Members of the union representing about 5,000 conductors, trainmen, yardmen, locomotive engineers and traffic controllers at Canadian Pacific Railway Ltd have voted 95 percent in favor of a strike mandate, the latest challenge for Canada's second-biggest railway.
The Teamsters Canada Rail Conference union members will be in a strike position after a cooling-off period ends on May 23, the company said on Friday. That's less than a week after CP holds its annual meeting, where shareholders will vote to decide between a management and activist investor's slate of directors.
Contract talks, which began in October 2011, have not resolved issues on pensions, work rules, wages, fatigue management and work-life balance, the union said. The previous collective agreement expired on Jan. 1, 2012.
CP, which is fighting a bruising proxy battle with hedge fund Pershing Square Capital Management, said more talks with the Teamsters are scheduled under the supervision of a government-appointed conciliator and that it is optimistic a deal can be reached.
"On the pension plan side there's a lot of things to discuss and it seems that CP Rail's position is very, very far away from our position," said union spokesman Stephane Lacroix.
"At this moment, there's still hope as long as CP Rail sits and negotiates in good faith."
For its part, CP says pension costs are significantly affecting operating efficiency and the company's ability to invest in growth opportunities.
It said it has made C$1.9 billion in solvency deficit contributions to its pension plan over the past three years and that it now must make its pension and retirement benefits comparable with industry standards.
"It is vital to the future of the railroad that legacy pension issues are resolved," Chief Executive Fred Green said.
Bad Timing
The prospect of a strike comes at a bad time for CP, which is fighting for shareholder support at its May 17 annual meeting.
Pershing Square has proposed a slate of seven new directors and wants to replace Green with former Canadian National Railway Co CEO Hunter Harrison.
Pershing argues that Harrison can make faster improvements in CP's worst-in-class operating ratio, a key measure of railroad efficiency, promising to reach a 65 percent ratio by 2015.
CP says it will reach a 70-72 percent ratio in 2014 and 68.5-70.5 percent in 2016. The lower the ratio, the more efficient the operation.
In the first-quarter results it issued last week, CP said its operating ratio had improved to 80.1 percent from 90.6 percent in the year-before quarter, when brutal winter weather hammered operations.
CP released a letter on Friday to Pershing Square founder William Ackman demanding he retract and apologize for statements he made about the CP quarterly results.
"We demand you publicly retract your untrue accusations and offer your apology to the company, our shareholders, our board of directors, our audit committee, and the dedicated employees whose integrity you called into question," CP Chairman John Cleghorn wrote.
The letter says that Ackman, in media interviews, said that the company had intentionally manipulated its first-quarter earnings by improperly not accruing for bonuses.
Ackman did not apologize, and said on Friday that shareholders agree there is a need for change.
"We have always spoken the truth based on sources and facts we have found reliable, and our concerns regarding Q1 accruals have been based on multiple sources," Ackman said in a statement.
"The bottom line is the case for change at CP is overwhelming based on the company's own reported numbers over the past six years."
A poll released of CP's institutional shareholders, representing about 45 percent of the company's shares, said 75 percent of favor Pershing slate of directors. (Reuters)
