OTTAWA – The federal government is in no hurry to decide whether to accept the $1.4 billion offer by CP Rail to purchase the eastern rail assets of CN Rail.
“We do not want to respond to that bid in any hasty way,” transport minister Doug Young told the House of Commons last week. “We are going to have to analyze it very carefully.”
Young said any federal decision to accept the CP offer would represent a change in the “fundamental rail policy” that has been in place in Canada for almost a century. He said CP’s 90-day deadline on its offer need not be respected if the federal government needs more time.
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The CP offer would lead to mass rail-line abandonment and the loss of 2,500 jobs in the rail system east of Winnipeg by the end of the decade.
Pay for service
CP has offered to continue carrying eastern cargo for CN on a fee-for-service basis.
The railway says its purchase offer is the next best thing to a merger of eastern operations of the two railways. Talks to bring about a merger collapsed this summer.
While both railways say they make money on their Prairie lines, they lose money on their eastern operations. The purchase offer does not affect the separate operations west of Winnipeg or grain terminals in Thunder Bay.
Young said the federal analysis of the offer must take into account the impact on employees and communities affected.
“It would be a major policy decision,” he told the Commons. “Nothing of that nature would be undertaken hastily.”
He also announced that a group of Liberal MPs will begin a study of the implications of selling CN to the private sector, both east and west of Winnipeg.
Young has been talking about drastically cutting transportation subsidies and warning Canadians to expect only a transportation system they can afford.
However, the CP offer is far less than the almost $3 billion that CN says its eastern assets are worth. A Canadian Pacific spokesperson has said $1.3 billion is a better reflection of worth, taking expected revenues into account.
Meanwhile, the railways last week announced that last year was a good year for the industry.
The Railway Association of Canada, representing all Canadian rail companies, said it was the best year in half a decade. Freight and passenger revenues were up.
“This resulted in total net income for the industry of $329.4 million compared to a loss of $943.1 million in 1992,” said the report from the association. “After five years of declining fortunes, 1993 was a better year for Canada’s railways.”
The healthier bottom line came both from increased revenues and from reduced costs due to technology, rail line abandonment and smaller work force.
