Canada orders end to railroad lockout, says 'trains will be running within days'

Canada’s two largest railways are preparing to restart operations after Prime Minister Justin Trudeau’s government stepped in to try to end a lockout that has stopped freight movement, including that of new vehicles and auto parts, across the country.

Labor Minister Steven MacKinnon asked the Canada Industrial Relations Board to impose binding arbitration on Canadian National Railway Co., Canadian Pacific Kansas City and the Teamsters union. He also ordered the board to direct the parties to extend their current labor contract, and he said the railways should resume operations “forthwith.”

Government intervention is something the auto industry had been calling for, even before the work stoppage.

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 on the federal government to do something.

The lockout had the ability to negatively affect auto assembly and sales in Canada and the U.S.

Canadian National's website said it handles more than 2 million finished vehicles annually, catering to over 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.

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.”

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,” association President Flavio Volpe said. “When vehicle assembly stops, so does parts and systems supply."

The New Car Dealers Association of BC also wanted to see the federal government step in, especially because a work stoppage would have affected inventory levels within two weeks, according to one analyst.

Michael Robinet, executive director at S&P Global Mobility, said most auto assembly plants operate on “just-in-time” inventories of parts — making it difficult to stockpile.

Rail workers not all aboard

MacKinnon told reporters in Ottawa, Ontario, that he’s “confident” the measures will get the trains rolling again within days, ending a lockout that began just after midnight Eastern time on Aug. 22.

Workers at Canadian National said they’d take down picket lines and go back to work Aug. 23. But thousands of employees at Canadian Pacific Kansas City were still off the job, and the railroad, based in Calgary, Alberta, said the union wants to challenge the constitutionality of the government’s decision.

The industrial relations board — an independent tribunal — will now have its own process to follow. MacKinnon said the board will consult with all sides and that he hopes a decision will come “very quickly” that will send railway employees back to work.

“I assume that the trains will be running within days,” he told reporters Aug. 22. “But I want to be deferential to the process that will unfold here.”

The labor board was scheduled to hold a case management conference at 10 a.m. Eastern on Aug. 23 to discuss next steps, according to a statement from Canadian Pacific.

The Teamsters Canada Rail Conference said it’s reviewing the minister’s referral and the board's eventual response with its lawyers. In an emailed statement, union division President Paul Boucher also accused the railways of manufacturing the crisis and manipulating the government to disregard worker rights, and attacked the government for stepping into the dispute just hours after rail traffic came to a halt.

'Very, very far apart'

The two railways control about 80 percent of Canada’s rail network, and shutting them down swiftly causes economic harm.

A two-week lockout would shave as much as $3 billion Canadian ($2.2 billion) from the country’s nominal gross domestic product, including a $1.3 billion Canadian hit to labor income and a $1.25 billion Canadian loss to corporate profits, the Conference Board of Canada said. Moody’s put a higher price tag on the stoppage, saying it could reduce nominal GDP by as much as $4.8 billion Canadian if it lasted two weeks.

The companies and the railways remain “very, very far apart” in talks on a new contract, the labor minister said.

“We have an impasse here,” he said. “We wanted to give these negotiations the absolute possibility of concluding successfully. We see little prospect of that currently.”

Business groups in Canada and the U.S. had been calling on the Canadian government to intervene, as the lockout disrupted the countries’ interconnected supply chain. Commodities such as coal, wheat, fertilizer and lumber depend on the railways, and there are few shipping alternatives.

The Teamsters, which represents more than 9,000 workers at the two railways, said its members were negotiating provisions to address scheduling and crew fatigue. The previous collective agreements had expired on Dec. 31.

Canadian National said it ended its lockout at 6 p.m. Eastern time Aug. 22 and had started a recovery plan.

“While CN is satisfied that this labor conflict has ended and that it can get back to its role of powering the economy, the company is disappointed that a negotiated deal could not be achieved at the bargaining table despite its best efforts,” the company said in an emailed statement.

Canadian Pacific Kansas City also said it’s getting ready to operate again.

“The government has acted to protect Canada’s national interest,” CEO Keith Creel said in a statement. “We regret that the government had to intervene because we fundamentally believe in and respect collective bargaining.”

MacKinnon said the government will also examine why labor disputes happen so frequently in the railway sector and the conditions that led to these work stoppages.

“Millions of Canadians rely on our railways every day — workers, farmers, ranchers, commuters, small businesses, miners, chemists, scientists — the list goes on, and the impacts cannot be understated,” MacKinnon said. “They extend to every corner of this country.”

— Greg Layson and Bloomberg contributed to this report.