(Reuters distributed the following article on June 18.)
TORONTO — Canadian Pacific Railway Ltd. said on Wednesday it will take a second-quarter after-tax charge of C$152 million ($113 million) to expand its job cuts program and take a writedown on its northeastern U.S. operations.
The country’s No. 2 railroad said it will increase to 820 from 300 the number of workers it plans to cut across the company by 2005. It said the move would improve productivity and was being done partly to offset the impact of a stronger Canadian dollar
Calgary-based CP Rail also said it will restructure its Northeastern U.S. operation, which operates as the Delaware & Hudson Railway, and write down its investment in it by C$75 million after tax.
“We are not satisfied with the current rate of progress toward our long-term financial objectives. This situation has been exacerbated by the unexpected rise in the value of the Canadian dollar added to sustained high fuel prices,” CP Rail Chief Executive Rob Ritchie said in a statement.
The job-cut program will now see 370 positions cut this year, 330 in 2004 and 120 in 2005. CP Rail said it will take an accrual of C$71 million after tax related to the job cuts.
The company said the cuts will occur across every area of its business and are partly due to new technology in administrative and freight yard operations, as well as lower maintenance cost stemming from its purchase of high-efficiency locomotives and rail cars.
CP Rail said as part of the restructuring of its northeastern U.S. operations it has begun talks with “a number of interested parties about ways to generate higher traffic volumes and greater earnings.”
The railway said it will also reduce administrative costs by absorbing its supply chain management subsidiary into the railway and providing logistics and supply chain expertise as a direct extension of its services.
CP Rail said it will reabsorb all purchasing activities, ending its participation in an industry-wide procurement entity. It said non-beneficial investments of C$6 million in these areas will be written off as part of the second quarter charge.