Canadian National's leading-edge service plan cuts transit times, boosts on-time performance and positions CN for growth.

MONTREAL--(BUSINESS WIRE)--Dec. 7, 1999--

Canadian National (TSE: CNR.)(ME:CNR.)(NYSE:CNI) has significantly reduced transit times and improved on-time delivery of carload freight since implementing a service plan a year ago that transformed CN into a scheduled railroad.

"Timely, consistent freight transportation is the Holy Grail of the railroad shipper," said E. Hunter Harrison, CN's executive vice-president and chief operating officer. "Our job is to deliver to them, and we're doing that with our ground-breaking service plan."

CN's conveyor-belt-like schedule of train services - fully implemented in the fall of 1998 - has:

- Achieved 81 per cent on-time performance for carload traffic at a

dock-to-dock level of measure, with a 96 per cent on-time

performance for deliveries within 24 hours of the prescribed

time. CN is making steady progress toward a 90 per cent on-time

performance - with no buffer - by yearend;

- Reduced the time freight cars spend in key terminals by 18 per

cent to 21 hours;

- Reduced overall transit times for carload traffic by 24 hours;

- Increased asset utilization significantly. Since early 1998, CN's

active locomotive fleet has been effectively reduced by 33 per

cent to 1,320 units, while its car fleet has been cut by 17 per

cent to 68,400 cars;

- Increased gross tons miles per available horsepower - a measure

of how efficiently a railroad utilizes its locomotive fleet - by

33 per cent;

- Increased car miles per car day - a measure of the velocity of

cars on the network - by 19 per cent to 138.

Harrison said the plan's scheduled freight train products have clear benefits for shippers - and CN. Shippers gain greater control over production and inventory costs, and car owners and lessors experience greater productivity and lower costs. At the same time CN enjoys reduced costs, better use of assets and greater flexibility in capital spending.

"CN believes the service plan's cost/quality improvements will position the railroad to capture new business from existing and prospective customers and, over time, improve yields," Harrison said. "The service plan is a powerful management tool and a competitive advantage in the freight transportation marketplace."

The strength of the service plan is its focus on dock-to-dock transit times for individual car shipments, not terminal-to-terminal transit times for trains.

In designing the plan from the railhead up, CN took a hard look at reducing "dwell time" - the amount of time freight cars sit idle in its classification yards. Consistent standards for connections and maximum throughput were established for each terminal. These were then used to anchor main-line train arrival and departure times. By bringing the connection time for major traffic flows as close as possible to the design standard, transit times, car cycles and yard congestion have been reduced. Dwell times at intermediate yards have also been cut by minimizing the number of times cars are classified.

All of this permits specific transit time commitments - trip plans, measured in hours, not days - for carload and intermodal shipments based on delivery capability and backed by those responsible for their day-to-day execution.

To support compliance with the service plan, CN developed a "product catalogue" for its sales and marketing group that defines the railroad's service capabilities for carload and intermodal freight. The catalogue also provides a means for monitoring CN's dock-to-dock transit performance, to drive real-time decision making in the field and to measure how CN's performance stacks up against its customer trip plan commitments.

Harrison said: "A key strength of the service plan is its focus on managing CN as an integrated network. Managers are continually examining opportunities to combine shipments from different business units, such as intermodal/auto-motive and merchandise. The creation of multi-purpose trains allows CN to fill idle capacity and to improve the ratio of tons of freight moved per locomotive."

Keeping track of the progress of shipments is a key aspect of the service plan. Using CN's Service Reliability Strategy (SRS) information system, CN monitors and controls customer shipments and provides timely, accurate information on the status of shipments to meet precise door-to-door scheduling commitments. CN now provides customers with the number of hours required to move a shipment from one point to another and the on-time performance level on a percentage basis on such shipments to date.

Canadian National Railway Company spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Montreal, Halifax, New Orleans, and Mobile, Ala., and key cities of Toronto, Buffalo, Chicago, Detroit, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America.