CN on the Move

Restructuring

Canadian National has unveiled a broad restructuring in preparation for its recently approved merger with Illinois Central. CN's new management structure creates five regional units with local decision-making authority and responsibility for meeting service and financial goals. Division managers will report to senior executives in CN's Montreal headquarters, who will continue to make broad strategic, financial, marketing and operations decisions as CN combines with Chicago-based IC to create the first major North American railroad system.

It is believed that the reorganization will require dozens of managers to relocate and will result in reassignment of at least 100 executives who will not move. The reorganization does not change the duties or job locations of any union employees in the United States or Canada. (April 15th)

Paul Tellier, CN's CEO, refutes the idea that CN is no longer Canadian since 60% of its stock is owned by American institutions: "These nationalist views, that to run a good company in Canada you've got to wear a tie with a maple leaf on it every morning when you walk into your office, I think is ridiculous. This is what is happening to the Canadian economy, the border is disappearing." Mr Tellier was payed a total C$1,5 million in 1998 for his job. (April 15th)

Canadian National's takeover of Illinois Central completes a remarkable turnround for the once moribund Canadian rail company, the Finacial Times writes. Its operating ratio - the critical measure of how much a railway spends for every dollar it earns - has fallen from 94.7 per cent in 1993 to 75.5 per cent in 1998, close to the most efficient US railways. CN shares, the majority of which are held by US institutional investors, have tripled in value since the initial public offering in 1995. (April 11th)

The US$2.4-billion deal was approved at the end of March the by the US Surface Transportation Board. CN said the actual integration won’t start until July 1, after the board issues its written report May 25th and the decision takes effect June 24. Among the STB's conditions are:

• The merged company must grant Kansas City Southern Railway Co. access to three shippers in Geismar, Louisiana, under the same conditions it has for other shippers in that city.
• It must "keep open and competitive" its Chicago gateway with the Soo subsidiary of rival Canadian Pacific for the benefit of agricultural shippers.
• CN must not block CP's efforts to enlarge the Detroit-Windsor Sarnia tunnel which the two companies jointly own. CP wanted the STB to force CN to sell their half of the tunnel. (March 26th)

Canadian National may run into trouble with plans to lay off 3000 workers. Its biggest union, the Canadian Auto Workers, alleges CN deliberately withheld disclosure of the layoffs until after a new collective agreement was ratified in September, and the Federal Labour Minister Claudette Bradshaw has granted consent for the union to challenge the job cuts before the Canada Labour Relations Board. (January 11th)

• Canadian Rail Reform, September 1996
• Canadian Railways Unload Subdivisions November 10th, 1997
• Canadian Railways Court Union Carbide January 7th, 1998
• CN may buy Illinois Central February 9th, 1998

Suggested further reading: Grand Trunk Corporation: Canadian National Railways in the United States, 1971-1992 by Donovan L. Hofsommer; 230 pages. Offers insight into deregulation, free trade, repositioning of basic industry, etc. Order this book at Amazon.