E. Hunter Harrison, who became CP's president and chief executive office in late June, said in a release posted on the company's website the jobs contraction is part of its plan to improve service and efficiency while lowing costs and growing the business.
"Service will be what drives this organization, by providing a premium, reliable product offering through a lower cost operation," Harrison said. "We have initiated a rapid change agenda and have made tremendous progress in my first 160 days, and we are only getting started."
Canadian Pacific, with headquarters in Calgary, Alberta, has 16,100 employees and about 14,700 miles of track.
Harrison said the company's reorganization plan will stress "centralized planning and decentralized execution," "eliminate bureaucracy" and "have service decisions made faster and closer to the customer."
CP said revamping its train service will result in faster transit times. The rail carrier also will close hump-switching yards in Toronto, Winnipeg, Ontario, Calgary and Chicago, and intermodal terminals in Milwaukee, Obico (Toronto), and Schiller Park (Chicago).
The workforce will be cut through job reductions, natural attrition and the use of fewer contractors.
CP also will move its corporate headquarters from downtown Calgary to new office space at CP-owned Ogden Yard by 2014.
"I am excited about what we've achieved to date, but we have only just started this journey to being a more competitive railway," Harrison said. "We will continue to drive our service offering while focusing on taking unproductive costs out of the business. We see a strong earnings profile and solid free cash flow picture emerging. "Canadian Pacific is a great franchise with strong growth upside and we are more confident than ever that we will drive shareholder value long into the future."