(The Montreal Gazette posted the following story by Nicolas Van Praet on its website on April 16.)
MONTREAL — Unknown weather conditions hang over an otherwise modest year of profit growth for Canadian National Railway Co.
A severe drought in Western Canada ripped $220 million in revenue from the Montreal railway’s bottom line last year and threatens to do the same this summer.
“The big kicker is grain,” CN chief executive Hunter Harrison said.
“We just don’t know yet what’s going to happen.”
Farmers produced little or no grain crop last summer, the second summer in a row of severe dry conditions. Grain shipments fell. CN cut five per cent of its workforce in response.
For the first six months of 2003, CN is forecasting flat growth, Harrison said after the company’s annual shareholders meeting downtown. In the second half, the company expects growth of three to five per cent across the board. But that growth could be wiped out by a loss on grain and Canadian coal, he said.
The railroad posted an $800- million net profit last year and led the industry with a stunning $513 million in free cash flow.
After freeing up $3.6 billion U.S. to buy Wisconsin Central Transportation Co. in 2001 and Illinois Central Corp. in 1998, CN now has its eyes on a trunk of tiny acquisitions.
It has bid for northern Ontario railroad ONRail and expects to receive a response to its offer next week. Canadian National delivers 80 per cent of ONRail’s shipments.
Harrison said CN is also eyeing B.C. Rail Ltd., which is also rumoured to be going up for sale.
Harrison was thrust into the top job at CN in January after former chief executive Paul Tellier left to work his much-lauded corporate magic at troubled plane and train maker Bombardier.
The Tennessean, who speaks in what people affectionately call a drawn out Southern twang, said he will move into a Montreal home permanently in May.
“Now I have a place to hang my clothes instead of the Queen Elizabeth (hotel),” Harrison said.
Under Harrison’s hand, CN spends far less than any of its competitors to run its railway system. And it plans on boosting its dividend this year.But not everyone is enthused about his leadership.
Robert Michaud, a spokesperson for the United Transportation Union, which represents some CN workers, said the company’s relationship with its unionized workers has soured under Harrison.
“People are working too much, the company’s hasn’t hired in Montreal since the 1980s, a lot of workers have been transferred elsewhere. And that has led to confrontation and layoffs,” Michaud said.
“His management style is much harder. It’s harsh. In Quebec we’re not used to that.”
Harrison admitted that CN’s management has had a confrontational relationship with workers in the past. But he said several initiatives are under way to improve relations, including less outsourcing.
“We’re trying to respect people. We’re trying to treat people fairly,” he said.