MONTREAL – Canadian Pacific Railway, which posted record profits and revenue last year, plans to cut almost 1,000 more jobs this year as it adjusts to lower shipment volumes amid a collapse in commodity prices and a weak Canadian economy.
The Calgary-based company says most of the cuts to unionized and management positions will result from attrition and kick in by mid-year.
Since 2012, the railway has cut 6,000 to 7,000 jobs in a move to boost its bottom line. In the process, it has dramatically improved its operating ratio, or operating expenses as a percentage of revenue, to below 60 per cent.
“There is still more to accomplish,” CEO Hunter Harrison said during a conference call Thursday about the company’s fourth-quarter and year-end results.
“What we’re focusing on is what we can control: which is execution, which is running an efficient railroad.”
The railway had $6.71 billion in revenue and adjusted earnings of $1.62 billion in 2015 — up from $6.6 billion and $1.48 billion respectively in 2014 — although both fell below analyst expectations. Meanwhile, the company forecasts a double-digit increase in adjusted profits in 2016.
The company said it had reduced its workforce by 12 per cent, eliminating nearly 1,800 jobs last year, as shipments dropped three per cent. It says attrition accounts for some 2,000 people leaving the company each year.
In addition to labour savings, the railway is cutting capital spending by $400 million.
The plan to further cut jobs takes into account changes to labour agreements in the United States that alter scheduling rules, allowing for fewer workers. Fewer workers are also needed as the railway operates longer, faster but fewer trains.
However, as market conditions improve over the longer term, CP would look to bring back employees to meet demand, said spokesman Martin Cej, who declined to say how many of the job losses will be in Canada versus the U.S.
Doug Finnson, president of the Canadian Rail Conference, which represents 3,400 CP train conductors and engineers, said he’s not aware of any planned jobs cuts beyond the 115 locomotive positions the union is fighting in arbitration.
“I’m always worried when they say they’re going to cut jobs, particularly when they don’t tell us anything,” he said in an interview. “I think this is just one more part of (Harrison’s) cut-to-the-bone philosophy.”
CP (TSX:CP) expects to build off its strong results, despite concerns about the economy that could affect some types of freight that it carries through its North American rail network, the company said.
“We’re going to be able to convert what the economy does provide us and poise ourselves for a strong bounce-back when the economy comes back,” said president and chief operating officer Keith Creel.
Meanwhile, CP Rail said it is reviewing its strategy to acquire Norfolk Southern Railway after saying it failed to anticipate that politics would overtake the regulatory review process.
Harrison criticized interventions by elected congressional leaders and challenged those who claim CP’s proposed use of a trust is unethical and illegal even though it has been used many times in the past.
“If the deck is stacked and if somebody’s got an ace up their sleeve and are not playing by the rules, then we understand that and we have to adjust accordingly,” he told analysts.
While he believes railway mergers will eventually be required to accommodate economic and population growth, Harrison said CP will also assess whether to abandon its bid and instead recommend that its board focus on repurchasing its shares, which have fallen 35 per cent in the last year.
“If nothing happens, we’ve got a wonderful franchise here in Canada. We have not fallen in love with any deal.”
Note to readers: This is a corrected story. A previous version said Canadian Pacific Railway eliminated 1,200 jobs last year.