CALGARY — Canadian Pacific (TSX:CP), citing pension issues, has asked for a federal mediator in its contract dispute with the union representing the company’s 4,800 Canadian train crew employees and rail traffic controllers.
“The legacy pension costs significantly impact CP’s operating ratio and our ability to further fund investments that will support growth opportunities for our customers,” president and CEO Fred Green said in a release Friday.
“We’ve made changes to the management pension plan. The time to address this within our collective agreements is now,” he said.
Green said the issues are “difficult and complex” for both sides and that CP believes “expert, third-party support, with a focused timetable, will offer the best opportunity to achieve a settlement.”
CP, which has made $1.9 billion in solvency deficit payments over the last three years, says it is seeking changes to legacy pension and post-retirement benefits to make them industry comparable.
“We have a number of proposed options for pension plan modifications, some of which align with the industry, all of which are fair to employees, and none of which have any impact on existing pensioners,” Green said.
The railway said pension amendments it has proposed include providing a guaranteed pension payment that is a multiple of average Canadian industrial pension payments and would be “comparable to what this union has already agreed to for the majority of its members at another major Canadian railway.”
The existing contract with the union, which represents engineers, conductors and rail traffic controllers, expired Dec. 31. The two sides have been negotiating since October on issues ranging from wages to work rule changes and pensions.
The issue of CP’s relative high operating ratio — a measure of efficiency in which a the lower the number the better — has brought Green under fire from CP’s largest shareholder, New York fund manager Pershing Square, headed by activist investor Bill Ackman.
Ackman, whose company holds 14.2 per cent of CP stock, is actively seeking to replace Green with Hunter Harrison, the retired CEO of rival Canadian National Railway Co. (TSX:CNR) who built a reputation by turning CN into North America’s most efficient railway.
Pershing Square believes Harrison can get Canadian Pacific’s operating ratio from 81.3 in 2011 down to 65 in the next four years. Canadian Pacific says no railway has been able to achieve that steep a drop in that little time.