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Rail strike could cost manufacturers millions, industry says

A rail strike would raise expenses, lower sales and delay shipments for Canada's manufacturers, an industry group says, as various sectors grapple with looming uncertainty around a key cross-country transport link.
Manufacturers say a rail strike would raise expenses, lower sales and delay shipments, as industry groups grapple with looming uncertainty about key transport links. A CN Rail train moves cargo containers at the Centerm Container Terminal at port in Vancouver, on Friday, July 14, 2023. THE CANADIAN PRESS/Darryl Dyck

A rail strike would raise expenses, lower sales and delay shipments for Canada's manufacturers, an industry group says, as various sectors grapple with looming uncertainty around a key cross-country transport link.

Two-thirds of respondents to a new survey of members from the Canadian Manufacturers & Exporters said the effects of a work stoppage would be "significant or severe," while more than three-quarters expect higher costs.

The organization cited the poll results, gleaned from 225 of its 2,500 member companies over the last three weeks, in a letter to cabinet urging the federal government to take action to prevent a strike or lockout later this year.

Last month, employees at Canadian National Railway Co. and Canadian Pacific Kansas City Ltd. authorized a strike mandate that could see some 9,300 workers walk off the job if they are unable to reach new agreements.

Labour Minister Seamus O'Regan, in an apparent move to delay a potential strike, stepped in by asking the country's labour board to review whether a work stoppage would jeopardize Canadians' health and safety. A decision is unlikely before mid-July, according to CPKC.

Manufacturers — from auto and chemical makers to propane exporters and brewers — are worried about the prospect of a work stoppage, said Dennis Darby, who heads the group.

"What we do now is make parts and pieces," he said of domestic industry. "We don't make washing machines anymore, but we have companies that make the motors in the washing machines.

"That's why it always has a knock-on effect when you talk about supply chains, because Canada is part of that North American supply chain."

The possibility of a halt to freight traffic on the tracks has already had an impact, said Darby, whose organization counts Ford Canada, Maple Leaf Foods, Bombardier Inc., Cenovus Energy and Moosehead Breweries among its members.

"In some cases they're pre-ordering extra inventory," he said of manufacturers generally.

"In some cases they're trying to book space on other carriers ... but on transport trucks, prices are at a premium."

The cost of a rail traffic halt would average $275,000 per company each day, according to the 225 respondents. If accurate, that means the cost for a sliver of Canada's manufacturers alone would top $433 million per week.

The manufacturers group is just one of hundreds of organizations and companies that have made submissions to the Canada Industrial Relations Board over the impact of job action at rail lines that haul more than $28 billion worth of cargo each year.

The labour minister referred the issue to the board after receiving a letter from the Canadian Propane Association, according to two sources with knowledge of the matter. The Canadian Press is not naming the sources because they were not authorized to speak publicly.

O'Regan highlighted heavy fuel, propane, food and water treatment materials needed in remote communities "and throughout Canada," said tribunal spokesman Jean-Daniel Tardif.

Darby said that Ottawa can now use "moral suasion" to wring a deal out of the two sides. Longer-term, Ottawa should look to frame rail transport as "some kind of an essential service" in order to impose binding arbitration if necessary, he said.

Teamsters Canada rejected the call for binding arbitration — a process that follows back-to-work legislation unless the two parties enter it voluntarily — or any government move to "prevent a rail stoppage," in the words of the manufacturers' letter to cabinet.

"Occasional labour disputes are a hallmark of a free and democratic society," said union spokesman Christopher Monette in an email. "It would be a step back to a time when workers had no rights."

Commuters could also feel the effects of a work stoppage.

Should one occur involving the 80 CPKC rail traffic controllers bargaining for a contract — distinct from CPKC's main group of engineers, conductors and yard workers — passenger trains that run on Canadian Pacific-owned tracks in Vancouver, Toronto and Montreal could shut down.

Thousands of riders could see major disruptions on TransLink's West Coast Express, GO Transit's Milton line and Exo's Candia, Saint-Jérôme and Vaudreuil/Hudson lines, according to the Montreal Economic Institute.

This report by The Canadian Press was first published June 3, 2024.

Companies in this story: (TSX:CNR, TSX:CP)

Christopher Reynolds, The Canadian Press