Teamsters Serve CN with a Strike Notice

Rhea-AI Summary

CN (TSX: CNR) (NYSE: CNI) has received a 72-hour strike notice from the Teamsters Canada Rail Conference (TCRC), with a potential strike starting at 10:00 AM ET on August 26, 2024. This comes after CN proactively ended a lockout following the Minister of Labour's direction for binding arbitration. CN emphasizes its focus on economic recovery, while criticizing the Teamsters' intent to strike.

Key points:

• CN claims to have negotiated in good faith for nine months, offering improved pay and working conditions
• Average 2023 earnings: conductors ~$121,000, locomotive engineers ~$150,000 (excluding benefits)
• CN offered modernized agreements in January and April, which were refused
• A simplified offer in May and proposal for voluntary binding arbitration in June were also rejected
• CN urges quick action from the Canada Industrial Relations Board (CIRB) to prevent economic harm

Positive

• CN proactively ended the lockout of Teamsters following government direction
• CN claims to have consistently proposed offers with better pay and improved working conditions
• Average conductor earnings in 2023 were approximately $121,000 (excluding benefits)
• Average locomotive engineer earnings in 2023 were approximately $150,000 (excluding benefits)
• CN offered binding arbitration to resolve the dispute without disrupting supply chains

Negative

• Teamsters served CN with a 72-hour strike notice, potentially starting August 26, 2024
• Potential strike could impact CN's operations and the Canadian economy
• Negotiations have been unsuccessful for nine months, indicating ongoing labor disputes
• Multiple offers and proposals by CN have been rejected by the Teamsters
• Labor unrest may lead to disruptions in CN's services and financial performance

Insights

Labor Relations Expert

The Teamsters' strike notice against CN Railway signifies a critical juncture in ongoing labor negotiations. This development could have significant implications for CN's operations and Canada's supply chain. The key points to consider are:

• The strike's potential to disrupt national logistics and economic activity
• CN's proactive ending of the lockout and willingness for binding arbitration, contrasting with the union's strike stance
• The average annual earnings of $121,000 for conductors and $150,000 for engineers, which are substantial
• CN's multiple offers, including improved wages up to $75/hour for engineers and $65/hour for conductors

The CIRB's ruling timing is crucial. A prolonged dispute could lead to widespread economic impacts, potentially forcing government intervention. Investors should monitor this situation closely, as it may affect CN's short-term performance and long-term labor relations strategy.

Financial Analyst

This labor dispute presents significant financial risks for CN and its stakeholders. Key financial considerations include:

• Potential revenue loss during strike periods
• Increased labor costs if negotiations result in higher wages
• Possible penalties or compensation to customers for service disruptions
• Long-term impact on CN's competitiveness and market share

CN's current offer of $75/hour for engineers and $65/hour for conductors represents a substantial increase. This could impact profit margins if implemented. However, the company's proactive stance in ending the lockout and seeking binding arbitration may mitigate some reputational damage. Investors should assess the potential impact on CN's Q3 and Q4 earnings, as well as its long-term cost structure and operational efficiency.

Supply Chain Analyst

The impending strike at CN Railway poses a significant threat to Canada's supply chain integrity. Key impacts include:

• Disruption of intermodal freight movement across the country
• Potential bottlenecks at ports and inland terminals
• Increased costs for alternative transportation methods
• Delays in raw material delivery and finished goods distribution

Industries heavily reliant on rail transport, such as agriculture, mining and manufacturing, could face severe challenges. The timing is particularly critical as we approach harvest season. Shippers may need to quickly develop contingency plans, potentially leading to increased demand for trucking services. This situation could have ripple effects throughout the economy, affecting consumer prices and potentially exacerbating inflationary pressures. The government's response and the speed of resolution will be important in minimizing economic damage.

MONTREAL, Aug. 23, 2024 (GLOBE NEWSWIRE) -- CN (TSX: CNR) (NYSE: CNI) has been served with a 72-hour strike notice by the Teamsters Canada Rail Conference (TCRC). The Teamsters intend to strike as of 10:00 AM ET on Monday, August 26, 2024.

CN proactively ended the lockout of the Teamsters on August 22, following the Minister of Labour’s direction to the Canada Industrial Relations Board (CIRB) to impose binding arbitration between both parties.

While CN is focused on its recovery plan to get back to powering the economy, the Teamsters are focused on returning to the picket line and shutting down the economy, impacting people and jobs across the country.

Over the last nine months, CN has negotiated in good faith. The Company consistently proposed serious offers, with better pay, improved rest, and more predictable schedules.

This latest development confirms that the Teamsters never took negotiations seriously and that they had no desire to reach a deal.

The impacts of this notice will depend on the timing of the CIRB. It is in the national interest of Canada that the CIRB rule quickly, before even more harm is caused.

Current Rest and Wages
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.

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.
  

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.

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	(514) 399-0052
media@cn.ca	investor.relations@cn.ca

FAQ

When is the potential strike by Teamsters against CN (CNI) scheduled to begin?

The potential strike by Teamsters against CN (CNI) is scheduled to begin at 10:00 AM ET on Monday, August 26, 2024.

What was CN's (CNI) average pay for conductors and locomotive engineers in 2023?

In 2023, CN (CNI) reported that the average conductor earned approximately $121,000, while the average locomotive engineer earned approximately $150,000, not including pension and medical benefits.

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

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

What was CN's (CNI) proposed hourly wage for Locomotive Engineers and Conductors in their April 2024 offer?

In CN's (CNI) April 2024 offer, they proposed hourly wages of $75 for Locomotive Engineers and $65 for Conductors.

What alternative dispute resolution method did CN (CNI) propose in June 2024?

In June 2024, CN (CNI) offered to voluntarily submit to binding arbitration to resolve the labor dispute with the Teamsters.