CPKC locks out TCRC employees, moves to full shut down of Canadian rail network

Rhea-AI Summary

Canadian Pacific Kansas City (CPKC) has initiated a lock out of Teamsters Canada Rail Conference (TCRC) employees, leading to a full shutdown of its Canadian rail network. The lock out affects approximately 3,200 locomotive engineers, conductors, and train and yard workers, as well as 80 rail traffic controllers. CPKC cites unrealistic demands from TCRC leadership as the reason for the impasse, stating these demands would impair the railway's ability to serve customers reliably and cost-effectively.

CPKC is proposing binding arbitration to resolve the dispute, emphasizing it as a fair process used successfully in the past. The company has offered a three-year status-quo contract with competitive wage increases for the TCRC – T&E division, and competitive wage increases for the TCRC - RCTC division. CPKC stresses the potential negative impact on Canada's economy and supply chains if the dispute continues into the fall peak shipping period.

Positive

• CPKC is offering competitive wage increases that exceed inflation
• The company has proposed a three-year status-quo contract with no work rule changes
• CPKC has executed a safe and structured shutdown, enabling efficient resumption of operations once the work stoppage ends

Negative

• Full shutdown of CPKC's Canadian rail network
• Potential disruption to Canada's supply chains and economy
• Failure to reach a negotiated settlement with TCRC after nearly a year of negotiations
• Lock out of approximately 3,280 essential railway employees

Insights

Labor Relations Expert

This lockout by CPKC marks a significant escalation in the ongoing labor dispute with the TCRC. The company's decision to initiate a full shutdown of its Canadian rail network will have far-reaching consequences for the supply chain and economy. Key points to consider:

• CPKC's offer of a three-year status-quo contract with competitive wage increases suggests they're trying to maintain operational stability.
• The company's push for binding arbitration indicates a desire for swift resolution, likely to minimize disruption during the upcoming peak shipping period.
• The repeated need for federal intervention in past negotiations (9 out of 10 times since 1993) with TCRC highlights a pattern of difficult labor relations.

This standoff could potentially lead to government intervention if prolonged, given the critical nature of rail transportation to Canada's economy. Investors should monitor for any signs of progress in negotiations or potential legislative action.

Supply Chain Analyst

The lockout and subsequent shutdown of CPKC's Canadian rail network pose significant risks to supply chains across North America. Key considerations:

• Timing is important - occurring before the fall peak shipping period could lead to substantial backlogs and delays.
• The disruption may cause a ripple effect, impacting industries reliant on rail transport such as agriculture, manufacturing and energy.
• Competitors like CN Rail might see increased demand, potentially straining their capacity.

Companies with exposure to Canadian rail transport should be prepared for potential delays and increased costs. This situation could lead to a short-term boost for alternative transportation methods like trucking, but prolonged disruption may have broader economic implications, affecting various sectors and potentially influencing inflationary pressures.

Financial Analyst

The lockout presents both short-term and long-term financial implications for CPKC:

• Short-term: Expect a significant hit to revenue and potential loss of market share to competitors.
• Long-term: The outcome of negotiations could impact operational costs and profitability.
• Investor sentiment may be negatively affected, potentially impacting stock price.

CPKC's push for a status-quo contract suggests an attempt to control costs amid inflationary pressures. However, the lockout strategy carries risks, including potential government intervention and damage to customer relationships. Investors should closely monitor the duration of the shutdown, any shifts in negotiation stance and the potential for regulatory action. The resolution of this dispute will be important in assessing CPKC's future financial performance and market position.

CALGARY, AB, Aug. 22, 2024 /PRNewswire/ -- Canadian Pacific Kansas City (TSX: CP) (NYSE: CP) (CPKC) said today it has locked out employees who are members of the Teamsters Canada Rail Conference (TCRC) – Train and Engine (T&E) division effective 00:01 Eastern Time on Aug. 22.

That will be followed by the lock out of employees who are members of the TCRC – Rail Traffic Controller (RCTC) division effective 00:01 Mountain Time on Aug. 22.

Throughout nearly a year of negotiations, CPKC has remained committed to doing its part to avoid this work stoppage. CPKC has bargained in good faith, but despite our best efforts, it is clear that a negotiated outcome with the TCRC is not within reach. The TCRC leadership continues to make unrealistic demands that would fundamentally impair the railway's ability to serve our customers with a reliable and cost-competitive transportation service.

At this time, the responsible path forward for the union, the company, our customers, the Canadian economy and North American supply chains and the public interest is for TCRC and CPKC to engage in binding arbitration to resolve all outstanding disputes. Binding arbitration is an effective, reasonable and fair process that ultimately has been used many times in the past to resolve disputes with this union. CPKC reiterates its standing offer to resolve this matter through binding arbitration. Acceptance of that offer by the TCRC would immediately end this work stoppage and mitigate further harm and disruption to supply chains and our economy.

CPKC has an excellent history of successful collective bargaining with its many unions. Unfortunately, the TCRC leadership has repeatedly demonstrated this type of behaviour, which ultimately has required federal intervention in some form in nine of the 10 rounds of collective bargaining negotiations since 1993. By contrast, over the same period, we have had 36 rounds of negotiations with four other unions in Canada, and only one work stoppage.

We fully understand and appreciate what this work stoppage means for Canadians and our economy. CPKC is acting to protect Canada's supply chains, and all stakeholders, from further uncertainty and the more widespread disruption that would be created should this dispute drag out further resulting in a potential work stoppage occurring during the fall peak shipping period. Delaying resolution to this labour dispute will only make things worse.

For the TCRC – T&E division, the company has focused on negotiating a three-year status-quo contract renewal with competitive wage increases that are consistent with recent settlements with other railway unions. That proposal has no work rule changes. In fact, we presented an enhanced final offer to avoid a work stoppage that includes: enhanced wages that exceed inflation, an engineers' guaranteed extra board, increased shift differentials, and resetting rest only at the home terminal, among other items that the TCRC negotiating committee requested. The only item we wish to negotiate remains reasonable adjustments to the timing of held-away from home pay that resets the negotiated buffers that existed before Transport Canada implemented work rest rule changes last year, that by default eliminated the buffer. The status quo-style offer fully complies with new regulatory requirements for rest and does not in any way compromise safety.

For the TCRC - RCTC division, CPKC has proposed a renewed agreement with the rail traffic controllers that would deliver competitive wage increases.

The TCRC - T&E represents CPKC's roughly 3,200 locomotive engineers, conductors and train and yard workers, and the TCRC - RCTC represents approximately 80 rail traffic controllers, all in Canada.

Working closely with customers, CPKC has executed a safe and structured shutdown of its train operations across Canada. This will enable CPKC to safely and efficiently resume full rail operations across the entire network once the work stoppage ends.

Visit the TCRC update page on our web site for ongoing updates.

Forward looking information

This news release contains certain forward-looking information within the meaning of applicable securities laws in both the U.S. and Canada. This news release contains forward-looking information relating, but not limited to, collective bargaining between CPKC and its labour unions, potential work stoppage and CPKC's business, operations and service. This forward-looking information also includes, but is not limited to, statements concerning expectations, beliefs, plans, goals, objectives, assumptions and statements about possible future events, conditions, and results of operations or performance.  Forward-looking information may contain statements with words or headings such as "financial expectations", "key assumptions", "anticipate", "believe", "expect", "plan", "will", "outlook", "should" or similar words suggesting future outcomes.   

Undue reliance should not be placed on forward-looking information as actual results may differ materially from the forward-looking information. Forward-looking information is not a guarantee of future performance. By its nature, CPKC's forward-looking information involves numerous assumptions, inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking information, including but not limited to the following factors: changes in business strategies; general North American and global economic, credit and business conditions; risks in agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures; industry capacity; shifts in market demand; changes in commodity prices; uncertainty surrounding timing and volumes of commodities being shipped via CPKC; inflation; changes in laws and regulations, including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; uncertainties of investigations, proceedings or other types of claims and litigation; labour disputes; risks and liabilities arising from derailments; transportation of dangerous goods; timing of completion of capital and maintenance projects; currency and interest rate fluctuations; effects of changes in market conditions and discount rates on the financial position of pension plans and investments; and various events that could disrupt operations, including severe weather, droughts, floods, avalanches and earthquakes as well as security threats and governmental response to them, and technological changes. The foregoing list of factors is not exhaustive.  These and other factors are detailed from time to time in reports filed by CPKC with securities regulators in Canada and the United States. Reference should be made to "Item 1A - Risk Factors" and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Information" in CPKC's annual and interim reports on Form 10-K and 10-Q. Readers are cautioned not to place undue reliance on forward-looking information. Forward looking information is based on current expectations, estimates and projections and it is possible that predictions, forecasts, projections, and other forms of forward-looking information will not be achieved by CPKC. Except as required by law, CPKC undertakes no obligation to update publicly or otherwise revise any forward-looking information, or the foregoing assumptions and risks affecting such forward-looking information, whether as a result of new information, future events or otherwise.

About CPKC

With its global headquarters in Calgary, Alta., Canada, CPKC is the first and only single-line transnational railway linking Canada, the United States and México, with unrivaled access to major ports from Vancouver to Atlantic Canada to the Gulf of México to Lázaro Cárdenas, México. Stretching approximately 20,000 route miles and employing 20,000 railroaders, CPKC provides North American customers unparalleled rail service and network reach to key markets across the continent. CPKC is growing with its customers, offering a suite of freight transportation services, logistics solutions and supply chain expertise. Visit cpkcr.com to learn more about the rail advantages of CPKC. CP-IR

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SOURCE CPKC

FAQ

Why did CPKC (CP) lock out its employees on August 22, 2024?

CPKC locked out TCRC employees due to unsuccessful negotiations and what the company calls 'unrealistic demands' from the union that would impair the railway's ability to serve customers reliably and cost-effectively.

How many CPKC (CP) employees are affected by the August 2024 lock out?

The lock out affects approximately 3,200 locomotive engineers, conductors, and train and yard workers, as well as 80 rail traffic controllers in Canada.

What solution has CPKC (CP) proposed to end the August 2024 work stoppage?

CPKC has proposed binding arbitration to resolve all outstanding disputes, stating it would immediately end the work stoppage if accepted by the TCRC.

What contract terms has CPKC (CP) offered to the TCRC in August 2024?

CPKC has offered a three-year status-quo contract with competitive wage increases exceeding inflation, an engineers' guaranteed extra board, increased shift differentials, and other benefits for the TCRC – T&E division.