THE EXPANSION OF THE GRAND TRUNK
The Darkest Days--New Men at the Helm--Expansion in the East--The Grand
Trunk
In the eighties, it will be recalled, the activity of the Canadian
Pacific in the eastern province had stirred the Grand Trunk to an
aggressive counter-campaign. Line after line had been absorbed,
extension after extension had been built. New life seemed to have been
injected into the old system. Holders of even ordinary shares began to
dream of dividends.
The activity was brief and prosperity briefer. Only in the golden days
from 1881 to 1883, when the West was enjoying its first 'boom' and
railway construction was at its height, did the policy of expansion
justify itself from the shareholder's point of view. The year 1883 saw
the high-water mark of prosperity for the Grand Trunk; for in that year
dividends were paid not only on guaranteed but on first, second, and
third preference stock. Not again until 1902 was even a {197} partial
payment made on the third preference; not until 1900, save for a
fraction in 1887, was anything paid on second preference; first
preference dividends were fractional and occasional, and even the
guaranteed stock dividends were passed time and again. The financial
position of this great system in the middle nineties may be briefly
summed up in the statement that securities of the par value of
L16,000,000, which in 1883 had a market value of L12,000,000, were
worth in 1894 only L3,500,000. The junior securities had become only
gambling counters on the stock exchange.
Where did the cause lie? There was not one; there were several. The
first was in capitalization. The line had been hopelessly
over-capitalized to begin with, and the new acquisitions doubled fixed
charges, while net receipts increased only ten per cent; feeders had
proved suckers.[1] Secondly, in the general commercial situation. The
whole continent was undergoing a trying test of panic and depression,
of low prices and industrial stagnation. For a quarter of a century
after {198} 1873 the gloom had been broken only at brief
intervals--from 1880 to 1883, and from 1887 to 1889. In 1893 the price
of wheat fell to the lowest point in a century. The great Mississippi
valley had been flooded with settlers, railway and steamship threw
their millions of bushels on the world's markets, while the gold basis
of prices failed to expand in proportion. Western farms were, it was
said, 'plastered with mortgages'; one-sixth of the railways in the
United States went into receivers' hands in 1893 alone. Free-silver
agitators denounced the 'gold bugs' of the east; Coxey armies marched
to Washington. Another cause was in excessive competition. The St
Lawrence was more accessible to shippers than ever, while the Canadian
Pacific had cut into the best paying territory in Ontario. In the
Chicago traffic absolute demoralization ruled--reckless rate wars were
waged, agreement after agreement was broken, line was played against
line by grain-shipper or by dressed-beef magnate. A final cause was in
management. The attempt was still being made to manage a great railway
from London, three thousand miles away. The Canadian officials had
little independent discretion; interminable delays, lack of initiative,
red {199} tape, nepotism, followed inevitably. Here and there
officials strove strenuously to better conditions, but the odds were
against them. Practically no Grand Trunk stock was held in Canada; it
was not even quoted on Canadian exchanges; Canadians regarded the road
entirely from the user's point of view.
The traveller and shipper had less to complain of than the shareholder.
The service of the road had been greatly increased. The mileage was
large in proportion to population. Rates were low. True, it was a
rare event for a Grand Trunk train to arrive on time, but it usually
arrived.
For these various ills corresponding remedies were sought in turn.
Drastic capital reorganization was discussed, but nothing was done.
Commercial prosperity could not be revived by the efforts of a single
railway. Competition was met by agreement after agreement,
'gentleman's' and otherwise, but in vain. The most hopeful resource
lay in the only remaining direction, change of management.
In 1895 Sir Henry Tyler resigned from the presidency after twenty-three
years of faithful service. His place was taken by Sir Charles
Rivers-Wilson, who had a record of efficient {200} service on the
borders of politics and finance. The new president and a committee of
directors made a thorough investigation of the Grand Trunk, and
recommended some immediate improvements. Their chief contribution to
its success, however, was the discovery of Charles M. Hays.
[Illustration: Charles Melville Hays. From a photograph by Notman]
The great rival of the Grand Trunk had pressed forward to prosperity
under the driving power of an American general manager. The new
administration decided that it, too, would look to the United States
for a chief executive of the ruthless efficiency and modern methods
which the crisis demanded. They found him in the man who had pulled
the Wabash out of a similar slough of despond. Mr Hays was not quite
forty when, in 1895, he was appointed general manager of the Grand
Trunk. He had risen rapidly since the days when, a boy of seventeen,
he had entered the office of the Atlantic and Pacific. At twenty-nine
he had been secretary to the general manager, and three years later
manager himself, of the Wabash.
His presence was soon felt. The staff realized, some with relief, some
with consternation, that the good old leisurely days, the days of
vested interests, were gone. {201} Many were pensioned, some were
dismissed. In some cases American officials were imported to fill the
vacant posts, to the patriotic discontent of the old guard. Equipment
was overhauled, larger freight cars were ordered, and new terminals
acquired. The main bridges on the road--the Suspension at Niagara
Falls, the International at Fort Erie, and the Victoria at
Montreal--were all rebuilt on a larger scale between 1896 and 1901.
The double tracking of the main line from Montreal westward was
continued, and many of the sharp curves and heavy grades of the
original construction were revised. Elevators at Portland, Montreal,
Midland, Tiffin, Goderich, Point Edward, and Fort William were built or
acquired. Trains came in on time. The whole system was 'speeded up.'
Later changes in the administration may be briefly summarized here. In
1900 Mr Hays's five-year contract as general manager expired. At the
same juncture a vacancy occurred in the presidency of the Southern
Pacific, which had fallen on evil days, and Hays was offered and
accepted the post at four times his salary with the Grand Trunk of
$25,000 a year. A year later he was back again in Canada. There was
not room in the {202} Southern Pacific for both Hays and Harriman, then
in financial control, and the Grand Trunk directors seized the
opportunity which the breach afforded. In 1909 the wide recognition of
Mr Hays's great services led to long overdue increase of the authority
of the Canadian officials of the road by his appointment as president,
on the retirement of Sir Charles Rivers-Wilson. Three years later,
with his projects for expansion still incomplete, he met a tragic death
in the sinking of the _Titanic_. Mr Edson J. Chamberlin, who had
increased his reputation for efficiency by his management for four
years of the Grand Trunk Pacific, was chosen as successor in the
presidency.
Fortune favoured the new administration from the start. The tide in
the continent's business affairs turned soon after the new men took the
helm. The long depression ended, prices rose, farmers met mortgage
payments, factory chimneys smoked once more, traffic multiplied.
The first result of the improved conditions was the easing of the
tension in railway relations. There was no longer a life-and-death
necessity for rate-cutting and traffic-stealing. Rate wars between the
trunk lines in the United States came to an end. On the {203} Canadian
side peace was longer in coming. The rush to the Klondike in 1897
started a rate war between the Canadian Pacific and the Grand Trunk,
with its American connections, which lasted nearly a year. In its
course rates were cut in the east as well as in the west, and the
Canadian Pacific sent its west-bound freight from Toronto by Smith's
Falls rather than use any longer the direct line of the Grand Trunk to
North Bay. Peace was patched up, but the Canadian Pacific shortly
afterwards set about building a road of its own from Toronto north to
its main line, thus threatening the Grand Trunk with permanent loss of
western business, and providing it with one incentive toward the great
westward expansion it was soon to undertake.
Along with prudent retrenchments went increasingly aggressive
expansion, both east and west. It was one of the main objects of Mr
Hays's policy to secure a hold on the rich traffic possibilities of New
York and the New England states. Portland, the original New England
terminus of the Grand Trunk, had not become the great commercial centre
it once expected to be. The first further step was taken in 1899, when
the Grand Trunk secured control of the five hundred miles of {204} the
Central Vermont, with which relations had been close for some years
past. With running rights over a gap controlled by the Boston and
Maine, this gave a line from St Johns, Quebec, to the port of New
London, Connecticut; from this point connection was made by boat to New
York, where valuable terminal docks were owned.
New London was not the final goal, however--Providence and Boston
offered greater possibilities. But to seize them it was first
necessary to break through the monopoly of New England land and water
transport, which the New York and New Haven line had acquired, or to
come to terms with the interests in control. At first the word was to
fight. The Grand Trunk was received with open arms by the business men
of Massachusetts and Connecticut, eager for competition in railways,
and in spite of all the political influence of the New Haven, Hays
secured a charter for his Southern New England Railroad, to run from
Palmer, on the Central Vermont system, to Providence; a branch from
Bellows Falls to Boston was also planned. Construction was begun on
the Providence line in May 1912, but suddenly halted. The Grand Trunk
management declared the {205} halt due to financial conditions, but New
England suspected a compromise with the New Haven. Probably the change
in policy was mainly due to the change in management, the new
administration setting less store on the extension than the
Hays-Fitzhugh executive had done.
All these eastern activities, however, were overshadowed by the Grand
Trunk Pacific scheme. It was not the first plan the Grand Trunk had
formed for westward expansion. In the embryo days of the Canadian
Pacific, it may be recalled, the government had offered to the old line
the opportunity of carrying through the new one. Later, a connection
with the Northern Pacific through Sault Ste Marie had been discussed,
but Van Horne had forestalled this move. Still later an extension of
the Grand Trunk from Chicago northwesterly, possibly through control of
the Wisconsin Central, had been under consideration. Nothing came of
these plans until the proved fertility and rapid settlement of the
Canadian North-West, the improved position of the Grand Trunk in the
money markets, and the threatened loss of traffic between Toronto and
North Bay, lured and urged the new administration forward.
{206}
In 1902 Mr Hays announced that the directors were considering building
a line from North Bay, through New Ontario westward, to a terminus on
the Pacific at Port Simpson or Bute Inlet. It would be a line of the
highest standards. Government aid, the announcement continued, would
certainly be sought and expected.
Once more railways became Canadian politics. There was little doubt
that the government would aid either this or some rival
transcontinental scheme. Opposition to the lavish subsidy policy of
the past had developed, indeed, but it was overwhelmed by the demands
from every quarter for a vigorous forward policy. It was Canada's
growing time, and new-born confidence spurred country and government
on. But if the line was to be not merely a private enterprise, but in
part a policy of state, then considerations of high politics and low
politics alike came in, and compelled material changes in the Grand
Trunk's scheme before it could secure government acceptance.
A road from North Bay west would satisfy the local demands of the
western provinces, but would not satisfy the local demands of the East,
or meet certain common national {207} aspirations. Eastern, and
particularly Quebec, interests, demanded that any new trans-continental
should be built far to the north, opening up the wilderness between
Hudson Bay and the Laurentian highlands bordering the St Lawrence. A
Quebec company, the Trans-Canada, was in fact urgently seeking support
for such a line, endeavouring, since patriotism is in Canada the last
refuge of the promoter, to stimulate investors by stressing the
military advantages of the remote route. Again, the Maritime Provinces
protested against aid to a company to carry the traffic of the West to
Boston and Portland instead of to St John and Halifax.
Sir Wilfrid Laurier, the prime minister, endeavoured to combine all
these ends. His plan provided for a road 3550 miles in length,
beginning at Moncton--a neutral point between the politically
inconvenient rivalries of St John and Halifax--crossing New Brunswick
northwesterly, skirting the Maine border, and on to Quebec City, where
the St Lawrence was to be crossed by a great bridge. Thence it would
strike westerly far to the north of existing settlements. From
Winnipeg the previously proposed route was followed. The West would
have the development and {208} competition demanded, the hinterland of
Quebec and Ontario would be opened, and the ports of the Maritime
Provinces put on an equality with their American rivals. And since
this vast project was much beyond the power of the Grand Trunk to
finance, it was arranged that the road should be divided into two
sections. The eastern, from Moncton to Winnipeg, was to be built and
owned by the government and leased to the Grand Trunk Pacific, free for
seven years and at a rental of three per cent of the cost for
forty-three years following. The western, from Winnipeg to the coast,
was to be built and operated by the company, aided by a government
guarantee of principal and interest on the greater part of the bond
issue.
The announcement of this plan in July 1903 led to a storm of
controversy as fierce as that which followed the launching of the
Canadian Pacific. The Opposition brought forward various policies,
looking to a greater measure of government ownership; the minister of
Railways, Andrew G. Blair, resigned in protest; rival railways opposed
openly and sometimes by secret plot; two general elections were fought
on the issue. But rarely is a government in Canada defeated on a {209}
proposal, sound or unsound, to spend untold millions, if the money is
to be had at all. The agreement went through, with modifications, in
the following year, and the building of the great northern road began.
The railway policy of the past twenty years is still on its trial, but
some tentative conclusions may be ventured.
In the first place, it seems clear that a new transcontinental was
needed, not only to open the West, but to develop the hinterland of
eastern Canada. The rediscovery of a vast clay belt north of the
height-of-land between Hudson Bay and the Great Lakes, its known
resources in timber and pulp and its probable mineral wealth, as well
as the farming areas of the western plains, and the forest, mine, and
fishery wealth of northern British Columbia, all gave some economic
justification for the adventure. Perhaps even stronger were the
political considerations. Here, again, if railways were Canada's
politics, it was not only because Canadians were materialists, but
because they were idealists. They were determined that, in spite of
geography and diplomacy, in spite of Rocky Mountains and Lake Superior
wildernesses, Laurentian plateaus and Maine intrusions, {210} Canada
should be made one and independent. Often this national spirit has
been manipulated to serve sordid ends in railway as in tariff matters;
the flag has covered a multitude of sinners. Yet whether it was the
Grand Trunk or the Intercolonial, the Canadian Pacific or the Grand
Trunk Pacific, the national purpose has been strong, and must fairly be
set on the assets side of the sheet. Sir Wilfrid Laurier and Sir John
Macdonald both worked with high courage and enduring faith for a
greater and more united Canada. Any one who looked at a map of the
Dominion and realized how incredibly narrow a fringe of population was
strung out on the southern border, could not but feel that some attempt
to add a second storey to the structure, to give breadth as well as
length, was a national necessity. Perhaps least defensible was the
Quebec-Moncton section; true, it was essential, if freight was to reach
the Maritime ports, that a shorter line with better grades than those
of the Intercolonial should be secured if possible. Grades were
bettered in the lines secured, but the saving in distance was not as
great as old and incorrect surveys had led the government to anticipate.
How should the road be built, granted its {211} need? Government
ownership had its advocates, but experience of political 'machines' and
a recognition of the difficulties of a government line in carrying on
steamship or irrigation or other subsidiary activities, or in making
international extensions, told heavily against such a policy. The real
choice lay between the two private companies, the Grand Trunk and the
Canadian Northern, which were seeking to rival the Canadian Pacific.
Undoubtedly the best solution would have been to amalgamate these
companies, and thus to save the eventual outlay on a line north of Lake
Superior, on closely parallel lines in the prairies, and on the
enormously costly rival lines to be built through the Rockies. True,
competition even in railway matters has still its merits, but one
strong competitor of the Canadian Pacific would have better served the
country than two in financial straits. This solution appeared for a
time possible. As has been seen, negotiations were carried on in 1902
and 1903 looking to such a union, but unfortunately without result.
Forced to choose, the government had no alternative but to give its aid
to the older and better known system.
What standards were to be set for the {212} new road? The continent's
pioneer traditions were plain: build the road in the cheapest way it
could be made to hold together, with sharp curves and steep grades if
need be, with scanty ballast, wooden bridges, and light rails, since
traffic would be light and capital hard to get. Then, if the country
developed, and perhaps after a reorganization or two, rebuild the road
on a permanent basis. But 1903 was not 1873, and Mr Hays had learned
on the Wabash and on the Grand Trunk how difficult it was for a
second-class road to compete, and how costly was the process of
rebuilding with the line in operation. He knew that with high and
rising wages for trainmen, and with frequency of service a minor matter
on the long stretches, it was essential to concentrate loads in as few
trains as possible, and that a locomotive could haul almost twice as
great a load on a four-tenths grade as on a one per cent grade. So he
determined to build from the outset up to the highest standard,
securing a lower ruling grade than any other transcontinental enjoyed.
The policy meant high fixed charges and low operating costs.
What outlay would be involved and what state aid was needed? Given the
route and the standard set, the outlay could not but be {213} vast. It
proved, in fact, much greater than the estimates, as is the way with
most big enterprises. The government section cost about a hundred and
sixty instead of sixty millions, and the Grand Trunk Pacific section
about a hundred and forty, or three hundred millions in all--twice the
estimate for the Panama Canal and nearly its actual cost.[2] The
standard set was high, and proved difficult to attain; labour was
scarce and expensive, and prices of all materials were soaring
constantly. The large expenditure lent colour to charges of corruption
in the construction of the government section. Investigation after
investigation was held, however, without revealing any gross betrayal
of trust. One contractor had been handled too tenderly for repeated
delays, possibly engineers sometimes stretched classification on a
losing contract, and doubtless contractors were as usual given the
privilege of contributing to party campaign funds. But, fortunately
for the good name of Canada, the serious charges of corruption were not
sustained.
{214}
Of this great outlay the country bore the lion's share. The Grand
Trunk Pacific was organized as a subsidiary company of the old Grand
Trunk, which secured control of ownership of all but a nominal share of
the $25,000,000 common stock, given it in return for guaranteeing part
of the Pacific bonds. Only $20,000,000 preference capital stock was
provided for, and this was not issued. The interest of the independent
shareholder was thus negligible. The money required was secured by the
issue of bonds and debenture loans guaranteed by the government or the
Grand Trunk. Up to 1914, in connection with the western section, the
government had guaranteed the company's bonds to the amount of over
eighty millions, had lent twenty-five millions for ten years at four
per cent, and had made or promised a cash gift of twenty-three
millions. On the eastern section, the company was subsidized by the
use for seven years of the road, rent free, equivalent to thirty-four
millions. It was a vast outlay, though not as difficult for the
country to bear as one-third the amount would have been a generation
earlier. The unique and consoling feature, so far as posterity was
concerned, was that the bulk {215} of the government expenditure was
provided out of surplus current revenue, so that for the future the net
income to be received from rental would much more than balance interest
on borrowings.
Once the contract was ratified by parliament and by the Grand Trunk,
and the new company had been formally organized with Mr Hays as
president and Mr Frank Morse, and later Mr Chamberlin, formerly of the
Canada Atlantic, as general manager, the work of surveying and
determining the route began. On the government section political
difficulties were met in New Brunswick, from the advocates of a route
down the St John to the city at its mouth, and engineering difficulties
of many forms in the long trail through the northern wilderness. The
bridge which was being constructed by an independent company across the
St Lawrence at Quebec collapsed in 1907, with great loss of life, and
the delay in completing the second bridge made it necessary to depend
upon car-ferries for some time. On the western section a good route
through the prairies was decided upon, not without vigorous protest
from the Canadian Pacific because of the close paralleling of its line.
After repeated surveys of the {216} Peace, Pine, Wapiti, and Yellowhead
Passes, the last was chosen, and a line was settled upon down the
Fraser and Skeena valleys, passing through two million acres of fertile
land. Remarkably low grades were secured; in fact, as favourable as on
the prairie section. Kaien Island, 550 miles north of Vancouver, was
chosen as the terminus, rather than Port Simpson as originally
designed, and soon on its magnificent harbour and most unpromising site
of rock and muskeg the new and scientifically planned city of Prince
Rupert began to rise.
As the main line ran far to the north of the St Lawrence lake and river
system, the original plan provided for the construction of branch lines
to Fort William, to North Bay, and to Montreal. Of these only the
first, aided by the Dominion and also by the Ontario government, was
built. For the connection with North Bay running rights over the
provincial road, the Timiskaming and Northern Ontario, sufficed.
Later, in 1914, the Dominion government itself decided to build the
Montreal branch. In Alberta and Saskatchewan over 1200 miles of branch
lines were begun, under guarantees of bonds by the provincial
governments. In British Columbia an independent {217} road, projected
by the contracting firm of Foley, Welch and Stewart--the Vancouver,
Pacific and Great Eastern--promised when completed to give the Grand
Trunk Pacific, by a traffic agreement, entrance into Vancouver.
The first contracts on the main line were let in 1905. For ten years
construction went on, at the rate of a mile a day, with occasional
slackening from scarcity of labour or financial stringency, but with no
complete halt. Last to be completed were the section to be built by
the company in the Central plateau of British Columbia and the section
built by the government west of Cochrane. Meanwhile, the prairie lines
had been in operation through to Edmonton since 1910, and grain reached
Fort William over the Lake Superior branch in the same year.
From the beginning it had been questioned whether the Grand Trunk
Pacific would carry out its bargain to operate the government section.
The management professed its intention to perform every promise, but
fulfilment was delayed. In 1915 the company demurred to assuming the
lease, on the double ground that the road was not definitely completed,
and that, since the change of government in 1911, the standard {218} of
construction agreed upon had not been maintained. Accordingly the
government took power to operate the road from Winnipeg to Moncton, and
to expropriate the company's branch from Superior to Fort William,
pending further negotiations.
The great Canadian railway companies are much more than railways. The
Grand Trunk system, in its new expansion, branched into every
neighbouring field which could be made to increase the traffic. Fleets
of steamers, on the Pacific coast, on the Great Lakes, and on the New
England route, filled in gaps in its lines. Modern car-ferries crossed
Lake Ontario and Lake Michigan, as well as the river Detroit.
Elevators, it has been noted, were built at strategic points on the way
from the wheat-field to the sea. Magnificent hotels were opened at
Ottawa, Winnipeg, and Edmonton, with more rustic resorts in the parks
along the route. Tourist traffic was stimulated by lowered fares and
alluring advertising.
[Illustration: Grand Trunk System, 1914]
The Grand Trunk of 1914 was a much greater factor in the life of Canada
than the Grand Trunk of 1894; it had become nation-wide in its
interests, and had shaken off the unfortunate traditions of its earlier
stagnant {219} days. Difficult tasks still faced it: the building up
of the traffic of the far north would demand ceaseless effort, and when
the wheel of time should bring round slackened business once more, it
would call for all its powers to make ends meet in face of rising
wages, taxes, outlays of every kind. The record of the recent past
gave assurance that the need would be met with courage and alert
endeavour.
[1] One recent acquisition, the Toronto Belt Railway, to meet a rental
of $19,000 and working expenses of $22,500, had gross receipts of less
than $5000 a year.
[2] The Chicago, Milwaukee and Puget Sound, a high-grade road built to
the Pacific coast at nearly the same time, was capitalized, it may be
noted, at $157,000 a mile, or nearly $70,000 a mile more than the cost
of the Grand Trunk Pacific and National Transcontinental.
{220}