Canadian National Railway Co. estimates the 29-day strike by 5,000 of its Canadian employees that came to an end last week cost it $35-million to $40-million in operating profit or 8 cents to 10 cents a share on the bottom line.

As a result of this and the continued appreciation of the Canadian dollar against the U.S. dollar -- which will likely cost another 8 cents or 9 cents a share -- the Montreal company now figures it will likely only match or slightly exceed the 69 cents a share it delivered in last year's first quarter when it tallies the numbers for the first three months of 2004, chief financial officer Claude Mongeau said yesterday.

Despite these two "headwinds," Mr. Mongeau told analysts during a conference call, customer demand is strong and the company is hoping for a profit "rebound" later in the year.

CN held the conference call -- after the stock market's close -- to discuss the impact of the strike by the clerical and maintenance workers who are represented by the Canadian Auto Workers union.

The workers walked off the job Feb. 20 after they unexpectedly rejected a three-year collective agreement with the railway company despite the union's recommendation that they ratify it. However, the clerical and maintenance workers returned to work last Saturday after ratifying a slightly revised offer.

While the new contract did not sweeten the 3-per-cent annual wage increases of the first deal, it contained a $1,000 signing or back-to-work bonus and an agreement by CN to revert to an old disciplinary system.

CN chief executive officer Hunter Harrison told analysts that CN's Canadian intermodal -- truck and rail -- business took the brunt of the strike, but that the company was able to continue to handle about 98 per cent of its other rail business during the last three weeks of the strike.

Mr. Harrison appeared conciliatory toward the CAW during the call. Indeed, at least for public consumption, he said the strike was mostly a result of management's failure to do a better job at communicating the need for change at the company to the workers who went on strike.

"I think the real issue was the management of change," Mr. Harrison said. "I keep forgetting people don't like change." He said a key challenge for the company now is "to try to repair the relations with the CAW [so that] we don't go through this experience again."
The strike was the first at CN since 1995.

The company is currently in negotiations with six other Canadian unions that represent about 8,500 of its approximately 22,500 North American workers.

However, Mr. Harrison indicated that CN does not expect another strike. "We've had some informal discussions with the other groups and I don't sense any problems there," he said.
He also said that CN managers, who together with retirees filled in as much as possible for the workers during the strike, learned a great deal from the process, adding that from this point of view it was "a wonderful experience."

Mr. Mongeau said that although CN saved on workers' wages during the strike, the savings were largely offset by additional security and legal costs. As well, it considers the approximately $5-million in signing bonuses it is paying as part of the costs of the dispute.
The conference call came as CN revealed that its top executives' incentive bonuses soared last year, as its profit and share price climbed.

Mr. Hunter's pay also benefited from his promotion to CEO from chief operating officer, which took effect Jan. 1, 2003.

CN's management proxy circular shows that his total pay rose to $2.87-million (U.S.) for the year, up from $2.13-million in 2002. The main components of his pay packet were an annual bonus that soared to $1.43-million from $238,600 and a salary that rose to $1.1-million from $925,000.

He also was awarded options on an additional 540,000 CN shares, compared with 337,500 in 2002. In all, Mr. Hunter was sitting on exercisable and unexercisable options worth more than $25-million at the end of 2003.

Mr. Mongeau and fellow executive vice-president James Foote, meanwhile, saw their annual bonuses nearly quadruple last year, to $346,200 apiece from $90,000 in 2002, while their also identical salaries rose to $446,000 from $425,000.

Mr. Foote also cashed in $842,483 in stock options last year and recorded total pay of $1.31-million for the year, up from $1.12-million in 2002, when he cashed in stock options worth $600,858.

Mr. Mongeau also had stock option gains of $675,375, bringing his total 2003 compensation to $1.46-million, compared with $1.05-million in 2002, when he made $540,798 by cashing in options.

CN spokesman Mark Hallman said the bonuses were much higher in 2003 than in 2002 because the company met all the financial objectives set by the board of directors -- in terms of revenue, operating profit, profit per share, free cash flow and return on invested capital. This was not the case in 2002.

CAW officials, who last month cited high executive pay as one of the reasons for the strike, would not comment on the compensation numbers disclosed yesterday, saying to do so would simply anger union members still further.