Canada's government prevents rail shutdown, protecting auto industry supply chain

Canada’s government ended a brief railway shutdown late Thursday that could have had dire consequences for the U.S. automotive industry and the broader economy.

Driving the news: Two railway companies, Canadian National Railway (CNR) and Canadian Pacific Kansas City (CPKC), locked employees out on Thursday after failing to reach an agreement with the Teamsters union by the deadline.

• While the Canadian government had declined to force arbitration before the deadline, Labour Minister Steven MacKinnon said the country’s economy could not wait for an agreement between the two parties.

• CNR employees are expected to resume work this morning. The CPKC work stoppage is still technically ongoing but is expected to end once the Canadian Labour Board meets with union and company representatives today.

Big picture: Canada’s railway system transports roughly $730 million in goods daily, much of which crosses over into the U.S. When Thursday’s lockout went into effect, businesses on both sides of the border braced for impact.

• Negotiations broke down over disagreements on fatigue protections, which ensure employees receive enough rest.

• Railroad companies wished to move away from the current pay-per-mile system to an hourly wage system, which they said would make it easier to set predictable schedules.

• But the Teamsters union said this change would have ended fatigue protections, putting workers at risk.

Zooming in: While some U.S. automakers, like General Motors, made preparations ahead of the shutdown, a prolonged work stoppage would have had completely upended the North American supply chain.

Bottom line: Railroads are critical to national infrastructure: hence why governments rarely allow them to shut down without intervention. However, it seems many businesses learned to not depend on supply chains too heavily during the COVID-19 pandemic. Preparations for a possible rail closure began weeks ago, including at U.S. car manufacturers. If the lockout had continued, it would have been interesting to see which companies’ backup plans withstood the test of time.

Become an automotive insider in just 5 minutes.

Get the weekly email that delivers transparent insights into the car market.

Join 74,000 others now, it's free:

The Auto Hauler Exchange has revolutionized the way vehicle haulers and vehicle shippers collaborate. AHX's B2B marketplace connects vehicle haulers directly to shippers in a frictionless manner.

The Exchange helps vehicle haulers maximize their capacity while limiting empty miles. The Exchange is the first true B2B marketplace of its kind in the vehicle logistics industry.

By connecting carriers and shippers directly, carriers can save time and choose which opportunities fit their needs each day.

At the same time, shippers can rest assured that their vehicles are being moved by qualified, vetted carriers who fit their vetting program.

The Auto Hauler Exchange has democratized the vehicle logistics industry by eliminating the middleman and connecting shippers directly to available carriers.

Get off the vehicle hauling roller coaster today with Auto Hauler Exchange.