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On Nov. 26, Canadian National Railway Co. announced plans to permanently cut 1,146 jobs.


About 30 percent of the jobs will be eliminated through normal attrition
and retirement, 45 percent through early retirement and 25 percent through
severance packages, with two-thirds of the affected jobs in Canada.


"CN is a capital- and labor-intensive corporation. Its capital budget exceeds
$1 billion annually and we have to earn the cost of that capital to continue to invest in the railway," said Paul Tellier, CN president and chief executive officer, in a prepared statement. "Labor and fringe benefit expenses account for roughly 40 percent of total operating costs, so anytime we are looking to control costs we must, by definition, look to control our labor costs."


The job reductions also reflect CN's recent efficiency gains from large-scale information technology investments in administrative functions, and fewer locomotives and rail cars needing repairs and maintenance because of asset reductions derived from CN's scheduled railroad, said Tellier.


CN expects to record a fourth-quarter, after-tax workforce adjustment charge of about $79 million for severance and other payments to affected employees.


Meanwhile, the Class I also announced plans to adopt an actuarial-based methodology to account for U.S. personal injury and other claims, including hearing loss, carpal-tunnel syndrome and asbestos-related disease.


The cost of employee injuries and other claims will be based on an actuarial estimate of the ultimate cost and number of incidents in each year.


"The change reflects CN's growing presence in the U.S., where the rail industry is uniquely susceptible to litigation involving employee work-related injuries and occupational claims because of FELA, an outmoded law passed in 1908 that applies to railroads," said Tellier.


Due to the change, CN expects to record a fourth-quarter after-tax charge of about $173 million, with two-thirds of the charge for asbestos-related claims.