(Corrects 15th paragraph to show that company is based in Montreal, not Calgary)
By Susan Taylor
TORONTO Feb 5 Canadian National Railway Co said on Wednesday the union representing 3,000 of its workers gave notice it intends to strike as early as Saturday, threatening one of the country's most important transport networks.
The Teamsters Canada Rail Conference said that CN, the country's largest rail operator, told the union early on Wednesday it was "done negotiating" and workers must choose between an existing labor deal or walking off the job. Talks continued into the afternoon.
The union gave notice of its intention to strike after conductors, train and yard workers voted down a tentative pact in October, saying members had a deep distrust of the railway because it didn't respect provisions for rest.
"We really aren't looking forward to a strike," union general chairman, Roland Hackl, told Reuters. "It's more of a tool to put a little bit of pressure on the company to get them serious."
A work stoppage at CN could disrupt a vast cross-country network that ships goods ranging from lumber and crude oil to grains and automobiles. It would also come at a time when harsh winter weather has hampered operations, driven up costs and slowed services.
Chief Operating Officer Jim Vena said the company would decide on its next steps at the end of the day if it fails to reach an agreement with the union.
"CN underscores the seriousness of this action by the union," spokesman Mark Hallman said in an emailed statement. "CN remains available to meet the union today, with the assistance of federal mediators, to reach labor agreement."
Mediators met with the company and union in Montreal on Monday and Tuesday to discuss the voting results and solutions.
Hackl said that 61 percent of workers who voted on the tentative deal had rejected it and that slightly fewer than 50 percent of workers turned out to vote.
The union has given CN 72 hours' notice, so workers could go on strike as early as Feb. 8, but it says it still hopes to reach an agreement before the deadline.
Members are angry that they are being made to work 12-hour shifts, despite asking to be relieved after 10 hours, Hackl said, calling it a safety issue.
The union said that CN tried, but failed, to remove contractual rest periods from the collective agreement in talks last year. Following that, rest violations multiplied, the union said in a letter to Vena, in many cases by 300 to 400 percent.
"We are all too keenly aware of the increased focus on rail incidents and accidents. We have been fortunate that, as far as the union is aware, none of them have yet to be tied to crew fatigue," the union wrote.
CN has told Reuters that extreme winter weather conditions have hampered normal operations and that it complies with statutory rest provisions.
The Montreal-based company didn't say if it has trained management to replace striking workers or whether a disruption would slow or stop its transport of goods.
Any service disruption would exacerbate a severe backlog in moving western crops to ports that has racked up shipping penalties for grain handlers and left farmers with few buyers. [ID: nL2N0JS13T]
Record-large harvests of wheat and canola have overwhelmed CN and its smaller rival, Canadian Pacific Railway Ltd, resulting in a combined backlog of some 40,000 grain hopper cars.
A walkout would also affect crude oil being shipped by rail, which has surged over the last few years as oil production exceeds pipeline capacity.
CN said it shipped nearly 25,000 carloads of crude in its recently-reported fourth quarter and 75,000 for the full year. CP also shipped 25,000 carloads of crude in that quarter, and 90,000 carloads for the year.
Extreme cold and heavy snowfalls have already hampered operations. CN issued a cold weather advisory for western Canada on Tuesday, saying that it was running shorter trains in the hardest-hit areas and detouring where required.
Still, a prolonged strike could be averted if the federal government uses legislation to force workers back to the job.
Canada's government has been quick to intervene in recent years, ordering unionized staff at railways and airlines back to work several times to avoid major disruptions.
History suggests that a strike would impact the company's earnings per share by about 1 Canadian cent for every four days of disruption, said RBC Capital Markets analyst Walter Spracklin. A 15-day strike by 2,800 CN conductors in 2007 cut earnings per share by about 3.5 cents, he wrote, and a five-day strike in 2009 by CN locomotive engineers had a 1.5 cent impact.
"We believe potential downside is limited by the fact that the Canadian government has historically viewed rail as an essential service and has invoked back-to-work legislation within short order," the analyst wrote in a note to clients.
"Accordingly, if a labor stoppage does occur, we would expect the government to enforce this legislation within one week's time."
The labor dispute comes at a time when rail safety is under scrutiny both in Canada and the United States, following a series of derailments across the continent that have caused deaths and evacuations, due to oil spills and fires.
Most notably, a runaway train carrying crude exploded last summer in Lac Megantic, Quebec, killing 47 people.
Last month, CN said its railroad's safety record in 2013 improved 9 percent, even as it dealt with a series of high-profile derailments, including two in New Brunswick in January. One train caught fire and burned for days.
CN shares were down 16 Canadian cents at C$59.16 in afternoon trading on the Toronto Stock Exchange. (With additional reporting by Euan Rocha in Toronto, Rod Nickel in Winnipeg; Editing by Ros Russell, Jeffrey Hodgson and Bernadette Baum)