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Case The creation of the CNR.docx

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Administrative Studies
ADMS 1010
Barry O' Brien

What was Wilfred Laurier trying to accomplish by building two Railroads? 1. Continue Sir John A MacDonald’s nation-building 2. Boundaries 3. Provinces 4. Agriculture and infrastructure 5. French-English connections What did Robert Borden inherit when he was elected PM? The Railway Mess a. Three intercontinental railways b. Fewer than 7.5 million people c. Financially weak d. Unable to meet debt obligations e. Banks at risk Problems with CN Part 1 Abnormally high operating costs. In seven of the ten years between 1985 and 1995, the CNR's revenue from freight operations failed to cover its operating costs. To compensate for the shortfall, the railway raised the fees it charges other carriers to use its lines, driving down traffic and increasing shipping costs. But its owner, the federal government, acted as a patron and covered most of the difference. Because it could rely on this support, the CNR was able to avoid taking the steps necessary to become profitable. Problems with CN Part 2 Excess trackage. After railroads were deregulated in the U.S. in 1982, they shed 25% of their unprofitable lines. Between 1985 and 1995, the CNR trimmed only 15%. That left one-third of its track carrying only 1% of its freight volume. Less than half of its runs made money. It had failed to close more because of government regulations and its mandate as a service-oriented Crown corporation. Hearings to authorize more closings became political minefields, and the railway was forced to keep many open because of pressure from elected officials and voters. Problems with CN Part 3 Labour problems. For decades, the CNR employed many more people than necessary to run its operations. To remain competitive after American deregulation, it was forced to rationalize its workforce. It cut about a third of its workforce between 1992 and 1995 - about 11,000 jobs - but remained overstaffed. Labour costs, which represented 43% of the CNR's revenue in 1992, had fallen to 38% by 1994, but above the U.S. average of 36%. Arcane rules set up in past negotiations with labour unions made it more difficult and expensive for the CNR to cut staff. Privatization of CN 1. In 1993, the National Transportation Act Review Commission recommended that the CNR be privatized. Transport Minister Doug Young took up that cause two years later. In his 1995 spring budget, he announced the government's intention
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