Con-way Inc said it expects margins to rise as increased productivity more than offsets higher costs, but its shares fell following an earnings miss.

Con-way executives said the company would raise salaries and wages this year for the first time since 2008 and expects a return to "normalcy."

"I think that if you rewind the clock prior to the economic downturn, things like wage increases happened every year and they were not discussed that much," Chief Financial Officer Stephen Bruffett told analysts on a conference call.

"In our view, 2012 is the year of really getting back to some normalcy," where salary and customer rate increases are typical, he said.

The company expects a stable but slow-growth economy.

On the conference call, Con-way executives stressed that increased productivity and pricing power would overcome cost pressures.

"We expect that our productivity initiatives combined with price will help us expand margins in the end," said Gregory Lehmkuhl, president of Con-way Freight, the less-than-truckload division that accounts for 60 percent of the company's revenue.

The wage and salary increases, effective April 1, will tack on about $11 million of added quarterly costs, Bruffett said.

On the savings side, the company has been strategically shrinking shipping volume in some overloaded lanes to increase efficiency, and raising prices on business it wants to maintain.

Lehmkuhl said, "We are not looking to purge business. We have been done with those efforts for months and we're looking at fair and equitable price increases with all of our customers as the contracts expire."

In the fourth quarter, the freight segment's margins were below analyst estimates, while the truckload and logistics segments outperformed.

"Poor performance at Con-way Freight drove the miss as cost overruns failed to drive as much margin improvement as we had been expecting," Deutsche Bank analysts wrote in a note.

Con-way shares rose 13 percent in January after falling 20 percent in 2011. (Reuters)