Canadian Northern Railway - Financial Trouble and Nationalization

Financial Trouble and Nationalization

The last spike of the CNoR transcontinental railway was driven January 23, 1915, at Basque, British Columbia. Freight and passenger service north of Lake Superior also started in 1915, resulting in a system between Montreal and Vancouver, with lines in Nova Scotia, Southern Ontario, Minnesota, and on Vancouver Island. Between 1915 and 1918, CNoR tried desperately to increase profits during the height of conflict in the First World War when the majority of wartime traffic was moving on CPR. The company was also saddled with ongoing construction costs associated with the Mount Royal Tunnel project.

CNoR was heavily indebted to banks and governments, and its profitable branchlines in the prairie provinces — "Canada's breadbasket" — would not generate enough revenue to cover construction costs in other areas. Unable to repay construction costs, the company requested financial aid. In exchange for funds, the federal government gained majority control of shares and CNoR was nationalized on September 6, 1918, when the directors of CNoR, including Mackenzie and Mann, resigned. The replacement board of directors appointed by the federal government forced CNoR to assume the management of federally owned Canadian Government Railways (CGR). On December 20, 1918, a Privy Council order directed CNoR and CGR to be managed under the moniker Canadian National Railway (CNR) as a means to simplify funding and operations, although CNoR and CGR would not be formally merged and cease corporate existence until January 20, 1923, the date that CNR was formally consolidated.

Significant portions of the old CNoR system survive under CN (as the CNR has been known since 1960); for example:

• the Mount Royal Tunnel and suburban line to Deux-Montagnes, Quebec
• the line from Montreal (Pointe-aux-Trembles) northeast to Saguenay, Quebec
• the CN main line north and west from Toronto to Longlac, Ontario, about 900 km east of Winnipeg
• the CN main line from the Yellowhead Pass southwest to Vancouver.

The majority of CN's former CNoR branchline network across Canada has either been abandoned or sold to shortline operators. An important U.S. subsidiary of CNoR, the Duluth, Winnipeg and Pacific Railway, forms part of a key CN connection between Chicago and Winnipeg.