Part 8 (1/2)
CHAPTER XI
THE EXPANSION OF THE GRAND TRUNK
The Darkest Days--New Men at the Helm--Expansion in the East--The Grand Trunk
In the eighties, it will be recalled, the activity of the Canadian Pacific in the eastern province had stirred the Grand Trunk to an aggressive counter-campaign. Line after line had been absorbed, extension after extension had been built. New life seemed to have been injected into the old system. Holders of even ordinary shares began to dream of dividends.
The activity was brief and prosperity briefer. Only in the golden days from 1881 to 1883, when the West was enjoying its first 'boom' and railway construction was at its height, did the policy of expansion justify itself from the shareholder's point of view. The year 1883 saw the high-water mark of prosperity for the Grand Trunk; for in that year dividends were paid not only on guaranteed but on first, second, and third preference stock. Not again until 1902 was even a {197} partial payment made on the third preference; not until 1900, save for a fraction in 1887, was anything paid on second preference; first preference dividends were fractional and occasional, and even the guaranteed stock dividends were pa.s.sed time and again. The financial position of this great system in the middle nineties may be briefly summed up in the statement that securities of the par value of 16,000,000, which in 1883 had a market value of 12,000,000, were worth in 1894 only 3,500,000. The junior securities had become only gambling counters on the stock exchange.
Where did the cause lie? There was not one; there were several. The first was in capitalization. The line had been hopelessly over-capitalized to begin with, and the new acquisitions doubled fixed charges, while net receipts increased only ten per cent; feeders had proved suckers.[1] Secondly, in the general commercial situation. The whole continent was undergoing a trying test of panic and depression, of low prices and industrial stagnation. For a quarter of a century after {198} 1873 the gloom had been broken only at brief intervals--from 1880 to 1883, and from 1887 to 1889. In 1893 the price of wheat fell to the lowest point in a century. The great Mississippi valley had been flooded with settlers, railway and steams.h.i.+p threw their millions of bushels on the world's markets, while the gold basis of prices failed to expand in proportion. Western farms were, it was said, 'plastered with mortgages'; one-sixth of the railways in the United States went into receivers' hands in 1893 alone. Free-silver agitators denounced the 'gold bugs' of the east; c.o.xey armies marched to Was.h.i.+ngton. Another cause was in excessive compet.i.tion. The St Lawrence was more accessible to s.h.i.+ppers than ever, while the Canadian Pacific had cut into the best paying territory in Ontario. In the Chicago traffic absolute demoralization ruled--reckless rate wars were waged, agreement after agreement was broken, line was played against line by grain-s.h.i.+pper or by dressed-beef magnate. A final cause was in management. The attempt was still being made to manage a great railway from London, three thousand miles away. The Canadian officials had little independent discretion; interminable delays, lack of initiative, red {199} tape, nepotism, followed inevitably. Here and there officials strove strenuously to better conditions, but the odds were against them. Practically no Grand Trunk stock was held in Canada; it was not even quoted on Canadian exchanges; Canadians regarded the road entirely from the user's point of view.
The traveller and s.h.i.+pper had less to complain of than the shareholder.
The service of the road had been greatly increased. The mileage was large in proportion to population. Rates were low. True, it was a rare event for a Grand Trunk train to arrive on time, but it usually arrived.
For these various ills corresponding remedies were sought in turn.
Drastic capital reorganization was discussed, but nothing was done.
Commercial prosperity could not be revived by the efforts of a single railway. Compet.i.tion was met by agreement after agreement, 'gentleman's' and otherwise, but in vain. The most hopeful resource lay in the only remaining direction, change of management.
In 1895 Sir Henry Tyler resigned from the presidency after twenty-three years of faithful service. His place was taken by Sir Charles Rivers-Wilson, who had a record of efficient {200} service on the borders of politics and finance. The new president and a committee of directors made a thorough investigation of the Grand Trunk, and recommended some immediate improvements. Their chief contribution to its success, however, was the discovery of Charles M. Hays.
[Ill.u.s.tration: Charles Melville Hays. From a photograph by Notman]
The great rival of the Grand Trunk had pressed forward to prosperity under the driving power of an American general manager. The new administration decided that it, too, would look to the United States for a chief executive of the ruthless efficiency and modern methods which the crisis demanded. They found him in the man who had pulled the Wabash out of a similar slough of despond. Mr Hays was not quite forty when, in 1895, he was appointed general manager of the Grand Trunk. He had risen rapidly since the days when, a boy of seventeen, he had entered the office of the Atlantic and Pacific. At twenty-nine he had been secretary to the general manager, and three years later manager himself, of the Wabash.
His presence was soon felt. The staff realized, some with relief, some with consternation, that the good old leisurely days, the days of vested interests, were gone. {201} Many were pensioned, some were dismissed. In some cases American officials were imported to fill the vacant posts, to the patriotic discontent of the old guard. Equipment was overhauled, larger freight cars were ordered, and new terminals acquired. The main bridges on the road--the Suspension at Niagara Falls, the International at Fort Erie, and the Victoria at Montreal--were all rebuilt on a larger scale between 1896 and 1901.
The double tracking of the main line from Montreal westward was continued, and many of the sharp curves and heavy grades of the original construction were revised. Elevators at Portland, Montreal, Midland, Tiffin, G.o.derich, Point Edward, and Fort William were built or acquired. Trains came in on time. The whole system was 'speeded up.'
Later changes in the administration may be briefly summarized here. In 1900 Mr Hays's five-year contract as general manager expired. At the same juncture a vacancy occurred in the presidency of the Southern Pacific, which had fallen on evil days, and Hays was offered and accepted the post at four times his salary with the Grand Trunk of $25,000 a year. A year later he was back again in Canada. There was not room in the {202} Southern Pacific for both Hays and Harriman, then in financial control, and the Grand Trunk directors seized the opportunity which the breach afforded. In 1909 the wide recognition of Mr Hays's great services led to long overdue increase of the authority of the Canadian officials of the road by his appointment as president, on the retirement of Sir Charles Rivers-Wilson. Three years later, with his projects for expansion still incomplete, he met a tragic death in the sinking of the _t.i.tanic_. Mr Edson J. Chamberlin, who had increased his reputation for efficiency by his management for four years of the Grand Trunk Pacific, was chosen as successor in the presidency.
Fortune favoured the new administration from the start. The tide in the continent's business affairs turned soon after the new men took the helm. The long depression ended, prices rose, farmers met mortgage payments, factory chimneys smoked once more, traffic multiplied.
The first result of the improved conditions was the easing of the tension in railway relations. There was no longer a life-and-death necessity for rate-cutting and traffic-stealing. Rate wars between the trunk lines in the United States came to an end. On the {203} Canadian side peace was longer in coming. The rush to the Klondike in 1897 started a rate war between the Canadian Pacific and the Grand Trunk, with its American connections, which lasted nearly a year. In its course rates were cut in the east as well as in the west, and the Canadian Pacific sent its west-bound freight from Toronto by Smith's Falls rather than use any longer the direct line of the Grand Trunk to North Bay. Peace was patched up, but the Canadian Pacific shortly afterwards set about building a road of its own from Toronto north to its main line, thus threatening the Grand Trunk with permanent loss of western business, and providing it with one incentive toward the great westward expansion it was soon to undertake.
Along with prudent retrenchments went increasingly aggressive expansion, both east and west. It was one of the main objects of Mr Hays's policy to secure a hold on the rich traffic possibilities of New York and the New England states. Portland, the original New England terminus of the Grand Trunk, had not become the great commercial centre it once expected to be. The first further step was taken in 1899, when the Grand Trunk secured control of the five hundred miles of {204} the Central Vermont, with which relations had been close for some years past. With running rights over a gap controlled by the Boston and Maine, this gave a line from St Johns, Quebec, to the port of New London, Connecticut; from this point connection was made by boat to New York, where valuable terminal docks were owned.
New London was not the final goal, however--Providence and Boston offered greater possibilities. But to seize them it was first necessary to break through the monopoly of New England land and water transport, which the New York and New Haven line had acquired, or to come to terms with the interests in control. At first the word was to fight. The Grand Trunk was received with open arms by the business men of Ma.s.sachusetts and Connecticut, eager for compet.i.tion in railways, and in spite of all the political influence of the New Haven, Hays secured a charter for his Southern New England Railroad, to run from Palmer, on the Central Vermont system, to Providence; a branch from Bellows Falls to Boston was also planned. Construction was begun on the Providence line in May 1912, but suddenly halted. The Grand Trunk management declared the {205} halt due to financial conditions, but New England suspected a compromise with the New Haven. Probably the change in policy was mainly due to the change in management, the new administration setting less store on the extension than the Hays-Fitzhugh executive had done.
All these eastern activities, however, were overshadowed by the Grand Trunk Pacific scheme. It was not the first plan the Grand Trunk had formed for westward expansion. In the embryo days of the Canadian Pacific, it may be recalled, the government had offered to the old line the opportunity of carrying through the new one. Later, a connection with the Northern Pacific through Sault Ste Marie had been discussed, but Van Horne had forestalled this move. Still later an extension of the Grand Trunk from Chicago northwesterly, possibly through control of the Wisconsin Central, had been under consideration. Nothing came of these plans until the proved fertility and rapid settlement of the Canadian North-West, the improved position of the Grand Trunk in the money markets, and the threatened loss of traffic between Toronto and North Bay, lured and urged the new administration forward.
{206}
In 1902 Mr Hays announced that the directors were considering building a line from North Bay, through New Ontario westward, to a terminus on the Pacific at Port Simpson or Bute Inlet. It would be a line of the highest standards. Government aid, the announcement continued, would certainly be sought and expected.
Once more railways became Canadian politics. There was little doubt that the government would aid either this or some rival transcontinental scheme. Opposition to the lavish subsidy policy of the past had developed, indeed, but it was overwhelmed by the demands from every quarter for a vigorous forward policy. It was Canada's growing time, and new-born confidence spurred country and government on. But if the line was to be not merely a private enterprise, but in part a policy of state, then considerations of high politics and low politics alike came in, and compelled material changes in the Grand Trunk's scheme before it could secure government acceptance.
A road from North Bay west would satisfy the local demands of the western provinces, but would not satisfy the local demands of the East, or meet certain common national {207} aspirations. Eastern, and particularly Quebec, interests, demanded that any new trans-continental should be built far to the north, opening up the wilderness between Hudson Bay and the Laurentian highlands bordering the St Lawrence. A Quebec company, the Trans-Canada, was in fact urgently seeking support for such a line, endeavouring, since patriotism is in Canada the last refuge of the promoter, to stimulate investors by stressing the military advantages of the remote route. Again, the Maritime Provinces protested against aid to a company to carry the traffic of the West to Boston and Portland instead of to St John and Halifax.
Sir Wilfrid Laurier, the prime minister, endeavoured to combine all these ends. His plan provided for a road 3550 miles in length, beginning at Moncton--a neutral point between the politically inconvenient rivalries of St John and Halifax--crossing New Brunswick northwesterly, skirting the Maine border, and on to Quebec City, where the St Lawrence was to be crossed by a great bridge. Thence it would strike westerly far to the north of existing settlements. From Winnipeg the previously proposed route was followed. The West would have the development and {208} compet.i.tion demanded, the hinterland of Quebec and Ontario would be opened, and the ports of the Maritime Provinces put on an equality with their American rivals. And since this vast project was much beyond the power of the Grand Trunk to finance, it was arranged that the road should be divided into two sections. The eastern, from Moncton to Winnipeg, was to be built and owned by the government and leased to the Grand Trunk Pacific, free for seven years and at a rental of three per cent of the cost for forty-three years following. The western, from Winnipeg to the coast, was to be built and operated by the company, aided by a government guarantee of princ.i.p.al and interest on the greater part of the bond issue.