CP Rail Sees More Job Cuts in Workforce Already at Decade Lowby
`Some cleansing of headquarters' is on tap, CEO Harrison says
Additional 500 reductions would shrink total by about 4%
Canadian Pacific Railway Ltd. is considering as many as 500 additional job cuts as part of a plan to boost efficiency that includes using fewer locomotives and running faster trains.
“We see right now an opportunity and a need” to shrink staffing, Chief Executive Officer Hunter Harrison said Tuesday in a telephone interview. He didn’t specify where the “500 more or so” positions might come from beyond “some further cleansing of headquarters.”
Eliminating those spots would represent a reduction of about 4 percent in a workforce that numbered 13,700 at the end of September. That employment total already was the lowest for Calgary-based Canadian Pacific in at least a decade, according to data compiled by Bloomberg dating to the end of 2005, when the tally was 16,295.
Once North America’s least efficient railroad, Canadian Pacific has evolved into one of the continent’s leanest-running carriers under the 70-year-old Harrison, who took over in 2012. Harrison’s participation on Tuesday’s earnings conference call was his first in six months, after sitting out a July briefing and then taking a leave for most of the quarter while recovering from a leg operation.
Capital spending probably will drop in 2016 from this year’s C$1.5 billion ($1.2 billion), with savings possibly reaching C$400 million, Harrison said.
Operating ratio, a benchmark measure of railroad efficiency that compares expenses to sales, fell to 59.9 percent from 62.8 percent a year earlier, Canadian Pacific said. That ratio may improve by a further 200 to 300 basis points over time, Harrison told analysts.
Canadian Pacific’s trains averaged 22.2 miles (36 kilometers) per hour in the third quarter, a 19 percent improvement from a year earlier.
To help counter a decline in crude and other commodities shipments, Canadian Pacific has been parking locomotives and railcars to save money. With about 400 locomotives now idled, Canada’s second-largest railroad will consider options that include the sale of rolling stock, Harrison said.
As of the end of 2014, Canadian Pacific’s locomotive fleet was 1,578 owned and leased engines, according to a company filing.
“Those locomotives are going to last a while,” Harrison said. “If it’s going to be eight or 10 years before we see a demand, maybe we should sell those to short lines or other Class 1 railroads. That’s part of managing the fleet.”