Canadian government intervenes in railway labor dispute

Labor Minister Steven MacKinnon is stepping in to get trains moving again after an unprecedented lockout by Canada's two largest rail companies.

He will use his powers under Section 107 of the nation's Labor Code to ask the Canada Industrial Relations Board to impose final, binding arbitration.

The Canadian Vehicle Manufacturers' Association, the Global Automakers of Canada and the Automotive Parts Manufacturers' Association all spent the first day of the lockout calling for federal intervention.

The movement of freight and commuters on the two railways ground to a halt Aug. 21, threatening to upend the automotive industry and other supply chains.

Canadian National Railway Co. and Canadian Pacific Kansas City locked out 9,300 engineers, conductors and yard workers after the union representing hourly workers couldn’t come to an agreement before the midnight deadline.

Affected industries include automotive, agriculture, mining, energy, retail and construction. U.S. railways have also had to turn away Canada-bound shipments. The disruption could hit auto suppliers hard because many parts and components move back and forth across the U.S.-Canada border.

The Canadian Vehicle Manufacturers' Association said the stoppage "will have an immediate impact on the domestic and North American automotive supply chain."

Michigan financial consultancy Anderson Economic Group estimates losses from the lockout could range from $303 million for three days to $1.02 billion for a weeklong stoppage. 

"Almost all of this loss is within the Canadian economy," Anderson said in its Aug. 22 report. "The U.S. would have fractional losses related to this, after taking into account some gains to U.S. ports and shippers."

"Should the strike or shutdown persist beyond seven days, the impact in both the United States and Canada would be much worse."

Canadian National's website said it handles more than 2 million finished vehicles annually, catering to more than 12 North American vehicle assembly plants. In 2023, the U.S. imported and exported with Canada transportation equipment worth about $73 billion, according to the U.S. International Trade Administration.

"The highly integrated North American auto industry depends on efficient and predictable rail service to deliver vehicle assembly components, transport service parts, and deliver finished vehicles to domestic and international markets," said Brian Kingston, CEO of the Canadian Vehicle Manufacturers' Association. "This disruption will impact production schedules, jobs, finished vehicle inventories, and affordability for consumers.

"Over the longer term, increasingly frequent transportation disruptions are undermining Canada’s reputation as a reliable jurisdiction for the production and movement of goods and damaging our competitiveness for new investment.”

The Automotive Parts Manufacturers’ Association says “approximately four out of five [vehicles] made in Canada each year are exported to the U.S.”

“Cars travel almost exclusively by rail, and a prolonged strike would have a similar effect to the five-day 2022 Ambassador Bridge blockade, which caused temporary work stoppages throughout the industry,” APMA President Flavio Volpe said. “When vehicle assembly stops, so does parts and systems supply.

“Most parts travel by road, but vehicle assembly operations are not designed to stockpile supplies. The just-in-time nature of the industry makes it inflexible in moments like this.”

More North American risks

Meanwhile, Canadian Pacific Kansas City caters to about 90 percent of automotive assembly plants in Mexico, it said on its website. Some of those vehicles are destined for the U.S. and Canada.

David Adams, head of the Global Automakers of Canada, which represents the interests of all overseas automakers operating in Canada, called the labor dispute “disappointing” and “highly problematic for our industry.”

“As a vast trading nation, Canada relies on its ports and rails. Given the significant number of disruptions, it seems something is broken in transportation labor relations, and it needs to get fixed,” he said. 

As the deadline approached, business groups and rail-dependent industries from automakers to agriculture issued warnings about the economic damage — including the potential of longer-term harm to Canada’s trading relationships and reputation for reliability, following other recent disruptions to its transportation networks.

Greg Layson in Canada, Philip Nussel in the U.S. and Reuters contributed to this report.