Canadian National (NYSE: CNI) will be laying off employees amid “weakening” economy in key sectors, the company said on Nov. 15.
The railway confirmed that it was cutting its workforce, but it declined to say how many positions would be affected. The Globe and Mail reported on Nov. 15 that as many as 1,600 employees could be affected. Rail companies have historically used furloughs and layoffs as a way to match headcount resources with rail demand.
“As explained during CN’s Q3 [third-quarter] results, the company is adjusting its resources to demand. This includes the difficult decision of adjusting its workforce to demand levels by placing some employees on furlough and reducing both management and union job numbers due to a weakening of many sectors of the economy. These adjustments have already started to take place across the network,” Canadian National (CN) said. “CN would like to express gratitude to the employees who will be leaving the company and thank them for their service.”
In response to the news of the layoffs, Teamsters Canada Rail Conference (TCRC) President Lyndon Isaak told FreightWaves that the workers affected by CN’s cuts represent a small percentage of unionized workers. He had heard secondhand that many of the positions affected were nonunionized positions at CN’s headquarters in Montreal, but he couldn’t confirm that report.
The layoffs are the result of “the normal ebb and flow of freight traffic,” Isaak said.
The job cuts come as CN executives said the railway is experiencing several headwinds, including economic weakness and lower volumes for U.S. coal, crude and forest products compared with the same period in 2018.
CN’s volumes in revenue ton miles have been down by 12% to 13% in the past couple of weeks, according to Janet Drysdale, CN’s vice president of financial planning.
This is “not the robust freight environment that we were certainly hoping for,” Drysdale said at a conference hosted by equities research firm Stephens on Nov. 13.
And even though CN hauled an all-time monthly record of grain volumes in October, an early winter in both western and eastern Canada has likely curtailed grain shipments for the remainder of the year, Drysdale said.
There’s a portion of grain crop that wasn’t harvested and won’t likely be harvested until the spring, Drysdale said. Furthermore, there’s some concern about grain quality, and grain companies are trying to source the right kinds of grain to meet their sales. This is impacting carload levels, she said.
“If it wasn’t for this weather situation in western Canada, I think we would’ve been well positioned to set records for the balance of the year,” said CN’s James Cairns, vice president for the rail-centric supply chain, at the Stephen’s conference.
What also could impact carloads for certain traffic in the coming weeks are negotiations with the TRTC, Drysdale said.
Isaak confirmed that negotiations with CN are ongoing. The union will be in a position at 1 a.m. ET Nov. 16 to give notice that it could strike in 72 hours, or on Nov. 19.
“We’ll see what happens,” Isaak said.