Rail strike could devastate auto industry, close ports and lead to empty shelves, experts say

A strike or lockout in Canada’s rail industry could devastate auto and agricultural sectors and lead to empty store shelves heading into the busy holiday shopping season, say supply chain experts, economists and retail analysts.

 

More than 9,000 workers at CN Rail and Canadian Pacific Kansas City (CPKC) could be off the job as soon as 12:01 a.m. Thursday. Both companies are in negotiations with the Teamsters union.

 

The effects would be felt across the country within days, said Fraser Johnson, a supply chain expert and professor at Western University’s Ivey School of Business.

 

If there’s a lockout or strike on Thursday, you’re going to see the ripple effects throughout the economy very quickly,” said Johnson, noting that 50 per cent of Canada’s exports travel by rail at some point. “The ports will shut down. Plants will shut down — the automotive plants, forestry product plants, will all be impacted, and then we’ll start to hear about problems in the agricultural sector as the crops start to come off the fields.”

 

Switching to trucks isn’t really an option because of the sheer volume of goods being shipped, Johnson added.

 

“It’s not practical. There is no plan B,” said Johnson. “You can’t substitute truck capacity for the lost rail capacity.”

Canada’s railways ship about $380 billion worth of goods a year, said Johnson. That’s about 18 per cent of the size of Canada’s $2.14 trillion economy.

 

Goods produced in Canada for export typically travel by rail to ports in Vancouver, Montreal and Halifax, said Johnson.

 

“It could be cars from the Toyota plant in Cambridge, or even grain or oil,” said Johnson. “They’re also shipping lumber or coal to the port of Vancouver for export to Asia.”

 

Imports, meanwhile, arrive at those ports on container ships before being sent by rail to other parts of the country, he said.

 

“It’s going to cripple our ports: Halifax, Montreal and Vancouver will pretty much all have to be shut down for all intents and purposes,” Johnson said.

 

The head of Canada’s auto parts industry association said his members are dreading the impact of a potential work stoppage.

 

“It’s the last domino, falling backwards. If you’re an auto manufacturer, you can’t get the car to your customer,” said Flavio Volpe, president and CEO of the Automotive Parts Manufacturers’ Association.

 

And that means car companies are likely going to stop production, at least temporarily, as many did during the pandemic, Volpe said. And that’s bad news for parts companies.

 

“Once you get into that second day without a settlement on the horizon, you’re going to see companies making decisions to halt production,” said Volpe. “If they shut down, then we shut down.”

 

Retailers are also worried about the prospect of empty shelves, and say Canadians could see higher prices as a result of the rail shutdown.

 

“The rail disruption threatens to wreak havoc on Canada’s retail supply chains, push costs up and worsen affordability for food and consumer goods,” said Michelle Wasylyshen, spokesperson for the Retail Council of Canada. “With the critical holiday season also approaching, the possibility of empty shelves isn’t welcome news.”

 

Smaller businesses are especially vulnerable to the effects of a potential work stoppage, said the head of the Canadian Federation of Independent Business.

 

“If you’re a big company with market clout, you might be able to find a workaround. But for small businesses, those workarounds are either too expensive, or just not available,” said Dan Kelly, CFIB’s CEO and president.

 

Kelly said he’s been hearing from CFIB members across the country concerned about the impact of a potential work stoppage. One company gets aviation fuel from Winnipeg shipped via rail to Ottawa and Sudbury so it can be used in small planes and helicopters fighting forest fires. Another company gets baby formula shipped by train.

“Some of it’s really been eye-opening,” said Kelly.

 

Companies on both sides of the border are concerned about a potential work stoppage.

 

The U.S. Chamber of Commerce issued a joint statement with its Canadian counterpart Tuesday, urging the Canadian government to intervene pre-emptively.

 

“A stoppage of rail service will be devastating to Canadian businesses and families and impose significant impacts on the U.S. economy,” said the joint statement, from U.S. chamber CEO Suzanne P. Clark and retiring Canadian CEO Perrin Beatty.

 

“Significant two-way trade and deeply integrated supply chains between Canada and the United States mean that any significant rail disruption will jeopardize the livelihoods of workers across multiple industries on both sides of the border.”

 

 

 

 

This article was first reported by The Star