Grand Trunk Railway

Grand Trunk Railway Station in Montreal, ca. 1900-1925

The Grand Trunk Railway (GT or GTR) was a 19th-century Canadian railway system based primarily in Ontario and Quebec with operations over much of Canada and neighboring parts of the United States. It grew rapidly, becoming at one time the railway with the greatest number of track miles in the world. Troubled financially by extending its route to the Pacific Ocean, the railway was nationalized by the Canadian government in 1921 and merged into Canadian National Railways in 1923. Portions of the Grand Trunk continued to operate under this name in the United States for a number of years.

Background

The impetus for constructing the Grand Trunk Railway grew out of mounting concerns during the late 1840s that Canada would languish economically if major steps weren't taken to improve its transportation infrastructure. Though a canal system was in place, it was becoming increasingly obsolete and losing trade traffic due to the development of the United States' railways.

Several laws passed between 1849 and 1852 paved the way for the emergence of a comprehensive Canadian railway policy, of which the Grand Trunk Railway project was a part. In particular, the Guarantee Act of 1849, which was crafted and introduced by Sir Francis Hincks, provided Canadian government subsidies for all railways longer than 75 miles. Three years later, Hincks secured passage of the Municipal Loan Fund Act of 1852, which created a Canadian government fund to support local infrastructural expenditures.

Construction

The Grand Trunk Railway was chartered in 1852 to build a railway between Toronto, Ontario and Montreal. Construction started in 1853. By 1855, the section from Montreal to Brockville was complete. The following year, the section between Brockville and Toronto and another continuing from Toronto on to Stratford were also finished. By 1859 the line had been extended to Sarnia. The GT supplemented its construction efforts by buying five local railways between Sarnia and Montreal. It also acquired a 999-year lease on the Atlantic & St. Lawrence Railroad that provided access to the ice-free port at Portland, Maine.

Across lower Ontario, traffic grew quickly as the Grand Trunk made connections between Michigan (with access to Chicago, Illinois and the Western U.S.) and Buffalo, which served as a gateway to eastern markets. The Grand Trunk's early growth was stimulated by the enormous growth of U.S. trade after 1854 caused by Canadian-American reciprocity, which meant free trade between Canada and the U.S.

The London & Ottawa Connections

The Grand Trunk was backed by financiers based in London, where the railway's headquarters were established. To encourage investment, the railway published a prospectus, predicting that the amalgamated railway would be the most comprehensive system of railway in the world, comprising 1,112 miles from Portland to Lake Huron, and would be built to as high a standard as any in England.

Throughout its life, London financiers funded the Grand Trunk's purchase or lease of 50 other railways, making it by 1869 the world's longest railway. Despite these bankers and its private ownership, the Grand Trunk quickly became vital to Canada, which became a unified dominion in 1869. The new Canadian government (located in Ottawa) also facilitated the GT's growth with subsidies and loan guarantees.

Late 19th Century Growth & Troubles

By the 1880s, the Grand Trunk had reached most major cities in Quebec, crossed into Maine (U.S. state) and Vermont, and stretched into the fast-growing Detroit-Chicago corridor inside the U.S. It bought railways in Michigan, Indiana, and Illinois (U.S. state) to secure a route to Chicago. Apart from a 5-day strike in 1876, the GT avoided the labor violence that characterized most railways in the late 19th century.

Map of the railway system as of 1891

In spite of its backers and the Canadian government, the GT was never profitable because of competition from Great Lakes shipping and American railways. In 1880, for instance, 40% of the Grand Trunk traffic was bridge traffic across the southern tier of Ontario between Port Huron and Buffalo and not bound for any Canadian destination. 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 by allying it with the Conservative Party. Carlos and Lewis (1995) showed that the Grand Trunk 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. Such arrangements allowed the company to float new bond issues to replace existing debt and to issue securities in lieu of interest.

In 1895, British civil servant and financier Charles Rivers Wilson was elected president of the railway and promised to revitalized the company.

The Pacific Extension

In 1880, the Canadian government offered to build for the Grand Trunk an extension to the Pacific Ocean. But as this would have been an enterprise of building ahead of demand and as a sizable portion of GT's traffic base was in lower Ontario, the GT directors (all based in London, England) declined this offer. The government instead built the line for the Canadian Pacific Railway which received generous bounties in land and government subsidies.

American railroad executive Charles Melville Hays (1856–1912) joined the Grand Trunk in 1896 as general manager. Hays was someone who could inject the Grand Trunk with American expertise and enthusiasm, after all, the GT Montreal's main offices still shut down for tea. Hays was the architect of the great expansion during a colorful and free-spending era. He double-tracked the mainline between Montreal and Toronto, upgraded the tracks, bridges, shops, and rolling stock, installed new appliances (especially the new automatic air brakes) and made the road more efficient. But he was best known for building huge grain elevators and elaborate tourist hotels such as the Chateau Laurier in Ottawa. He reorganized the American division of the railway as the Grand Trunk Western Railroad. Within months, Hays had made the GT profitable, even to the point of paying dividends on the preferred stock (which it hadn't done since 1873).

But Hays also regretted that the GT had rejected the government's offer to build to the Pacific. The GT was dependent upon the CPR for its eastbound freight. By 1902, Hays was promoting an extension of the GT west to the Pacific Ocean. It was an daring plan because no one had yet envisioned a single railroad that would connect an eastern road with the Pacific Ocean and span nearly the entire North American continent. It was more daring that the Milwaukee Road Pacific extension and was a project on the scale and audacity as the Trans-Siberian Railway or the Cape-to-Cairo road. Prime Minister Laurier (of the Liberal Party) also wished for political alliances with Canadian industry. The CPR was closely allied with the conservatives, Laurie envisioned that the GT's transcontinental would be the Liberals' economic ally. So with Laurie's political backing and Hays's management, the time seemed right for a second Canadian transcontinental.

So propitious was this moment that the Canadian Northern Railway, a regional carrier in Manitoba and Saskatchewan, also began plans and construction for a transcontinental, equally assured of the backing of the Laurie government. The added competition meant that probably neither line would be profitable.

Laurie also faced political pressure to build a railway into northern Quebec and to the Maritimes. Canadian eastern ports wished for a share of the Canadian grain, that for a lack of an efficient rail connection, was diverted to American Great Lakes or Atlantic seaboard ports. Bowing to this pressure, Laurie proposed his own transcontinental railroad scheme, the National Transcontinental Railway (NTR) that would connect the Maritimes, through northern Quebec, with the Canadian Northern and Grand Trunk at Winnipeg. Coupled with the CNoR and GT plans, the Laurie government would build and promote a railway system twice as large as the one Hays proposed. Laurie proposed that the completed NTR would be leased to the GTP in exchange for a small annual return of construction costs. It would greatly enhance the revenue potential of the GT with no risk of construction. Furthermore, the Canadian government guaranteed bonds for 75% of the construction of GT's Pacific extension. The GT accepted the offer.

The GT established a subsidiary, the Grand Trunk Pacific Railway (GTP), for this purpose. This extension was some 1944 miles long and built between Winnipeg, Manitoba, and Prince Rupert, British Columbia. Prince Rupert was chosen as the Pacific port because it was some 500 miles closer to Asia than the Canadian Pacific's port at Vancouver, and with some investment and expansion, Prince Rupert was expected to rival Vancouver within a few short years.

Construction of the NTR began at Thunder Bay, Ontario, in September 1905. Both the NTR and the GTP were built to high standards which also elevated construction costs. The GTP platted towns every dozen miles or so which were named in alphabetical order east to west. The GTP received no land grants, so in order to facilitate settlement and interior development, Hays created the Grand Trunk Pacific Development Company. The land development company bought over 45,000 acres of land and established dozens of towns.

By the time the GTP reached the Rockie Mountains later in the decade, costs had risen substantially. Construction costs in the mountains were twice what they were across the prairie. So expensive was the construction that Hays abandon all plans to develop the Prince Rupert port. The constant drain of construction was only partly offset by subsidies from the Canadian Government and Hays began making frequent trips to London to ask GT directors and bondholders for more money. By 1912, the drain of the extension construction threatened the bankruptcy of the GT and Hays developed plans to foist the extension onto the government and relieve the British directors of this sink. Whether or not Hays's plans would have saved the GT will remain unknown, for he booked passage on the return trip from London on the RMS Titanic. Afterward, the Canadian government continued to keep both the CNoR and the GTP afloat with periodic cash infusions.

By 1916, with grain revenues drying up, immigration into the interior halted completely because of the war, money markets unavailable (also because of the war) for railway construction, the extensions running perpetual deficits, and Canadian national credit stretched to the limit the Canadian Government (then led by Robert Borden) created the Royal Commission to Inquire into Railways and Transportation in Canada. It was chaired by the chairman of the New York Central Railroad Alfred H. Smith, and assisted by British railway economist William M. Acworth and Canadian Board of Railways Commissioner Henry Drayton. The commission's majority report (written by Drayton and Acworth) noted that the strengths and weaknesses of the GT and CNoR complimented each other and recommended that both be taken over by the Canadian government but operated on a commercial basis as a single system along with the government-owned NTR and Intercolonial Railway. Smith, the commission's chairman rejected this plan in a minority report that condemned any association between the railways and government.

By the summer of 1917, half of Canada's rail system was bankrupt. Prime Minister Borden put forward the proposals of the Drayton-Acworth report as the solution to Canada's railroad problem. In August, the government bought the Canadian Northern from its stockholders at ten-cents on the dollar. A month later, the government consolidated the Canadian Northern, with the NTR, the Intercolonial, the Prince Edward Island Railway, and the Hudson Bay Railway into the Canadian Government Railways led by David Blythe Hanna.

The Pacific extension, however, had problems. The very expensive subsidiary was too far north of major population centers and had far too little traffic. The cost of constructing the Pacific extension and the meager returns in operating it led the GT towards bankruptcy after World War I. In order to avoid the break-up of this transcontinental railway network threatened by bankruptcy, the Canadian government nationalized the entire system. The Grand Trunk Pacific was acquired in 1919 after the Grand Trunk announced it could no longer operate it, and then merged into the new Canadian National Railways. The Grand Trunk was nationalized in 1921 and merged into Canadian National Railways in 1923.

The Remnants of the Grand Trunk

The Grand Trunk name survived on Grand Trunk's former United States lines. In 1928, Canadian National Railways consolidated its lines in Michigan, Indiana, and Illinois into the Grand Trunk Western Railroad, a separate company owned by the CNR. The Portland line also kept the Grand Trunk name until it was acquired by a shortline operator in 1989.