miles (52,000 kilometers) of observe in 23 Western states.