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Canadian Pacific, union appear on track for spring rail strike

Canadian National also in talks with their workers, setting up a precarious freight scenario
A Kansas City Southern locomotive is shown in this undated photo. Canadian Pacific Kansas City reported its first-quarter profit fell compared with a year ago.THE CANADIAN PRESS/HO-Kansas City Southern

Canadian Pacific Kansas City Ltd. is steeling itself for the possibility of a strike by some 3,300 workers next month, as the clock ticks down toward a negotiation deadline.

“The way I see it, the positions have not changed a lot,” chief executive Keith Creel told analysts on a conference call Wednesday.

“Obviously hope for the best, but you have to make sure you plan for the worst as well.”

The potential work stoppage helps account for what Creel called a “responsibly conservative” forecast that predicts only a slight uptick in cargo volumes this year.

“If the strike isn’t as long as what we might think would be — or if we don’t have a strike at all — then sure, we’ve got some upside,” the CEO said.

With 6,000 workers at rival Canadian National Railway Co. in talks with their employer as well, the possibility of work stoppages at two rail companies looms this spring, which combined could grind virtually all freight rail traffic in Canada to a halt.

In February, CPKC and CN asked the federal labour minister to appoint a conciliator for the bargaining process over a new collective agreement for train conductors, engineers and yard workers. The notice of dispute started the clock on a possible strike or lockout, which could occur as soon as May 22.

Commuters in Canada’s three biggest cities would also be affected. Among the potential strikers are dispatchers who direct passenger trains on CPKC-owned rails used by riders on Toronto’s GO Transit network as well in the Montreal and Vancouver regions.

The Teamsters Canada Rail Conference has said safety is at stake, claiming that the country’s two main railways aim to eliminate all “safety-critical rest provisions” from their collective agreements.

“This is just not true, to be very clear,” CN chief network operating officer Patrick Whitehead said Tuesday.

Creel said Canadian Pacific has offered workers a “win-win scenario.”

“But it takes change. It takes leaders that are willing to see the wisdom in it, the benefit in it. And at this point that has not happened,” he said.

On Wednesday, CPKC reported its first-quarter net income attributable to controlling shareholders fell three per cent year over year to $775 million for the quarter ended March 31.

But the Calgary-based company’s core adjusted operating income stayed flat at about $1.26 billion when compared with the combined income of Canadian Pacific and Kansas City Southern a year earlier. The former acquired the latter in December 2021 in North American’s first major rail merger in decades, but had to wait to merge operations until April last year following regulatory approval of the deal.

Strong U.S. grain shipments to Canada, Mexico and overseas helped boost total revenues by two per cent year over year versus the combined revenue of the two companies last year, though a weaker Canadian grain harvest dampened the results.

Inbound containers surged at the Port of Vancouver to the point that congestion hampered traffic in late March and early April, according to German shipping giant Hapag-Lloyd.

The bottleneck barely registered on CPKC’s results, however, with average train speed up 13 per cent and dwell time — the time a railcar spends waiting in a terminal — reduced by 10 per cent.

“Operating metrics look good, really good,” said analyst Walter Spracklin of RBC Dominion Securities.

CPKC chief marketing officer John Brooks said the return of ships to Vancouver and Prince Rupert after last summer’s 13-day strike by B.C. dockworkers drove the container rebound, as did “some impacts from the Red Sea and potential looming East Coast labour disruptions.”

Ongoing missile strikes by Iran-backed Houthi militants in Yemen have pushed major container carriers to steer clear of the area. The crisis prompted many shippers that had recently switched to the Suez Canal to return to transpacific routes between Asia and North America.

Meanwhile, tense talks between Montreal port employers and the union representing some 1,200 dockworkers have stirred up more fears of yet another possible strike this spring. Longshore workers rejected an offer by management earlier this week, voting more than 99.5 per cent against the would-be deal.

CPKC said revenue for its most recent quarter rose two per cent to $3.52 billion from a combined $3.46 billion last year.

The railway said its core adjusted combined diluted earnings per share amounted to 93 cents in its latest quarter, up from 90 cents a year earlier and roughly in line with analysts’ predictions, according to LSEG Data & Analytics.

READ ALSO: CN workers back union strike mandate as contract talks for 3,000 employees continue