Bloomberg News

Canad Plans Back-to-Work Law to End Strike at CP Rail

May 28, 2012

As lawmakers finish a one-week break today, freight traffic at Pacific Railway Ltd. remains snarled after Teamsters union members walked off the job May 23 in a contract dispute. Photographer: Don MacKinnon/Bloomberg

As lawmakers finish a one-week break today, freight traffic at Pacific Railway Ltd. remains snarled after Teamsters union members walked off the job May 23 in a contract dispute. Photographer: Don MacKinnon/Bloomberg

Striking workers at Canadian Pacific Railway Ltd. (CP) may be back on the job in three days after the government introduced legislation to end a strike that has snarled rail traffic in the world’s 10th-biggest economy.

“We would like to see CP Rail continuing to roll on Thursday, but we’d like it sooner quite frankly and that’s the message today,” Labor Minister Lisa Raitt told reporters in Ottawa after announcing the legislation.

The work stoppage is having a “grave and significant” impact on the Canadian economy and the two sides have “become entrenched” in their positions, Raitt said. “That’s why we as a government must intervene to protect the interests of all Canadians.”

Freight traffic at the country’s second-largest railroad has been stalled since Teamsters union members walked off the job May 23 in a contract dispute. Raitt gave notice last week that she may introduce legislation to end the strike once Parliament was in session after a one-week break.

Canadian Pacific fell 2.1 percent to C$75.54 at 2:26 p.m. trading in Toronto. The stock has risen 9.5 percent this year, compared with a 3 percent drop in the Standard & Poor’s/TSX Composite Index.

Federal action to halt the strike would make Calgary-based Canadian Pacific the third company where Raitt has intervened since Harper’s Conservative Party won a majority a year ago.

The Teamsters, representing more than 4,000 engineers, conductors and rail-traffic controllers, is at odds with Canadian Pacific over matters including pension payments and work rules.

Economic Impact

“The economic impact on the Canadian economy is significant day after day so we don’t want this to drag on,” Finance Minister Jim Flaherty told reporters today in Toronto.

The strike, which began after the carrier and the labor group failed to reach a deal on contract talks dating to October, constricted supply chains for growers and miners while slowing shipments at Canada’s two largest ports. The government estimated a prolonged stoppage might cost as much as C$540 million ($524 million) a week.

Negotiation “seems to be over,” said Doug Finnson, vice president of Teamsters Canada Rail Conference and chief negotiator.

“CP Rail is hiding behind the government again,” he told reporters in Ottawa. “Collective bargaining in this country is under attack.”

Pension Plan

Central to the dispute is Canadian Pacific’s pension plan.

The railroad sought to cut costs after contributing C$1.9 billion to its retirement programs in the past three years to reduce funding shortfalls, while union members resisted what they said was a 40 percent cut in post-retirement benefits.

The pensions helped push Canadian Pacific’s operating expenses as a percentage of sales above those of its peers, and the company said it sought changes to bring spending in line with industry norms.

The railroad’s operating expenses were criticized by activist investor William Ackman during a months-long proxy fight that led to the departure of former Chief Executive Officer Fred Green and five other board members on May 17.

To contact the reporters on this story: Natalie Doss in New York at ndoss@bloomberg.net; Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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