Union Pacific warns of 'devastating consequences' from Canada rail strike

By Ananta Agarwal

(Reuters) - U.S. railroad operator Union Pacific (NYSE:UNP ) has warned that a potential rail strike in Canada will have "devastating consequences" on the North American economy.

More than 2,500 Union Pacific cars per day would not move across the border, CEO Jim Vena said in a letter to Canadian Labor Minister Steve MacKinnon on late Monday.

"Some of these impacts have already begun," Vena said.

Railroad operators Canadian Pacific (NYSE:CP ) Kansas City and Canadian National Railway (TSX:CNR ) are bracing for a work stoppage by Teamsters union members, which could start as early as Thursday as talks to negotiate a new labor contract are yet to reach an agreement.

The union's demands included better wages and benefits, provisions for fatigue management and improved crew scheduling.

Roughly 30% of freight rail operations in Canada cross the northern border annually, the Association of American Railroads said on Tuesday.

In the first half of the year, rail transport accounted for about 14% of the total bilateral trade of $382.4 billion between the U.S. Canada, according to the U.S. Department of Transportation.

A strike could also raise costs for many industries, which will be forced to either find last-minute alternatives to rail service or face shut down, Vena said.

"For every one day of disruption, you can expect at least 3-5 days of recovery – perhaps even more, given two Canadian railways are impacted."

Union Pacific links 23 states in the western two-thirds of the U.S., connecting with the Canadian railway network and serving all six Mexico gateways.



MacKinnon is meeting with the two Canadian rail companies and the union in Montreal on Tuesday and in Calgary on Wednesday.

U.S. freight brokerage C.H. Robinson had said on Monday it has started diverting ocean cargo of some U.S. customers away from Canadian ports.

Source: Investing.com