Urges Rail Freight Service Review panel to focus its recommendations on commercial supply chain solutions

MONTREAL, May 3, 2010 — CN (TSX: CNR)(NYSE: CNI) said today that customer-focused innovation and balanced accountability among transportation partners are the keys to improving the effectiveness of Canada’s logistics supply chain.

CN, in a submission to the Rail Freight Service Review panel appointed by the Canadian government, said hard facts compiled for the panel establish the quality of CN’s rail transportation product, most notably in terms of hub-to-hub transit time performance. At the same time, CN said it is committed to do a better job of partnering with its customers and is taking concrete action to further improve service by:

Strengthening the “first and last legs” of traffic movements that are critical customer “touch points,” with measures such as improving empty car supply and customer ordering flexibility; 

Re-designing its bulk service offering, with precision railroading innovations such as the implementation of a new scheduled grain transportation plan for Western Canada;

Streamlining demurrage rules to address customer complaints about bunching and car placement outside switching windows, and

Engaging its customers with better communication and faster resolution of service issues through a new marketing organization and customer service function.

Claude Mongeau, president and chief executive officer, said: “CN’s customer-centric innovations are being driven by normal commercial incentives in a market place where there is substantial and effective competition, both within the rail sector and across transportation modes.

“CN understands that, even with good rail service, customer issues may arise from time to time. That’s why we are again urging broad adoption of mediation under a Commercial Dispute Resolution model. Clearly, making further improvements to the logistics system does not require that more regulation be added to an already robust Canadian regulatory regime.”CN said the fact-based study prepared for the panel by QGI Consulting Ltd. on railway fulfillment of shipper demand and transit times found no systemic market structure issues within the Canadian rail industry. Moreover, the study found no difference in rail service delivery, whether the customer is large or small, located on a main line, a secondary or short-line, or whether the customer is served exclusively by one carrier or has access to other rail service providers. This is a very important finding.

CN urged the Review panel to recognize another critical conclusion of the QGI report – a conclusion CN shares – that the reliability of supply chains is not only influenced by railways, but also by the performance of shippers and receivers, terminal operators, port authorities, truckers and steamship lines.

Mongeau said: “Railways cannot be arbitrarily held responsible for all failures in the system.  Good transportation service depends on all supply chain participants working as much as possible in a synchronized manner. Failures often happen, for instance, because vessels are late or waterfront terminals are clogged. Balanced accountability is best served by allowing normal commercial incentives to inject the discipline required of all participants.

“The de-regulation of the rail industry has been a true success in Canada. It helped to revive the industry, improve service, generate competitive rates for customers, and it encouraged railways to step up investment in their networks. That’s a powerful story and why CN is calling on the Review panel to recommend staying the course.”

To read CN’s submission to the Rail Freight Service Review panel and learn more about its Commercial Dispute Resolution model, please click here.

Forward-Looking Statements
Certain information included in this news release constitutes “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and under Canadian securities laws. CN cautions that, by their nature, these forward-looking statements involve risks, uncertainties and assumptions.  The Company cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although reasonable at the time they were made, subject to greater uncertainty.

Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results of performance of the Company or the rail industry to be materially different from the outlook or any future results or performance implied by such statements. Important factors that could affect the above forward-looking statements include, but are not limited to, the effects of general economic and business conditions, industry competition, inflation, currency and interest rate fluctuations, changes in fuel prices, legislative and/or regulatory developments, compliance with environmental laws and regulations, actions by regulators, various events which could disrupt operations, including natural events such as severe weather, droughts, floods and earthquakes, labor negotiations and disruptions, environmental claims, uncertainties of investigations, proceedings or other types of claims and litigation, risks and liabilities arising from derailments, and other risks detailed from time to time in reports filed by CN with securities regulators in Canada and the United States. Reference should be made to “Management’s Discussion and Analysis” in CN’s annual and interim reports, Annual Information Form and Form 40-F filed with Canadian and U.S. securities regulators, available on CN’s website, for a summary of major risks.

CN assumes no obligation to update or revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable Canadian securities laws. In the event CN does update any forward-looking statement, no inference should be made that CN will make additional updates with respect to that statement, related maters, or any other forward-looking statement.

CN – Canadian National Railway Company and its operating railway subsidiaries – spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America. For more information on CN, visit the company’s website at www.cn.ca.

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