Canadian rail union discussions near deadline as strike looms

MONTREAL (Bloomberg) -- Hours away from a midnight deadline, Canadian Pacific Railway is trying to hammer out a deal with two unions to avoid a labor strike that threatens to disrupt Canada’s second largest railroad for the second time in three years.

Talks are continuing in Calgary between the railway, the International Brotherhood of Electrical Workers and Teamsters Canada, Jeremy Berry, a Canadian Pacific spokesman, said Friday via e-mail. The unions, which represent more than 3,000 train conductors, engineers and electrical workers, have said their members would walk off the job as early as 12:01 a.m. Saturday if no agreement is reached.

A work stoppage would hamstring Canadian Pacific’s ability to provide freight service in a country already buffeted by congestion on a rival railroad’s network. Commuters in Toronto, Canada’s largest city, would also suffer because some of the trains they ride use Canadian Pacific’s tracks.

Canadian Pacific CEO Keith Creel said Wednesday he refuses to sacrifice long-term profitability just to get a “bad short-term deal,” and has contingency plans in case of a walkout.

The labor showdown is happening against a backdrop of rising profits at the railroad. Net income jumped to a record $1.9 billion last year while adjusted operating ratio -- an industry benchmark of efficiency that compares expenses to sales -- improved to 58.2% by year-end, the best performance in company history.

Union Complaints

Teamsters Canada has accused Canadian Pacific of “systematically bullying” workers and pushing them to work “well beyond their point of exhaustion.” Canadian Pacific has declined to comment on the allegations. Canadian Pacific last experienced a strike in February 2015, which was resolved within a few days through arbitration.

Canadian Labor Minister Patty Hajdu told lawmakers in Ottawa Thursday that she expects “all parties” to stay at the negotiating table until they get a deal, adding she would continue to closely monitor the situation.

If a walkout happens, it’s “likely to play out as a temporary event,” Allison Landry, a Credit Suisse Group analyst, said Thursday in a note to clients.

The 2015 strike had a “sharp impact” on network velocity and the amount of time railcars sat idle, but the system recovered quickly when the strike ended. “And while it did cause some disruptions, it wasn’t anything that CP couldn’t overcome,” Landry said.

Canadian Pacific -- with a 12,500 mi network across stretching from British Columbia to Montreal and down to Kansas City, Missouri -- is benefiting from rising demand for intermodal traffic and commodities such as crude oil and potash. The company had 12,328 employees at the end of March, 4.5% more than a year earlier.