Canadian Pacific Railway Ltd. is facing a strike by 4,800 employees on Wednesday, posing the first major test for the company's new interim chief executive officer and revamped board of directors.
CP is seeking to reduce pension costs as part of a strategy to turn around the freight carrier's underperforming operations.
Railway industry veteran Stephen Tobias, appointed as CP's interim CEO last Thursday, is headed for a confrontation with union leaders from the Teamsters Canada Rail Conference.
Teamsters officials are worried that Calgary-based CP will move to water down existing pensions and potentially place new hires on less costly plans.
But the railway said its bargaining team has presented fair proposals.
"The offer on pension aligns with the industry and allows the railway to remain competitive as we invest in strategic infrastructure upgrades along our network," CP chief operations officer Mike Franczak said in a statement.
The labour tensions have risen just days after investor activist Bill Ackman scored a resounding victory in a proxy battle against CP, resulting in the resignation of Fred Green as CP's CEO.
Mr. Ackman's Pershing Square Capital Management LP is CP's largest shareholder, with a 14.2-per-cent stake. Mr. Ackman and six other Pershing Square nominees now serve on CP's revamped board of directors.
CP's 2011 operating ratio – a gauge of efficiency that measures costs as a percentage of revenue – was 81.3 per cent. A lower number is better, but CP lags its rivals in North America's railway industry.
Pershing Square is touting its recovery plan to chop CP's annualized operating ratio to 65 per cent within four years of replacing Mr. Green.
The union represents 4,800 conductors, engineers, yard workers and rail traffic controllers. The previous five-year collective agreement expired on Dec. 31, 2011.
Industry observers have said that Ottawa has been keeping close tabs on the contract dispute at CP, with federal Labour Minister Lisa Raitt examining her options on ways to minimize disruptions to freight shipments from any work stoppage.
CP said pension reform is crucial to helping make the railway more efficient.
"CP, which contributed approximately $1.9-billion of solvency deficit contributions to its pension plan over the past three years, requires changes to legacy pension and post-retirement benefits to make them industry-comparable," the railway said.