Canadian Pacific Rail to slash 4,500 jobs in efficiency drive
By Allison Martell and Susan Taylor
(Reuters) - Canadian Pacific Railway Ltd (CP.TO: Quote), the country's second biggest rail carrier, said on Tuesday it would cut 4,500 jobs by 2016 as part of a drive by its new CEO to slash costs and improve its operating efficiency, now the industry's worst.
The job reductions, announced by Chief Executive Hunter Harrison during a speech in New York, were deeper than expected. The company, which has 19,500 employees and contractors, had earlier estimated that it would cut 5 to 10 percent of its workforce, or about 1,950 at the most.
In his speech, Harrison said he pushed hard to cut costs in the five months since he was installed as chief executive after a proxy battle led by William Ackman's Pershing Square Capital Management Ltd, the U.S. hedge fund that is CP Railway's largest shareholder.
"Make no mistake, this is clearly, initially, a cost take-out story," he said. "I would emphasize to you this is not some experiment in a laboratory, this is a proven, tried and tested model."
Releasing an outline of its formal turnaround plan ahead of the speech, the company repeated its pledge to achieve an aggressive target for operating efficiency.
It aims to lower its operating ratio - currently at 74.1 percent - to the mid-60s by 2016.
The ratio, which shows operating expenses as a percentage of revenue, is a key indicator in the rail industry - the lower the number, the better. CP's ratio in the third quarter was the highest among North America's six biggest railways.
The pace of that change may be faster than predicted for the first 18 months, Harrison said, but will then "settle in." Continued...