Given the weak economy has resulted in a drop in demand for commodity shipments, Canadian Pacific Railway said it plans to cut another 1,000 jobs this year.
CEO Hunter Harrison made the announcement during a conference call with analysts on Thursday, after reporting fourth-quarter earnings that were strong, but still fell short of analyst forecasts.
“We feel with some productivity gains, there are probably 1,000 additional heads to come out, potentially in ’16,” Harrison said, noting the job cuts could begin by the middle of the second quarter.
It would impact employees across the company, including both unionized and management staff, but a spokesman noted job cuts would be handled through attrition, given more than 2,000 people leave the company annually.
“As market conditions improve over the longer term, we would look to bring back employees in order to meet market demand,” said CP spokesman Martin Cej said in an email.
Harrison took over the top job at the Calgary-based railway after a bitter proxy fight in 2012. He estimated that “6,000 to 7,000 jobs” have been eliminated to date, mostly through attrition. At the end of 2015, CP had about 13,000 employees.
Harrison also boasted that the promises made during the proxy fight have been achieved, including getting to an operating ratio of 65 per cent by 2016.
At the time, that target was widely questioned and considered too ambitious. Harrison noted CP’s operating ratio, an industry measure of efficiency, was even better at 59.8 per cent in 2015.
Executives including Keith Creel, president and chief operating officer, emphasized the company’s focus will be on controlling operating expenses and capital costs, because they can’t predict revenue growth, due to the economic slowdown.
At the same time, CP continues to push for a merger with Norfolk Southern railway, which operates in the eastern United States.
But Norfolk Southern has rebuffed a takeover, even though CP has sweetened its offer, first extended last November.
CP has argued that rail mergers are needed in order to ease rail congestion, especially around Chicago, where freight trains can get stuck for 30 hours, and move goods more efficiently across the United States.
CP’s earlier attempt for a merger with Florida-based CSX was abandoned in 2014.
Rival rail CEOs have charged a merger between CP and Norfolk Southern would limit competition and hike prices. A merger would also face the hurdle of winning U.S. government approval.
Earlier this week, CP took the unusual step of asking the U.S. Department of Justice to look into whether top executives at railways such as CSX and Union Pacific were working together to thwart CP’s bid.
Several have openly said that they don’t support a CP-Norfolk Southern merger.
Questions have arisen about whether the U.S. Surface Transportation Board would approve such a merger, which has already been publicly opposed by some U.S. members of Congress.
Harrison alluded to political influence when he suggested that CP is waging an uphill battle, facing a stacked deck.
“If somebody has an ace up their sleeve, and they’re not playing by the rules, then we understand that,” he said. “We would have to adjust accordingly.”
CP has not said whether it would then launch a proxy battle with Norfolk Southern, which reports earnings next week.
One analyst, however, pointed out that given CP’s stock price has been dropping as other railroads are falling, would CP consider dropping its bid.
CP’s shares in Toronto closed at $149.84 on Thursday, way down from a high last March of $245.05.
Harrison conceded that CP is reviewing its plans – and it could decide to abandon the merger, and pursue an aggressive stock buyback plan to boost the price.
“We could just run the railroad. It has worked well for us, and life goes on,” he said.