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Canadian Pacific says it will not replace CEO

Canadian Pacific Railway Ltd (CP-T) is confident it can improve its performance early this year without replacing its chief executive, Fred Green, as advocated by activist shareholder William Ackman.

Canada's No. 2 railway released a combative open letter to shareholders on Monday, criticizing Ackman and outlining its pre-existing plan to improve efficiency.

The company said it expects to see "meaningful" performance improvements starting in the first quarter of 2012

Ackman, whose Pershing Square Capital Management owns a 14.2-percent stake in CP, wants it to replace Green with Hunter Harrison, credited with turning around CP's rival Canadian National Railway (CNR-T).

Pershing was not immediately available for comment.

"Having considered Pershing Square's demand, the board came to the unanimous conclusion that replacing the company's chief executive officer, and thereby jeopardizing the successful execution of the multi-year plan, is not in the best interest of CP or its shareholders," said the letter, signed by chairman John Cleghorn.

CP's board is confident CP can improve its operating ratio, an important measure of a railway's productivity, to the low 70s in the next three years. In the third quarter the key metric was at 75.8 percent.

CP, which operates a 14,000-mile (22,400 km) rail network across Canada and into the United States, has struggled to improve its operating ratio.

By comparison, the larger CN reported an operating ratio of 59.3 percent. The higher the ratio, which measures operating costs as a percentage of revenue, the less efficient the railway.

The letter also quoted CP's newest board members, Tony Ingram and Ed Harris, in support of the company's plan, which is meant to boost volume, expand capacity and control costs.

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