Problems of The Canadian National Railways
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The Empire Club of Canada Addresses (Toronto, Canada), 10 Oct 1929, p. 247-257
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Thornton, Sir Henry W., Speaker
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Text
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Speeches
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Compliments paid to the Right Honourable Mr. Arthur Meighen and Sir Thomas White, who were materially concerned in the birth of the Canadian National Railway. Disabusing the public mind of a statement which recently appeared in one of the financial papers with regard to the Canadian National Railway (CNR). The CNR as an expression of a co-operative effort, and ways in which that is so. A discussion of some of the problems of the CNR. Having regard for the public character of the CNR. The wide-flung mileage of the CNR as one of its essential problems to be confronted. Determining priorities. The curious and intricate financial structure of the CNR System. Finding solutions to the financial problem. Hope that at the next session of parliament a financial scheme will be presented which will be broad enough and sound enough to secure the financial permanence of the CNR and at the same time capitalize the financial improvement of the CNR in the last six or seven years. Relations between the CNR System, a state-owned railway, and what is generally called labour. A partnership theory. Various proposals presented by employees and adopted by the Company. Results of the co-operative shop movement. Wage increases and other employment benefits. Extending the partnership theory to maintenance-of-way employees. Three contributions which the CNR is making towards the arts and science of transportation in the mechanical, economic or social, and political arenas.
Date of Original
10 Oct 1929
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English
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Full Text
PROBLEMS OF THE CANADIAN NATIONAL RAILWAYS
AN ADDRESS BY SIR HENRY W. THORNTON, K.B.E., MONTREAL.
10th October, 1929

PRESIDENT EAYRS introduced the speaker, who was warmly received and said: Mr. Chairman and Gentlemen, I thank your Chairman for his kindly words of introduction, and your very cordial reception. It is a great pleasure for me to speak to the Empire Club, not only because there are gathered here those who are so representative of the life of this community, but also because of a fine aspiration and the work which the Club is performing. Its motto, as I have just heard from your President, is "God and the King"-surely a sufficiently broad and at the same time sufficiently conservative motto to include everything. I am particularly glad to see here two of your distinguished citizens who at least may be described as godfathers to the enterprise over which I have the privilege of presiding at the moment. There is always a good deal of doubt with respect to the parentage of a child until it achieves some degree of success-(laughter)-and I, as President of the Canadian National Railway, rejoice in the fact that both of the political parties at the moment have been claiming this privilege. (Laughter). At any rate I should like to pay my compliments to the Right Honourable Mr. Arthur Meighn--(applause)--and Sir Thomas White. (Applause.) What ever they may or may not have done, at least they were materially concerned in the birth of the Canadian National Railway. I have always contended that the Government of that day pursued the only sane course with respect to the transportation system which any patriotic and sagacious Government could have pursued.

The Canadian National Railway has been considerably discussed, and sometimes cussed (laughter), so that the subject has become almost threadbare in its various aspects. It is difficult to find any activity of the Canadian National Railway which one can discuss with frankness. I would like, however, before I proceed with my remarks, to disabuse the public mind of a statement which recently appeared in one of the financial papers. That journal said that the Canadian National Railway was a dictatorship, and I was the dictator. Well, I am very much obliged for the compliment, but it is not anything of the sort. The Canadian National Railway represents, perhaps, as fine an expression of co-operative effort as will be found in the industrial world. (Hear, hear and applause.) It would be both stupid and foolish to maintain that whatever success this railway has achieved has been achieved by any one group of individuals or by any individual. It represents the cooperative effort of all. In our various problems there is given the fullest opportunity to all of our executive officers to freely express their opinions, to frankly criticize, and to assist in the determination of policies; and when those policies are crystalized and reported to the Board of Directors for final consideration, as must necessarily be the case with any well-organized institution, we find that our Directors bring to bear a fine sense of responsibility, a very deep knowledge of conditions in Canada, and I am very happy to find that I can there get the advice, support and assistance which is the responsibility of the Directors to give to the enterprise.

The Canadian National Railway therefore represents precisely the antithesis of dictatorship. It is a co-operative movement in which all of our employees, from the humblest up, all of our officers, all of our vice-presidents, and all of our directors, participate freely and frankly; and if the Railway has achieved any material degree of success it has been due to that co-operative spirit, that freedom with which advice is offered, and that unity of effort which has always developed the policies that are decided upon, and the execution of those policies. (Applause.)

Now, I would like to discuss with you today what I shall describe as some of the problems of the Canadian National Railway, and as far as I am concerned personally this audience and other similar audiences, immediately present, is one of our problems-that is, to speak to such audiences as one must necessarily speak to, meet them in friendly contact as I like, to say what there is to say without getting one's foot in it. (Laughter.) That represents a considerable problem. It is essential, having regard for the public character of the Canadian National Railway, that the people of Canada, who are its shareholders, should be fully advised and kept reasonably well posted with respect to the condition of the property, its aims and aspirations. One of the functions which is placed upon me as Chairman of the Company is to meet our people throughout Canada and explain to them in a friendly, intimate way, what their property is doing and what they may expect from it; but to do that from the Atlantic to the Pacific with due regard to geographical competition and reasonable jealousies is not always an easy problem to me.

One of the essential problems which confronts the Canadian National Railway is due largely to its wideflung mileage. This railway serves the people of Canada from the Atlantic to the Pacific; each one of the provinces and the communities which we serve has its own individual aspirations which necessarily find expression in the mouths of their political representatives. One of the functions of every member of the House is to not only represent his party politically-and incidentally that is the least of his responsibilities-but also to represent his own community, to promote things which are for the welfare of that community, to speak for it in public places, and at all times where the interest of the community is involved. That necessarily means that the various members of the House whom I melt sincerely and ardently advance the demands of the constituencies which they represent. Likewise the provinces through their premiers pursue the same course. The problem which confronts the administration of the railway is to examine all of those proposals and to determine that priority of construction which necessity requires. Obviously, for example, hotels cannot be built in every city of Canada simultaneously. Also, every city in Canada cannot have a new station at the same time. Branch lines cannot be built into every community in the same year, no matter how great the demand. Terminals cannot be provided in important centres in the same year or two years. All of those things involve a certain priority which is determined by necessity.

Now, gentlemen, to examine and sort out these various propositions with due regard to their cost to determine their priority, is one of the problems of the Canadian National Railway which confronts the administration, and all that the administration can do is to employ its best judgment, decide when certain improvements should be made, and present those proposals to Parliament in such a fashion-and I hope in such a convincing way-as to secure approval. The very fact, that the railway is a state-owned institution, and that every individual in Canada is a shareholder, makes that problem rather more difficult than if we were a privately-owned company. However, if we can establish in the minds of the people of Canada the confidence that the administration of the railway is capable and honest, while there may be some who will be disappointed they will at least be satisfied that the best is being done under the circumstances.

Another problem which confronts us is the curious and intricate financial structure of the Canadian National Railway System. If I undertook to explain to you in any sort of detail what that financial structure is, the end of this speech would be limited by the dawn of tomorrow's sun. (Laughter.) But since 1923 there has been made an intensive examination of the whole situation. Of course we have in those intervening years adjusted the personnel of the railway to various departmental tasks. We have unified and standardized our equipment; we have arranged the movement of traffic n that fashion which will produce an economy of results, and we have also standardized our maintenance. Much has also been done in co-ordinating our various lines where they paralleled one and the other.

In that connection I would like to remind you that the Canadian National Railway System is composed of a number of different units which were built entirely for competitive purposes. It is a collection of railways which were designed not to work as a whole, but to compete one with the other, as distinguished from the Canadian Pacific Railway, which was conceived as one entity and has been pursued as one entity, and as the years roll by each part of that property has been augmented and supported as a whole. In many parts of our system, instead supporting the whole railway, they affect the soundness of the structure; but all of that co-ordination work of a physical nature has been going on since 1922, and it has now achieved a fair measure of completion.

We still have left on our hands the solution of the financial problem. The Canadian National Railway, as it was represented on December 31st of last year, was composed of 92 different companies, and the corporate existence of each one of those companies was alive. Some were parent companies, some were subsidiaries, all were of different sizes, and all organized for different purposes. The conglomeration of the securities of X11 those companies is represented by a very considerable figure of $1,328,000,000. There were all kinds, sorts and descriptions of mortgages on those properties. Some were guaranteed by the Government, some by the provinces, some not at all. They all had different dates A maturity, different rates of interest. Some were pledged, some were re-pledged, and some were not. Those mortgages represented something more than 150 different instruments. Some were, firstly, on the property for some hundreds of miles, and then a secondly or thirdly for some other districts and some other miles. To examine, to codify and to capitalize all those different securities has been a stupendous task; and what made it worse was that in many cases the records of the subsidiary companies were simply deplorable. It will require years of work in many instances to find out exactly what the obligations of those various companies were.

Now that has all been done, and I am hopeful that at the next session of Parliament we shall be able to present a financial scheme which will be broad enough and sound enough to secure the financial permanence of your property and at the same time, and as equally important, enable us to capitalize the financial improvement of the property in the last six or seven years. As things stand today, irrespective of what financial improvement we might make, it would be quite impossible to give expression to that financial improvement which would relieve the national debt; therefore, if our property is to improve in the future as it has in the past it is essential for the interests of the Dominion that that improvement should find an expression which will enable the Government of Canada to legitimately write down the national debt accordingly, and take advantage of what were formerly liabilities and what now become assets. (Applause.)

Another problem which has confronted us is the relations between the Canadian National Railway System, a state-owned railway, and what is generally called labour. Now, it is popularly supposed that because of its political relationship every state-owned railway is more or less at the mercy of labour because labour, politically, means votes, and to run a railway on a system of votes inevitably means failure. When this present administration took charge of the Canadian National Railway we realized that it was essential to secure the full and complete and unselfish co-operation of labour as distinguished from labour in its political sense. That work has proceeded as the years have rolled by, and we have now established with the recognized labour organizations a relationship which brings a sense of pride to our employees, which excites in them a desire to give of their best to the company, and which has substantially short-circuited any unreasonable selfish or predatory influence in our labour organizations which might conceivably affect us. That situation finds its best expression in what is known as the co-operative movement.

I had the privilege this morning of speaking to the American Federation of Labour at their 49th Convention in this hotel, and the subject which I ventured to discuss with them was the partnership theory in business enterprises, and particularly as exemplified by the co-operative movement on the Canadian National Railways. Briefly that movement is a machine which gives to our employees a voice in the administration of the local place or shop in which they work. It commenced in the railway shops, in each one of which there is a committee of men composed of the foreman and shop superintendent, and they virtually run that shop between them. They meet at frequent intervals, generally once a week. Suggestions for improved safety, improved sanitary conditions, improved lighting, and all those things which relate to the comfort of the men are discussed, and also all matters which relate to increased output and reduced cost.

Since the inception of this plan in 1924 our employees have presented to the shop administrations 6,300 proposals. We call them suggestions; they run all the way from some trivial improvement of a machine to perhaps some large question of shop policy. Of those 6,300 suggestions, 72 per cent. have been adopted by the Company. (Applause.) 15 per cent. are still under consideration, and the balance, a small percentage of 10 or 12 has been rejected. Now, the point is that had it not been for that co-operative shop movement all of our men and their brains would have remained inactive; we would never have had those proposals; but as a result of this movement we have the brains of all our men working to find some way to improve the operation of that particular thing with which they are engaged. (Applause.) Now, it has not all been one-sided. This co-operative shop movement has increased the wages of shop employees by $150.00 a year on the average, per man, and in addition to that we have been able to give all our employees a week's holiday on pay, with substantially no cost to the company. In other words, gentlemen, that is the principle of the partnership idea. That is one of the reasons why I tell you that the Canadian National Railway is not a dictatorship; it is a partnership proposition. (Applause.)

We have just extended this theory to our matienance-of-way employees, and although that has only been in operation a few months it promises to be even more successful than the cooperative movement in the shops. When that is organized, I intend to extend the same thing to the engine and train service and clerical forces, and I can visualize the day when all the employees of the Canadian National Railway will have the proprietor's point of view, will have the partnership idea in their minds, will go to their work as proprietors and as partners with the determined effort to do that day everything that they can do for the welfare of the company, rather than to do as little as possible and to work only because they are paid to work. (Loud applause.) I maintain, gentlemen, that that spirit, in its last analysis, in its larger scope, is the dawn of a new sun, a new day, for the relations between capital and labour; and I am happy that the Canadian National Railway has been an instrument in the promotion of an idea which carries with it such large potentialities. (Applause.)

Now, gentlemen, those are just a few of the problems with which we have dealt and with which we are dealing, and the progress that we are making with respect to them. I would like briefly to call your attention to three contributions which I think the Canadian National Railway is making towards the arts and science of transportation. It is well enough to run a railway satisfactorily, to move freight and passengers economically and safely from A to B, and to perform all those functions, those day-by-day details which are essential to any business enterprise; but any enterprise which is worth while should also be making some definite contribution towards advancing the particular profession which engages it, otherwise progress would come to a stand-still: The three things which we have done within the last six years may be described as mechanical, economic or social, and political.

Mechanically, we have developed for railway transportation purposes the Diesel electric locomotive. That is an adaptation of the Diesel engine for railway purposes. We went into the matter first because on many of our branch lines we were maintaining a steam service which was not economical, which cost us 110 percent. of the gross earnings to operate many of the branch lines, and we sought some cheaper form of transport. The story of the new development, briefly told, is that we reduced the operating ratio from 110 percent. to 72 per cent. In other words, we are making money where we once lost it. (Applause.) We are now preparing to expend the use of the Diesel electric to yard shipment, because we find that in yard work the Diesel electric saves 75 per cent. of the cost of fuel. You will easily see how that comes about, because with the ordinary coal-burning yard engine the coal goes up the chimney whether the engine is standing still or working, while with the Diesel electric the fuel is only consumed when work is in progress and the engine is moving. I believe I am safe in saying also that we have the largest Diesel electric in the world for road purposes, and that locomotive has already shown an economy in fuel cost of 50 per cent. There are still some problems to be solved in connection with it, but the contribution of the engineers of the Canadian National Railways to the art of transportation has been the development of a Diesel electric engine as a successful transportation device. (Applause.)

The second contribution, which I have described as economic and social, has been the inauguration and development of the cooperative partnership movement with our employees which I have just described. I think that theory contains great potentialities, and I believe that we are the foremost railway with respect to that policy.

The third contribution we have made is that we have demonstrated to the world that a state-owned railway can be run just as efficiently and give just as good service to the public as any privately-owned institution. (Hear, hear, and applause. However true the latter may be, it does not necessarily follow that because we have been successful, in our peculiar circumstances, in this demonstration, that it will be equally successful in other countries. The Canadian National Railway has been held up as a horrible example of state-ownership. and also as an example of the best that can happen in state-ownership. Neither is true. As far as we are concerned, we were confronted in Canada by a certain set of conditions involving certain problems. Those problems were solved wisely, I think, by the establishment of a state-owned railway system. We are minding our own business; we are not bothering anyone else, and would be much obliged if other people would leave us alone. (Laughter and applause.)

Now, gentlemen, I again thank you very cordially for this opportunity of talking to you in what I am afraid is a rather desultory fashion. Perhaps I have not stuck to any particular subject, but I did want this opportunity of talking to you rather than making a speech to you; I wanted to tell you something of our problems, and something of the things which we have accomplished. This railway will always make mistakes. (Laughter.) It could not be otherwise; and so will its officers. The only individual within my knowledge who made no mistakes was the prophet Elijah, and you all know what happened to him. (Laughter.) Itherefore hardly think that we shall find ourselves suddenly translated to Heaven in a fiery chariot. We do make our mistakes, but what mistakes are made will be made in sincerity, with a desire to help rather than to harm. This railway is never finished, never will be finished. We shall always have our problems, but I do want the people of Canada, of all political and religious faiths, and in all localities, to feel that the railway itself, its officers and its men, are dedicated to the people of Canada. (Loud applause.)

Mr. J. W. DAFOE, Winnipeg, the recently appointed Non-National in the consultation between Germany and the United States, voiced the thanks of the Club to the speaker.

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Problems of The Canadian National Railways


Compliments paid to the Right Honourable Mr. Arthur Meighen and Sir Thomas White, who were materially concerned in the birth of the Canadian National Railway. Disabusing the public mind of a statement which recently appeared in one of the financial papers with regard to the Canadian National Railway (CNR). The CNR as an expression of a co-operative effort, and ways in which that is so. A discussion of some of the problems of the CNR. Having regard for the public character of the CNR. The wide-flung mileage of the CNR as one of its essential problems to be confronted. Determining priorities. The curious and intricate financial structure of the CNR System. Finding solutions to the financial problem. Hope that at the next session of parliament a financial scheme will be presented which will be broad enough and sound enough to secure the financial permanence of the CNR and at the same time capitalize the financial improvement of the CNR in the last six or seven years. Relations between the CNR System, a state-owned railway, and what is generally called labour. A partnership theory. Various proposals presented by employees and adopted by the Company. Results of the co-operative shop movement. Wage increases and other employment benefits. Extending the partnership theory to maintenance-of-way employees. Three contributions which the CNR is making towards the arts and science of transportation in the mechanical, economic or social, and political arenas.