CP Rail trying to control costs as volumes slump

TORONTO, March 24 (Reuters) - Canadian Pacific Railway's CP.TO average weekly carload volumes are down around 16 percent so far in 2009, the company's executive vice president and chief financial officer said on Tuesday.

To handle the shortfalls, the Canada’s No. 2 railway is trying to control costs, conserve cash, strengthen its balance sheet and manage its capital judiciously, Kathryn McQuade told analysts at a conference in Toronto.

She said CP is targeting C$100 million ($82 million) in annual savings over the next two to three years and that expense reductions should offset roughly 30 to 40 percent of revenue declines.

“I have told the team it’s hard to catch a falling knife, however... operations is doing a good job in keeping up with volume shortfalls,” McQuade said.

To cut costs, she said CP has parked almost 350 locomotives. It has laid off about 1,600 employees and put 15,000 freight cars in storage.

The company is also looking at balancing its network better, using longer trains and enhancing maintenance practices to keep costs down.

Earlier this year, CP issued new debt, raising about C$500 million. McQuade said the company is keeping cash for corporate purposes and possibly to reduce debt.

$1=$1.22 Canadian Reporting by John McCrank; Editing by Peter Galloway