CPR SLASHING 4,500 JOBS, CONFIRMS MOVE
BIG CHANGES AT CANADIAN PACIFIC
Canadian Pacific outlined a new vision for the future on Tuesday that includes job cuts and relocating its current corporate downtown Calgary office.
The company said it will reduce its workforce by 4,500 employees and contractors by 2016 and also relocate its headquarters by 2014 to a new office space at the CP-owned Ogden Yard. The company currently has 19,500 workers, including employees and contractors.
At its investor day in New York, president and chief executive Hunter Harrison outlined CP’s “go-forward” plan for change that the company says will greatly improve service, increase the railway’s efficiency, lower costs and grow the business.
He said the office move will save about $18 million a year in operating expenses. The company has between 1,500 and 2,000 employees in Gulf Canada Square in downtown Calgary.
“I’m not sure I believe in buying into the old business district issue anymore. I’m not sure that I’ve always agreed that railroaders should be downtown in glass towers,” said Harrison.
“And so I think it has a cul- tural impact on the organization to move out to what was or is a kind of a supplemental industry yard but nice headquarters, first-class nice headquarters for our people. They can look out the window and see the railroads, which I think is good, that we don’t forget what this business is about ... And we’re able to control our own destiny.”
CP, which moved to Calgary in 1996 from Montreal, did not release any other details on Tuesday about its corporate office move. It was the first official verification from the company of the office move after union officials leaked the news to the media two weeks ago.
It is the second major Calgary company in the last few months to announce a move out of the downtown. In September, Imperial Oil said it would be relocating its headquarters from downtown to the Quarry Park in southeast Calgary. The move would begin in 2014 with completion in 2016.
Harrison said the workforce reduction will take place through job reductions, natural attrition and fewer contractors.
“We have already made progress on this front and expect 1,700 positions to be eliminated by year end,” he said in the release.
Maggie Schofield, executive director of the Calgary Downtown Association, said she understands that it makes sense for CP to move to property it owns.
“We understand that CP is making some very significant cost-cutting moves within the organization,” said Schofield. “We also understand that they will keep some sort of a presence in the downtown. We’re grateful for that.”
Schofield said there’s still an appetite for prime office space downtown, and the space vacated by the railway in Gulf Canada Square will be an attractive location for companies in the hunt.
Bruce Graham, president and chief executive of Calgary Economic Development, said CP’s presence in Calgary is of the “utmost importance” to the city.
“The relocation of CP’s head office has greater impact from the standpoint ... it’s an iconic company and it also represents the diversification of our downtown core as well,” said Graham. “We’re disappointed to see them leave (downtown) ... while we’re still happy to see that they’re maintaining their (head office) presence here ... it’s certainly going to be a diminished presence from what we’re used to having from CP.”
Harrison said momentum is building at Canadian Pacific and the organization is driving to a culture focused on operations.
“Service will be what drives this organization, by providing a premium, reliable product offering through a lower cost operation,” said Harrison. “We have initiated a rapid change agenda and have made tremendous progress in my first 160 days, and we are only getting started.”
Among other initiatives will be a new longer sidings program which will improve asset utilization and increase train length and velocity.
“I am excited about what we’ve achieved to date, but we have only just started this journey to being a more competitive railway,” said Harrison. “Canadian Pacific is a great franchise with strong growth upside and we are more confident than ever that we will drive shareholder value long into the future.”
Harrison was installed as CP’s chief executive in the summer following a bitter proxy fight with the company’s largest shareholder.
Pershing Square Capital pushed for Harrison to replace then-CEO Fred Green, saying the veteran railroader had what it takes to bring CP from 2011’s operating ratio of 81.3 to 65 by 2015.
On Tuesday, CP said it expects a full-year operating ratio in the midsixties for 2016.