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CN Rail, Union Dig In With Little Progress Seen in Canada Strike

Jacqueline Thorpe and Sandrine Rastello

(Bloomberg) -- The rhetoric is heating up between Canadian National Railway Co. and its union as workers stayed off the job for a fourth day and economists predicted the strike could nearly flatten growth.

The Teamsters Canada Rail Conference said reports of propane shortages in Ontario and Quebec appear to be largely manufactured by CN Rail, adding that more than 1,800 locomotive engineers and 600 supervisors are free to continue to cross picket lines and operate freight trains.

Hours later, the railroad company said it only has a “small pool of qualified managers” for the job, enabling about 10% of normal service.

“Currently, very limited amounts of various commodities are moving across the country,” the Montreal-based company said. “This includes container traffic to keep Canada’s ports fluid to be able to return to normal operations after the strike.”

More Propane

About 3,200 conductors and yard operators at Canadian National walked off the job Tuesday, snarling shipments from one of the world’s largest exporters of raw materials. Canadian Transport Minister Marc Garneau, who faces calls from provinces and industry groups to force strikers back to work, on Friday reiterated his government wants to see a negotiated settlement.

“We believe this is not only the most probable but also the fastest way to resolve this issue,” he told reporters in Montreal.

The province of Quebec, which warned Thursday that its supply of propane was going to run out in four days, braced for continued disruptions. The government on Friday said it found ways to extend the reserves by a few more days, including supply coming from Edmonton that should arrive early next week.

A long strike could nearly flatten economic activity, according to Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce. He currently expects gross domestic product to expand 1% in the fourth quarter.

A prolonged strike “would clearly be disruptive to the Canadian economy and to the company in question, both due to the direct reduction in the transportation services component of GDP, the resulting back up in unshipped inventories, and the further spillover from that into production in affected sectors,” he wrote to investors Friday.

The company’s shares rose Friday, paring this week’s decline to about 2%.

“While CN is nowhere near operating at full capacity, we think enough trains are running to allow CN to supply Ontario and Quebec with propane,” Lyndon Isaak, president of the union, said in the statement earlier Friday. “We wonder if CN is choosing not to ship goods like propane in order to manufacture a crisis and force back-to-work legislation.”

Should the disruption last until Nov. 30 it could crimp gross domestic product by as much as C$2.2 billion ($1.7 billion), according to Toronto-Dominion Bank economists Brian DePratto and Derek Burleton. If it extends until Dec. 5, when lawmakers resume work in Ottawa, it could put a C$3.1 billion hole in the economy. That’s equivalent to a drag of nearly one-quarter percentage point in the fourth quarter, the economists estimated.

The union has been quiet as negotiations with Canadian National continue in Montreal to resolve the dispute, but comments by Quebec Premier Francois Legault appear to have provoked the Teamsters’ statement on propane. Legault said the fuel, which is largely shipped in from Sarnia, Ontario, is running low in Quebec, threatening the heating systems of hospitals and elderly residences across the province. The government has since backpedaled, saying there was no such immediate risk.

Working Conditions

The union is striking over labor conditions and drug benefits, and says fatigue is a major issue. No substantive progress has been made on the union’s key workplace safety and health issues since the strike begun, the labor group said.

“We are fighting for the safest workplace possible,” Isaak said. “We’ve lost nine of our members in various railway accidents over the past 24 months, including three from the group at CN that’s currently on strike.”

CN Rail Chief Executive Officer Jean-Jacques Ruest said on Thursday that the Montreal-based company has taken reasonable steps to end the economic impact by offering binding arbitration, something the union has rejected.

(Adds CN Rail, government statements starting in third paragraph.)

--With assistance from Theophilos Argitis.

To contact the reporters on this story: Jacqueline Thorpe in Toronto at jthorpe23@bloomberg.net;Sandrine Rastello in Montreal at srastello@bloomberg.net

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, ;Jacqueline Thorpe at jthorpe23@bloomberg.net, Divya Balji

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