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6/18/2003



Rail News: Rail Industry Trends

CPR to restructure, slash more jobs


An unexpectedly stronger Canadian dollar coupled with year-long high fuel prices continue to affect Canadian Pacific Railway's earnings — so much so that the Class I is tightening its belt a few more notches.


On June 18, CPR announced several cost-cutting and restructuring measures. The Class I plans to cut 820 instead of a previously announced 300 jobs (eliminating 370 positions in 2003, 330 in 2004 and 120 in 2005); restructure its northeastern U.S. network (Delaware & Hudson Railway); absorb supply-chain management subsidiary Tronicus into the railway and provide those services through CPR; and re-absorb all purchasing activities — ending the railroad's two-year participation in industry-wide procurement entity RailMarketplace.com.


"We are not satisfied with the current rate of progress toward our long-term financial objectives," said CPR President and Chief Executive Officer Rob Ritchie in a prepared statement. "We are accelerating existing plans and taking additional steps to improve productivity and address investments that aren't performing to expectation."


CPR plans to "create a more cost-effective and flexible" northeastern U.S. rail network, and is discussing options "with a number of interested parties" to generate more traffic and increase earnings.


"We believe our northeastern U.S. network has additional earnings potential and we are prepared to take the measures necessary to make it a success," said Ritchie.


Although CPR has generated efficiencies by implementing information technology in administrative and yard functions, scheduling operations, and acquiring high-efficiency locomotives and rail cars, the railroad will continue to drive productivity improvements to meet financial objectives, said Ritchie.


The railroad plans to hire more employees "in specific business areas" to accommodate growth or traffic-pattern changes, and maintain required train-service levels.


In its second-quarter financial statement, CPR will take a special after-tax charge of about $114 million to pay for initiatives and write-down under-performing assets to fair-market value.


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