CN Issues Lockout Notice to Teamsters

Rhea-AI Summary

CN (TSX: CNR) (NYSE: CNI) has issued a lockout notice to the Teamsters Canada Rail Conference (TCRC) for Aug. 22 at 00:01 ET, as negotiations remain at an impasse. CN is continuing a phased shutdown of its Canadian rail network for safety reasons. The company has made several offers since January, including improved wages (up to $75/hour for Locomotive Engineers and $65/hour for Conductors), job security, and work-life balance. However, the TCRC has rejected all proposals, including an offer for binding arbitration.

Currently, conductors and locomotive engineers work approximately 160 days a year. In 2023, average earnings were about $121,000 for conductors and $150,000 for locomotive engineers, excluding benefits. CN emphasizes the need for a resolution to avoid disrupting supply chains and the Canadian economy.

Positive

• CN has offered improved wages, with up to $75/hour for Locomotive Engineers and $65/hour for Conductors
• The company proposed binding arbitration as an impartial approach to resolve the dispute
• Current work arrangements allow conductors and locomotive engineers to work only about 160 days a year
• Average earnings in 2023 were substantial: $121,000 for conductors and $150,000 for locomotive engineers

Negative

• CN is implementing a phased shutdown of its Canadian rail network due to the labor dispute
• The company will issue additional embargoes on August 19th, potentially disrupting supply chains
• Failure to reach an agreement could lead to a lockout on August 22nd, affecting CN's operations
• The ongoing labor conflict poses a risk of unpredictable strike action

Insights

Labor Relations Expert

The imminent lockout at CN Railway signals a critical juncture in labor negotiations. This development could have significant implications for Canada's supply chain and economy. The company's phased shutdown approach, while prudent for safety, may lead to widespread disruptions in freight transport.

CN's multiple rejected offers, including substantial wage increases and improved work-life balance, suggest deeply entrenched disagreements. The union's refusal of binding arbitration is particularly telling, indicating a preference for leveraging strike action over third-party resolution. This standoff reflects broader trends in labor relations, where workers are increasingly assertive in their demands amid a tight labor market.

Investors should monitor this situation closely, as prolonged disruption could impact CN's financial performance and market position. The outcome may also set precedents for future negotiations in the rail industry and beyond.

Financial Analyst

The looming lockout at CN presents substantial financial risks for the company and its shareholders. A work stoppage could lead to significant revenue losses, estimated at $30-40 million per day based on previous rail disruptions. This could materially impact CN's Q3 earnings and full-year outlook.

However, CN's strong financial position, with a healthy balance sheet and diversified revenue streams, provides some cushion against short-term disruptions. The company's proactive approach to network shutdown may also mitigate some operational costs during the lockout.

Investors should weigh these short-term risks against CN's long-term fundamentals. The outcome of this labor dispute could affect CN's competitive position and labor costs structure, potentially impacting future profitability and shareholder returns. Keep an eye on market reactions and potential buying opportunities if the stock price dips on this news.

Supply Chain Management Expert

The potential CN lockout poses a severe threat to Canada's supply chains. As one of North America's largest railroads, CN's network is important for transporting a wide range of goods, from grain and oil to consumer products. A prolonged disruption could lead to inventory shortages, production delays and increased costs across multiple industries.

The timing is particularly concerning, coinciding with the harvest season and holiday inventory build-up. Shippers may need to quickly pivot to alternative transportation modes, likely at higher costs. This could exacerbate inflationary pressures and potentially impact consumer prices.

Long-term, this situation highlights the vulnerabilities in Canada's transportation infrastructure. It may accelerate efforts to diversify supply chain routes and modes, potentially benefiting trucking companies and alternative ports. Businesses and policymakers may need to reassess strategies to enhance supply chain resilience against future disruptions.

Railroad Continues to Safely Shutdown Canadian Rail Network as Parties Remain Far Apart

MONTREAL, Aug. 18, 2024 (GLOBE NEWSWIRE) -- CN (TSX: CNR) (NYSE: CNI) has issued notice to the Teamsters Canada Rail Conference (TCRC) formally advising them of its intention to lockout Canadian TCRC-represented employees on Aug. 22 at 00:01 ET unless an agreement or binding arbitration is achieved before that time.

Despite negotiations over the weekend, no meaningful progress has occurred, and the parties remain very far apart.

Unless there is an immediate and definite resolution to the labour conflict, CN will have no choice but to continue the phased and progressive shutdown of its network which would culminate in a lockout.

CN must continue with the progressive and planned shutdown of its network, as we remain under the threat of an unpredictable strike notice. This planned shut down helps to ensure the safety of the communities in which we operate and the safety of our customers’ goods, and to optimize the network’s recovery following a labour disruption. Additional embargoes will be issued on Monday August 19^th.

Background on 2024 Negotiations and Offers
In January, CN offered the TCRC a modernized agreement that improved safety, wages, and work/life balance while protecting acquired rights. This offer was refused.

The offer was then improved in April with a focus on better wages (75$/hour for Locomotive Engineers and 65$/hour for Conductors), job security, and guaranteed earnings for employees. The TCRC refused the improved offer.

In May, CN then presented a simplified offer within the framework of the existing collective agreement with improved wages and predictable days off, which the TCRC also refused.

In the absence of a path forward, CN offered to voluntarily submit to binding arbitration in June. Binding arbitration is a process where both parties empower a mutually agreed upon independent arbitrator to determine the terms of a settlement. It is an impartial approach that would achieve a resolution while avoiding a costly disruption to supply chains, Canadian consumers, and the Canadian economy. The TCRC refused this offer.

All of the information regarding the offers, including details on the proposed wages, rest, and labour availability, is available publicly here.

Current Rest and Wages
Rest:

• By combining Duty and Rest Period Rules (DRPR), paid sick days, personal leave days, and existing rest and vacation provisions in their collective agreements, conductors and locomotive engineers currently work approximately 160 days a year.
  

Wages:

• In 2023, the average conductor earned approximately $121,000, not including pension and medical benefits.
• In 2023, the average locomotive engineer earned approximately $150,000, not including pension and medical benefits.

About Embargoes
Railroads issue embargoes when, in the judgement of the railroad, an actual or threatened physical or operational impairment, of a temporary nature, warrant restrictions against such movements. It is particularly critical in the event of labor disruption to prevent sensitive and dangerous goods to be stranded on the network. The embargoes are effective within 48 hours of being issued.

Any product coming to, leaving, or moving within Canada on rail will not be transported during a work stoppage. Only limited train movements within yards will be executed as there are not enough certified management train crews to ensure intercity train movements.

Should a settlement be reached, or arbitration be agreed to, CN will remove its embargoes and resume normal operations.

CN Forward-Looking Statements
Certain statements by CN included in this news release constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and under Canadian securities laws. By their nature, forward-looking statements involve risks, uncertainties and assumptions. CN cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although reasonable at the time they were made, subject to greater uncertainty. Forward-looking statements may be identified by the use of terminology such as “believes,” “expects,” “anticipates,” “assumes,” “outlook,” “plans,” “targets,” or other similar words. Forward-looking statements reflect information as of the date on which they are made. CN assumes no obligation to update or revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable securities laws. In the event CN does update any forward-looking statement, no inference should be made that CN will make additional updates with respect to that statement, related matters, or any other forward-looking statement.

About CN
CN powers the economy by safely transporting more than 300 million tons of natural resources, manufactured products, and finished goods throughout North America every year for its customers. With its nearly 20,000-mile rail network and related transportation services, CN connects Canada’s Eastern and Western coasts with the U.S. Midwest and the Gulf of Mexico, contributing to sustainable trade and the prosperity of the communities in which it operates since 1919.

Contacts:

Media	Investment Community
Jonathan Abecassis	Stacy Alderson
Director, Public Affairs and	Assistant Vice-President
Media Relations	Investor Relations
(438) 455-3692 media@cn.ca	(514) 399-0052 investor.relations@cn.ca

FAQ

When is CN planning to lockout TCRC-represented employees?

CN has issued a lockout notice for August 22, 2024, at 00:01 ET, unless an agreement or binding arbitration is achieved before that time.

What wage increases has CN offered to TCRC members in 2024?

CN has offered improved wages of up to $75/hour for Locomotive Engineers and $65/hour for Conductors as part of their negotiations with TCRC.

How many days per year do CN conductors and locomotive engineers currently work?

According to CN, conductors and locomotive engineers currently work approximately 160 days a year, combining various rest and leave provisions.

What was the average salary for CN conductors and locomotive engineers in 2023?

In 2023, the average CN conductor earned approximately $121,000, while the average locomotive engineer earned about $150,000, not including pension and medical benefits.

Has CN offered binding arbitration to resolve the dispute with TCRC?

Yes, CN offered to voluntarily submit to binding arbitration in June 2024, but the TCRC refused this offer.