The railway company that drove the last spike in the train track spanning the country has announced a massive layoff of workers. Canadian Pacific Railway last week unveiled a plan to slash 1,900 jobs or 10 per cent of its North American workforce of 19,000 by the end of next year. The move is an indication of the cutthroat competitiveness in the continental rail industry and the stock market pressure for profits. Rob Ritchie, the president and chief executive of CPR, told a Calgary news conference that the reductions would save $300 million a year. The company had no choice, he said, because “competition is relendess.”
That was cold comfort to unionized workers, especially those in areas targeted for cuts. Ritchie said 45 per cent of maintenance jobs would be eliminated, 30 per cent in administration and the rest in train operations. Some union members responded by raising safety concerns. “A broken rail because they’ve cut back on inspections on track can mean a train wreck,” said Lou Schillaci, general chairman of the Canadian Council of Railway Operating Unions. But Ritchie vowed safety would never be compromised.
While CPR announced the layoffs, parent company Canadian Pacific Ltd. (the rail, shipping and energy giant) released second quarter results, which included a onetime charge of $501 million for CPR severance packages. Without the charge, CP had operating income of $198 million, compared with $171 million during the same quarter last year. With the charge, the conglomerate reported a loss of $104 million for the period. Meanwhile, rival Canadian National Railway Co. reported a strong second quarter, with profits of $196 million, well up from $143 million in the same quarter last year. CN and its chief executive Paul Tellier established the Canadian railway trend of improving returns by slashing jobs. Last October, CN chopped 3,000 positions to cut costs.
The Greenspan effect
U.S. Federal Reserve Board chairman Alan Greenspan raised the spectre of higher interest rates, pledging to “act promptly and forcefully” to stem inflation. His words sent a chill through stock markets around the world and caused the loonie to fall to 66.32 cents (U.S.), its lowest level since March.
Frustration has grown as gasoline prices continued to climb at filling stations across the country. So far this summer, St. John’s, Nfld., residents
Oil (average‘Edmonton par' opecoil price in Canadian dollars) 7®®5
have faced the highest average price at Canadian pumps—69 cents per litre. In some border communities, motorists are crossing in droves to top up on U.S. gasoline, which is cheaper despite a weaker Canadian dollar. (For instance, Buffalo, N.Y., is selling gas for the equivalent of 49 cents a litre.) Many politicians and consumers want prices frozen, but they may be in for a shock. As summer gasoline consumption abates, prices usually decline. But with OPEC’s decision last March to boost oil prices by cutting production, this fall, prices may only drop slightly, remaining high into the winter.
Auto talks revving up
The Canadian Auto Workers began talks with the Big Three automakers last week, suggesting Ford of Canada could be a main strike target. But CAW president Buzz Flargrove had kinder words for DaimlerChrysler Canada, saying the firm appears to support the union’s request that auto parts giant Magna International not interfere with efforts to organize its plants. A DaimlerChrysler spokesman said the company simply encouraged the two sides to meet.
Suit slaps First Marathon
In what appears to be the first lawsuit of its kind in Canada, a lawyer has filed a class action suit against First Marathon Inc., arguing that the brokerage sold itself too cheaply to the National Bank of Canada. The class action seeks $300 million for a Toronto investor, and aims to represent all those who held stock in the brokerage when the buy-out was announced on June 17. First Marathon
says the deal is sound.
Scotiabank ups its stake
The Bank of Nova Scotia is buying an additional 32 per cent of Chile’s Banco Sud Americano, increasing its stake to 60.6 per cent. While the $ 174.3-million investment fits Scotiabank’s expansion into Latin America, some analysts expressed concern about the Chilean bank’s nonperforming loans.
Japanese recovery slows
The director of Japan’s economic planning agency has thrown some cold water on his country’s economic recovery. Taichi Sakaiya said that while the gross domestic product grew 1.9 per cent in the first quarter, it appears to have shrunk in the April-June quarter.
A woman of influence
Carly Fiorina, 44, has been named chief executive of California-based Hewlett-Packard Co., becoming the first woman to head one of the 30 companies listed in the Dow Jones industrial average. Fiorina, whom Fortune magazine recently dubbed the most powerful woman in American business, is leaving Lucent Technologies Inc. where she was a top executive.
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