Grand Trunk Railway - Legacy

Legacy

The GTR was a private company headquartered in England that received heavy Canadian government subsidies and was never profitable because of competition from shipping and American railways. (In 1880 40% of the Grand Trunk traffic was from one or another American city to and from Chicago, taking a shortcut across Ontario.) Inflated construction costs, overestimated revenues, and an inadequate initial capitalization threatened bankruptcy for the Grand Trunk. Sir Joseph Hickson was a key executive from 1874 to 1890 based in Montreal who kept it afloat financially and formed an alliance with the Conservative party. Carlos and Lewis (1995) show that it managed to survive because its British investors accurately assessed the corporation's value and prospects, which included the likelihood that the Canadian government would bail out the railway should it ever default on its bonds. The government had guaranteed a very large loan and had enacted legislation authorizing debt restructuring. These arrangements allowed the company to float new bond issues to replace existing debt and to issue securities in lieu of interest.

American executive Charles Melville Hays (1856-1912) joined the Grand Trunk in 1895 as general manager (and in 1909, president, based in Montreal). Hays was the architect of the great expansion during a colorful and free-spending era. He upgraded the tracks, bridges, shops and rolling stock, but was best known for building huge grain elevators and elaborate tourist hotels such as the Château Laurier in Ottawa. Hays blundered in 1903 by building a subsidiary the Grand Trunk Pacific Railway Company some 4,800 kilometres (3,000 mi) long; it reached Prince Rupert in northern British Columbia in 1914. The government built and the Grand Trunk operated the National Transcontinental to link the main Grand Trunk with its Pacific subsidiary. The very expensive subsidiary was far north of major population centers and had too little traffic. Nearing bankruptcy in 1919, the entire system was nationalized. In 1923 the government merged the Grand Trunk, the Grand Trunk Pacific, the Canadian Northern and the National Transcontinental lines into the new Canadian National Railways. The Grand Trunk lines, however, kept its distinctive name.