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Canadian National Railways

The Oxford Companion to Canadian History

T. D. Regehr

Canadian National Railways. 

cn was incorporated as a Crown corporation in 1919, when the Canadian government nationalized the financially troubled transcontinental Canadian Northern Railway system and amalgamated it with Canadian Government Railways (formerly the Intercolonial Railway) in the Maritime provinces. In 1923 the country's largest railway, the Grand Trunk Railway, was also nationalized and became a part of cn. The Grand Trunk system at the time included its own lines in eastern Canada, the subsidiary Grand Trunk Western Railroad to Chicago, the Grand Trunk Pacific Railway from Winnipeg to Prince Rupert, British Columbia, the government-built but Grand Trunk-leased National Transcontinental Railway from Winnipeg to Quebec City, and several smaller lines. Other railways, including the moribund Hudson Bay Railway, were added to cn later.

Most of the amalgamated railways had received financial assistance from federal and/or provincial governments, usually in the form of bond guarantees. In return they agreed to provide services, sometimes at stipulated rates, which were not directly linked to operating costs. These obligations, combined with the massive indebtedness of the component companies, made it virtually impossible for cn to operate profitably. A further difficulty was related to the fact that construction of these various lines had proceeded without much planning. Integrating the various lines, which had previously been competitive, required the construction of new links between the different systems, and the abandonment of duplicate lines and facilities. In addition, the work environment and culture of each system was unique, making the merging of management teams and workers difficult.

Sir Henry Thornton, who was appointed president of the amalgamated railways in 1923, worked hard to integrate the company's multifarious operations. cn also inherited from its predecessor companies numerous telegraph, township-development, land, hotel, rolling-stock, shipping, ferrying, manufacturing, and repair companies. These were further expanded in the 1920s when cn developed the country's first network of radio stations, which later became the Canadian Broadcasting Corporation; it broadcast, among other things, programs such as Hockey Night in Canada. In 1937, cn also organized Canada's first government-owned airline, Trans-Canada Airlines (now Air Canada).

The company found it difficult, in the best of times, to pay the fixed charges on its enormous debt. It could not do so under the depressed economic conditions of the 1930s, even after resorting to controversial and difficult reductions in wages, the dismissal of many of its employees, and drastic cutbacks on some of its services. In an effort to streamline rail operations, the federal government passed the Canadian National–Canadian Pacific Act, which directed the two very different and fiercely competitive companies to co-operate in effecting operating economies. Even with those economies, cn escaped bankruptcy during the Depression only because the federal government paid most of the fixed charges and eventually cancelled much of the company's debt.

Under the presidency of Donald Gordon in the 1950s, cn converted its motive power from steam to electric-diesel locomotives, modernized its equipment, reduced its commitment to unprofitable passenger service, and sought authorization to abandon uneconomic branch lines. Together with other railways, cn lobbied successfully for federal financial assistance to support uneconomic services, most notably prairie grain carried under the terms of the Crow's Nest Pass Agreement, Maritime freight carried under arrangements the federal government had made with the eastern provinces, and continued maintenance and service on unprofitable branch lines. The company formed its own trucking subsidiaries and experimented with piggy-back rail-trucking arrangements. It also initiated numerous urban real estate developments. The best-known and most visible of these were the cn tower and the convention centre complex in Toronto.

Canadian railways were built as instruments of national policy. They were expected to tie the country together along an east–west axis. But after the signing of the North American Free Trade Agreement in 1988 more trade moved along north–south lines. cn responded by strengthening its American connections through acquisitions, alliances, running rights, and traffic exchanges. It remains one of the six largest rail systems on the continent. It has, however, spun off or divested itself of most non-rail holdings. nafta made government transportation subsidies controversial. In efforts to resolve that problem, the federal government wrote off most of the ancient cn debts and relieved the company of many of its obligations to provide service at uneconomic rates or over money-losing branch lines. As a result, the company became profitable, and in the 1990s the federal government initiated a series of steps resulting in the privatization of Canadian National Railways.

T. D. Regehr