Canadian Pacific (TSX: CP) says it will eliminate about a quarter of its workforce by 2016 and expects to cut about 1,700 of those jobs by year-end as the struggling railroad works to bring down its operating costs.
The Calgary-based company said Tuesday the reductions will be achieved through job cuts, attrition and reducing contractors as part of its restructuring plan.
UPDATE: Canadian Pacific stock prices hit a 52-week high on Wednesday, following its announcement of job cuts, CBC reports. Shares reached $97.49 in heavy volume before falling slightly again, on investor expectations the job cuts will make the company more profitable.
The stock hit $97.49 in heavy volume before falling back to $97.19, a gain of $4.19, or 4.51 per cent by midday Wednesday in Toronto. Investors bid up the shares of companies they expect will be more profitable because of lower costs.
It expects about one-third of the 4,500 targeted to be eliminated by the end of the year. In total, the reductions will amount to the elimination of about a quarter of some 19,500 employees and contractors operating in six provinces and 13 U.S. states.
"We do not want to lose good people. When you've got talent, you protect it,'' CEO Hunter Harrison said at the company's annual investor conference, his first since taking the helm of the storied railway 160 days ago.
"We've said to people this: If you're willing to be cross-trained in another discipline, if you're mobile as far as being able to move, we've got work for you and hopefully they will be able to take advantage of that.''
The railway is "fortunate'' to have a high attrition rate of eight to nine per cent, given its older workforce. Over the course of his four-year plan, Harrison said there's potential for 5,700 people to leave the organization and not be replaced.
The cuts are part of a plan to increase annual revenue growth between four and seven per cent from 2012 levels as well as reduce its full-year operating ratio -- a closely watched measure of how much revenue is required to run the business -- to the mid-60s range by 2016.
Harrison said reaching that target is "doable.''
"Every day at work, I gain more confidence. In fact I reach over sometimes and start to change the number and they take the pencil out of my hand,'' he said.
The strategic moves are the latest for the railway since a new board of directors installed Harrison as its chief executive officer in the summer following a bitter proxy fight with the company's largest shareholder.
Pershing Square Capital pushed for Harrison to replace then-CEO Fred Green, saying the veteran railroader and one-time boss at rival Canadian National Railway Co. (TSX:CNR) had what it takes to bring CP from 2011's operating ratio of 81.3 to 65 in four years.
CP said Tuesday it will also explore options including the potential to sell surplus real estate, as well as the Delaware and Hudson line in the U.S. Northeast. The railroad company also announced it's seeking potential buyers for a part of its DM&E line that stretches about 1,000 kilometres across several states in the U.S. Midwest.
It will move its current corporate headquarters in downtown Calgary to new office space at its Ogden Yard, about 10 kilometres away, by 2014.
In addition to shaving some $18 million annually off CP's operating costs, the move will also have benefits when it comes to corporate culture, said Harrison.
"I'm not sure that I've always agreed that railroaders should be downtown in glass towers,'' said Harrison.
"I think it has a cultural impact on the organization to move out to what was or is kind of a supplemental industry yard. They can look out the window and see a railroad, which I think is good -- that we don't forget what this business is about.''
Another plan to bring down costs includes building longer sidings, connector tracks used to load and unload cars, which it says will allow it to move the same or increased volumes with fewer trains.
The news follows an announcement Monday that CP has deferred plans to extend one of its lines into a coal-producing area known as Powder River Basin. In the weeks following Harrison's arrival, a number of executives left and were replaced with Harrison supporters.
About seven employees at the vice-president level and above have left already and Harrison said he does not see having to fill those positions.
"That has allowed us to take the layers out, to take bureaucracy out of the organization,'' said Harrison.
"One of my evaluations initially was that we were clearly, in my view, top heavy. We had too many non-union officer, managers, supervisors, leaders up to the range of 28 to 30 per cent. That's far too much.''
Harrison is the Tennessee-born retired CEO of Canadian National Railway and is credited with turning the Montreal-based company into the most efficient major railway in North America.
Labour Day: A Canadian Invention
Few Canadians realize it, but Labour Day is as Canadian as maple bacon. It all began in 1872, when the Toronto Typographical Union went on strike to demand a nine-hour workday. When <i>Globe and Mail</i> chief George Brown had the protest organizers arrested, Prime Minister John A. Macdonald passed a law legalizing labour unions. Thus, a Conservative prime minister became a hero to the working class, and Canada became among the first countries to limit the workday, doing so decades before the U.S. The typographers' marches became an annual event, eventually being adopted by the U.S., becoming the modern day Labour Day.
The Winnipeg General Strike
The end of World War I brought social instability and economic volatility to Canada. On May 15, 1919, numerous umbrella union groups went out on strike in Winnipeg, grinding the city to a halt. Protesters were attacked in the media with epithets such as "Bolshevik" and "Bohunk," but resistance from the media and government only strengthened the movement. In June, the mayor ordered the Mounties to ride into the protest, prompting violent clashes and the death of two protesters. After protest leaders were arrested, organizers called off the strike. But the federal mediator ended up ruling in favour of the protesters, establishing the Winnipeg General Strike as the most important strike in Canadian history, and a precursor to the country's modern labour movement.
The Regina Riot
During the Great Depression, the only way for a single male Canadian to get government assistance was to join "relief camps" -- make-work projects set up by the federal government out of concern idle young men were a threat to the nation. The relief camps, with their poor work conditions, became breeding grounds for communists and other radicals. The "On-To-Ottawa Trek" was organized as a protest that would move from Vancouver across the country to Ottawa, to bring workers' grievances to the prime minister. The trek halted in Regina when Prime Minister R.B. Bennett promised to talk to protest organizers. When talks broke down, the RCMP refused to allow the protesters to leave Regina and head for Ottawa, and on June 26, 1935, RCMP riot officers attacked a crowd of protesters. More than 100 people were arrested and two killed -- one protester and one officer.
In May, 1938, unemployed men led by communist organizers occupied a post office and art gallery in downtown Vancouver, protesting over poor work conditions at government-run Depression-era "relief camps." In June, the RCMP moved in to clear out the occupiers, using tear gas inside the post office. The protesters inside smashed windows for air and armed themselves with whatever was available. Forty-two people, including five officers, were injured. When word spread of the evacuation, sympathizers marched through the city's East End, smashing store windows. Further protests against "police terror" would be held in the weeks to come.
Giant Mine Bombing
In 1992, workers at Royal Oak Mines' Giant Mine in the Northwest Territories went on strike. On September 18, a bomb exploded in a mineshaft deep underground, killing nine replacement workers. Mine worker Roger Warren was convicted of nine counts of second-degree murder. The Giant Mine closed in 2004.
The Toronto G20
The Canadian Labour Congress, representing numerous labour groups, participated in protests in Toronto during the G20 summit in June, 2010. When a handful of "Black Block" anarchists rioted through the city core, it brought an overwhelming police response that resulted in the largest mass arrests in Canadian history. More than 1,000 people were arrested, with most never charged with any crime. Numerous allegations of police brutality have been made, and the Toronto police are now the target of several multi-million dollar lawsuits. So far, two police officers have been charged with crimes relating to G20 policing, and charges against other police officers are also possible.
When Vancouver-based magazine Adbusters suggested the public "occupy Wall Street" to protest corporate malfeasance, New Yorkers took the suggestion seriously, and occupied Zuccotti Park in Manhattan. Canadians followed suit, sparking copycat occupations in all major Canadian cities in September, 2011. By December, most of the occupations had been cleared, all of them non-violently. Though the protests achieved no specific goals, they did change the political conversation in North America. What their long-term legacy will be remains to be seen.