Canadian rail shuts down as workers lockout; fears of economic fallout grow By Reuters

By Allison Lampert, Abhinav Parmar, Jahnavi Nidumolu

(Reuters) – Canada’s two top railways have locked out more than 9,000 unionized workers, triggering an unprecedented rail shutdown that could cause billions of dollars in economic damage and affect North American supply chains.

Companies – Canadian National Railway (TSX:) (CN) and Canadian Pacific (NYSE: ) Kansas City (CPKC) – and the Teamsters union blamed each other for the work stoppage after several rounds of talks failed to produce a new deal.

“Throughout this process, CN and CPKC have shown themselves willing to compromise rail safety and separate families to make an extra dollar,” said Paul Boucher, president of the Teamsters Canada Rail Conference (TCRC), adding that the talks continue.

The two railroads said they negotiated in good faith and made several offers of better wages and working conditions.

“Despite our best efforts, it is clear that a negotiated outcome with the TCRC is out of reach,” CPKC said.

The Canadian government has so far asked the railways and the union to work together and reach an agreement, choosing not to use its power to send the dispute to binding arbitration.

Francois Laporte, president of Teamsters Canada, told reporters outside CN headquarters in Montreal that he did not expect the government to force workers into arbitration.

“We believe this matter needs to be resolved at (the) bargaining table,” Laporte told the picketing CN workers. “We don’t believe in letting a third party decide what these people’s working conditions will be.”

But the disruptions were growing.

Tens of thousands of people who depend on certain commuter rail lines in the cities of Toronto, Vancouver and Montreal were also affected by the gridlock as all train service on these CPKC-owned lines was halted.

“The rail closures at CN and CPKC are already costing workers, transit users and businesses across the country, and we can’t afford to let things get worse,” Ontario Premier Doug Ford (NYSE: ) said in a post on the platform X socialization.

The two companies said they would lock out workers at 1201 ET on Thursday.

Business and industry groups have sounded the alarm over a shutdown they say would increase costs and lead to “devastating consequences”.

Ratings agency Moody’s (NYSE: ) said on Wednesday that the shutdown could cost more than $US341 million ($251 million) a day.

The shutdown is set to paralyze shipments of grain, potash and coal, while also slowing shipments of petroleum products, chemicals and machinery.

US business will also be affected, as the two economies are highly integrated. Rail transport accounted for 14 percent of total bilateral trade of $382.4 billion in the first half of the year, according to the US Department of Transportation.

imposing

The work stoppage that is forcing out thousands of workers, including conductors, train drivers and construction workers, across Canada is largely rooted in scheduling, labor availability and demands for a better work-life balance , according to statements from the union and the company.

It comes after the Canadian government introduced new rules for rest and duty in 2023.

CN said it wanted workers to stay on the job for up to 12 hours in line with government rules, a change it said would improve productivity.

But CN workers now have shifts of up to 10 hours a day, and the Teamsters don’t want to relax those conditions.

CN locomotive engineers on the picket line said they were concerned about longer work shifts and the companies’ push to halve the current 24-hour rest period after returning home.

They said most of CN’s younger workers work on-call and must shift to assignments, packing days’ worth of food for the road on two hours’ notice.

“What we want are working conditions that ensure that the train operator, whether it’s an engineer or a conductor … gets proper rest,” Laporte said.

Analysts signaled an impact on profits at both railways following the strike.

“Our rough calculations show that each day under the strike/lockout will negatively impact CN’s EPS by ~$0.04 and CP’s by ~$0.02,” Desjardins analyst Benoit Poirier wrote in a note earlier this week.

Shares of CN and CPKC were down about 0.5 percent in early trading.

($1 = 1.3587 Canadian dollars)