Canadian National Railway
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- CN redirects here, as it's the most common usage of the abbreviation in Canada; for more uses, see CN (disambiguation).
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The Canadian National Railway (CN; AAR reporting marks CN, CNA, CNIS), known as Canadian National Railways (CNR) between 1918 and 1960, and Canadian National/Canadien National (CN) from 1960 to present, is a Canadian Class I railway operated by Canadian National Railway Company. It is the largest railway in Canada, both in terms of the physical size of its rail network, and in revenue; it is currently Canada's only transcontinental railway company, spanning from Nova Scotia to British Columbia. CN also has extensive trackage in the central United States running along the Mississippi River valley from the Great Lakes to the Gulf of Mexico. Its headquarters are in Montreal, Quebec.
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Canadian railway industry in crisis
In response to public concerns fearing loss of key transportation links, the Government of Canada assumed majority ownership of the bankrupt Canadian Northern Railway (CNoR) on September 6, 1918 and appointed a "Board of Management" to oversee the company. At the same time, CNoR was also directed to assume control of Canadian Government Railways (CGR), a system comprised of the Intercolonial Railway of Canada (IRC), National Transcontinental Railway (NTR), and the Prince Edward Island Railway (PEIR), among others. On December 20, 1918 the federal government created the Canadian National Railways (CNR) through a Privy Council order as a means to simplify the funding and operation of the various railway companies. The absorption of the Intercolonial Railway would see CNR adopt that system's slogan The People's Railway.
Another Canadian railway encountered financial difficulty on March 7, 1919 when the Grand Trunk Pacific Railway's (GTPR) parent company Grand Trunk Railway (GTR), defaulted on repayment of construction loans to the federal government. The federal government's Department of Railways and Canals took over operation of the GTPR until July 12, 1920 when it too was placed under the CNR.
Finally, the bankrupt GTR itself was placed under the care of a federal government "Board of Management" on May 21, 1920, while GTR management and shareholders opposed to nationalization took legal action. After several years of arbitration, the GTR was absorbed into CNR on January 30, 1923. In subsequent years, several smaller independent railways would be added to the CNR as they went bankrupt, or it became politically expedient to do so, however the system was more or less finalized following the addition of the GTR.
Railway nationalization
Canadian National Railways was born out of both wartime and domestic urgency. Railways, until the rise of the personal automobile and creation of taxpayer-funded all-weather highways, were the only credible long-distance land transportation available in Canada for many years, and as such, their operation consumed a great deal of public and political attention. Many countries regard railway networks as critical infrastructure (even to this very day) and at the time of the creation of CNR during the continuing threat of the First World War, Canadian Prime Minister Robert Borden was not alone in his Union government's actions.
United States President Woodrow Wilson nationalized major U.S. railroads under the Federal Possession and Control Act on December 26, 1917 as part of the war effort, however railways reverted to private ownership control afterward. The United Kingdom nationalized its railway system during the Second World War, however subsequent governments endured harsh criticism for lack of re-investment into the late 1990s when a complicated privatization took place to a series of private sector operators under contracts (see British Railways).
It should also be remembered that broader geo-political events in Canada and worldwide were leading to governments taking a more interventionist role in the economy, with the growth of the public sector, as well as events in Canada such as the Winnipeg General Strike and the rise of Bolshevism. The latter two events were particularly troublesome to the federal government in Canada, which entered the Russian Civil War in support of the Allies from the First World War, for which at the time, the outcome was uncertain at best. The need to maintain a viable rail network was paramount.
Criticism of CNR
Regardless of the political and economic importance of railway transportation in Canada; there were many critics of the Canadian government's policies in maintaining CNR as a Crown corporation from its inception in 1918 until its privatization in 1995. Some of the most scathing criticism came from the railway industry itself, namely the commercially successful Canadian Pacific Railway (CPR) which argued that its taxes should not be used to fund a competitor. Some argue that the CPR could afford to make this criticism, having been itself the child of government and recipient of untold wealth by virtue of land and resource grants, as well as its position as a monopoly from its completion in 1885 until the CNoR started operations on the Prairies at the turn of the century.
As a result of history and geography, CPR served larger population centres in the southern prairies, while the CNR's merged system served as a de-facto government colonization railway to serve remote and undeveloped regions of Western Canada, northern Ontario and Quebec, and the economically-depressed Maritimes. The company also became a convenient instrument of federal government policy from the operation of ferries in Atlantic Canada, to assuming the operation of the narrow-gauge Newfoundland Railway following that province's entry into Confederation, and the partnership with CPR in purchasing and operating the Northern Alberta Railway. A company-driven decision to create a radio network across Canada for its passenger train customers led to the federal government assuming total control in 1932, naming the radio network the Canadian Radio Broadcasting Commission, which was then renamed and organized into a separate Crown corporation in 1936 as the Canadian Broadcasting Corporation (CBC).
Politics and government priorities
It is generally accepted that government policy dictated CNR commercial decisions, whether such decisions were in the nation's interest, or in the political interest of the party in power. As such, CNR lost money for many years, except during the Second World War when its extensive network reaching into the resource hinterland proved beneficial, and during the late 1980s and early 1990s following deregulation of the Canadian railway industry. Where CNR failed to address costs was largely due to government interference, such as the requirement to purchase locomotives from all Canadian locomotive manufacturers, resulting in operational inefficiencies.
CNR was considered to be competitive with CPR in several areas, notably in Central Canada, prior to the age of the automobile and the dense highway network that grew in Ontario and Quebec. The former GTR's superior track network in the Montreal-Chicago corridor has always been a more direct route with higher capacity than CPR's. CNR was also considered a railway industry leader throughout its time as a Crown corporation in terms of research and development into railway safety systems, logistics management, and in terms of its relationship with labour unions.
Deregulation and recapitalization
Another problem that hobbled CNR was in the sheer number of low-volume branch railway lines which did not produce sufficient traffic to pay for their operation. Without deregulation in the railway industry permitting abandonment or sale of a railway line, or even the ability to set prices to match those of trucks, both CNR and CPR paid dearly for owning these inefficient lines. One tactic that CNR perfected was to demarket a line by providing sufficiently poor service to its few customers, that those customers would turn to trucks for improved service and lower costs. Once customers ceased to exist on a small branch line, the federal government would permit the line's abandonment. Had deregulation been in place several decades earlier, it is conceivable that many Canadian branch lines would have been viable in the hands of short line operators, saving millions of dollars for taxpayers funding highways, since the railway lines had already been publicly funded in their construction.
From the creation of CNR in 1918 until its recapitalization in 1978, whenever the company posted a deficit, the federal government would assume those costs in the government budget. The result of various governments using CNR as a vehicle for various social and economic policies was a subsidization running into billions of dollars over successive decades. Following its 1978 recapitalization and changes in management, CN (name changed to Canadian National Railway, using the shortened acronym CN in 1960) started to operate much more efficiently, by assuming its own debt, improving accounting practices to allow depreciation of assets and to access financial markets for further capital. Now operating as a for-profit Crown corporation, CN reported a profit in 11 of the 15 years from 1978 to 1992, paying $371 million CDN in cash dividends (profit) to the federal government during this time.
Cutbacks and refocusing
CN's rise to profitability was assisted when the company started to remove itself from non-core freight rail transportation starting in 1977 when subsidiary Air Canada (created in 1937 as Trans-Canada Air Lines) became a separate federal Crown corporation. That same year saw CN move its ferry operations into a separate Crown corporation named CN Marine, followed similarly by the grouping of passenger rail services (for marketing purposes) under the name VIA. The following year (1978), the federal government decided to create VIA Rail as a separate Crown corporation to take over passenger services previously offered by both CN and CPR, including CN's flagship transcontinental train the Super Continental and its eastern counterpart the Ocean. CN Marine was renamed Marine Atlantic in 1986 to remove any references to its former parent organization. CN also grouped its money-losing Newfoundland operations into a separate subsidiary called Terra Transport so that federal subsidies for this service would be more visible in company statements.
CN also divested itself during the late 1970s and throughout the 1980s of several non-rail transportation activities such as trucking subsidiaries, a hotel chain (sold to CPR), real estate, and telecommunications companies. The biggest telecommunications property was a company which was co-owned by CN and CP (CNCP Telecommunications) which, upon its sale in the 1980s, was renamed Unitel (United Telecommunications) and upon corporate affiliation with Rogers Communications, was renamed AT&T Canada. Another more-famous telecommunications property wholly-owned and built by CN was the CN Tower in Toronto which still keeps its original name but was divested by the railway company in the early 1990s. All the proceeds from such sales were used to pay down CN's accumulated debt. At the time of their divestitures, all of these subsidiaries required considerable subsidies which partly explained CN's financial problems prior to recapitalization.
CN also was given free rein by the federal government following deregulation of the railway industry in the 1970s, as well as in 1987, when railway companies began to make tough business decisions by removing themselves from operating money-losing branch lines. In CN's case, some of these branch lines were those which it had been forced to absorb through federal government policies and outright patronage, while others were from the heady expansion era of rural branchlines in the 1920s and early 1930s and were considered obsolete following the development of local road networks.
During the period starting in the late 1970s and throughout the 1980s and early 1990s, thousands of kilometres of railway lines were abandoned, including the complete track networks in Newfoundland (CN subsidiary Terra Transport, the former Newfoundland Railway ended freight operations in 1988 and passenger travel in 1969.) and Prince Edward Island (the former PEIR), as well as numerous branch lines in Nova Scotia, New Brunswick, Southern Ontario, throughout the Prairie provinces, in the British Columbia interior, and on Vancouver Island. Virtually every rural area served by CN in some form was affected, creating resentment for the company and the federal government. Many of these now-abandoned right-of-ways were divested by CN and the federal government and have since been converted into recreational trails by local municipalities and provincial governments.
CN's U.S. subsidiaries prior to privatization
CN's railway network in the late 1980s consisted of the company's Canadian trackage, along with the following U.S. subsidiary lines: Grand Trunk Western Railroad (GTW) operating in Michigan and Illinois; Detroit, Toledo and Ironton Railroad (DTI) operating in Michigan and Ohio; Duluth, Winnipeg and Pacific Railway (DWP) operating in Minnesota; Central Vermont Railway (CV) operating down the Connecticut River valley from Quebec to Long Island Sound; and a former GT line to Portland, Maine, known informally as the Grand Trunk Eastern, sold to a short line operator in 1989.
Privatization
In 1992 a new management team led by ex-federal government bureaucrat, Paul Tellier, started preparing CN for privatization by emphasizing increased productivity, achieved largely through aggressive cuts to the company's bloated and inefficient management structure, as well as widescale layoffs in its workforce, and further abandonment or sale of branch lines. In 1993 and 1994 the company experimented with a rebranding exercise that saw the names CN, Grand Trunk Western, and Duluth, Winnipeg, and Pacific replaced under a collective CN North America moniker. During this time, CPR and CN entered into negotiations regarding a possible merger of the two companies. This was later rejected by the federal government, whereby CPR offered to purchase outright all of CN's lines from Ontario to Nova Scotia, while an unidentified U.S. railroad (rumoured to have been Burlington Northern Railroad) would purchase CN's lines in western Canada. This too was rejected. In 1995, the entire company including its U.S. subsidiaries reverted to using CN exclusively.
The CN Commercialization Act was enacted into law on July 13, 1995 and by November 28, 1995, the federal government had completed an initial public offering (IPO) and transferred all of its shares to private investors. Two key prohibitions in this legislation include, 1) that no individual or corporate shareholder may own more than 15% of CN, and 2) that the company's headquarters must remain in Montreal, thus maintaining CN as a Canadian corporation.
Purchasing Illinois Central
Following the successful IPO, CN has recorded impressive gains in its stock price. In 1998, during an era of mergers in the U.S. railway industry, CN purchased the Illinois Central Railroad (ICR), which connected the already existing lines from Vancouver, British Columbia to Halifax, Nova Scotia with a line running from Chicago, Illinois to New Orleans, Louisiana. This single purchase of ICR changed the entire corporate focus of CN from being an east-west uniting presence within Canada (sometimes to the detriment of logical business models), into a north-south NAFTA railway feeding Canadian raw material exports into the U.S. heartland and beyond to Mexico through a strategic alliance with Kansas City Southern Railway (KCSR).
Failed BNSF merger
In 1999, CN and Burlington Northern Santa Fe Railway (BNSF), the second largest rail system in the U.S., announced their intent to merge, forming a new corporate entity North American Railways to be headquartered in Montreal to conform with the CN Commercialization Act of 1995. The merger announcement by CN's Paul Tellier and BNSF's Robert Krebs was greeted with skepticism by the U.S. government's Surface Transportation Board (STB), and protested by other major North American rail companies, namely CPR and Union Pacific Railroad (UP). Rail customers also denounced the proposed merger, following the confusion and poor service sustained in southeastern Texas in 1998 following UP's purchase of Southern Pacific Railroad (SP). In response to the rail industry, shippers, and political pressure, the STB placed an 15-month moratorium on all rail industry mergers, effectively scuttling CN-BNSF plans. Both companies dropped their merger applications and have never refiled.
Purchasing Wisconsin Central
After the STB moratorium expired, CN purchased Wisconsin Central (WC) in 2001, which allowed the company's rail network to completely encircle Lake Michigan and Lake Superior, permitting more efficient connections from Chicago to Western Canada. The deal also included Canadian WC subsidiary Algoma Central Railway (ACR), giving access to Sault Ste. Marie and Michigan's Upper Peninsula.
Purchasing BC Rail
On May 13, 2003 the provincial government of British Columbia announced that the provincial Crown corporation, BC Rail (BCR), would be sold with the winning bidder receiving BCR's surface operating assets (locomotives, cars, and service facilities). The provincial government is retaining ownership of the tracks and right-of-way. On November 25, 2003 it was announced that CN's bid of $1 billion (CAD) would be accepted over those of CP and several U.S. companies. The transaction was closed effective July 15, 2004. Many opponents – including CP Rail – accused the government and CN of rigging the bidding process, though this has been denied by the government. Also contested was the economic stimulus package that the government gave the cities along the BC Rail route – some saw it as a buyoff done in order to get the municipalities to cooperate with the lease, though government has asserted that the package was intended to promote economic development along the corridor.
Purchasing Great Lakes Transportation
CN also announced in October 2003 an agreement to purchase Great Lakes Transportation (GLT), a holding company owned by Blackstone Group for $380 million (USD). GLT was the owner of Bessemer & Lake Erie Railroad, Duluth, Missabe and Iron Range Railway, and the Pittsburgh & Conneaut Dock Company. The key instigator for the deal was the fact that since the Wisconsin Central purchase, CN was required to use Duluth, Missabe and Iron Range Railway trackage rights for a short 17 km "gap" that existed near Duluth, Minnesota on the route between Chicago and Winnipeg. In order to purchase this short section, CN was told by GLT that it would have to purchase the entire company. Also included in GLT's portfolio were 8 Great Lakes vessels for transporting bulk commodities such as coal and iron ore as well as various port facilities. Following Surface Transportation Board approval for the transaction, CN completed the purchase of GLT on May 10, 2004.
CN today
Since the company operates internationally in two different countries, CN apparently maintains some corporate distinction by having its U.S. lines grouped under Grand Trunk Corporation for legal purposes [1] (http://www.aar.org/PubCommon/Documents/AboutTheIndustry/RRProfile_GTW.pdf), however the entire company in both Canada and the U.S. operates under CN, as can be seen in its locomotive and rail car repainting programs.
Since the ICR purchase in 1998 CN has been increasingly focused on running a "scheduled freight railroad/railway", meeting on-time performance with rail industry-leading consistency. This has resulted in improved shipper relations, as well as reduced the need for maintaining pools of surplus locomotives and freight cars. CN has also undertaken a rationalization of its existing track network by removing double track sections in some areas and extending passing sidings in other areas.
CN is also a rail industry leader in the employment of radio-control (R/C) for switching locomotives in yards, to the detriment of employees since this results in reductions to the number of yard workers required. CN has frequently been touted in recent years within North American rail industry circles as being the most-improved railroad in terms of productivity and the lowering of its operating ratio, acknowledging the fact that the company is becoming increasingly profitable.
Recent controversies
Controversy arose in Canadian political circles in 2003 following the company's decision to refer solely to its acronym "CN" and not "Canadian National," a move some interpret as being an attempt to distance the company from references to "Canada," particularly in the U.S. where Canada's decision to not participate in the 2003 invasion of Iraq was unpopular. Canada's Minister of Transport at the time called this policy move "obscene" [2] (http://www.canoe.com/CNEWS/Canada/2003/09/19/197416-cp.html) after nationalists noted it could be argued the company is no longer Canadian, being primarily owned by American stockholders. The controversy is somewhat tempered by the fact that a majority of large corporations are being increasingly referred to by acronyms. Despite this, the company is still legally called the Canadian National Railway.
In March, 2004 a strike by the Canadian Auto Workers union showed deep-rooted divisions between organized labour and the company's current management.
Passenger trains
When CNR was first created, it inherited a large number of routes from its constituent railways, but eventually pieced its passenger network into one coherent network. For example, on December 3, 1920, CNR inaugurated the Continental Limited, which operated over four of its predecessors, as well as the Temiskaming and Northern Ontario Railway between Cochrane and North Bay, Ontario. The 1920s saw growth in passenger travel, and CNR inaugurated several new routes and introduced new services, such as radio, on its trains.
The growth in passenger travel ended with the Great Depression, which lasted between 1929 and 1939, but picked up somewhat during World War II. By the end of World War II, many of CNR's passenger cars were old and worn down. Accidents at Dugald, Manitoba in 1947 and Canoe River, British Columbia in 1950, wherein extra passenger trains comprised of older equipment collided with transcontinental passenger trains comprised of somewhat newer equipment, demonstrated the dangers inherent in the older cars. In 1953, CNR ordered 359 lightweight passenger cars, allowing them to re-equip their major routes.
On April 24, 1955, the same day that the CPR introduced its transcontinental train The Canadian, CNR introduced its own new transcontinental passenger train, the Super Continental, which used new streamlined rolling stock. However, the Super Continental was never considered to be as glamourous as the Canadian. For example, it did not include dome cars.
Rail passenger traffic in Canada declined significantly between World War II and 1960 due to automobiles and aeroplanes. In the 1960s, CN's privately-owned rival CPR reduced its passenger services significantly. However, the government-owned CN continued much of its passenger services and marketed new schemes, such as the "red, white and blue" fare structure, to bring passengers back to rail.
In 1968, CN introduced the a new fast train, the United Aircraft Turbo, whose locomotive used gas turbine engines. It made the trip between Toronto and Montreal in four hours, but was not entirely successful because it was somewhat uneconomical and not always reliable. The train was retired and the entire train set was scrapped at Naporano Iron and Metal in New Jersey in 1982.
In 1976, CN created an entity called VIA as a separate operating unit for its passenger services. VIA later evolved into a coordinated marketing effort with CP Rail for rail passenger services, and later into a separate Crown corporation responsible for inter-city passenger services in Canada. VIA Rail took over CN's passenger services on April 1, 1978. CN continued to operate its commuter rail services in Montreal until 1982, when the Montreal Urban Community Transit Commission (MUCTC) assumed responsibility for them.
Since acquiring the Algoma Central Railway in 2001, CN has operated passenger service between Sault Ste. Marie and Hearst, Ontario. As well, CN operates the Algoma Canyon Tour excursion, an excursion that runs from Sault Ste. Marie, Ontario north to the Agawa Canyon. The canyon tour train consists of up to 28 passenger cars and 2 dining cars, all made by Can-car between 1952 and 1954. A "Snow Train" tour is also offered during the fall and winter season.
Since CN acquired BC Rail in 2004, it has operated a railbus service between Seton Portage and Lillooet, British Columbia.
Locomotives
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In 1929, the CNR made its first experiment with diesel-electric locomotives, acquiring two from Westinghouse, numbered 9000 and 9001. It was the first North American railway to use diesels in mainline service. These early units proved the feasibility of the diesel concept, but were not always reliable. No. 9000 served until 1939, and No. 9001 until 1947. The difficulties of the Great Depression precluded much further progress towards diesel locomotives. The CNR began its conversion to diesel locomotives after World War II, and had fully dieselized by 1960. Most of the CNR's first-generation diesel locomotives were made by General Motors Diesel and Montreal Locomotive Works.
For passenger service the CNR acquired CLC CPA16-4 units, GMD FP7 and GMD FP9 diesels, as well as MLW FPA-2 and FPA-4 diesels. These locomotives made up most of the CNR's passenger fleet, although CN also owned some 60 Railliners (Budd Rail Diesel Cars), some dual-purpose diesel freight locomotives (freight locomotives equipped with passenger train apparatus, such as steam generators) as well as the locomotives for the Turbo trainsets. VIA acquired most of CN's passenger fleet when it took responsibility for CN's passenger services in 1978.
See also
Former component railways
Former subsidiaries
List of CN companies
References
External links
- CN Official Website (http://www.cn.ca)
- Railway Association of Canada (http://www.railcan.ca/en/welcome/default.htm)
- Canadian National on Vancouver Island (http://www.geocities.com/enrailway)
- Agawa Central Tour Train (http://www.agawacanyontourtrain.com/)