* Move to Calgary rail yard planned, union president says
* Move, job cuts likely part of CEO restructuring plan
* CEO to detail strategy Dec 4-5 in New York
By Susan Taylor and Nicole Mordant
Nov 23 Canadian Pacific Railway is
planning to relocate much of its head office from downtown
Calgary, union officials and a source close to the company said,
under a restructuring plan that its new chief executive will
detail to investors in early December.
Chief Executive Hunter Harrison told U.S. union leaders and
a Canadian union president that Canada's second-biggest railroad
will move employees out of its glass-towered headquarters as
part of an ambitious cost-cutting plan.
Harrison, a hard-driving, 50-year veteran of the rail
industry, was appointed CEO in June to turn around the
underperforming railway after a bruising proxy battle ousted his
predecessor, as well as the previous chairman and several
directors. He is the hand-picked choice of CP's biggest
shareholder, William Ackman's Pershing Square Capital
Management, who launched the proxy fight.
One union official said the head office move was to a nearby
Calgary rail yard that CP owns. Details are expected Dec 4 and
5, along with an announcement of further job cuts, when Harrison
outlines his plan to improve efficiency at CP.
"They're moving the headquarters to Ogden, which just makes
sense," said Bill Brehl, president of the Teamsters Canada Rail
Conference Maintenance of Way union.
"We're a railroad. What were we doing downtown hanging out
with the oil barons? Our place is to be in a rail yard," said
Brehl, who was told of the plan by Harrison.
Brehl said the company will rebuild the century-old Ogden
yard, constructing offices there. CP decided last year to close
the Ogden repair shop, constructed in 1912 on land south east of
Calgary's city center. It moved locomotive and train car repair
A CP spokesman declined to comment when asked to confirm the
A source close to the company, who asked not to be
identified, said CP will maintain a reduced downtown presence
consisting of a boardroom and small number of offices.
The change aims to trim the cost of operations over the long
term, the source said. "Downtown is very expensive. There is a
lot of real estate around the yards," the source said.
James Nelson, general chairperson of the United
Transportation Union, said he attended a meeting in Chicago with
other U.S. labor leaders in late September where Harrison said
CP would save $19 million annually from the move.
Downtown Calgary, Canada's oil industry capital, is the
nation's second, most-expensive office market behind Toronto,
according to a July 2012 report by global research firm CBRE.
CP shifted its head office to Calgary from Montreal in 1996,
in a company-wide reorganization that eliminated 1,450 jobs.
PLAN TO PICK UP EFFICIENCY
Harrison, the former CEO of CP's bigger rival, Canadian
National Railway Co., has promised to dramatically
improve CP's operating ratio from 74.1 percent in the most
recent quarter to 65 percent by 2016.
Operating ratio, a closely watched efficiency gauge in the
rails, measures the share of operating revenues used for
operating costs. The higher the ratio, the less efficient the
operation, and CP's is the highest of North America's big
As part of the cost-cutting plan, Harrison told analysts and
investors last month that 5 to 10 percent of the company's
headcount would be eliminated, with a focus on management
positions and jobs in the Calgary headquarters. CP had about
14,500 employees at the end of the third quarter.
Harrison told U.S. union officials in late-September that CP
was looking at closing costly hump yards, which are used to sort
cars, in parts of Canada and Bensenville, Illinois, Nelson said.
At the same meeting, Harrison also said that CP planned to
sell the 365-mile section of its DM&E rail line west of Pierre,
South Dakota, Nelson said.