Canadian National's Rate Reductions and Cash Payments to Grain Farmers and Shippers Have Exceeded $190 Million Since 1995, Says CN Executive Peter Marshall.

WINNIPEG, Manitoba--(BUSINESS WIRE)--June 8, 1999--

Canadian National (NYSE:CNI) (ME:CNR.) (TSE:CNR.) has delivered more than $190 million in rate reductions and cash payments to grain farmers and shippers since the Western Grain Transportation Act (WGTA) was abolished in 1995, says Peter Marshall, vice-president of CN's Prairie division.

In 1998 alone, CN shared $60 million, or $5.03 per ton of export grain it moved, with key grain industry stakeholders. CN has also spent $214 million on capital projects since 1995 to increase its grain-handling efficiency, Marshall said.

"CN believes it's vital -- at this critical stage in the evolution of Canada's grain handling and transportation system to set the record straight on CN's contributions to the industry," Marshall said.

"Market forces, in tandem with productivity gains at CN, are producing tangible benefits for the grain industry. We need more of these efficiencies to ensure the competitiveness of Prairie farmers in global markets. CN believes the best way to lower costs and to maximize the net returns of all grain trade stakeholders, including farmers, is to allow more competition into the system."

Marshall issued his remarks following the submission of CN's report, Railway Competitiveness -- a Look at the Facts, to Arthur Kroeger, who is working with industry stakeholders to prepare recommendations by Sept. 30, 1999, to implement Justice Willard Estey's grain transportation reform package by crop year 2000-2001.

Marshall said existing grain freight rates reflect railroad cost reductions in recent years. The rate scale established in 1992 was adjusted to capture anticipated rail savings owing to labor force reductions and better equipment utilization. Since then, the maximum rate scale has also been adjusted to reflect cost savings due to branch-line abandonments.

And since WGTA change in 1995, CN has shared rate reductions and efficiency gains with shippers under a number of competition-driven programs, including:

--   Rate discounts at competitive delivery points: Seventy-three per
     cent of grain deliveries to CN are made to points within 50
     kilometers (30 miles) of a loading point on Canadian Pacific
     Railway or another carrier. CN offers rate discounts at more than
     one-third of its delivery points to attract competitive traffic.

--   Discounts for shipments to Prince Rupert: Producers have
     benefited from rate discounts offered by CN on shipments to the
     Port of Prince Rupert.

--   Incentives for efficient loaders: CN offers rebates to producers
     who can load large blocks of cars in a specified amount of time.

--   Contributions to new and upgraded customer facilities: CN
     contributes to the construction and associated rail
     infrastructure costs of new high-throughput grain terminals.

In addition, CN's grain-related capital expenditures have totaled $214 million since 1995. Investments in locomotives, track infrastructure and computer systems are improving CN's efficiency and ability to handle customers' traffic in a timely, cost-effective manner.

Marshall stressed that grain transportation costs must be put into perspective. Adjusted maximum rail freight rates this year, for example, are six per cent greater than they were in 1986. By comparison, export terminal costs are 43 per cent higher now than in 1986, while overall farm input costs are 30 per cent higher.

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