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Canadian National Railway Co. is making deeper cuts to its work force amid a plunge in rail traffic and economic demand stemming from the COVID-19 pandemic.

Canada’s largest freight carrier has laid off 5,800 people in recent months – 21 per cent of its employees – as the number of carloads on its network dropped by 16 per cent in April and 20 per cent in May, Jean-Jacques Ruest, CN’s chief executive officer, said on Thursday.

About 3,500 of the people laid off could be called back when demand for rail freight rebounds, but an economic recovery could be three years away, Mr. Ruest said on a webcast hosted by a U.S. investment bank. Some of the company’s overall cuts – about 2,000 jobs, sidelined locomotives and railcars and previously announced rail-yard shutdowns – could be permanent.

“We are not as optimistic as we were two months ago,” Mr. Ruest said. “The consumer still looks very tentative. Most of the stores are closed or their traffic levels are slow.”

Montreal-based CN in April suspended its financial guidance, and CN’s finance chief, Ghislain Houle, on Thursday declined to estimate revenue for the coming year.

Bright spots in the company’s list of cargo are food shipments and Canadian grain. The coming harvest is expected to be strong and the railway is still moving a large carry-over from last season’s crop.

But automotive shipments fell by 90 per cent amid the pandemic as auto dealers closed, and crude-by-rail trains halted as oil prices plunged, Mr. Ruest said.

Mr. Ruest said CN has a strong balance sheet, and is able to borrow money at low rates. CN recently went to market with a US$600-million, 30-year bond offering that pays 2.45-per-cent interest.

To preserve cash, CN has reduced capital spending by about $1-billion to $2.9-billion, compared with 2019.

But Mr. Ruest said CN will be cautious about rehiring and putting resources back to work, leaning on efficiencies – not economic growth – to bolster the company’s financial results. “We are probably going to be running lean when the business starts to come back … to maintain the efficiencies,” Mr. Ruest said. “We will not have the benefit of a V-shaped recovery.”

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