Canadian Pacific says it will have 61 of 91 new train cars it has ordered running by the end of this year, which should improve efficiency even in blustery weather.Canadian Pacific
Canadian Pacific Railway Ltd. is girding itself for an attack against winter, vowing to deliver cargo through sleet and snow.
Last winter, severe weather temporarily shut down vast portions of CP's network on the Prairies and U.S. Midwest, but company executives say they will be in a much better position this time around.
Mike Franczak, CP's executive vice-president of operations, said 61 new locomotives will be running by the end of this year, with another 30 to be in service by March 31, 2012. The older locomotives will be parked in heated storage areas and serve as back-ups.
"We have taken steps to fortify our operation with contingent resources," he said Tuesday during a transportation webcast organized by Scotia Capital Inc.
Calgary-based CP will be adding 500 extra conductors, engineers and others in the "running trades" for the winter, deploying them at crucial points along the tracks.
"We increased the number of snowplows and assigned locomotives to each. We've installed more remote-controlled switch heaters and increased the amount of snow fencing in North Dakota," Mr. Franczak said. "Another La Nina year is in the forecast, but we are much better prepared heading into this season. And I'm confident that we'll be able to deliver a reliable, efficient and safe service this coming year."
The railway has been upgrading its line between Edmonton and Winnipeg, sprucing up that path so that it can handle longer and heavier trains, and also serve as a route backup should the tracks get blocked between Calgary and Winnipeg.
CP's quest to survive and thrive this winter comes as Pershing Square Capital Management LP, headed by William Ackman, pushes for a strategic review of the railway's underperforming network of trains. The New York-based activist hedge fund disclosed last month that it had become CP's largest shareholder after acquiring a 12.2-per-cent stake.
Kathryn McQuade, CP's chief financial officer, declined to speculate on Pershing's move.
But she said the costs to CP of reducing its pension solvency deficit have taken some of the shine off the company's efficiency drive.
Ms. McQuade said the value of the railway's pension plans took a hit in 2008 as equity markets got hammered, and the company continues to be dogged by the "pension headwind." CP is expected to contribute between $100-million to $125-million this year to its defined benefit pension plans.
"Pension expense continues to be coming at us," she said. "Many of the improvements that we're putting in place are actually offsetting the increases in pension expense."
CP, which had a $673-million pension solvency deficit at the end of 2010, contributed $1.44-billion to its pension plans in 2009-10. "It does mask many of the efficiency improvements that we do have in place," Ms. McQuade said.
Desjardins Securities analyst Benoit Poirier noted this week that CP runs a network that is primarily single track, making it vulnerable to service delays, so "the company is investing in track infrastructure."