Rail strike leads to massive disruptions in supply chains

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After Canadian National and Canadian Pacific Kansas City trains screeched to a halt due to a corporate lockout that began shortly after midnight Wednesday, Canadian business associations and industry leaders are warning that large parts of the North American economy will be damaged.

Rakesh Naidu, CEO of the Windsor-Essex Area Chamber of Commerce, said the region is particularly at risk as a border city with a heavily integrated economy with the United States.

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“It will cause significant disruption in several sectors of the economy,” Naidu said.

“We import and ship so many things by rail – grains, fresh produce, auto parts and finished vehicles, iron ore, chemicals and so many small items. Rail plays a very important role in keeping our economy running and our supply chains intact.”

The last work stoppage in the rail sector occurred in 2022 during a 60-hour strike by CP workers. The last labor dispute at CN was an eight-day strike in 2019.

Both strikes were ended through negotiations between both sides.

Naidu said Windsor was doubly affected as most of our products are shipped across the border. However, US railways also suspended shipments to Canada this week as the strike looms.

“Our economy is tied to trade. We will feel this even more,” said Naidu.

According to the Canadian Railway Association, the strike will affect the daily rail movement of goods valued at over a billion dollars. More than half of the goods produced in Canada are transported by rail.

The lockout is particularly problematic for an automotive industry that relies heavily on the rail network to transport vehicles and parts.

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“The work stoppage at CN and CPKC Rail will have an immediate impact on the domestic and North American supply chain,” said Brian Kingston, CEO/President of the Canadian Vehicle Manufacturers’ Association, in a statement.

“The highly integrated North American automotive industry relies on efficient and reliable rail transportation to deliver vehicle components, transport service parts and move finished vehicles to domestic and international markets. This disruption will impact production schedules, jobs, finished vehicle inventories and consumer affordability.”

The immediate impact of the lockout could be more of a problem for Ford’s engine plants in Essex and Annex than for Stellantis’ assembly plant in Windsor.

The Ford plants, which have a rail link to the factories, supply engines for the company’s profitable F-Series truck line. The Windsor assembly plant is entirely supplied with trucks.

“At this time, there will be no immediate impact on production at Windsor Assembly,” said James Stewart, president of Unifor Local 444. “Our parts are not shipped by rail.”

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“The logistical aspect of shipping the finished vehicles could become a problem over time. I think the OEMs can probably get around that in the short term.”

Stewart said Windsor’s border location also eases Stellantis’ transportation problem. He expects the company will have no problem trucking its minivans across the border, where they can then be loaded onto rail cars and transported across the U.S.

“The U.S. market is our main customer, so our border location really helps,” Stewart said. “In Canada, coast-to-coast shipping is a bigger problem.”

Stewart added that the lockout for Stellantis is somewhat mitigated by the fact that its Brampton assembly plant is currently shut down for retooling. Ford Motor Company’s Oakville assembly plant is also shut down for retooling.
Ontario’s other two automakers, Toyota and Honda, both ship their finished products by rail.

Naidu said a railway strike would inevitably lead to shortages of goods, rising prices and possibly work stoppages and layoffs as factories and shops run out of parts and materials.

“You can put some things on trucks to fill the gap, but trucks can’t carry everything,” Naidu said. “In the automotive industry, trucks don’t make sense depending on the destination. That’s why rail is so important.”

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Agricultural products are also particularly at risk at the moment, as the harvest has to be brought in and taken to the market or factories for further processing.

“Our economy depends on trade and trade depends on transport,” Naidu said. “We don’t want disruptions in supply chains and a return of inflation, especially now that we are back to normal and interest rates are coming down.”

Naidu said this third disruption to international trade since February 2023 is damaging Canada’s reputation.

In February 2023, the Ambassador Bridge was blocked by protesters during the COVID-19 pandemic. Last October, the St. Lawrence Seaway was closed by an eight-day strike.

“There have been a lot of supply chain disruptions coming from Canada in recent months,” Naidu said. “We need to be seen as a strong, reliable trading partner, and that means making sure things run smoothly across the border.”

“Our image has been damaged.”

Talks between the Teamsters union, which represents 9,300 railroad workers, and the two railroads began in November 2023; their contracts expire at the end of the same year.

The union said the main hurdles in the talks were workforce planning, rail safety and worker fatigue.

More to follow

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