CN: Business, Labor and Governments Must Allay the Public's Productivity Fears, Build Consensus for Tackling Canada's Poor Productivity Record, Says CN's Paul M. Tellier.

OTTAWA--(BUSINESS WIRE)--March 16, 1999--Canada's business, labor and government leaders "must demonstrate to Canadians that higher productivity is something to be desired rather than feared," says Canadian National (NYSE:CNI)(ME:CNR.)(TSE:CNR.) President and Chief Executive Officer Paul M. Tellier.

Tellier, speaking to the Summa Strategy Forum today, said the chief challenge is to convince Canadians that improved productivity "doesn't mean working longer hours for the same pay. It means working smarter, working richer and working to build a strong Canada."

Tellier said there "are no quick fixes," but business, labor and governments must take the lead in fostering a national consensus favoring increased productivity - they must demonstrate how vital productivity is to Canada's quality of life. "Low productivity is not a shareholder issue; it is a stakeholder issue."

Tellier said signs of Canada's poor productivity record abound:

-- Canada's manufacturing productivity is now only 70 per cent of

that in the U.S.; -- Canadian productivity is growing slower than in most industrial

countries; U.S. productivity is growing almost twice as fast; -- According to the Organization for Economic Co-operation and

Development, without improved productivity Canada's per capita 

gross domestic product within 20 years will drop from 10 per cent

above the average of OECD countries to 15 per cent below that.

"With productivity falling behind, Canada has had to find another way to compete in the NAFTA environment. We end up masking our weakness through currency devaluation."

Tellier called on Canadian governments to implement policies that encourage change and lower costs.

In Canada, productivity growth has been hampered by government tax and regulatory policies, he said. "In the United States, lower corporate and personal tax rates encourage productivity. So does a deliberate attempt to reduce regulatory red tape."

For railways, Canada's tax and regulatory barriers "affect our customers as well as ourselves, and we will continue to argue for changes. Canada needs a tax and regulatory regime that levels the playing field for railways and their customers."

Despite such hindrances, Tellier said, CN in the past five years has been the most-improved railway in North America, posting a 70 per cent rise in productivity. But the battle isn't done - CN is still trying to close its productivity gap with U.S. railroads.

Tellier said corporate Canada has no time to waste. Corporations, he suggested, must benchmark their performance against the best in the world - in CN's case the benchmark is U.S. railroads - then communicate the results to all stakeholders and go to work. Corporations must find the reasons for any productivity gap, design a strategy to address it, ensure fair and generous adjustment programs are implemented and finally communicate the strategy to all parties with an interest in the enterprise.

Tellier said organized labor's role in managing change is fundamental to productivity improvement. Labor must be consulted and involved in the development and implementation of corporate strategy - it must buy into the strategy. Moreover, labor has a clear stake in negotiating fair treatment of workers displaced by productivity improvements.

"Generous adjustment programs for affected workers are an essential part of improving productivity. We must support the people who face the difficult transitions that increased productivity can sometimes bring."

Canadian National Railway Company serves all of Canada and the U.S. Midwest, including the ports of Vancouver, Montreal, Halifax and the key cities of Toronto, Chicago, Detroit and Buffalo, with connections to all points in North America.