TORONTO — A lack of synchronization between the economies of Canada and the United States gives Canadian National Railway Co. an advantage over U.S. competitors, CN chief executive Paul Tellier said in a Toronto Star article.
“It’s very seldom the U.S. and the Canadian economy are in perfect sync,” he told a transportation conference yesterday in Florida.
“When there is a slowdown in the U.S., sometimes the slowdown is several quarters later in Canada, and the other way around,” Tellier said in an Internet broadcast. “Therefore, we think that having a continental railroad like this is, in addition to our traffic mix, a major advantage.”
Tellier spoke at a conference sponsored by Salomon Smith Barney in Key Biscayne.
“We happen to be Canada-based,” Tellier told analysts, adding that the former crown corporation and Canada’s largest rail carrier is now “a true North American company in the spirit of NAFTA.”
Sixty-five per cent of CN’s shares are held in the United States, as are most of the company’s assets, and 52 per cent of the railway’s traffic comes either from the United States or in cross-border business.
CN’s acquisition of Illinois Central, a Chicago-based regional freight carrier, last year, expanded CN’s operations in the U.S. Midwest states, the heart of the U.S. industrial and manufacturing sector.
Despite major challenges, CN is on target for 1 per cent to 2 per cent revenue growth in 2003, and 4 per cent to 6 per cent growth in 2004-05. As well, earnings per share are forecast to increase between zero per cent and 5 per cent in 2003, and between 10 per cent and 15 per cent in 2004-05.
Challenges include the weak U.S. economy, the impact of a possible invasion of Iraq, the western drought and cost pressures. CN recently added $52 million to the pension fund for its Canadian employees after reducing investment-return assumptions.
But Tellier said CN has gone from last to first in the industry in 10 years. Unlike the continent’s five other major railways — including Union Pacific, Burlington Northern Santa Fe, and Canada’s CP Rail — “we are not overly dependent on bulk commodities,” he said.
“We are not overly dependent on grain or on coal. We are the largest carrier of forest products in North America — lumber, panel, pulp and paper. This is a very strong franchise that is basically very much truck-competitive and, therefore, quality of service is critical if we are to increase our market share.”