Canada Calling
April 1998

by Bryce Lee

Canadian National Railway

Canadian National Railway Co. expects cost savings and higher revenues and earnings from its planned US$3.0 billion acquisition of Chicago-based Illinois Central Corp., CN executives said February 11, 1998. CN Chief Executive Paul Tellier said he expects the railway's operating ratio to decline to less than 70 percent after the merger from 81.5 percent in 1997. Operating ratio, which measures operating expenses as a percentage of revenues, is a standard for gauging a railway's overall performance. The lower the ratio, the better the railway's performance. Already one of the lowest-cost railways in North America, Illinois Central had an operating ratio of 62.4 percent in 1997. CN Chief Financial Officer Michael Sabia said the acquisition under which CN will pay US$2.4 billion to buy all of Illinois Central's stock and assume an additional US$560 million of debt will have a break-even impact on CN's 1998 earnings. In 1999 and 2000, the merger will increase earnings in the range of 15 percent to 20 percent.

The merged company will benefit from total cost savings of about US$100 million by 2001 through certain job cuts, and by integrating information systems and optimizing fleet management and system operations. It is expected overall revenue growth for the merged company of 3.5 percent to 4 percent. CN's outlook for its stand-alone revenue growth had been 2 percent to 2.5 percent. Expenses will be held flat or will rise less than 1 percent, if approved sometime next year, the merger would create the fifth largest railroad in North America in terms of revenue, at C$3.7 billion annually. This combination is about growth,'' said Paul Tellier, Canadian National's president and chief executive. "It's a perfect fit of two complementary lines providing a three-coast strategy from the Atlantic to the Pacific to the Gulf of Mexico." The agreement, which is subject to shareholder and antitrust approval, was announced after trading had ended for both companies' stock on the New York Stock Exchange. Illinois Central Corp. operates the 2,600-mile Illinois Central railroad from Chicago Illinois south to the Gulf of Mexico and the 850-mile Chicago Central freight line from Chicago west through the state of Iowa.

Shares of Canadian National Railway Co. surged on the Toronto stock market a day after the company announced it will buy Illinois Central Corp for US$2.4 billion US, creating North America's fifth largest railway. CN stock gained C$5.85; about 13 per cent in value to close at C$84 on the TSE. About 1.1 million CN shares were traded, helping Canada's biggest exchange post a solid 63-point gain on the day.

The merger clearly takes advantage of growing Canada-U.S. trade, which CN chief executive Paul Tellier said has grown at more than 10 per cent a year since the Free Trade Agreement went into effect in 1989. The combined company will have annual revenue of about C$5.4-billion, more than 24,000 employees and an unbroken stretch of track linking Canada to the Gulf of Mexico. Analysts said the stock markets welcomed the deal because it improves CN's ability to expand its north-south freight handling business.

At the end of the first week of February it was announced that CN and the federal government will share in the repair costs of the vehicle roadways on the Victoria Bridge in Montreal and it will not close on March 31, 1998. There will however be traffic disruptions for up to two years.

A Saskatchewan man is dead after the propane delivery truck he was driving collided with a freight train, near the Alberta border on February 16, 1998. The 35-year-old man from Lashburn was driving through an uncontrolled crossing on a gravel road about fifteen kilometres east of Lloydminster. A mostly empty CN freight train struck the driver's side of the cab. The RCMP said the man, who was working for ICG Propane in Lloydminster, died at the scene. The propane didn't explode. It was extremely foggy at the time of the accident and visibility was limited to about 50 metres.

1800 Canadian National employees in Winnipeg started casting their ballots February 16 in a national strike vote. Their contract with the company ran out in December 1997. Union officials with the Canadian Auto Workers say conciliation talks are not progressing. Up to 8,000 of its members nationwide could be in a legal strike position within three weeks. One of the major issues in this dispute is job security. The union fears that CN's purchase of Illinois Central could result in more contracting out of jobs. And that would have a particularly negative impact on workers in Winnipeg. The union is concerned that perhaps CN intends to close the operation at Transcona Shops in Winnipeg as the company has been doing quite a bit of contracting out on component work that goes into locomotives plus CN could move the customer Service Centre to the United States in order to save even more money. CN has recently closed shops in Moncton and Montreal and it would appear they would also like to close the shops in Winnipeg.

INDUSTRY NEWS

Pressure is mounting for a moratorium on rail line abandonment until Judge Willard Estey finishes a report on the federal grain transportation system. Farmers and provincial politicians say the railways are abandoning lines too quickly. The CPR has told farmers it plans to abandon the rail line between Meath Park and Choiceland in Saskatchewan. Farmers need the rail line as trucking grain costs a lot more than moving it by rail. The province wants to see a moratorium or at least a slow down in the pace of abandonment. They say it's inappropriate that the railways are going ahead in some ways almost speeding up the process while the federal government isn't addressing the issue. Provincial governments have no jurisdiction when it comes to regulating railways.

CPR says it has a three year plan to abandon 1600 kilometres of prairie track by the end of this decade. And it plans to meet that target unless Ottawa steps in. So far, the federal government has shown no signs of doing so. OmniTRAX Inc., an American company which owns and operates the Carlton Trail Rail Line between Prince Albert and Warman, has expressed an interest in the rail line. A group of farmers in West Central Saskatchewan has set up a company to try to buy a number of branch rail lines from CN. The rail lines, which run through 12 rural municipalities, are scheduled to be abandoned within a couple of years. The group which calls itself West Central Road and Railways says it's time for residents to put up the money for a short-line railway, or forget the idea.

The railway tracks connect a couple of dozen communities between Alsask and Delisle Saskatchewan. They include Eston, Kyle and Beechy, small communities in the middle of prime farm land. The group needs 15-thousand dollars to hire a law firm to set up the short-line company. The people behind the venture hope that rural municipalities in the region will buy in with cash. The concern voiced by many is "if you start pulling out elevators and pulling out railroad tracks and then businesses start closing. When you start losing families that are associated with the elevator companies it just simply becomes the fast track acceleration of the death of these communities." Once the company is legally set up, it can sell shares. In the meantime, the provincial government is behind the idea. It is helping the group develop a business plan and is pressuring the federal government as well as Canadian National to become involved. Saskatchewan Premier Roy Romanow has promised financial help for groups trying to buy branch rails lines. Romanow told a grain transportation conference February 20, the government is willing to consider short-term financial assistance to purchase assets. After the speech, Romanow ruled out a government buyout of the lines despite the threat they may be abandoned under the newly deregulated rail system. He was speaking at a conference sponsored by the provincial highways department and the province's two main municipal government organizations which focused on roadblocks for groups trying to purchase track being abandoned by CP and CN.

Canadian Pacific Railway and GE Canada announced two locomotive acquisition and servicing agreements on February 23, 1998. An equipment servicing agreement that provides for up to 20 years of locomotive maintenance jobs for CPR and GE Canada employees at the railway's newly upgraded Port Coquitlam shop. Under this agreement, the shop will maintain and repair the 184 GE AC-traction locomotives CPR's Western Canadian network. Up to 11 GE managers will provide support to CPR's 128 employees at the Port Coquitlam shop. Secondly a GE Canada industrial benefits program that will see goods and services from, or investment in, British Columbia companies for a total value of C$20 million during the next four years.

The economic benefits being realized in B.C. as a result of the railway's investments are a positive outgrowth of the provincial government's railway property tax reform started in 1995. The locomotive servicing agreement and this second wave of industrial benefits, along with CPR's greatly increased capital investment in the province, have been stimulated by the improved tax environment for railways that has been created by the Government of British Columbia.

PASSENGER SERVICE

Canada's national passenger rail service says it plans to make its trains more accessible to handicapped passengers. Via Rail's chief executive officer, Terry Ivany announced February 5 the company will implement its plan to make coach cars and washrooms wheelchair accessible much earlier than the deadline of April 1, 2001 set out by a code of practice prepared by the Canadian Transportation Agency.

Growing numbers of persons with disablities want to travel and we want them as customers, said the CEO. The code requires that each coach car have at least one wheelchair tie-down plus space for storage of more chairs, and that sleeping cars contain at least one accessible bedroom and washroom. Dining cars must be equipped to handle wheelchairs, or carriers must provide food and beverages at mealtimes. And staff must help handicapped passengers with boarding and luggage.

But the new code doesn't address some major problems that face handicapped riders, said David Baker, executive director of Advocacy Resource Centre for the Handicapped. He'd like to see level access to trains, so that handicapped people can just roll right on, he said. Currently, disabled persons using electric wheelchairs at Toronto's Union Station must use freight elevators built in 1929 and not licensed to carry passengers to reach VIA platforms. The code applies to railways regulated by the federal government such as VIA Rail, Algoma Central Railway, Quebec North Shore and Labrador Railway, Hudson Bay Rail, Amtrak and Ontario Northland Railway trains operated by Canadian National Railway.

A Quebec truck driver was killed Friday February 13, 1998 when his tractor-trailer collided with a train at a level crossing, about 15 kilometres east of Ottawa. The driver, was thrown from the truck's cab when it hit a VIA train carrying 63 passengers and crew. No one else was seriously injured in the accident. After about two hours on the stopped train, passengers boarded buses to finish their morning trip to Ottawa from Montreal. The crossing's warning signals and bells were working at the time. The cause of the accident is under investigation.

All four RDC cars of BC Rail passenger train derailed Friday the 13th of February near Pemberton, due to a broken rail but no one was hurt. One RDC will be retired. The train was travelling from North Vancouver to Prince George when the accident occurred. A BC Rail spokeswoman said four self-propelled cars RDCs were involved. Three were derailed, but the cause of the accident is not known. The 59 passengers were bussed to their destination.

Federal Transport Minister David Collenette announced February 20, 1998 that the Levis Quebec railway station will remain open until such time as a new station can be constructed on the South Shore to accommodate the current 20,000 passengers a year which pass through the present facility. The present Levis Station will close because it was concluded that a possible purchase by VIA of the eight-mile portion of the Montmagny subdivision that serves Levis Station would not be the best solution. So a new station will be constructed, the present station will then be closed and the Montmagny Subdivision will be abandoned.

Bob Nagel of Nagel Tours in Edmonton announced February 24, 1998 a new tour train. This would operate from Edmonton to Camrose on CN tracks, Thursday to Sunday weekly. Nagel Tours already organizes bus tours throughout North America. They are targeting local tourists for the "fun train" in the first year, and international tourists in the second year. The train would leave from the new Edmonton Alberta VIA station (still under construction) near the City Centre Airport at 17:30. Passengers would be entertained with music and theme characters during the ninety minute trip to Camrose. Once there they would have a meal and show at the Camrose Exhibition grounds, anything up to a "wild west rodeo". On the return trip, those who had sufficiently partied could avail themselves of the sleeping car. The train would arrive back in Edmonton at 23:00. Sunday trips from 11:00 to 16:00 would be geared to families. So far Nagel has obtained 20 passenger cars, two locomotives and a baggage car from VIA. He expects to employ 20 people on the operation which could carry up to 1100 people. CN noted that they have not yet come to an agreement with Nagel for the use of CN tracks.

INDUSTRY NEWS

A film about black porters who worked for the Canadian Pacific and Canadian National railways is being honoured with The Canada Award. The Canada Award is given to a television program that best reflects the racial and cultural diversity of Canada. "The Road Taken", produced by Selwyn Jacob and Dale Phillips, chronicles the racial prejudice that black porters faced while working for the country's railways. Using archival footage, photographs and interviews with retired porters the film shows how management and unions of the railways discriminated against the men. Past Canada award winners include "Degrassi Junior High" and last year's recipient "The Mind of a Child". The Canada Award will be given during the Gemini Awards to be broadcast on March 1, 1998.

The Regina Saskatchewan downtown casino has been named a heritage property by the provincial government. Union Station, which was renovated two years ago, received the designation February 16, 1998. The minister in charge, says the transformation of the railway station to a gambling room does not "impair" the historic significance of the building as the main features of the station were preserved. The designation means the building's architectural character can not be altered, without special consultation and approval.

The sale of Toronto's Union Station to the Toronto Maple Leafs is raising some questions at City Hall. The Leafs plan to buy the Toronto Raptors Basketball Club and take over their new stadium being built south of the train station. The City of Toronto owns the land that Union Station sits on however the building itself is owned by the Toronto Terminal Railway Company, which is owned by Canada's two national railways. Now, the Leafs want to buy Union Station and link it to their new arena. Mayor Mel Lastman has hailed the deal as a win-win for the city. But councillor Jack Layton calls selling Union Station a "grave error." Toronto's budget chair Tom Jacobek says the deal will benefit the city financially. Toronto has been involved in a protracted dispute to collect millions of dollars in back rent from the railways. He says that will be settled as part of this sale, the Leafs will put money into Union Station improve the structure. The rent for the land still has to be negotiated; however Jacobek estimates the Leafs could pay up to a C$1.5 million a year.

Canadian Pacific Hotels Corp. has closed a C$65-million deal to acquire two hotels in the Toronto area from Hong Kong's Shui On Group. CP Hotels, a unit of Canadian Pacific Ltd., said February 23, 1998 it has bought the Sheraton Toronto East in the Toronto suburb of Scarborough and the Sheraton Four Points in nearby Mississauga. The company said it will spend about C$5 million to improve the hotels. CP Hotels said it made the acquisitions with financing from the Legacy Hotels real estate investment trust.

Someone has vandalised a sculpture located near Toronto's Skydome. Three bronze plaques are missing from a sculpture entitled The Chinese Railroad Workers Memorial. The 75-by-75-centimetre plaques were inscribed with brief descriptions, in English and Chinese, of the fate of 17,000 Chinese labourers who helped build the western section of the Canadian Pacific Railway during the 1880s. The Chinese were employed by contractor Andrew Onderdonk or his sub-contractors on the construction of the Pacific section of the Canadian Pacific Railway. The letting of sub-contracts was as common in railway construction as it is in general contracting today. This is not the first time the sculpture has been attacked by vandals. Three smaller plaques were taken in 1992, and the concrete base of the work has been spray painted with non-political graffiti four or five times since it was installed in 1989.

On February 11th, 1998, former Ontario Northland RS-10 number 1400 was delivered to the Canadian Railroad Historical Association's Canadian Railway Museum in St. Constant, Quebec. The 1600 HP MLW locomotive, a uniquely Canadian model, is one of two preserved RS-10's in Canada. The Museum intends to restore the unit (built in 1950, stored serviceable in 1985) to operating condition. Basically an RS-2 in the body of an RS-18, only 128 RS-10's were built by Montreal Locomotive Works, all for Canadian use. The last units were withdrawn from service in the mid-80's.

SHORTLINES

Indiana & Ohio GP9 #62 (ex-C&O 6018) arrived in Sydney Nova Scotia February 24, 1998 to take up residence on the Cape Breton & Central Nova Scotia Railway. This brings to 8 the number of EMD units now on the formerly all MLW/ALCO powered railroad. #62 joins IORY GP50s 3100, 3102, 3104, 3107, 3108 & 3109 and ex-Grand trunk GP18 #4700. The new arrival was painted in the red, orange and cream colours of the Indiana and Ohio Railway. She has dynamic brakes, high short hood, and is setup to run short hood forward. Most of the MLWs have been retired. RS18s 3716 and 3842 are currently operating out of Stellarton, NS as the local switchers while former CN C-630Ms 2016 and 2003 were in the shop for minor repairs. It is believed that these are the only active MLWs left. Over the last few months, Nova Scotia Power has been importing United States coal via ship and the railway has been hauling coal from the Strait of Canso to power plants in Trenton, Point Tupper and Lingan. When this coal traffic is completed the remaining MLWs may well be retired. Rumour has it that the Alco prime movers will be sold, likely to a foreign buyer and the carbodies will be scrapped.

On the RailTex-owned Ontario L'Orignal Railway it would appear there have been confusion on the names on locomotives. The 179 was named Griffin, and then it was renamed Butler or so it was named the first week of January 1998. Go figure. The Quebec Gatineau Railway trains on the former CPR LaChute Subdivision meet at Marelan Monday to Friday around 21:00 and Saturday around 16:00. Where necessary there is Sunday service with the same scheduling as Saturday. These trains meet at Marelan to swap crews so that the employees that live in Montreal are back home the same day and the same for the Gatineau crew. In December 1997 seen were RS18s and C424s leading ex-Conrail SW1500s.

MOTIVE POWER - Canadian National

Acquisitions:

General Electric Dash 9-44CWL's 2580-2587 were delivered February 2, 1998; 2588 Feb. 8; 2589 Feb. 9; 2590 Feb. 12, 2591, 2593-2597 February 21; 2598 Feb. 22; 2599 Feb. 23, 2592, 2600 Feb. 28, 2601 & 2602 are expected to complete the order shortly. General Motors built 5765 SD75I was finally delivered February 6. Canadian National has ordered 40 additional 40 GE Dash 9's for the spring of 1999 and apparently has also requested an unconfirmed report for an additional 50 GE units for the spring of the year 2000.

Leased Power:

Leased GCFX (Connell Leasing) SD40-3s 6061, 6062, 6063, 6064, 6065, 6066, 6067 ex-AMF Transport leased for Western Canada coal service. Thirty locomotives are being leased to the Kansas City Southern, who in turn will send them to BNSF for horespower hours owed. These are mostly 9600-series GP40-2's with the smaller fuel tanks are 9633, 9635, 9637, 9638, 9639, 9641, 9642, 9643, 9644, 9645, 9651, 9652, 9653, 9655, 9657, 9658, 9660, 9661, 9664-9670, 9673, 9674, 9675, 9675, 9677. The following are off lease as of the end of February 1998: HATX 425, 426, 427, 428 returned to Helm for lease to CSXT; EMD 182, 187, 190, 193, 195, 196, 197 are to be returned to GTW Battle Creek for further disposition. Conrail 6459, 6470, 6655, 6656, 6664 have returned to CR Selkirk NY various and sundry repairs and won't return. They, along with the 25 LMSX units, are leased until the end of April, 1998.

Retirements:

The following locomotives have been retired: February 05: GTW GP18s 1514, 1515, 1517; February 06: GMD1m 1113, 1123; February 13: HR616 2108, 2112; M420W 3516, 3517, 3569, 3578, 3579, HR412(W) 3582, 3583, 3586, 3588; February 16: M420W 3508, 3509; February 23: HR616 2103; M-420W 3567, 3573, 3577; GTW GP9 4439; GTW GP18 4702, 4707; February 27: HR616 2106, 2118; M420W 3560, 3568. The following M420Ws were still in service: 3530, 3532, 3533, 3538-3551, 3553-59. Of these the following are leased: 3530, 3541, 3543, 3550, 3556, 3575 are on lease to the Hudson Bay Railway (HBRY), 3538 on lease to the Quebec Gatineau Railway, 3540 failed on HBRY and is in Toronto, 3542 is at CANAC in Montreal, 3545 & 3554 are leased to the Chaleur Bay Railway, 3546 is stored unserviceable, 3558 is leased to Cando Contracting at Barrie operating the former CN spurline to Collingwood Ontario.

The following locomotives will be retired when they reach their home terminals: M420W 3505, 3512, 3514, 3522, 3562, 3575, 3560, and 3568.

Rebuilds:

Under a special program retired four axle GMD1s, will lose their 2000 gallon fuel tanks and four axle trucks to rebuilt six-wheel 1600 series GMD1's. So, retired GMD1 1140, gave up its fuel tank & trucks to 1614, which has now been renumbered 1444. Also GMD1 1123, gave its tank and trucks to 1611 and was renumbered 1441. This conversion will continue at the rate of three units a month. There are still eleven locomotives to be completed. The retired 1100 series GMD1s now with a small fuel tank and six-wheel trucks will be offered for sale as is. This work is being performed at CN's Transcona shops in Winnipeg.

Dispositions:

On February 20, RaiLink purchased M420Ws 3502, 3508, 3509, HR412Ws 3582, 3585, 3586. Two were put into service between Brantford and Nanticoke as of February 28, 1998. The balance have been sent to the Ontario Northland Railway shop in North Bay Ontario for various repairs. GTW SW1200s 1514, 1515, 1517 were all sold to CANAC in Montreal. The three remaining CN HR616s 2100, 2113, 2115 are to be leased to the New Brunswick East Coast Railway. RaiLink Trans-Ontario (TOR) at Hamilton Ontario has SW1200s 1364 and 1366 on lease; The Hudson Bay Railway at The Pas in Manitoba has GMD1s 1606, 1608, M420Ws 3530, 3541, 3540, 3543, 3550, 3556, and 3575 on lease. The Carlton Trail Railway at North Battleford Saskatchewan has on lease GP38-2 4701 and GP38-2s(W)s 4769, 4808.

Thank you to the following for contributions: Will Baird, Peter Bowers, Gerry Burridge, Bruce Chapman, John Godfrey, Tim Green, Roman Hawryluk, Manny Jacob, Joseph F. Kazmar, Brad Kindschy, Andrew Kirk, Randy S. O'Brien, Raymond Morrissette, Doug Page, Carl Perleman, John Read, Earl Roberts, Jim Sandilands, Glen Smith, Mike Swick.

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