Canadian Pacific RR vs Union Pacific RR

[ralph124c]

I once read that one of the big reasons for building the CP RR line was the need to unify Canada, and provide Canada with a reliable link to the Pacific. The construction of the line was much more expensive than the line crossing the USA-I understand that the route is much more difficult, needing more tunnels, bridges, etc., that the US route. So, was the CP RR profitable? Or was it run at a loss for reasons of national interest?

[BlakeTyner]

Looking at the CP history, it doesn’t appear that it was ever run at a loss. It is (and was) a privately owned railroad, although there was some government funding early on. The CP was able to buy several smaller railroads around the turn of the century, and remained profitable through WWI.

Canadian National was a government railroad until '95 IIRC, and has a different history.

[David_Simmons]

Here is Britannica’s take on the finances of the Canadian Pacific.

Canadian Pacific initially received a land grant of 25 million acres (10 million hectares). Over the years it acquired assets in mining and smelting and in timber. In 1956 it set out to develop these assets, establishing subsidiaries in oil and gas, minerals, fertilizers, food products, forest products, real estate, hotels, finance, trucking, telecommunications, shipping lines, and airlines. These assets were centralized in a holding company, Canadian Pacific Investments Ltd., in 1962 (renamed Canadian Pacific Ltd. in 1971). Canadian Pacific’s passenger services were taken over in 1978 by the crown corporation VIA Rail Canada.

And likewise for the Canadian National Railway.

In its early years Canadian National engaged in a fierce competitive struggle with the privately owned Canadian Pacific Railway Ltd. This ended with the Canadian National–Canadian Pacific Act in 1933, which directed the railways to cooperate by eliminating duplication of services. In 1978 Canadian National’s passenger services were taken over by VIA Rail Canada, a crown corporation set up to operate all Canadian passenger services except commuter services. After the government privatized Canadian National in 1995, the railroad acquired all the stock of the Illinois Central Railroad in 1999, thereby forming a rail network that reached from the Gulf of Mexico to the Atlantic and Pacific coasts of Canada. In 1998 an alliance with Kansas City Southern Railway extended CN’s lines into Mexico.

I’m not sure how the Union Pacific enters in. Much nearer in geography would be the Great Northern and Northern Pacific Railroads, now Burlington Northern.

[Freddy_the_Pig]

@ralph124c

So, was the CP RR profitable? Or was it run at a loss for reasons of national interest?

Private corporations aren’t run at a loss for reasons of national interest. The managers would be in breach of their fiduciary duty to shareholders if they did so. If a corporation loses money, it’s because its managers and investors misjudged its economic prospects.

Likewise, if the government decides that an unprofitable venture is in the national interest, it has two choices: run the venture itself, or subsidize it until investors believe that it will be profitable. Both the United States and Canada chose the latter path with respect to Nineteenth Century transcontinental railroads.

So you’re really asking two questions: To what extent did the Canadian government subsidize the Canadian Pacific Railroad, and given the subsidy, was the railroad then profitable?

For the American transcontinental lines, the answers were “a lot” and “very”. I don’t have any data on the Canadian Pacific, but those are the questions to be asking.

[Muffin]

There was huge subsidization, particularly concerning the Crows Nest Pass, which the CPR “repaid” by way of itself subsidizing the shipping of grain from the west to the east – the Crow Rate, which lasted for the best part of a century.

The down side of the Crow Rate was that the articficially low rates for grain shiping were balanced by correspondingly higher rates for manufactured goods, which was an obstacle for industrial growth in the Prairie provinces.

[Muffin]

Here’s a copy of the original 3.3 million dollar Crow’s Nest Pass Agreement
http://www.lac-bac.gc.ca/canadian-west/052920/05292083_e.html

Note that this is just a cash subsidy for a short line. The CPR already had been given title to a great deal of land etc., as mentioned above.

I forgot to mention, part of the deal included cut rates for shipping manufactured goods from the east to the west, not just cut rates for shipping grain from west to east. Penis ensued for a very long time.

[Spoons]

@David Simmons

Much nearer in geography would be the Great Northern and Northern Pacific Railroads, now Burlington Northern.

I was on a business trip to the Burlington Northern Santa Fe (BNSF) offices in Fort Worth Texas in early 1999, and the staff there were talking about a proposed merger of CN and BNSF. Certainly, the two companies had some sort of arrangement at that time (for example, perhaps an agreement to use each other’s trackage as necessary), as evidenced by one wall map of Canada and the US that showed the trackage of the two companies criss-crossing the two countries. It also showed the lines of other railroads, but those of CN and BNSF were color-coded, while other railroads’ were in gray.

But not having heard anything since, and at the risk of hijacking the thread, I’m left wondering something:

– Were the BNSF employees correct in stating that a merger was proposed, or were they simply repeating a rumour that was floating about their offices? If a merger was planned, what scuttled it?

[Skammer]

The CPR had an interesting origin. Originally, a bunch of investors approached Canadian PM Sir John Macdonald in the early 1870s with the desire to link Quebec and Ontario to the Pacific. There were a couple of reasons for the desire to build the railway:

1. British Columbia had been invited to join the Canadian Confederacy, but refused to join until a rail link connected it to the eastern provinces. When the Great Northern RR started building an east/west link just south of the Canadian border, the government feared that it would move north and into BC. At best, this would siphon all BC rail traffic through the United States. At worst, it would provide incentive for BC to join the United States. It hadn’t been a decade since the US had purchased Alaska, and Canada was worried about losing the entire Pacific coast to the USA.

2. Beside these political reasons, there were economic reasons to believe that the railroad would be successful. The western part of the country had many valuable natural resources (timber and minerals) and also provided port access for goods from Montreal and Toronto. The investors were also hopeful that they could entice settlers to farm the wide prairies between the mountains and the Great Lakes - who would in turn use the railroad to get their produce to market.

When Macdonald’s government fell due to scandal, the CPR stalled for a few years. But later, Macdonald was re-elected and CPR became a priority again. Through massive government subisidies of land and cash, the company kept afloat in its early years. When William Van Horne came on board in the early 1880’s, he oversaw the completion of the mainline and led the CPR into a fairly stable financial era.

So to make a long answer short: yes, it was built for national unity, among other economic reasons. Yes, it was very difficult to build due to the Rocky Mountains and the Laurentian Sheild (not to mention political instability). And it was highly subsidized by the government during its construction. But, for the most part, it was profitable pretty early on.

[David_Simmons]

@Spoons

I was on a business trip to the Burlington Northern Santa Fe (BNSF) offices in Fort Worth Texas in early 1999, and the staff there were talking about a proposed merger of CN and BNSF. Certainly, the two companies had some sort of arrangement at that time (for example, perhaps an agreement to use each other’s trackage as necessary), as evidenced by one wall map of Canada and the US that showed the trackage of the two companies criss-crossing the two countries. It also showed the lines of other railroads, but those of CN and BNSF were color-coded, while other railroads’ were in gray.

But not having heard anything since, and at the risk of hijacking the thread, I’m left wondering something:

– Were the BNSF employees correct in stating that a merger was proposed, or were they simply repeating a rumour that was floating about their offices? If a merger was planned, what scuttled it?

The BNSF web site lists these lines as making up the company.

Burlington Northern (BN)
Chicago, Burlington & Quincy Railroad (CB&Q)
Northern Pacific Railway (NP)
Great Northern Railway (GN)
Spokane, Portland & Seattle Railway (SP&S)
Frisco
Santa Fe

[Muffin]

@Spoons

– Were the BNSF employees correct in stating that a merger was proposed, or were they simply repeating a rumour that was floating about their offices? If a merger was planned, what scuttled it?

Yes, a merger had been proposed:
http://www.stb.dot.gov/newsrels.nsf/219d1aee5889780b85256e59005edefe/eaeb4df1e2c2e5eb85256855006026cb?OpenDocument

Yes, the merger was scuttled by the U.S. Surface Transportation Board
http://www.cbc.ca/news/background/cn/

The two companies still cooperate with regard to routing:

404 Error | cn.ca

(There is a link at the top left of this CN page that goes to the CN network route map.)