CPKC to issue TCRC lockout notice for Aug. 22

Rhea-AI Summary

Canadian Pacific Kansas City (CPKC) has announced plans to issue a lockout notice to the Teamsters Canada Rail Conference (TCRC) for August 22, 2024, if a negotiated settlement or binding interest arbitration is not reached. This decision follows a Canada Industrial Relations Board (CIRB) ruling that no essential services need to be maintained during a railway strike or lockout. CPKC aims to protect Canada's supply chains and mitigate uncertainty for customers.

Key points:

• CPKC offers binding interest arbitration to resolve the dispute
• Company will issue embargoes for toxic goods to ensure safe network exit
• CPKC withdraws offer for a modernized, time-based collective agreement
• Focus shifts to a three-year status quo-style contract with competitive wage increases

Positive

• CPKC is committed to continuing good faith negotiations
• Company offers binding interest arbitration to resolve the dispute quickly
• Proactive measures taken to protect supply chains and customer interests
• Proposed status quo-style contract includes competitive wage increases

Negative

• Potential lockout on August 22, 2024, may disrupt railway operations
• Ongoing labor dispute creates uncertainty for stakeholders and supply chains
• Withdrawal of modernized, time-based collective agreement offer
• Possible damage to Canada's reputation as a reliable trading partner if dispute continues

Insights

Labor Relations Expert

This lockout notice from CPKC is a significant escalation in the ongoing labor dispute with the TCRC. The company's willingness to initiate a lockout suggests they're taking a hard stance in negotiations. This move could have substantial implications for Canada's supply chains and economy.

The company's offer to resolve the dispute through binding interest arbitration is noteworthy. This approach could provide a quicker resolution, but the union's refusal indicates they believe they can achieve better terms through continued negotiation. The withdrawal of the modernized, time-based agreement in favor of a status quo contract with wage increases is a strategic shift that may or may not break the impasse.

Investors should be aware that a work stoppage could significantly impact CPKC's operations and financial performance in the short term. However, the company's proactive approach in issuing embargoes and preparing for a potential shutdown demonstrates responsible management of the situation.

Supply Chain Analyst

The potential lockout at CPKC poses a serious threat to Canada's supply chains. With CPKC being a major player in North American rail transportation, a work stoppage could lead to significant disruptions, especially as we approach the fall peak shipping period. This timing is particularly concerning for industries relying on just-in-time inventory management.

The planned embargo on toxic inhalation hazard (TIH) materials is a important safety measure, but it will likely cause immediate supply chain adjustments in industries dealing with these materials. Other embargoes may follow, potentially affecting a wide range of sectors. Companies dependent on rail transport may need to quickly seek alternative logistics solutions, likely at higher costs.

This situation could have ripple effects across the economy, potentially leading to temporary shortages, increased transportation costs and delays in various industries. The uncertainty surrounding the negotiations may also prompt businesses to build up inventories as a precautionary measure, affecting their cash flow and storage costs.

Financial Analyst

From a financial perspective, this labor dispute presents significant risks for CPKC. A lockout or strike could lead to substantial revenue losses during the work stoppage, potentially impacting the company's Q3 and Q4 financial results. The timing is particularly unfortunate as it coincides with the fall peak shipping period, typically a high-revenue season for rail companies.

Investors should consider the potential for increased operating costs in the short term, as CPKC may need to implement contingency plans or offer incentives to quickly resume operations post-resolution. There's also a risk of losing market share to competitors if customers seek alternative transportation methods during and after the dispute.

On the positive side, CPKC's proactive approach in offering binding arbitration and reverting to a status quo contract proposal demonstrates a willingness to reach a resolution. If successful, this could lead to improved labor relations and operational stability in the long term. However, investors should closely monitor the situation, as prolonged uncertainty could negatively impact CPKC's stock performance and market valuation.

CALGARY, AB, Aug. 9, 2024 /PRNewswire/ - Canadian Pacific Kansas City (TSX: CP) (NYSE: CP) (CPKC) today said it will issue notice to the Teamsters Canada Rail Conference (TCRC) – Train and Engine (T&E) division and TCRC - Rail Traffic Controller (RCTC) division of its plan to lock out employees at 00:01 ET on Aug. 22 if union leadership and the company are unable to come to a negotiated settlement or agree to binding interest arbitration. CPKC is committed to continuing good faith negotiation throughout.

The decision to issue a lockout notice comes after the Canada Industrial Relations Board (CIRB) on Friday issued its decision determining that no services need to be maintained during a railway strike or lockout in order to protect Canadian public health and safety. The CIRB also ordered a 13-day extension of the cooling off period which ends on Aug. 22. Following the expiration of the cooling off period, a legal strike or lockout involving the TCRC – T&E or TCRC - RCTC could occur.

All stakeholders want an end to this needless uncertainty as rapidly as possible so that we can continue serving the North American economy. Stability could be restored today if the TCRC would accept CPKC's offer to resolve the current labour dispute through binding interest arbitration.

If no resolution is reached during bargaining through the extended cooling off period, and the TCRC continues to refuse binding interest arbitration, CPKC will have no choice but to take this action. CPKC is acting to protect Canada's supply chains, and all those who depend on them, from the more widespread disruption that would be created should a work stoppage occur during the fall peak shipping period. Delaying resolution to this dispute only makes things worse, causing more disruption and damage to Canada's international reputation as a reliable trading partner.

CPKC provides this public notice to mitigate uncertainty and give our customers and supply chains proper time to plan for a safe and orderly shutdown of railway operations. As part of those preparations, CPKC will issue an embargo for all toxic by inhalation (TIH) dangerous goods traffic to allow this traffic to safely exit the rail network prior to a work stoppage. Other embargoes will be issued during the cooling off period, as necessary.

CPKC remains committed to doing its part to avoid a work stoppage. In response to opposition from TCRC leadership, CPKC has advised the union representing conductors and locomotive engineers that we will conditionally withdraw the offer for a new modernized, time-based collective agreement. That time-based agreement proposal was intended to address the union's concerns related to work and time off scheduling, while allowing significant wage increases and additional customer service flexibilities. 

CPKC will focus on a status quo-style contract renewal covering three years with competitive wage increases that are consistent with recent settlements with other railway unions and maintains the status quo for all work rules. 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 also proposed a renewed agreement with the rail traffic controllers which would deliver competitive wage increases.

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 Canadian Pacific

FAQ

When is CPKC planning to issue a lockout notice to TCRC?

CPKC plans to issue a lockout notice to TCRC for August 22, 2024, at 00:01 ET if a negotiated settlement or binding interest arbitration is not reached.

What decision did the Canada Industrial Relations Board (CIRB) make regarding CPKC's labor dispute?

The CIRB ruled that no services need to be maintained during a railway strike or lockout to protect Canadian public health and safety, and ordered a 13-day extension of the cooling-off period ending August 22.

How is CPKC preparing for a potential work stoppage?

CPKC is issuing embargoes for toxic by inhalation (TIH) dangerous goods traffic to allow safe exit from the rail network and will issue other embargoes as necessary during the cooling-off period.

What type of contract is CPKC now proposing to the TCRC?

CPKC is proposing a three-year status quo-style contract renewal with competitive wage increases, maintaining the status quo for all work rules and complying with new regulatory requirements for rest.