(The following story by Brent Jang appeared on the Globe and Mail website on March 12, 2009.)
TORONTO — Canadian Pacific Railway Ltd. is asking employees to burn off vacation days and also scrapping a system that allowed holiday time to be banked, part of renewed efforts to control costs amid a slowdown in the railway industry.
Managers and other non-union workers in Canada hired before 1996 had been allowed to carry over their vacation time, but CP chief executive officer Fred Green said he’s leaving no stone unturned in an effort to strengthen the carrier’s balance sheet.
“Unused vacation is a liability for which the company maintains an accrual. This accrual is basically a financial reserve representing past service vacation,” Mr. Green said in an internal memo to roughly 3,000 non-union staff across Canada, including those located at the company’s Calgary head office.
CP is seeking to cut costs as the recession erodes cargo deliveries across the North American rail sector. In the first two months of this year, CP and Canadian National Railway Co. have seen their carload traffic fall an average of 18.4 per cent.
North American carriers, including major firms in the United States and Mexico, have experienced an average drop of 16.2 per cent in freight volumes.
CP said it’s converting fully to a use-it-or-lose-it system, requiring non-union employees to take their full 2009 vacation entitlements, as well as making it mandatory to drain at least two weeks of accumulated holidays from time bank each year.
“You may be required to take some of your annual vacations at times that are not necessarily the most convenient for you,” Mr. Green cautioned. “With the approval of your manager, consider short work weeks to use up annual vacations or take advantage of the traditional down times in your department and take time off then.”
In his memo, Mr. Green said the move to reduce vacation time on the books would chop payroll expenses and help meet the railway’s performance targets.
During a transportation webcast Wednesday from New York, he said CP remains committed to its cost-cutting campaign titled Execution Excellence for Efficiency, or E3, featuring initiatives such as running longer trains and renegotiating fuel contracts with freight customers.
North American carriers, including CP and Montreal-based CN, have been parking locomotives and temporarily laying off workers during the freight slowdown.
Keith Creel, CN executive vice-president of operations, said his company prefers to eliminate overtime rather than resorting to “significant headcount reductions.”
CN prides itself on being a “precision railroad” that schedules freight deliveries and tracks measures such as average train speed and distance travelled daily, Mr. Creel said.
He said CN’s recent acquisition of Elgin, Joliet & Eastern Railway Co. will clear the way for reducing congestion because CN is optimistic about bypassing train gridlock in Chicago’s core by rerouting traffic through EJ&E’s suburban tracks, similar to road traffic skirting cities on interstate highways.
Despite the recession, CN sees short-term growth opportunities and will be poised to benefit in the long term when freight demand rebounds, Mr. Creel added.