* Company to cut 1,700 jobs by year end, 4,500 by 2016
* Job cuts deeper than CP Railway estimated earlier
* New CEO Harrison unveils formal turnaround plan in speech
* Railway to explore options on two U.S. rail lines
* Harrison confirms plans to relocate Calgary headquarters
By Allison Martell and Susan Taylor
Dec 4 Canadian Pacific Railway Ltd, 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
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
"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
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."
Harrison pointed out that CP Railway had closed hump yards,
facilities used to sort rail cars, in Toronto, Winnipeg, Calgary
and Chicago since he took the helm. That will save C$40 million
to C$50 million in direct costs, with "much more" in indirect
savings, he said.
The company has also closed intermodal terminals in
Milwaukee, Toronto, and Chicago.
Along the way to its 2016 target, CP Railway said it
expected compound annual revenue growth of between 4 and 7
percent, measured against a 2012 base.
For 2016, it expects cash flow before dividends of C$900
million ($907 million) to C$1.4 billion.
Harrison also confirmed a Reuters report that the company
would relocate its headquarters from downtown Calgary to a rail
yard in the city, saving about C$18 million annually. CP is also
considering the sale of surplus real estate.
In another measure to boost efficiency, CP said it would
build longer rail sidings to accommodate longer trains. That
will allow it to move greater volumes of material with fewer
Looking for potential assets to divest, CP Rail said it
would review options for its Delaware and Hudson Railway Co line
in the U.S. Northeast.
"The first thing I did when I came to this organization ...
was take the map home at night and start saying what if, what
if," Harrison said. "What if we could do this? What if we could
Earlier on Tuesday, the company said it was exploring options
and partnerships for the western part of its Dakota, Minnesota &
Under Harrison's push to reduce bureaucracy and "red tape",
a string of senior executives have left the company, including
the chief operating officer.
Harrison, who is currently serving as COO and CEO, said the
company is in no hurry to hire his successor. He has previously
said he plans to stay at CP for three to five years.
Harrison was Ackman's favored candidate for chief executive
ahead of the boardroom coup that saw Fred Green, the previous
CEO, resign on the eve of the company's May annual meeting.
A lifelong railroader who headed up CP's chief rival,
Canadian National Railway Co until 2009, Harrison is
widely credited with making it into North America's most