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CP battles with teamsters on pension, demands retraction from Pershing Square

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Canadian Pacific Railway (TSE:CP) Friday commented on yesterday’s announcement made by the Teamsters Canada Rail Conference (TCRC) that the union sought a strike mandate from their members.

CP said that discussions with the TCRC regarding changes to the company’s legacy pension plan will continue under the supervision of the conciliator appointed by the Federal Minister of Labour.

No work stoppage can occur until the expiration of a cooling-off period on May 23, 2012.

"CP has a long history of constructive relations with its unions and we are confident that we can reach a settlement with the TCRC," said CP president and CEO Fred Green.

"It is vital to the future of the railroad that legacy pension issues are resolved. 

"Legacy pension costs significantly impact CP's operating ratio and our ability to further fund investments that will support growth opportunities for the benefit of all CP stakeholders."

CP reported that it is seeking to achieve changes to legacy pension and post-retirement benefits to make them industry-comparable. 

The company said it has contributed $1.9 billion of solvency deficit contributions to its pension plan over the past three years.

CP has proposed a number of options for pension plan modifications for future pension recipients, none of which impacts current pensioners. 

The company said that one of its proposed amendments would provide guaranteed pension payment that is comparable to what the union has already agreed to for the majority of its members at another major Canadian railway.

CP noted that its existing contract with the union, which represents 4,800 engineers, conductors and rail traffic controllers, expired on December 31, 2011.

The company has been in negotiations since early October 2011 with the union on a number of topics ranging from wages to work rule changes and pensions, all intended to further drive service, productivity, and efficiency.

In other news, in the latest installment of the ongoing battle between CP and its largest shareholder Pershing Square Capital, CP chairman John Cleghorn publically demanded the retraction of statements made by its largest shareholder Pershing manager William Ackman.

Early Friday, Cleghorn released a statement demanding that Ackman correct statements made during a television interview earlier this week, where he said that CP intentionally manipulated its first quarter earnings.

Ackman said in the television interview that CP was able to improve its benchmark operating ratio “by 100 basis points” by not including executive bonuses in the calculation.

CP and Pershing Square Capital have been back and forth publically in recent weeks as they campaign for shareholder support ahead of a May 17 proxy vote.

As Pershing Square acquired a 14 percent stake in CP last fall, Ackman is seeking to oust CP’s CEO Fred Green and replace seven of the company’s 15 directors with an alternative board that he has proposed.

"It is outrageous for Mr. Ackman to make the accusations he did today on the Business News Network,” stated CP chairman of the directors audit committee.

"To put the company's performance in a negative light, Mr. Ackman suggested that management deliberately distorted CP's financial results.

"He attacks the competence of our Audit Committee, which approved our first quarter results."

In a response to CP's letter on Friday, Ackman said:“We have always spoken the truth based on sources and facts we have found reliable, and our concerns regarding Q1 accruals have been based on multiple sources. 

"This proxy contest is about which directors and CEO are best suited to restore CP to greatness.

"The bottom line is the case for change at CP is overwhelming based on the Company’s own reported numbers over the past six years. 

"Our fellow shareholders agree - yesterday’s Brendan Woods independent poll revealed that 94 percent of CP’s shareholders support change. 

"We look forward to the annual meeting on May 17th.”

CP disputed claims made by Pershing in a proxy circular submitted to regulators in April and urged shareholders to vote for its slate of nominees for the board at the company’s annual general meeting in Calgary next month.

Quick facts: Canadian Pacific Railway

Price: 354.74 CAD

TSX:CP
Market: TSX
Market Cap: $48.11 billion
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