ADM sues CPR over U.S. service disruption

Company blames railway’s push to cut costs

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CHICAGO, Ill. (Reuters) — Archer Daniels Midland is suing Canadian Pacific Railway over service disruptions in 2013 and 2014 at crop processing plants in North Dakota and Minnesota.


ADM said the disruptions partly stemmed from cost cutting and CP’s pursuit of merger partners. 


It is seeking damages “resulting from one of the worst and most persistent railroad service failures experienced by ADM in many years.”


The U.S. rail system has long served as the lone, dependable way to move grain thousands of miles in the northern U.S. Plains, where there are no commercially navigable rivers.


In early 2014, farmers in the upper Midwest held the largest grain stocks in years after months of worsening delays that crippled the U.S. farm transportation system. 


The damages referred to by ADM in several counts in the lawsuit amount to only “several million dollars,” but it is potentially embarrassing for CP because it highlights key areas that the railroad has touted in its bid to buy Norfolk South-ern Corp. 


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CP disclosed in mid-November that it had made a $28 billion offer to buy Norfolk Southern, which has rebuffed the Canadian railway’s approaches. 


CP has claimed a deal would result in cost savings of more than $1.8 billion a year. 


Some rail customers back the bid, but many, such as delivery companies UPS and FedEx, oppose it. Opponents say cost-cutting initiatives would cause service disruptions.


The U.S. financial sector has cheered CP’s cost cuts as a success story since railroad legend Hunter Harrison became chief executive officer in 2012.


However, ADM’s lawsuit claims that service disruptions at its facilities in Enderlin and Velva in North Dakota and Red Wing, Minn., are partly the result of CP “engaging in imprudent cost-cutting initiatives.” 


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ADM also blamed the problems on CP’s “engaging in ancillary and diversionary management activities during the period pertaining to potential rail merger/acquisition partners.” 


CSX Corp. also rejected a takeover bid from CP in late 2014.


The lawsuit alleges that CP did not allow ADM to use alternative rail providers “to mitigate its service deficiencies.” 


CP has promoted the idea of “open access” that would allow rail customers to use alternatives in similar situations. 


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