IMAGE EVALUATION
TEST TARGET (MT-3)
^.
%
. ' ,
1.0
1.1
11.25
1^ IZ8 12.5
■30 ^^~ ■■■
2.2
,3,y£
m m
G^^A
/>
V.
o
/
y^
HiolDgraphic
Sciences
Corporation
33 WIST MAIN STRUT
wnSTiR,N.Y. 14S80
(7U) •73-4503
CIHM/iCMH
Microfiche
Series.
CIHIVI/ICMH
Collection de
microfiches.
M
Canadian Institute for Historical Microreproductions / Institut Canadian de microreproductions historiques
Tschnictii and Bibliographic Notes/Notes tachniques et bibliographiquas
Tha
tot
Tha Institute iias attamptad to obtain tha bast
original copy availabia for filming. Faaturas of this
copy which may ba bibliographically unlqua.
which may altar any of tha imagas in tha
raprodiiction, or which may significantly changa
tha usual mathod of filming, ara chackad balow.
Q
Colourad covars/
Couvartura da coulaur
r~| Covars damagad/
D
D
D
D
D
n
Couvartura andommagte
Covars rastorad and/or laminatad/
Couvartura rastaur6a at/ou palliculte
I I Cover title missing/
Le titre de couverture manque
|~~| Coloured maps/
Cartes giographiquas en couleur
Coloured ink (i.e. other than blue or black)/
Encre de couleur (i.e. autre que bleue ou noire)
I I Coloured plates and/or illustrations/
Planches et/ou illustrations an coulaur
Bound with other material/
RaliA avac d'autras documents
Tight binding may causa shadows or distortion
along interior margin/
La re liure serrde peut cauwar de I'ombre ou de la
distortion la long de la marge intirieure
Blank leaves added during restoration may
appear within tha text. Whenever possible, these
have been omitted from filming/
II se peut que certainas pages blanches aJoutAes
lors d'une restauration apparaissant dans la taxta,
mais, lorsqua cela 4tait possible, ces pages n'ont
pas At* filmAas.
Additional comments:/
Commentaires supplAmantairas:
L'Instltut a microfilm^ la mailleur exemplaira
qu'il lui a 4tA possible de se procurer. Les details
de cat exemplaira qui sont paut-Atre uniques du
point da vue bibliographiqua. qui peuvent modifier
una image reproduite, ou qui peuvent exiger une
modification dans la mAthoda normala de filmage
sont indiqu^s ci-dessous.
I I Coloured pages/
D
Pages de couleur
Pages damaged/
Pages endommagdas
Pages restored and/oi
Pages restaurias et/ou pelliculAes
Pages discoloured, stained or foxei
Pages dAcolories, tacheties ou piqu6es
Pages detached/
Pages d6tach6es
Showthrough/
Transparence
Quality of prir
Qualiti inigala de I'impresrion
Includes supplementary materii
Comprend du mat6rial suppiimentaira
Only edition available/
Seule Mition disponible
r~n Pages damaged/
I I Pages restored and/or laminated/
rri Pages discoloured, stained or foxed/
I I Pages detached/
Fyl Showthrough/
I I Quality of print varies/
I I Includes supplementary material/
I — I Only edition available/
The
post
oft
film
Ori(
beg
the
sion
othi
first
sion
oril
The
shal
TINI
whi(
Map
difffl
entii
begi
right
requ
metl
Pages wholly or partially obscured by errata
slips, tissues, etc., have been refilmed to
ensure the best possible image/
Les pages totalament ou partiallement
obscurcies par un fauillet d'errata, une pelure,
etc.. ont M filmies A nouveau da fa^on d
obtanir la mailleure image possible.
This item is filmed at tha reduction ratio chackad below/
Ce document est film* au taux de reduction indiquA ci-dassous.
10X
14X
18X
22X
26X
SOX
V
12X
16X
20X
24X
28X
32X
re
Atails
IS du
nodifier
ir un«
ilmage
The copy filmed here has been reproduced thanks
to the generosity of:
Unlvsrsity of Saslcatehawin
Sadutoon
The images appearing here are the best quaiity
possible considering the condition and legibility
of the original copy and in keeping with the
filming contract specifications.
L'exemplaire film* fut reproduit grAce k la
gAnArositA de:
University of baskatchawin
Ssfkatoon
Les images suivantes ont At6 reproduites avec le
plus grand soin. compte tenu de la condition et
de la nettet6 de l'exemplaire filmi, et en
conformity avec les conditions du contrat de
fllmage.
Original copies in printed paper covers are filmed
beginning with the front cover and ending on
the last page with a printed or illustrated Impres-
sion, or the back cover when appropriate. Ail
other original copies are filmed beginning on the
first page with a printed or illustrated impres-
sion, and ending on the last page with a printed
or illustrated impression.
es
Les exemplaires originaux dont la couverture en
papier est imprimte sont fllmds en commengant
par le premier plat et en terminant soit par la
dernidre page qui comporte une empreinte
d'Impression ou d'illustration, soit par le second
plat, selon le cas. Tous les autres exemplaires
originaux sont fllmte en commenpant par la
premiere page qui comporte une empreinte
d'Impression ou d'lllustration et en terminant par
la dernlAre page qui comporte une telle
empreinte.
The last recorded frame on each microfiche
shall contain the symbol — »• (meaning "CON-
TINUED "), or the symbol V (meaning "END "),
whichever applies.
Un des symboles suivants apparaltra sur la
dernlAre image de cheque microfiche, selon le
cas: le symbols -^ signifie "A SUIVRE", le
symbols V signifie "FIN".
Maps, plates, charts, etc., may be filmed at
different reduction ratios. Those too large to be
entirely included In one exposure are filmed
beginning in the upper left hand corner, left to
right and top to bottom, as many frames ss
required. The following diagrams Illustrate the
method:
Les cartes, planches, tableaux, etc., peuvent Atre
fllmte A des taux de rMuction diff^rents.
Lorsque le document est trop grand pour Atre
reproduit on un seul clich6, 11 est filmt A partir
de I'angle suptrieur gauche, de gauche A droite,
et de haut en bas, en prenant le nombre
d'images ntcessaire. Les diagrammes suivants
iliustrent la m6thode.
errata
to
i pelure,
on A
1 2 3
32X
1
2
3
4
5
6
HI
\
^ 4
\
THE
CANADIAN PACIFIC
RAILWAY:
ITS
GEOGRAPHICAL
$
;.
ij^
1^
1
AND
FINANCIAL POSITION.
**>- . ^'
BY
ir>.
•■'••6' .S"' ' ■^* '"^'"' ■"..'■■i>^
/ // '
" Z./ ^oi, /^^ ;5^/^ ^e;/5.« a ^.a/ w/^../ «,«, ^^^^^^ « hill, Qi^i^ak '^^ '
% neck with following ;/."_King Lear, II., 4.
4.
^
London :
BATES, HENDY, and COMPANY,
yj, WALBROOK.
December, 1888.
THE CANADIAN PAOII'IO RAILWAY.
As there is much interest at the present time in regard to the
Canadian Pacific Railway, financially and otherwise, the following
description has, as regards the figures, been compiled principally
irom the Reports and published Statements of the Company,
and from the " Report on Railways for 1887," presented to the
Canadian Government, and printed in the form of a Blue Book
during the Session of 1888, and will serve to indicate the
position of the Company, and the character of the country
through which the Railway passes.
GEOGRAPHICAL.
The Canadian Pacific Railway is at the present time 4,660
miles long, according to the Company's weekly traffic state-
ments ; and the following detailed distances arc taken from the
Company's reports and time-tables : —
Of the above total of 4,660 miles, 2,905 miles are on the
main line, between Montreal and Vancouver ; 1,130 miles are in
the Provinces of Ontario and Quebec, competing with the Grand
Trunk and other railways ; and there are 440 miles of branch
lines west of Lake Superior, and 183 miles between Sudbury
Junction and the Saint Mary River — or the " Soo."
As regards the main line, from Montreal to Vancouver,
there are 649 miles from Callander, running north of Lake
Superior to Port Arthur, on which settlement cannot be expected,
and on which the traffic is very scanty. The principal traffic
to and from the North-West would naturally be taken, via Port
Arthur, by the cheaper route, across Lake Superior and Lake
Huron, during the open season of navigation ; and grain would
be accumulated during the winter in the extensive elevators
which have been constructed at Port Arthur for the purpose, in
readiness for the next open season. This expensive line
north of Lake Superior, must therefore be of comparatively
ilittle use, and must always be a dr^g upon the remainder of the
-system.
The line between Port Arthur and Winnipeg, 430 miles, is
almost destitute of local traffic, and runs through a country of
rocks and swamps, offering little inducement to settlers, and it is
therefore mainly of use for carrying through traffic.
The line between Winnipeg and Brandon, 132 miles, is that
xm which the principal dependence may be placed for settlement
and the production of wheat, of which, however, there is, unfor-
tunately, always a risk of damage from early frosts, which has
discouraged settlers year after year. In fact, the year 1887
appears to have been the only year during the last seven in
which the crops fully matured and were abundant. The crops
•suffered considerably in 1 888.
Westward to Calgary, settlement and wheat-growing
diminish, and the Prairie land for a great part of the 700 miles
between Brandon and Calgary, some of it alkaline, is liable to
• suffer from drought in summer. It cannot be depended on for
wheat, and the climate and pasture are hardly good for cattle.
There are 40 miles between Calgary and the Rocky
Mountains, which are generally well calculated for feeding cattle
and sheep ; but for 600 miles further west there is little else but
mountain scenery and extensive forests, nearly to Vancouver.
This mountain part of the line has been expensive to construct
and is expensive to maintain, especially during winter, when
*x
-v ^r
1
V
snow slides and glaciers are liable to destroy jifwtions of the
railway.
There is no local traffic to speak of on this last portion, and
what little tourist traffic arises is for a short ticne in summer.
As regards the through traffic in 1887, the following is extracted
from the Company's Report : —
" The difficulties between the American trans-continental
lines, mentioned in the last Report, continued without much
change until November, 1887, when an agi cement was reached
looking to the restoration and maintenance of rates. Up to
that time the greater part of the. freight traffic to and from the
Pacific Coast was carried wichout profit, and some of it at an
actual loss ; but while satisfactory rates have not yet been fully
established a great improvement has been made."
At Vancouver a town is being built, so it is stated, with
pecuniary assistance from those interested in the Company, and
an attempt is being made to open up commerce with China and
Japan. Five steamers are at present employed in this service,
and two small steamers to collect traffic along the American
Coast ; but the results up to the present time are said not to
have been satisfactory. Such traffic is competed for with the
American lines ; and the steamers have not apparently been
made to pay their expenses, but ha\^e been, and must, it is
apprehended, continue to be, a considerable drain on the Com-
pany.
Of the lines in Ontario, the Ontario and Quebec is in direct
competition with the Grand Trunk between Montreal and
Toronto. The Credit Valley Railway, now extending from
Toronto to London and St. Thomas, led to the construction of
the Ontario and Quebec Railway, and is now, it appears, to
be extended from London to Detroit, by means of a railway to
be constructed between the existing double line of the Grand
Trunk Railway and the existing line of the Michigan Central
(formerly the Canada Southern) Railway. When running in
•f.
-V /
competition with these two lines, it can ..ardly be expected
that this new line from London to Detroit will be satisfactory
in a pecuniary point of vijvv.
The two branches from Winnipeg to the American frontier
will in future have to be run in competition with the Red River
Railway, constructed by the Manitoba Government, and taken
over by the Northern racific Railroad Company, and further
competition in the district may be expected as the Northern
Pacific extends its connections in Manitoba. Other competition
is likely to arise when lines are completed through — for instance,
from Duluth to Winnipeg, as well as another line, which has
already been commenced, between Winnipeg and Port Arthur,
through a better country, as stated, than that traversed by the
Canadian Pacific route.
The North Shore line, between Montreal and Quebec, is not
a lucrative acquisition of the Canadian Pacific, and will be still
less so in the future, now that the channel between Quebec and
Montreal has been deepened to 27 feet, for the purpose of
running the steamers through from Quebec to Montreal, in place
of landing passengers at Quebec.
The lines in the eastern district hive not yet been completed,
nor have they, so far, yielded such results as were expected.
The traffic upon them is poor, and the line under construction
through the State of Maine to St. John is hardly likely to
be of any benefit to the Company as regards its financial results.
FINANCIAL POSITION.
In the last yearly Report of the Company — for 1887 — it was
stated that the gross earnings for the year were $ii,6oo,cxx)
(^£^2,320,000), whilst the working expenses were $8,ico,ooo
(;^i,620,ooo) ; leaving $3,500,000 (;^700,ooo), of which
$3,250,000 (.£"650,000) were appropriated to the payment of
9
the fixed charges — /.^.^ rents on leased lines, interest on bonds,
&c. ; and there was a so-called surplus of $250,000 (;C50,ooo).
But the cost of road and works maintenance of the whole
system (taken for that year at 4,300 miles completed and main-
tained) was at the rate of only $435 {£^7) per mile of railway
for the year 1887. For a similar period the average charge for
road and works maintenance of the principal Canadian railways,
exclusive of the Canadian Pacific Railway, as shown in the note
below,* upon 4,1^0 miles, was at the rate of $922 {£1^4) per
mile of railway per year, leaving a difference of $487 ^£97) per
mih of railway. Had the charges of t^e Canadian Pacific Rail-
way for maintenance of road, &c., been in the same ratio as the
char^'cs of these other principal Canadian systems of railways,
the total charge for such maintenance for the year 1887 would
then have been $3,964,000 (;^792,8oo) for the Canadian Pacific
system, in place of $1,871,000 (;^374,20o) — a difference of
$2,093,000 (;^4i8,6oo); and the general working expenses would
have amounted to $10,193,000 (;^2,038,ooo), instead of $8,100,000
(;^ 1,620,000) as stated by the Company. Deducting $10,193,000
(^^2,038,000), which would thus have approached more nearly
to the normal charge for the working expenses of the Canadian
Pacific system for the year, from the total earnings, as
above given, of $11,600,000 (^^2,320,000), there would have re-
mained only $1,407,000 (;^28i,40o) to meet the fixed charges ;
and there would thus have been a deficit of $1,843,000 (;^368,6oo)
* Note. — The following is a Statement of the cost of the works maintenance of the
principal Canadian Railways.
Cost.
Amount. Per mile.
Canadian Southern ... 362 $531,502 $1,468 (;^294) Year to Tune 30, 1887.
Intercolonial 880 782,052 889 (j^ 1 78) "Do.
Grand Trunk 2,918 2,5:2,187 864(^^173) Year to Dec. 31, 1887.
Total 4,160 $3,835,741 —
Aver.ige — — $922 (;,f 184)
Canada Pacific 4,300 $1,871,175 435 (;^87) Year to Dec. 31, 1887.
8
b
— in place of a so-called surplus of $250,000 (^^50,000) — to be
made up from other sources in paying the fixed charges for 1887.
The ordinary works charges of these principal Canadian
railways — all of them having been working for a considerable
period — forni^^he best standard available for estimating the
actual or ultimate cost of the works maintenance on a fixed
basis of the Canadian Pacific Railway. Although, on the one
hand, the traffic may not be so heavy on the Canadian Pacific
Railway, yet, on the other hand, the cost of the works
maintenance of the Canadian Pacific Railway, especially through
the Rocky Mountains and round the north of Lake Superior,
having regaij to the circumstances, ought obviously to exceed
the works maintenance properly charged for railways more
completely finished, ballasted, and consolidated in more
favoured parts of Canada.
The Canadian Pacific Company, by the Ontario and
Quebec Railway, have already duplicated the main line of
the Grand Trunk ; they are — hoping for the aid of British
capital by fresh issues in London — constructing, or have in con-
templation to construct, other lines to compete both with the
Canada Southern and the Grand Trunk ; and they are con-
structing a line to compete with the Intercolonial Railway be-
longing to the Government of Canada, which by the last Report
did not earn its working expenses. It is, therefore, clear that
the works maintenance of the portions of the Canadian Pacific
which are in the Provinces of Ontario and Quebec, must ap-
proximate to that of other Railways in those provinces ; and, as
previously stated, the works maintenance of large portions of
'he main line, especially on the mountain and other sections,
must be comparatively high.
Since the ^ist December, 1887, the annual fixed
charges of the Canadian Pacific have been increased, partly
in consequence of further issues, by at least $i,oco,ooo
(;^200,oco), the greater portion of which will be a charge
^
and
ne of
ritish
con-
the
con-
be-
port
that
cific
ap-
, as
s of
ons,
Ixed
rtly
looo
irge
}
I
against 1888 ; whilst the net revenue for the ten months
to October 31, 1888, has only been increased by $243,000
(;^48,6oo). The published working statement of the railway for
ten months to October 31, 1888 — in spite of the apparently insuffi-
cient charges which are made for maintenance of permanent way
and of bridges and other works — shows only gross earnings
$10,720,000 (;^2, 144,000), and net profits $2,872,000 (;^574,40o)
— insufficient by, say, $328,000 (jC6i,,6oG), to meet hxed charges,
w^icb cannot be le^*- than $3,200,000 (;^640,ooo) up to that date ;
and, calculating upon receipts for the months of November and
December, 1 888, similar to those of the same months in 1887
(which were swollen by the abundant harvest of that year), it is
difficult to see how the fixed charf:;^es for 1888 can be shown to be
met out of profits, judging from the accounts as shown so far in the
published statements. With an addition to make up a fair normal
charge, as above, for maintenance of permanent way, bridges, &c.,
there would apparently be a very heavy deficit in meeting
the fixed charges, especially as now increased, for the year 1888.
It must be remembered, also, that the rolling stock up to
the present time has been constantly increased with additions of
new engines and cars, and that as it is subjected to wear and
tear, and the influences of climate, a much heavier charge will
have to be incurred in properly maintaining it than has been
entered in the published accounts up to the present time, though
no details of the expenses of locomotive working are published
in the Canadian Pacific accounts ; and this is another reason
why, as heavier sums are incurred for the maintenance of the
railway and its equipment, it will be difficult to avoid in future
years a serious annual deficiency in the amount required for
meeting the fixed charges.
It is, however, significant, that as the Canadian Pacific line
has extended, the net profits, even as shown by their published
statements, have been comparatively reduced.
Thus, in 1886 the profits were stated at $3,703,000
10
(£7/[o,6oo), and in 1887 at $3,504,000 (;^700,8oo), whilst for 1888
they cannot, it is estimated, exceed $3,700,000 (;^740,ooo)
if the receipts and working charges for the remaining two
months of the year are on the basis of those for the preceding
ten months to October 31, 1888. For these ten months the
expenser increased, as shown in the published accounts, over
1 887, by $30,000 (;£6,ooo') per week. Since October ^ i, the gross
receipts for the first three weeks of November have only increased
at the rate of $:o,ooo (^2,000) per week, so that, for those two
months, the net profit may be expected to be less than for the
corresponding period of 1887. The result shown for 1888 may
thus be expected not to exceed that shown for 1886, although
there has been since the beginning of 1886 an addition of 1,000
miles to the system.
But again, if the proportionate addition to the fixed charges
is made in respect of the $15,000,000 (;^3,ooo,ooo) of 3^ per
cent. Bonds issued this year, and for interest on the bonds of the
Algoma Branch, then the fixed charges for the year 1888 may be
estimated at about $3,850,000 {£,770,000) ; and for the year
1889, without including the cost of the further extensions con-
templated, at about $4,250,000 (;^8 50,00c). Comparing these
fixed charges, already incurred, and seemingly inevitable for
1889, with the estimated net revenue of 18S8, as derived from
the Company's figures, $3,700,000 (;£"740,ooo), there would be a
deficiency of $550,000 (;!^ 1 10,000) ; and adding to this the sum
of $2,093,000 {jQj^ [ 8,600), by which the works maintenance, as
stated in the last published Report of the Company, was
previously shown (page 7) to be under the normal figures, there
would be a deficiency of $2,643,000 (^{^528,600), to be reduced
only by any increased net profit that might be earned in 1889, if
increasing competition, and other conditions above referred to,
admit of improvement in that respect.
It would appear from the policy of the Canadian Pacific
Directors that they have no great faith in the future of
5r 1888
p,ooo)
ig two
^ceding
;hs the
:s, over
le gross
creased
ose two
for the
88 may
Ithough
)f 1,000
charges
3% per
s of the
maybe
le year
ns con-
g these
ible for
d from
Id be a
:he sum
ance, as
ly, was
is, there
reduced
1889, if
;rred to,
Pacific
iture of
1 1
Manitoba and the North-West, inasmuch as their extensions
instead of being, as might have been expected, in connection
with the main line through those territories, have been mainly
in the older parts of Canada, where the proportion of miles of
railway to the number of inhabitants is greater than in any
other country in the world, and where the rates generally are
for that and other causes exceedingly low, as is shown by the
results of the railways in Ontario and Quebec.
Irrespective of the further construction of competitive rail-
ways above referred to, there are, however, the following reasons
for anticipating continued increase of expenses, without a pro-
portionate increase of revenue : —
(i) The expenditure out of, or the charges to, capital upon
lines open for traffic must necessarily come sooner or later to
a close. The expenditure of capital upon the main line, which
was opened for traffic in 1885, was in 1886 $6,281,957
(^1,256,400), and in 1887 $3,674,240 (^734.85o). making a total
expended for these two years of $9,956,197 (;^ 1,99 1,2 50). To
a great extent that expenditure must apparently have relieved the
charges which would otherwise have been made against revenue.
(2) The main line has now been in existence for at least three
years, and every year will bring against the revenue a heavier
charge for the maintenance and renewal of road, bridges, and
buildings, and for the repair of rolling stock, cars, steamboats,
and other equipment.
(3) The fares and rates have been steadily decreasing. The
rates per ton per mile for frieght were, for 1885 1.20 cents, for
1886 1. 10 cents, and for 1887 1,006 cents — a decrease since 1885
of 16 per cent. ; and the fares'per passv. ger per mile were, for
1885 2.45 cents, for 1886 2.10 cents, and for 1887 1.98 cents — a
decrease since 1885 of 19 per cent.
(4) There is already a still further decrease in fares and rates
by the construction of the Red River Valley Railroad, from the
United States frontier to Winnipeg, and its extension to join
12
the Manitoba and North- Western, which will be worked by the
Northern Pacific Railroad ; and there is a probability of other
extensions into the North- West Territory, from other points in
the United States, and of the diversion of traffic to the American
lines.
The following extract from the Railway Life for November,
published in Toronto, is sufficiently suggestive : —
" The competition of the Red River Valley road to Winni-
peg has been marked by the organisation of a series of cheap
excursions to the eastern provinces, on November 5, 12, 20,
and 27, and December 3, 11, and 17. Dining and sleeping
cars will be on each train, and the price for the round trip, good
for ninety days, will be $4.00."
(5) Further, the proposed extension of the Canadian Pacific
line in Ontarig to Detroit, as a Imk in a new line to Chicago,
will add another competitor amongst the Trunk Lines of the
United States and Canada, and will thus tend to reduce the rates
for through traffic ; and, as traffic from the North- West will also
be diverted by the Northern Pacific and other American lines,
the tendency of this extension to Detroit will be to increase
competition for traffic vta Chicago from the Manitoba District,
and to lead to a diversion of such traffic from the main line of
the Canadian Pacific to Chicago routes.
So far, for the present position. But the Canadian
Pacific Company, it is reported, are now contemplating
a considerable expenditure for new lines, amounting to
no less than, say, 25 million dollars, or 5 millions sterling,
for, say, i,ocx) miles of railway in the Province of Ontario alone,
besides expending large sums in controlling other lines, or in
connection with their railway in the Eastern districts, and in
Manitoba, and the North-West and other district"?. They will
hardly be able to raise these extra millions of money in New
York, or on the Continent, and they must naturally look to the
British public to advance money for these purposes in a condi-
it
IP"
13
tion of affairs which cannot be considered re-assuring. All the
lines to be so constructed in Ontario will compete with existing
railways, previously paid for by British investors, who have not
had too much reason to be satisfied ,vith the result of their
Canadian investments ; and it cannot be expected that these new
railways will be able to produce better results than those already
constructed, especially if the traffic has to be competed for at cut
rates with the existing lines.
The Canadian Pacific have hitherto been very much assisted
in bringing out their loans by the recognised agents of the
Canadian Government, but it has been shown that the previous
issues, and the construction of existing parts of the Canadian
Pacific Railway, have not produced the traffic results or profit
which the promoters of that system so confidently prophesied,
and which investors were sanguine enough to believe ; and
now that Sir George Stephen has retired from the Presidency
of the Canadian Pacific Railway, and is seeking a well-earned
repose after his active exertions, there may possibly be a less
cautious control over the management of affairs in Canada, and
a less earnest advocate with investors in this country.
When once default is made in the payment of interest on the
various bonds and securities by which this undertaking has
been so rapidly encumbered, then a very curious legal question
will arise — viz., whether the shareholders, who ought, under
present arrangements, to receive for the next five years 3 per
cent, upon their shares out of the funds set aside by the
Company for that purpose, will be safe so far as that dividend
is concerned ; or whether it will be competent for those bond-
holders who fail to receive their interest to seize, by means of
legal process, the funds so set aside. It has never yet happened
in the history of railways that shareholders have received
dividends, whilst the bend or debenture holders, taking priority
over them, have been in default; and if this question should arise
it will be one no doubt to be fought out on both sides with all
H
the skill that the legal profession can provide, at considerable
expense, both to the Company and to the parties interested.
I
SUMMARY.
On a review of the foregoing official facts and figures, on
consideration of the well-known climatic conditions of the
country, and having regard to the foregoing unavoidable in-
ferences, it would appear that : —
(i) Tne main line of the Canadian Pacific Company has
been constructed — for political rather than commercial reasons
— through territories, of which large portions (altogether two-
thirds) are ill-adapted for settlement, and unsuitable for the pro-
duction of cereals ; and any through traffic on this main line
must be carried in competition with the American Pacific rail-
ways ; whilst the lines constructed and being constructed by
the Company, mainly in the Provinces of Ontario and Quebec,
are and will be subject to constant competition with existing
railway systems, previously in great part sufficient for the
natural requirements of the country.
(2) On a fair estimate, based on the figures officially
published, it does not appear that the Canadian Pacific
Companyis , even under a system of abnormally low mainten-
ance charges, earning its fixed charges for the year 1888; and
the inevitable increase in those fixed charges against the profits
of the year 1889 will render it still more difficult, on the basis
of similar figures, for the Company to earn them in that year ;
whilst if the maintenance of road and works were charged with
a cost similar to that incurred by other principal Canadian
Railways, there would (as shown in the figures on page 10) be
an annual deficiency — to be laced in future — cf, say, half a
million sterling ; or, in other words, a prospective annual loss
of that amount if the fixed charges were fully met.
s
15
(3) The rates per passenger [and per ton per mile, taken
together, have steadily decreased to the extent of 17 per cent,
from 1885 to 1887, and tl.cy are likely still further to decrease,
in consequence both of the extensions of railways across the
American frontier into Canadian Pacific territory and of the
extensions of the Canadian Pacific system in other parts of
Canada where competition will be increased as the result of these
extensions.
(4) The charges against Revenue for the working expenses
of the Canadian Pacific Railway must in future increase — (a)
because they have hitherto been relieved by the newness of
works and rolling stock, and by the large expenulture upon the
lines opened for traffic charged against capital ; (d) because they
must in future approximate more neany to the expenditure for
maintenance upon other Canadian lines, not subject to the
disadvantage of having to maintain railways for, say, i.b'oo miles
through mountainous and other difficult country, subject to
intense cold and severe blizzards, and occasional destruction
by snowslides ; vide Illustrated London Nezvs^ December i,
1888, pages 657 and 658, illustrating and describing the snow-
slides.
(5) The various extensions proposed by this Company at an
expenditure of, say, 5 millions sterling, in Ontario and Quebec
alone, parallel to or competing with existing railways, must
tend, especially in the immediate future, rather to swamp than
to assist the general undertaking.
The English shareholders cannot be expected, under existing
arrangements, to exercise much control in regard to such ex-
tensions. At the recent General Meeting of the Company, held
at Montreal, convened for the 19th and adjourned to the 23rd of
November —
" For the purpose of considering and authorising the terms of a lease to the said
Company, from the Ontario anrl Quebec Railway Company, of the extension of the
i6
Une of the last.nan,ed company fro™ Londo^^^^^^^^^^
River, and of .earn ^^^^^^j::;^^ ter.s and condition,
rn\re-t ietJet f^et^ c^anies for securing, the sp.dy co.plet.on of the
s id extension and the establishment and workmg of the sa.d 1 erry
there were-it is stated-only five shareholders attending m
person, of whom four were directors of the Company.
-Someihiugis rotten in the State ,/ Z?.«.//^r^-."-HAMLET, I. 4
h
in
17
VIEWS OF THE PRESS,
The following articles from the London Economist, the
London Statist, and the New York F'nancial Chronicle, in
regard to issues of capital, and other newspaper articles,
more especially in regard to the Canadian Pacific system,
will, no doubt, be read with interest, and are here reprinted, as
indicating the views of impartial Journals on both sides of the
Atlantic : —
THE ACTION OF THE GREAT LOAN HOUSES.
{From the ^^ Economist," London, November 24, 1888.)
The speculative community are now reaping what they have sown, for the extreme
weakness now shown by Stock Exchange securities is a direct conseouence of the
eager rush after all kinds of new issues likely to command a premium which has
abaracterised the current year. For some time past the market has been in a very
sensitive and unstable condition, owing to the continuous efflux of gold, especially to
the Argentine Republic, by whom the most lavish borrowings have been made in
London and on the Continent— the total sum raised this year by that country, directly
and indirectly, being about ;^40,ooo,ooo. And this week the sharp advance in the
value of money, which has been so long threatened, has occurred. The effect upon
the stock markets has been very marked, for a state of exaggerated apprehension has
prevailed, and speculators for the rise in ali departments have shown much anxiety to
reduce their commitments to small dimensions. But although much has been done,
they are still nervous, being fearful not only in regard to the speculation open for the
rise, but in regard to the great mass of new securities which are in the hands of
speculative investors. Indeed, the position, as a whole, has been decidedly unsatis-
factory, and the future has not been regarded without some apprehension even by
those not given to nervous exaggeration. In these circumstan s there is a strong
temptation to find a scapegoat upon whom all the blame may be cast, and recently
the important group of large firms by whom the market has been so industriously fed
with new issues, has rather generally been picked out for this purpose. And, as
usual, the general feeling on the subject has been partly right and partly wrong.
It has been wrong, because people have formed mistaken views as to what are
the proper functions of these great issuing firms, v;hich act as intermediaries between
i8
MJ
those who borrow on a large scale and the general body of investors. These firms
as we h«ve pointed out before, transact a business which, when kept within legitimate
limits, is extremely useful to the public. It consists, like most mercantile operations, in
buying in bulk and retailing out in more or less small amounts, only the business is
in securities instead of merchandise. In other words, they supply home investors
with a variety of investments, which afford channels for the continuou'^ accumulation
of capital in this country, and they obtain these investments by ministering to the
needs of borrowers, or by the support which they afford to the extension of joint
stock enterprise. In doing this, they take care that there shall be no technical flaw
in their dealings with the public, that, in fact, the formal terms of their contract
shall be fulfilled, and, of course, no firm of standing would identify itself with a
new issue which wis obviously unsound ; but beyond this they do not go. It
is no part of their province to inquire into the essential soundness of the securi-
ties they oflfer for sale, for that must be left to the judgment of each individual
investor, nor should the mere fact of them acting as sponsors to any new issue
be understood to imply any guarantee on their part. In fact, to put it briefly,
they simply offer certain securities to the public, and if they do this in a bona
fide manner, they cannot be rightly expected to go further, and undertake in regard to
investors any duties of a "trust" character. The public, however, have been
accusiomed to look at the matter in another light, and, as a result, we have seen
investors taking up, without the slightest regard as to their real character, great masses
of securities, simply because they were issued by some firm with a great name. For
many investors of this stamp we are afraid there will be some day a sad awakening,
just as there was some ten or twelve years ago, when Peru, and other States which
had issued large loans, through firms of the highest standing, defaulted so completely,
and it may also be said so hopelessly.
In a measure, however, the public have been right in reprobating the conduct of
the great houses which have been inundating the market with new securities, for in
too many cases they have not kept within the legitimate limits of their business.
On the contrary, they have taken many measures quite outside them. For instance,
it has been notorious that some of the difficulties now being experienced in the money
market are due to the fact that the firms who had new loans to issue have used very
strong means to keep the value of the money artificially low, and have thus neutralised
the natural effect which their operations would have had upon the market. Moreover,
there has been a good deal of manipulation in the stock markets, in order to give
prices an appearance of firmness which otherwise they would have not possessed.
The object of these operations has been, of course, to attract investors and induce
them to take up securities from which, if left to themselves, they would have pro-
bably stood clear. This conduct does not differ in any essential respect from the
"rigging" of shady company promoters, or the market manoeuvres of unscrupulous
American railway magnates of the Jay Gould type. If we take, for instance, the
case of the Deccan Mining Company, just investigated, in which the stock market
was manipulated in order to induce the public to buy at high prices shares whose
value was extremely doubtful, or if we look at some of the tricks which have been
played by speculaitots like Mr. Gould, we shall, no doubt, find some difference in
degree, but they are, nevertheless, of essentially the same kind as those which have
recently flourished in high circles in London. In such circles the old maxim,
noblesse oblige^ had once a certain binding power, for there was a jealousy of good
loanl
niar
IJ
firms
imate
)ns, in
i\ess is
restots
ilation
to the
)f joint
;al flaw
onttact
with a
go. It
secviri-
dividual
;w issue
briefly,
1 a bona
regard to
ive been
ave seen
at masses
ne. For
vakening,
tes which
impletely,
:onduct of
ies, for in
t business.
instance,
the money
used very
neutralised
Moreover,
er to give
possessed,
ind induce
have pro-
:t from the
nscrupulous
[Stance, the
ock market
lares whose
. have been
difference in
which have
old maxim,
ousy of good
19
'A
name and credit which was mora powerful than the attraction of a " fat Ti5^- >i^|^ ^
mission, but for some time past this has seemed to have become almost a ) "^
tradition. It may be of little use to utt;r vain regrets respecting the change,
investors will do well to bear it in mind a little more clossly in their future deal
ings, unless they want to lose money. Unfortunately, the public have short'
memories, or they would not have forgotten the lessons of the last decade, when it
was so conclusively shown that the standing of the issuing house had nothing to do
with the soundness of the securities they offered to the public.
MESSRS. BARING BROTHERS' ISSUES.
(From the " Statist," December i, 1888.)
When there is action detrimental to the public interest, and yet not infringing any
provision of law, restraint can be imposed only by enlightened public opinion.
Public opinion, when ill-informed, is apt to make a scape goat of the wrong person,
and to cry out for the wrong remedy, but when well-informed, its influence for good is
incalculable. It is the functii^n of the press to inform public opinion, and with that
object in view we print below a list of the principal issues made by Messrs. Baring
Brothers since th^ beginning of 1882. The Money Market for some time has been
disturbed every now and then by the drain of gold resulting from the foreign issues>
more particularly of the present year. Business men in consequence have been made
anxious, for the fear is ever present to their minds that money may become suddenly -
30 scarce and dear as to paralyse business, and thereby jeopardise the improve-
mf;nt in trade. The drain of gold has been stopped for the moment, but everybody •
knows that it may set in again by-and-by, and if foreign issues continue it will
go on growing until it becomes a serious danger. It is desirable, therefore, that the
influence of public opinion should be brought to bear upon those who aie immediately -
concerned in launching these foreign issues. And to enable this to be done we begin
with the list of those issues for which Messrs. Baring Brothers are responsible. The
list is a remarkable one. It began, as we have said, in i88?. In 1S83 there were no -
issues. In six years, however, the enormous sum of 95 millions sterling has been
brought out by this single house, and with three exceptions — two breweries and the
Manchester Ship Canal — all the issues are foreign or colonial. Messrs. Baring.
Brothers cast their net widely — from China, in the extreme east, to Canada and South
America in the extreme west. Naturally, as was to have been expected at the present
time, Argentine issues figure very largely, and Uruguay obtained in a single lump ^%
millions sterling, though how the Messrs, Baring could think it deserving of such
large credit, either on the score of population, development, or political stability,
passes our comprehension. It will be noticed, too, that since 1884 Messrs. Baring
have been growing bolder and bolder in their invitations to the public. In that year
they offered altogether very little more than 6 J^ millions sterling ; in 1886 they offered
over l%% millions sterling ; in the present year, up to date, ihey have offered some-
what more than 28 millions sterling, irrespective of the Buenos Ayres Drainage,
&c.. Loan, which we are glad they did not succeed in placing with the public.
It may be said that it is the business of firms like the Messrs. Baring to bring out
loans and companies, and that the fault re^ts with the investing public if they take too
many of the bonds and shares offered. We do not care to bandy words as to which i»
20
must in fiiult, the issuing houses or the public, but it is evident that the public are in
a very different position from the great issuing houses. The public consists of a vast
multitude of individuals scattered all over the country, without means of communicat*
ing one with another — and, therefore, of acting in combination — guided very largely
by brokers and bankers, who, in turn, are guided very largely by the issuing houses.
The case is different with such a great house as the Messrs. Baring. They are bound,
in the fust place, to lay before the public such material facts as will enable the public
to judge whether the securities offered are a desirable investment ; they are bound,
secondly, to assure themselves, through their connections of every kind, as to the
correctness of the material facts stated. They are able, save under exceptional
circumstances, to float an issue, and they can therefore put pressure upon Govern-
ments and industrial companies to extract all necessary information. Of course, like
everybody else, the Messrs, liaring Brothers may be deceived, but if they take reason-
able care to inform themselves, they have done their duty ; unless they do so, they
have not.
It is sometimes contended that an issuing house does not guarantee the security
it offers, and all that can be expected from it is to ensure a compliance on the part
of borrowers and promoters with certain formal conditions. Wc totally dissent from
this view of the duty of issuing houses. The law as it stands no doubt imposes very
little responsibility upon issuing houses ; it deals rather with directors, who are often
mere creatures of the issuing houses, and with promoters. But the law ns it stands
is notoriously defective, and public opinion ought to step in and enforce upon issuing
houses precautions which the law neglects to impose upon them. The issuing houses
ought to be required to set before the public all material facts necessary to enable an
investor to judge of the character of the security offered to him, and we regrrt to say
that this condition the Messrs. Baring very oft^n fail to comply with. Their pros-
pectuses too frequently are not merely meagre, out quite insufficient to enable anyone
to judge of the character of the security. The Messrs. Baring, moreover, never state
what compensation they receive for bringing out either a loan or a company, though
surely this is a material circumstance. They sometimes, like other loanmongers, act
for a commission, but sometimes, it is said, they buy the issue outright at an equal
price, and then offer it to the public at a higher price. In no case, however, do
they state what profit they stand to make. Messrs. Baring do not explicity state
whether they have taken proper pains to satisfy themselves that the loan or the
company is one for which a great English house ought to stand sponsor. Of course
their name ought to be sufficient recommendation. One other point is, their deal-
ings with allotments have given rise to widespread dissatisfaction.
It might reasonably have been expected that the Messrs. Baring would exercise a
restraining influence upon borrowers, especially upon Argentine borrowers, when it
became evident that they were piling up debt too fast. We admit, of course, that an
issuing house benefits the public, while benefiting itself, in offering investors sound
securities, provided always that it does not carry the business too far. In this
country capital accumulates more rapidly than the means of profitable investment. In
new countries the means of profitable investment exceed the supply of capital. To
enable the saving classes in this country, therefore, to invest their money safely and
profitably abroad, is, no doubt, a benefit to the public ; but it ceases to be so when
too much capital is sunk in any particular country. We have seen even in so rich a
country as France how an extravagant expenditure on military preparations, on
railways, canals, and schools, led to a crisis six or seven years ago, from which the
c are in
t a vast
nunicat-
■ largely
; houses,
e bound,
le public
e bound,
IS to the
cep'ional
I Govern-
urse, like
ce reason-
[o so, they
e security
n the part
.ssent from
iposcs very
o are often
5 it stands
pon issuing
iiing houses
o enable an
egret to say
Their pros-
able anyone
, never state
any, though
nongers, act
at an equal
however, do
tplicity state
loan or the
. Of course
iS, their deal-
uld exercise a
vers, when it
ourse, that an
vestors sound
far. In this
.vestment. In
,f capital. To
ney safely and
o be so when
en in so rich a
reparations, on
torn which the
31
country has not yet recovered. Wc have seen again frequently in the United St.ite how
over-construction of railways ends in a crash. It ought to have been obvious, therefore,
to Messrs. Haring long ago that Argentine issues were growing exce-sive, and th.nt some
moderation hid l);c(>nK' iirpcrativoly necessary. It w.is the duty of Messrs. I!;i'ing
to use their influence to ensure moltration, for it was largely owing to tliem and their
patronage that Argentine ere lit stood so high in this ni;uket. They ought to have
been well aware that when it was known in the Argentine Republic that Argentine
securities were being eaget'y taken up here, a swarm of promoters would spring up
anxious to take advantage of the opjiortunity that seemed to be offered ; and, in lact,
Lon;lon at the present momentandformonthspasthas beenover-runwilh such promoters.
Hut Messrs. Haring Brothers did nothing. It may be said that if they had refused to
bring out this or that issue others would have been more complaisant. That surely
is no excuse in the mouth of so great a house. It is much l)etter, in the long run,
that bad business should not l)e eml)arked in than that insecure loans shoul<l be
foisted on the pulilic by one of the greatest of our houses. In the long run the latter
policy does not \>?y.
Chronological record of the principal loans, &c., offered by or issued through
Messrs. Baring Brothers and Co. : —
Amnt. & Issue j/ilce.
^— ^'~ —>
Pate. L'lan. I'er cent. £ Vet cent.
March, 1882. Buenos Ayres 6 2,049,200 92
M.iy „ Atchison Topeka ami .Santa He Railway... 6 ^$0,000 105
June ,, Cape of Good Hope 4 J.ooo.ooo 94
Oct. ,, Transcaucasian Railw.iy 3 8,904,200 55
March, 1884. Argentine 5 1,683,100 84;^
June ,, Canada 3J'i 5,000,000 91
March, 1885. Atchison, &c.. Railway 6 i,ooo,coo 107
June ,, Canada 4 4iOOO,ooo 99
„ „ Chinese 6 1,500,000 98
July ,. Canadian Pacific Railway S 3,000,000 95
Jan. 1886. Argentine 5 4,000,000 80
Feb. „ Southern Mahratta Railway 4 1,200,000 104,'',
March „ Buenos Ayres 6 1,933,600 88
April „ Canadian Pacitic Railway 5 4,191,50c 104
Aug. ,, Illinois Central Railway 3^4 1,000,000 98,'^
Oct. „ Guinness, Son and Co — 6,000,000 par.
Jan., 1887. Argentine 5 4,295.100 85/*
„ „ Atchison, &c.. Railway 5 3.000,000 107;^
June „ Italian Railway 3 6,300,000 63%
fuly ,. Manchester Ship Canal 5 4,000,000 i)ar.
Jan., 1888. Canadian Pacific Railway 5 75o,ooo 98^^
Feb. ,, Grand Russian Railway 4 1,888,000 75
April „ Uruguay 6 4,255,300 82>4
May ,, B-tltimore and Ohio Railway 5 1,500,000 108
(With Morg.in and Brown Shipley.)
June ,, Canadian Pacific Railway 3/^ 3,o93>7oo 95
',, „ Philadelphia and Reading Railway 4 4,937,200 89
(With Morgan and Brown Shipley.)
„ „ Dominion of Canada 3 4.000,000 92'i
(With Glyn and Co.)
„ ,, Combe and Co : — 3,000,000 —
Oct. „ Argentine 4/2 3,933.5^o 87
„ „ City of Montreal 3 840,000 82;^
Nov. ,, Buenos Ayres Drainage, &c — 3,500,000 ~
23
Aggregate of the principal public loans, &c., offered by or issued through
Messrs. Baring Brothers and Co : —
Year. Amount.
1882 ;^I4,703,400
1884 6,683,100
1885 9,500,000
1886 18,325,100
1887 17,595,100
♦1888 28,197,780
Total of 5 years and 1 1 months ;i'95,0O4,48o
Extract from the New York " Commercial and Financial Chronicle " of Nov.
3, 1888, on the subject of the reduction of the Chicago Milwaukee
and St. Paul dividend.
\
This being the state of affairs, what has been the part of investors abroad in
bringing it about ? Have they been disinterested spectators ? Have they lent no aid
or support to the new undertakings, but sought to discourage them by withholding
Ihe necessary pecuniary means ? Is it not a fact, rather, that they have taken with
great avidity the securities issued for the new roads ? As regards the St. Paul itself,
a good part of the new issues have certainly been placed in England. And as regards
the issues of many other companies, the same thing may be said. Indeed, it is so
well established, that a considerable portion of the money for carrying on the new
construction work of the past two years has come from across the ocean (not entirely
"from Great Britain, of course) that it would bs superfluous to argue the point.
Suppose now the foreign investor had discountenanced the schemes, taken a decided
stand against them, and firmly refused to subscribe money to them. Would
not a great many of them have fallen to the ground, and to-day have no existence ?
But perhaps it will be claimed that the responsibility in such cases is rather remotfi.
Englishmen were not charged with the management of the roads, and simply took
ihe bonds oflered because they appeared to be a good investment. Take, there-
fore, a road directly under English control and ownership. There is at least one
•such Company in the North-West. Yet that Company has been just as free in build-
ing new lines as any other -if anything, a little more so — and it has nevei had the
slightest difficulty in getting from its English supporters all the necessary funds
Even in the case of the St. Paul, it will be admitted, we think, that if English in-
fluence instead of American had been paramount, the money would have been jus
as readily forthcDming and probably just as readily asked for. What justification is
there, therefore, for thinking that if the foreign owner had exercised his influence
the result now would be any different ?
* Eleven months to end of November and exclusive of the Buenos Ayres Drainage
and Waterworks issue of November.
$
fo
ac
It
23
BEWARE OF THE CANADIAN PACIFIC.
{^From ''Truth;' November 15, 1888.)
Sir Henry Tyler raised a grave question as to the great rival of the Grand Trunk
when he asked at the meeting whether, as time goes on, the Canadian Pacific's net
profits will suffice to pay the fixed charges of the line ? This remark has induced my
friend Emanuel to look into the figures.and the result is a table which I give you below,
and which shows the prospects of this greatly subsidised and extravagantly managed
line in'a very unenviable light : —
Fixed charges for 1887, as per report $3,250,263
Additional on ;,^l,ooo,ooo(only four months, interest in 1887) 176,822
Atlantic and North-West Bonds —
;i^i, 330,000 at 5 per cent., ;^66,ioo, say.. $332,500
Less subsidy $186,600
Less charge in 1887 9i985
196,585
135,915
Algoma Branch Bonds —
;^7So,ooo at 5 per cent., ;^37,5oo. say 187,500
Land Grant Bonds (new issue) —
-^3,093.700 at 2% per cent, for six months, ^{^54,139, say 370,697
. 00 $4,o2',i97
Net revenue m 1887 $3,504,000
Add nine months' net increase 197,000
Therefore to make up in three months
$3,701,000
320,197
$4,021,197
The above estimate of the fixed charges very nearly agrees with that mentioned by
Sir Henry Tylerat the Grand Trunk meeting. As regards the Atlantic and Noith-
West Bonds, it may be mentioned that nine months' interest was paid in 1887, but is
not traceable in the accounts. This interest was, apparently, paid out of proceeds of
bonds in 1887, excepting the proportion for the completed part of the line. There
were outstanding at the end of 1887 $3,471,000, less sales on deferred payment,
$1,252,827, leaving outstanding at 5 per cent. $2,218,173. Nothing is added above
for the Saults Bridge, although the Canadian Pacific own half of that bridge. No
addition is further made for the Japan steamers ; do the company own them or not ?
It will be seen that, if the above figures are correct, there is little chance of the
Canadian Pacific Company earning the fixed charges. And what then ? Surely this
, i? not a time for rumous competition and unprofitable extensions !
i4'
{From " Truth," November 2C), iS88.)
Since I published my table of the revenue and fixed charges of the Canadian
Pacific Railroad (7;*«///, November 15), this stock has receded ever two points, a
result at which you will not have been surprised. I am afraid my statement has been
sorry news for a good many stockholders, some of whom, by the way, object that
possibly the amount of interest on the Atlantic and North-West Bonds and on the
Algoma Branch Bonds will not rank in full, as the lines were not yet completed, and that
the interest on (he Land Grant Bond may also fall short of my estimate. But, after
making every allowance for such contingencies, I cannot see how the fixed charges
can be covered by revenues. I say this in spite of the Canadian Pacific president's
latest utterance, and I really cannot see by what course of jugglery he will be able to
show the surplus over fixed charges which he foreshadows. A correspondent writes
from Glasgow to the Railway Neiis very hopefully as to the trafiic announcements to
be anticipated for the next few weeks, and which he expects will be greatly benefited
by the opening of the Minneapolis Sault St. Marie and Atlantic, and of the Duluth
South Shore and Atlantic lines. It is to be hoped that his expectations of an additional
traffic of $100,000 to $200,000 per week will be realised, but I must confess to being
somewhat sceptical on this poirrt.
CANADIAN PACIFIC RAILWAY.
{From the ^'•Financial Times" Friday^ November 23, iSSS.)
The sharp fall which has taken place during the past few days in Canadian
Pacific Stock can hardly have been altogether unexpected. The only subject
for surprise is that the drop has not taken place before, but if an explahation
of this were needed it probably would be found in the strength with which
the stock is held in this country. The fact that it is so largely held as an
investment by peoj le who are interested in the development of our great
American dependency, always makes it a particularly unthankful task to
write anything deprecatory upon the position of the railway or its prospects
for the future. But the time has come when it is a serious question whether silence
ought to be maintained any longer. It is impossible to deny that the past has been
fraught with keen disappointment, and that the future is full of uncertainty. In spite
of the fostering care of the Canadian Legislature, ii- spite of almost unlimited
financial assistance in the shape of subsidies, and in spite of the comparative immunity
it has enjoyed from serious competition, the road (as a commercial undertaking) can
be pronounced little short of a failure. Of course, if the Government guarantee were
a perpetual one, there would be little cause for anxiety, but the stockholders are con-
fronted with the knowledge that the guarantee expires in 1893. Can anyone
25
seriously believe that even if the development of Canada proceeds at a far quicker
rate than in the past the railway will be able to stand alone in five years' time ?
True it is that there is a possibility that the Government may be found willing to
prolong the guarantee, but we fear it is a very faint one. Any such attempt would
be met with the most strenuous opposition, and besides this, five years in the history
of a new country like Canada may be pregnant with great results, that would make
a prolongation of the guarantee an impossibility, Takmg the present year, it is more
than questionable whether the company is earning its fixed charges. According to the
statements issued by the company, they amount to $4,021,197, and to make up this
sum it will be necessary that $320,197 increase must be earned by Christmas. What
possibility is there of this being accomplished? The amount of grain to be moved
falls far short of the anticipations upon which the stock advanced in the summer.
Traffics are thoroughly disappointing, and from all accounts they are likely to con-
tinue so.
It is significant also of the unsatisfactory position of the road that during the
past three years the gross receipt? have increased by $2,991,197, the working expenses
by $2,993,683, and the fixeil charges by $431,959. Thus, in spite of the increase in
the gross earnings, it can hardly be contended that the company is in as favourable a
position as three years ago.
Turning to the future, there can be little doubt that the Ked River Extension
Line will become an accomplished fact, in spite of the opposition of the State sub-
sidised road. The case is now being argued before the Canailian courts, and the
decision is expected in a few days. When the Red River Extension Railway is built
and in working order, it must cut very seriously into the traffics of the Canadian
Pacific, as it will offer much greater facilities to the farmers of Manitoba than the
existing line can afford. We know that there is a disposition to underrate the im-
portance of this competition, but we think it will be clear to any unprejudiced mmd
that if the Canadian Pacific Company could have afforded to treat with contempt its
rival, it woul 1 not have opposed its construction with the rancour and the bitterness
it has. Judging by the enth siastic manner in which the Manitobans have sup-
ported their local line, being ready even to defend it with their lives if necessary,
there appears little doubt that when it is constructed throughout it will receive a very
large part of the grain transportation and other traffics of the Province. It must also
be remembered that the Canadian Pacific has drawn an enormous revenue from
Manitoba, and that in no part of its system would competition be more disastrous.
But this is what it has to look forward to, and it will be a matter of surprise if its
traffics do not in consequence suffer very materially.
The last and most serious contingency is the disposition of the Canadian Pacific
to invade the territories served by the Grand Trunk. Sir Henry Tyler, at the last
meeting of the proprietors of the latter company, spoke in no uncertain terms of what
the result will be. Those results are already within measurable distance. In this
instance, at least, it cannot be claimed that the Grand Trunks are the offenders.
Already they have suffered considerable provocation, but it cunnot be expected that
they will tamely submit for ever. The utterly unjustifiable aggressiveness of the
Canadian Pacific must end in a war of rates, and what this means for both companies
requires no illustration. Certainly this invasion in the territories of the Grand Trunk
Company cannot in the near or distant future bring anything but constant friction,
repeated hostilities, and an enormous loss to the proprietors. There is not the
26
slightest excuse for it, as the Trunk line certainly provides every transportation facility
necessary for the inhabitants ; there are no reasonable complaints of the monopoly
the company enjoys leading to excessive or extortionate rates ; nor is really the
volume of business sufficient to tempt the cupidity of a rival. It only seems a part
and parcel of the senseless extension of the Canadian Pacific system which has been
going on of late, regardless of the rights of others. To this cause is largely attribut-
able the position of the company to-day, the enormous amount of its fixed charges,
and the unmanageable figure its capital account has assumed, and yet, in spite of the
aggressiveness the Canadian Pacific has shown, we see with what jealous watchful-
ness it endeavours to preserve itself from the inconvenience of competition.
Taking all these eventualities into consideration, the present price of the stock
ceitainly far more represents its true value than the quotations of a week ago.
THE CANADIAN RAILWAY QUESTION.
(/><?;« the '^Statist," December i, 1888.)
The Grand Trunk and Canadian Pacific Railways, combined, hold and control
nearly ten thousand miles of railw?y, and although the Canadian Pacific, per se, is
purely a trans-continental line from the Pacific coast to the St. Lawrence River, pot
at all interfering with the Grand Trunk, still, through a system ot extensions, more
especially that of the Ontario and Quebec, which is guaranteed by the Canadian
Pacific, that system is now interwoven, so to speak, with the Grand Trunk to such
an extent through the provinces of Quebec and Ontario as to render sharp competi-
tion inevitable ; and, as usual, such a competition means low rates and small profits.
Considerable interest has been aroused recently by a proposition which was sub-
mitted to a meetmg of the Canadian Pacific shareholders last week, for the extension
of the guarantee of the Ontario and Quebec for a further portion of that line from the
city of London, Ontario, to the Detroit River, and as this line for a distance of 1 10
miles would have to be constructed almost within a stone's throw of the Great
Western Division of the Grand Trunk, it has caused great anxiety both to the share-
holders of the Canadian Pacific Railway and those of the Grand Trunk, because it is
believed by the former that these continued guarantees will jeopardise their dividends,
and by the latter that it will bring in another competitor for the through American
business between Chicago and New York. It is, therefore, not to be wondered at
that those concerned should take this serious position of affairs into their careful
consideration.
It was stated in a cable message published by a contemporary that the president
of the Canadian Pacific had remarked at tho meeting of shaieholders of that company,
which was called to consider this question, last Saturday, that several attempts had
been made to come to an agreement with the Grand Trunk, by which running powers
over that line could be secured between London and Detroit, and that these attempts
had been unsucessful. The President of the Grand Trunk, at the meeting of that
company's shareholdeis on the 30th October last, stated, on the other hand, that
pany,
had
27
every effort had been made on their part to come to an arrangement with the Canadian
Pacific, but that they had been unsuccessful. The only way of arriving at the truth
after these conflicting assertions was by the publication of the correspondence between
the managers of the two companies, and this has been done. On examination of this
correspondence we find that the statement made by the Canadian Pacific president,
that the Grand Trunk Company would only make an arrangement on condition that
the Canadian Pacific Company gave up the right to do business from the Province ot
Ontario, along its long route round by Smith's Falls and North Bay, to the Canadian
North-West, is inaccurate, because there is no such statement to be found in the
correspondence ; on the contrary, the Canadian Pacific demanded that, if they made
Jin arrangement with the Grand Trunk, that that company t.. Duld be precluded from
using its own American lines for any traffic to the North-West. Now, there are two
ways of reaching the North-West from the City of Toronto ; one is by the Northern
system of the Grand Trunk to North Pay to a junction with the Canadian Pacific
main line, a distance of 229 miles, as against 449 miles by the Canadian Paific via
Smith's Falls, to the same point ; the other route is by the American connections of
the Grand Trunk, by the Chicago and Grand Trunk, and the Detroit Grand Haven
and Milwaukee. The restriction, therefore, alluded to was demanded by the Cana-
dian Pacific, and not by the Grand Trunk, as alleged. Another feature is revealed in
this correspondence, and that is, that the Canadian Pacific intend building a line from
Sudbury Junction parallel with the Northern division of the Grand Trunk Railway to
Toronto, and also contemplated another extension of the Ontario and Quebec to the
Niagara frontier. So that what with the paralleling of the Grand Trunk from London
to Detroit, its Northern division, and the further extension to the Niagara River, the
plans of the Canadian Pacific are, of course, perfectly clear. Now, as the Grand
Trunk are willing to give the Canadian Pacific running powers from London to
Detroit for reciprocal rights of running over their Algoma branch to the Sault Bridge,
here is a modus viveitdi combining the minimum of damage with the maximum of
convenience to the public ; furthermore, unnecessary construction would be avoided.
The solution of this dangerous position is in the hands of the shareholders of the
Canadian Pacific Railway, and it is for them to bring proper pressure to bear upon
their board of directors to curtail these ambitious and unprofitable extensions,
paralleling the existing systems of the Grand Trunk, and materially increasing the
guaranteed and fixed charges of the Canadian Pacific Railway. Perseverance in this
dangerous course can have but one ending, and that is the pulling down of the
financial credit of both companies.
It should not escape notice that Mr. Van Home's letter of October 3c was
written one month and three days after Mr. Hickson's letter to him. The " haste,''
therefore, which Mr. Van Home desires in his correspondence does not appear to
have been very genuine. A few dates may be of interest. Mr. Hickson's letter
was dated September 27, Sir Henry Tyler sailed from New York on October 6, and
addressed a meeting -^f Grand Trunk proprietors in London on October 30, and on
the same day Mr. Van Home wrote his letter, this being, as before stated, a month
and three days subsequent to the letter received from Mr. Hickson, on which date
Mr. Van Home had no doubt heard the result of the proceedings at the Grand
Trunk meeting in London.
2S
THE C. P. R. PRESIDENCY.
From the ^^ Shareholder and Insurance Gazelle,''^ Montreal, August lo, 1888.)
The scheme of connecting the Atlantic and Pacific Oceans by an iron road, en-
tirely within Canadian Territory, originated with the Rii^ht Hon. Sir John A. Mac-
donald, Premier of Canada, and to him must the credit of the scheme which resulted
in the materialisation of the idea be accorded. The building of the Canadian Pacific
Railway was, however, the work of others. The Presidency of that Company wis en-
trusted to Mr. (afterwards Sir) George Stephen, as all our readers are aware. The
amount of hard and constant labour which devolved upon him, developed to its full
what vast energy, indomitable perseverance, and solid determination could accomplish.
As a result, the Canadian Pacific Railway was begun, carried on, and completed. That
the country has been and will be benefited by the construction of this vast undertaking
no one possessed of reasoning faculties can deny. That success has attended it under
all the circumstances which its construction have given birth to is, however, a con-
sequence which it would have been rash not to expect. The country stood by the
company through thick and thin, paid it for the construction of the road, and 01. its
completion made it a present of the work for which it had been paid. To accomplish
all this required the presence of qualities of no ordinary kind. It is not to be
wondered at, therefore, that relief should be sought from the mental strain which
such a vast undertaking imposed upon the president of the company. We therefore
congratulate Sir (ieorge upon the achievement of all that he has done, and upon the
success which culminates all his efforts, and we hope that the rest he now seeks will
give new point to his energies and new vim to his faculti«s. The Canadian Pacific
has been a success so tar as Sir George is concerned ; but wliile we are disposed to
give the company and its late president all the credit which the accomplishment of
this great undertaking deserves, we cannot in justice to the country refrain from ex-
pressing regret at the aggressive disposition exhibited by this company towards other
roads built under vastly less favourite conditions in so far as the country's assistance
was concerned. There has been an attempt — adesperate attempt — to suffocate, strangle,
and destroy other roads built with the capital of the shareholders, and those for the
most part residents of the Mother Country, who not only had faith in Canada's future,
but had the courage to apply that faith to their purse-strings and invest their capital
in bringing under subjection the wilds of this vast colony. A decent regard for the
interests of the jieople who had paid for and then given the Canadian Pacific Rail-
way to the company, would have, one would think, restrained the grasping tendencies
of those from whom to expect some (Consideration would not have been either ungenerous
or un-Briiish. It was both ungenerous and un-Bntish of the Canadian Pacific Railway
Company to use the power it had acquired from the people to injure the people and
the country by entering into direct competition with roads already established, when
the object of such competition w.is not honourable rivalry on equal terms, but injury
whenever and whereverjt could be inflicted. The consideration of this position is not
unworthy the company at the present day. As to Sir George Stephen's successor we
have not much to say. He is a foreigner and an alien. There was no Canadian
29
deemed fit to take his place. The elccSon of Mr. Van Home as President (retaining
the office of General Manager) of the Ct .adian Pacific Railway, virtually tells Canada
and the Canadian people that the road, th. ugh built with Canada's money, is in-
tended for foreigners, and no doubt the day is not far distant when foreigners will
own and control it for the purpose of making money out of it. The resignation of
Sir George Stephen and the appointment of Mr. Van Home to succeed him are
significant. We hope, however, that there is nothing in the significancy, but as it is,
foreigners have and have had already too much to say in the management and con-
trol of the road.
THE CANADIAN PACIFIC RAILWAY.
{^From the ^^ BuUionist" November lo, 1888.)
The news from Manitoba is to the effect that the men of the Red River Railway
Company have managed to get an engine across the Canadian Pacific line, in spite of
legal and mechanical obstructions, and although the latter company promptly destroyed
the track, the construction of the extension is being rapidly proceeded with, and
before long Northern Pacific trains will be running right through the Manitoba district
to Langenberg. It is easy to understand that the Canadian Pacific will strain every
nerve to prevent this, but the time is past when it could have done so with success,
and soon, in addition to its other tmables, it will find that a considerable portion of
the traffic of the only paying portion of their eastern division will be diverted to the
American lines for transport to the seaboard. It cannot be said that this new line
will make traffic for itself. In any way improve the country through which it runs,
as it merely parallels existing roads in a district already too well provided to be
worked profitably. It may be that rates have not yet been lowered to any extent,
but as soon as the connection shall be completed the struggle will begin, and not
merely for local traffic but lor a considerable portion of the main line work.
The existence of this new competitor is the natural outcome of the agreement
under which the Dominion Government guaranteed the payment of the interest on
the late issue of $15,000,000 Three and a Half per Cent. Land Grant Bonds ; for
the first clause of the agreement between the Government and the company sets out
that the restrictions contained in clause 15 of the original contract, dated the 21st
day of October, 1880, between the Government and Sir George Stephen and others
on behalf of the company, which gave the Canadian Pacific an absolute monopoly
throughout the eastern part of their sys em, shall be removed ; but such were the
necessities of the company that, in order to obtain the money they required to com
plete and equip their road, they were compelled not only to mortgage the whole of
their unsold land, but also to give up what to them was an invaluable protection.
That their necessity was great is apparent, as at the end of last year, and before the
issue of this new loan; the balance-sheet disclosed an excess of more than $3,000,000
of floating liabilities over floating assets. Besides, it must be borne in mind that the
endeavour of the Americans to tap the Manitoba district is only a reply to the
30
Canadian endeavour to draw traffic from them by way of Sault Ste. Marie and of
Detroit, and the annulment of clause 15 of the original contract referred to above
gives them the opportunity.
Under the very favourable conditions upon which the company was placed by the
special assistance and large subsidies received, it might reasonably be imagined that
the earnings would be sufficient for all purposes ; but what do we Bnd ? Last year,
after providing for fixed charges, there were only available towards dividend on the
Ordinary stock $253,854, which is at about the rate of ^ per cent, for the year ; nor
are the prospects of the current year so good, as with increased earnings the wor'ning
expenses are larger, and the fixed charges considerably augmented.
Turning first to the capital account, let us see what portion of the property has
been actually given to the company by the G jvernment and others.
Cai'Ital.
.Shares issued $65,000,000
Loans on mortgage, main line 34»998,633
„ ,, ,, other lines 14,226,888
$114,225,521
Cash subsidy $25,000,0:0
Lines handed to the company by Government
(estimated) 35,000,000
Proceeds of lands sold 19,225,181
Land loans, new 15,000,000
i> >i old 3,471,000
Bonuses from townships 307,600
Total grants 98,003,781
Floating liabilities 6)599i7So
$218,829,082
The land loans included in the above will be paid off as the land is sold, and
these sales may, besides, leave a further profit beyond the amount required for such
redemption (the agreement whereby the three and a-half per cent, loan was issued
provides for the payment off of the old land bonds out of the proceeu^ of that loan,
although this is not included in the Schedule "A "attached thereto). But in the
meantime the interest must be met out of the earninQ;s of the line, in addition to the
interest on the five per cent, mortgage, the mortgage loans, and other guarantees to
leased lines not included in the above.
The capital subscribed has not all been expended on the line, as $15,942,645
had to be deposited with the Government to constitute a fund to provide for the pay-
ment of a dividend at the rate of 3 per cent, per annum for ten years from August,
1883, on the ordinary shares; and out of the proceeds of the Canada Central First
Mortgage a deposit of $1,500,000 had to be made to secure the sinking fund. Taking
the income account of last year, and adding the increase to date, we can easily arrive
and
such
ued
oan,
the
the
to
f.64S
pay-
gust.
First
iking
.rrive
31
at a fair esliitiate of the year's takings, and so of the probable income available for
all purposes in 1888.
Total gross earnings, 1887 $11,606,412
Add —
Increase for present year, ten months, $1,508,000
equal, at same rate for twelve months, to 1,806,000
$13,412,412
Less —
Working expenses at same ratio as last year. (The monihly state-
ments for 1888 show a larger proportion so far) 9,725,000
$3,687,412
Fixed charges 1887 $3,250,263
Further Loans issued since —
3^ per Cent. Loan, half-year only 262,500
Algoma Branch Line Bonds I73»37S
Saulte Ste. Marie Bridge, half share —
Other loans and guarantees —
$3,686,138
Estimated surplus in 1888 $i,274
This result, it may be remarked, is upon 224 more miles operated than last year.
In order to pay 3 per cent, upon the Ordinary shares the sum of $1,950,000 is required,
so that the earnings must show a net weekly increase of $37,500, equal to a gross
weekly increase of $63,750 beyond what is being earned at the present time, unless
the working expenses should be very largely reduced. The very limited increase in
the traffics is disappointing, and necessitates that the shareholders should boldly look
the position in the lace. In five years they will be entirely dependent upon earnings
for their income. It has been so long and confidently stated, that " the Government
will extend the guarantee," that the future has caused no anxiety. But the idea of an
extended Government guarantee is simply moonshine. In point of fact there is no
such thing as a Government guarantee, as usually understood, although in the " Daily
Oflicial List " this note is appended to the shares : — " Guaranteed by Dominion
Government to 1893." A part of the capital was sunk in the purchase of a ten years'
annuity, and to that extent there is a guarantee for the payment of a 3 per cent.
dividend for that period ; bu' this cannot, except by a misapplication of terms, be
called a Government guarantee. There is no doubt that this belief in a Government
guarantee has always cast a sort of glamour over the property, and given it a fictitious
value ; but there never was any ground whatever for the statement.
That the Canadian Government will do anything more for the Canadian Pacific
line than it has already done is extremely unlikely in face of the decided public
opinion to the contrary, and the bitter opposition of the Grand Trunk party. And
this is evidenced by the exceedingly hard baigain the Government drove with them
when they undertook to guarantee the last loan. They not only took as security their
only valuable asset, but withdrew from them the only power they possessed ot
securing for themselves a paying traffic.
The line of itself is maintaining a positive struggle for existence. Every-
where throughout Ontario it is extending its branches at a ruinous cost, and
bringing itself into competition with the Grand Trunk. Even now they are
32
spending more money and hypothecating the future in order to build a line
actually alongside the Canada Southern, so as to be able to bo'.it of a through
connection with Chicago, the value of which is more than ooubtful except as
a means of reducing rates all round. The financial condition of the Company, in
spite of the help it has received, is very bad ; the earnings, too, are bad, and the
only connected idea apparently underlying the policy of the directors is reckless
competition with everybody all round. They are like spoiled children ; they have
received so much that tliey think then can get more by merely asking, but the
chances are mu:h more likely that the Dominion Government will have to take otrer
the line at a date not remote, and adopt the mortgages only, leaving the shareholders
out in the cold when their annuity is exhausted.
The Grand Trunk Company recognise the position thoroughly, and the speech
of Sir Henry Tyler to the proprietors at the General Meeting contained no more
forcible remarks than when he sjoke of the suicidal conduct of the Canadian Pacific,
and expressed the determination of his Company to fight, not only for their share of
traffic, but against the Dominion Government giving them any further assistance.
Thus they are making for themselves bitter enemies in the western division, both
with the Trunk and with the American roads, by the extensions to Chicago and
St Paul, which is returned with interest on the one hand in the direction of Manitoba
and on the other in Ontario. President Cleveland's retaliation message appears to
be forgotten for the time, but it may at any moment be revived and even carried out.
What, then, would be the position of the Canadian Pacific ? In the summer they
can ship at Quebec, but in winter they have absolutely no opening to the Atlantic
without passing through a part of the United States, and in order to avoid this they
must either run over a portion of thd Grand Trunk line or build one for themse'ves,
or else bridge the St. Lawrence River at Quebec, and to do either of these last they
have not got money, while in any case it means diminished earnings. At present
there is a break in the continuity, and unless the transit can be made entirely through
British territory should the necessity arise, our Home authorities would not be justi-
fied in making any contract with lnem or granting any subsidy.
We decidedly think that partly owing to a sort of patriotic feeling, but more to
the misleading statements about a Government guarantee, the shareholders of the
Canadian Pacific are living in a fool's paradise ; for no reliance whatever is to be
placed upon the expectation of the line earning dividends upon its ordinary shares
for many years to come, and in the meantime the Directors are carrying out a policy
which will, sooner or later, bring the line to utter ruin. The value of a Three per
Cent. Annuity for five years is about ;^I3, and, as a speculative contingent stock,
the shares will always be worth something, but certainly not what they are at present
quoted at. In five years they will have to fight their own battle, and unless some-
thing out of the ordinary course occurs, it will be a very hard one.
THE CANADIAN PACIFIC RAILWAY.
{From the ^^ Bullwnisi" December i, 1888).
Since we made some remarks on this company in our issue of the lOth inst., we
have heard what the president, Mr. Van Home, has to say upon the present con-
33
lore to
[of the
to be
shares
policy
|ee per
stock,
jresent
some-
Ist., we
\t con-
dition and future prospects, and it is l)y no means reassuring to the shareholders. The
p>iblishe(l correspondence between this Rcnlleman and the managing director of the
Grand Trunk line only shows that the divergence of views existing cannot easily be
bridged over ; nor can we see how it is possible to come to any arrangement satisfac-
tory to both parties. What the Grand Trunk has it wishes to keep, and as a set-off
against what the Canadian Pacific diverts in its Eastern section, it asks a share of the
Western traffic.
We before referred to Sir Henry Tyler's words at the last general meeting of the
Grand Trunk Company, and although he spoke more in deprecation of the policy
pursued by the Canadian I'acilic, there was apparent a full recognition of the gravity
of the situation, and a well-fotnied opinion as to the policy to be pursued. From the
correspondence we see now that he might have said a great deal more, but he was
evidently influenced by the hope that matters might yet le arranged. Last Friday's
meeting at Montreal has dispelled this idea, and war to the knife is declared.
Hampered as it is by monetary difficulties, Mr. Van Home's Company is heavily
handicapped, while the Cirand Trunk has more resources and is unfettered in any
way, and besides this is actually independent of the other company. The proprietors
in England are only beginning to realise the situation. The assistance given by the
Dominion Government in guaranteeing the late loan was too dearly bought.
The assistance was perhaps absolutely necessary ; so was the mess of potage
to Esau. But a birthright once parted with cannot be recovered. What, after
all, have the Trunk people to gain from the Canadian Pacific that they cannot
get for themselves ? What the Canadian Pacific shareholders want is to get the
American traffic, as they have found that they cannot live and pay dividends out of
the traffics to be obtained in their own country, and in order to achieve this end they
are willing to sacrifice everything. The Grand Trunk has suffered enough in times
past to make itself,even without immediate competition,and in the process it has accu-
mulated a (nominal) capital of nearly ;^54,ooo,ooo. Of this more than one-half may
be fairly set down j.s absolutely non-dividend stock, and this for a line of 3,943 miles,
the whole of which runs through a district well settled, and the most pro-
ductive in the country. On the other hand we have the Canadian Pacific, of
4,660 miles, the greater part of which runs through the wilderness, and a capital
(nominal) of nearly ;^44,ooo,ooo. It is admitted even by the Company, that it is only
in the eastern section that it is able to earn anything beyond working expenses,
so that if it met with anything like retalialory competition from the Grand Trunk
what will the condition of the Canadian Pacific shareholders be ? If they are not
very careful as to what they do, they will be unable to meet even their preference
charges, and as these consist mainly of mortgage bonds upon different sections, the
result would be that the whole of the eastern section must fall to pieces like a
house of cards, and the Trunk Company would tap what it has so recklessly sown.
What does this eager desire to tap the American traffic mean ; is it a legiti-
m?ite fflbrt io get more business, or is it merely an insane attempt to injure
the Grand Trunk so as to force it to make terms? It would
almost appear to be the latter, as the Company has no outlet to
the sea on the Atlantic side of the Continent without passing over the Grand Trunk
or over an American road. A question that the shareholders should ask is by whom
is our line controlled, is it ife facto an American line, and to be used merely to
send traffic to the Vanderbilt Roads ? The company being registered in Canada, we
34
have no access to the register, even if that contain suflicient inforniation to enable the
i|iiestion to be answered. The company has deliberately entered upon a course which
it must follow to the end, and that end is certainly not what was contemplated by the
Dominion fiovernment when it granted the first charter and gave to it certain facilities
in the way of monopolies, land grants, and money. It may be noticed too, that, as
the company has extended itself in Ontario by .almost duplicating the Graml Tiunk
in every direction, the fostering hand of the (Government has been withdrawn, and
instead of free gifts, any assistance h.is been grudgingly given .ind repayment
rigidly enforced, and the cUause which gave them protection .ngainst American
or any other competition has been annulled. At the late (Irand Trunk
meeting, before meniioned, one of their shareholders brought down the house by his
vehement jmitcstatitms against the Dominion Government giving such favours to the
Canadian Pacific as they h.id done, and were supposed to further contemplate doing ;
and, the meeting showing great enthusiasm upon this point, Sir Henry Tyler, smiling,
endorsed it. But Sir Henry knew better than the indignar.t shareholder, and better
than we ourselves, that the assistance was a sham as regards the present and future.
He knows that the Canadian Pacific has had its cake, and has eaten it, and the
CJrand Trunk interest is quite strong enough in Canada to prevent a reckless dis-
tribution of cakes to rivals and competitors. Whether the fault of the inauguration of
a policy of active competition is to be laid to the one or the other, there can be no
doubt that it is the Canadian Pacific which began it by invading in every direction
the territory served by the Grand Trunk, while the latter has hardly moved out of its
w.ay to retaliate, except by affording to its customers greater facilities of transport
than they had before. And the cnly^rcply Mr. Van Home can make will be found
to be, what others in a like position have said before, '' We must live."
GRAND TRUNK AND CANADIAN PACIFIC.
{From "■'' HerapatlCs Journal i^ December r, 1888.)
The Prcsidcrt of the Canadian Pacific thinks Sir Henry Tyler's remarks re 'f^ft-
ing the Canadian Pacific at the recent Grand Trunk meeting "unfair and unreason-
able." He says the Grand Trunk Company were appro.iched three times regaiding
use of their line from London to Detroit without result, and at the last moment that
the Grand Trunk proposed impossible conditions as to the Canadian Pacific traffic
between Ontario points and the North-Wcst.
This, at first blush, looks a formidable indictment, but an examination of the
ccrrespondence and negotiations regarding the matters in dispute, running from the
beginning of June to the cloEC of October just past, leads to the conclusion that the
matter is very much the other way. The Grand Trunk appears throughout to be
actuated by motives of fairness, and to be desirous of peace, whilst the Canadian
Pacific, pursuing what it terms a " policy," seems to be in feverish haste to establish
monopolies and cherish exclusiveness.
The matters in immediate dispute are three in number, and arc very simple.
The two systems are now coming in close contact, and one of two things must happen
35
Ithat
laffic
the
the
the
be
Idian
|)Ush
Iple.
Ipen
They must interchange traffic or they must fight. There is no other logical result.
The Canadian Pacific, for instance, wants to get to Detroit, and it becomes a question
whether it shall reach it over the (Iram) Trunk system or by a line of its own. That
is the first point in the controversy. Again, by means of the recent acquisitions, the
(irand Trunk has good command of the Ontario traffic, and a good junction with the
Canadian Pacific at Nipissing Junction. It becomes a question whether the Canadian
Pacific shall avail in a friendly way of this means of communication or push into
Ontario itself and fight for traffic by building a line to Sudbury, practically patallcl to
the line the Grand Trunk has just ac(iuired. That is point number two. Then the
Canadian Pacific has an undoubtedly fine means of communication with the Western
and South-Western States of America by the Sault Stc. Marie route. lUit ihe Grand
Trunk can reach it too over the Nipissinj; Junction, and the third point in dispute is
whether the Canadian Pacific will allow the Grand Trunk to do this or compel the
Grand Trunk to protect itself as best it can by sending the Ontario traffic by other
means of communication.
Now toT Mr. Van Home's contenlions. lie seemed at the outset to recognise the
principle that it would be unwise for the Canadian Pacific to build a line of its own
from Londcn to Detroit, whilst the Grand Trunk had between the two jjlaccs 80
miles of double and 30 miles of single track. It became a question of price. Mr.
Ilickson asked a rental of $85,000 per annum; Mr. Home stuck to an ofl'er of
$65,000, although, on his own showing, it would cost his Company $100,000 a year
at least to provide the interest on the capital of the new line. Mr. Hickson could not
think of taking the inadequate rental of $65,000, but finally agreed to accept it on
condition that the two other points of difference referred to above wcie pushed on toa
settlement. Mr. Home had previously recognised the general principles affecting these
two disputes, an;l so the terms were entered on. As regards the Ontario traffic, the
Grand Trunk wanted free interchange of traffic at Nipissing Junction, differences and
terms to be referred to arbitration if necessary. This would not suit the Canadian Pacific.
They wanted what they termed an" exclusive agreement," which, translated into Saxon
English, means monopoly. i.Ir. Van Home virtually sold to Mr. Hickson, " Vouancl
I can club together and manage the Ontario trafTic for our own advantage ; we will
keep others out ; if you do not do this you will compel us to push into competitive
points into Ontario." Well, of course, Mr. Hickson scouted this suggestion, for the
proposal virtually meant that the Grand Trunk should shut out its allies in the United
States. Finally, as regards the Sault Sle. Marie question, the Canadian Pacific
refused to refer the matter to arbitration, and declined to formulate any counter
proposals. In his concluding letter, in fact, Mr. Van Home drops it out of sight
altogether, so that we may take it as granted that the only reply of the Canadian
Pacific to the eminently pacific proposals of the Grand Trunk is a threat to build a
line of its own from London to Detroit, and another from Toronto to Sudbury, a
denial of interchange of traffic at Nipissing Junction, and, of course, a similar negation
of use by the Grand Trunk of the Sault Ste. Marie route. This is what is meant by
the three fruitless attempts at negotiation ; by the springing of surprises on the part
of the Grand Trunk at the last moment by the unfair and misleading statements of
Sir Henry Tyler !
The question has a much wider aspect than a mere difference between the two
Companies. Both are systems in an important British dominion— the one exclusively
financed by Bri'.ish capital ; the other partially so, but largely subsidised by Imperial
i- I
36
money. Now the question is, will this Imperial money be brought into play to in-
jure English capitalists, especially when the pledges given to these capitalists have
been shamefully ignored ? That is a question for the Dominion Ciovernment, perhaps
for the Home authorities, slight as is the link now existing between the Dominion
Parliament and the Crown. The Canadian Pacific could not for a single day play the
part it does without State support. Mr. Van Home reminds Mr. llickson that he
can afford to build the parallel line from London to Detroit, because the Government
will give a subsidy of $192,000. Again, ihe Canadian Pacific comes to London for
money. Will English capitalists back up a policy so unfair, reckless and extravagant ?
It is something appalling to think of the demoralisation which would ensue
if the Grand Trunk and Canadian Pacific entered fairly on a war of
rates. It would cripple the Grand Trunk and ruin the Canadian
Pacific, already at its wit's ends to meet its fixed charges. And
what else can we expect it the Canadian Pacific goes on nursing what it terms a
•' policy "—building a line of no miles all for nothing, taking traffic from Toronto to
North Bay via Smith's Falls, 449 miles, rather than by the Grand Trunk route, 228
miles ; threatening to build a line bet veen Toronto and Sudbury, rather than give
and take with the Grand Trunk ; totally refusing to give the Grand Trunk access to
Sault Ste. Marie? And what answer does it give respecting all this perverse
extravagance ? Nothing, only that it has a policy, and that it knows its own interests
best. People here can judge too, and their verdict upon the whole business will be
that the Grand Trunk proposals were moderate, pacific, and (air. That the Canadian
/'acific attitude means a mingling of bluster, blundering, and menace. If they imagine
.iiey can keep all Canadian traffic on Canadian soil, and so give it an outlet solely by
the Eastern seaboard — that is what th'ey mean— they are mistaken. They have had
ori'i rebuff on this issue over the Red River question ; and :he practical reply of the
Grand Trunk and its allies will ultimately be no lesj decisive.
THE CANADIAN PACIFIC AND GRAND TRUNK RAILWAYS,
{From the "JirJhmy Times," Decemhet i, 1888.)
It might have, been expected that the adjournment of th; meeting called in
Montreal to consider the rash proposal of the President of the Canadian Pacific Rail*
way to make an independent line from London, in Ontario, to Detroit, at an
estimated cost of $2,300,000, and thus to parallel to a considerable extent the Grand
Trunk and Canada Southern systems, might have brought with it a less heated and
more intelligent view of the question, and have led to the adoption of counsels less
injurious to the real interests of the undertaking over which Mr. Home seems to exercise
influence of so doubtful a character. He would appear to have interpreted the con-
dition of the Canadian Pacific's incorporation, which forbade any fusion with the
Giand Trunk, £.s a distinct encouragement to thwart and oppose the latter on every
conceivable occasion, and to burden its own newly-fledged existence with responsi-
bilities conceived rather in the spirit of restless competition than of a due regard for
t'.eir adequate fulfilment. The challenge of Sir Henry Tyler, thrown down with
\
3;
cons'ulerable distinctness at the recent meeting of the proprietors, by which he un •
inistakably impressed upon them the inability of the Canadian Pacific to sustain
such additions to its existing liabilities, seems, however, to have been taken up
without parley or argument, and the proposed line to have been adopted by the
shareholders of the latter with a suspicious unanimity that places them at once
in the same category with others who are incorrectly supposed to control the erratic
tendencies of certam railway chairmen nearer home. On both sides of the Atlantic
the entire correspondence bearing on the subject has been givan to the respective
proprietaries, and covers ground extend-ng from June to October in the present year,
although in his earliest letter Mr. Van Home intimated that '"an hour " would suffice
to reach an unaerstanding as to the more pressing matters affecting the relations of
the two companies, of which the present question may presumably have been one.
The hour seems to have extended in the first instance to a matter of forty days,
at the close of which Mr. Van Home wrote curtly to Mr. Ilickson, that a
decision must at oncj be arrived at as to whether approach to Detroit by the
Canadian Pacific should be secured over the Grand Trunk or by its own line.
These negotiations had for their object the granting by the Grand Trunk of running
facilities to the Canadian Pacific over the line from London to Windsor on the
Detroit River, and the equivalent for such an arrangement was the rock on which
the discussion foundered. ¥qt this 80 miles of double and 30 miles of single trade
m the very highest state of efficiency, the Grand Trunk had estimated a rental of
$85,000 as a fairly reasonable price to pay, but this amount was ultimately waived
in favour of the smaller one of $65,000, on the positive statement by Mr. Van Home
that the cost of an independent line— previously estimated to involve an outlay of
$3,000,000— would not exceed an outlay of $2,300,000, the interest of which, at 4.3
per cent., would therefore be less than $loo,coo. On the other hand, the Grand
Trunk desired to have the user of the Pacific line from North Bay to Sault iSte.
Marie, and the interchange of traffic from Ontario at North Bay or Nipissing, the
point at which the newly acquired Northern of Canada section of the former line
connects with that of the Pacific ; but in deference to the urgent wish
of Mr. Van Home to have the question as to the London and Windsor
running agreement settled out of hand, Mr. Hickson had been willing
to refer those other matters to arbitration, although it was only
in September that Mr. Van Home discovered that this mode of settlement was
unacceptable, and intimated that the consideration of those points would involve so
much delay that his board had resolved to construct a line of its own from London to
Detroit. He had, indeed, suggested that the proposed interchange of traffic at North
Bay might be compensated by the Grand Trunk working exclusively with the Canadian
Pacific ior the North West and British Columbia traffic,which,however,as Mr. Hickson
had pointed out, was obviously impracticable in view of the Grand Trunk relations
with its American connections, with whom a very large business was already ex-
changed between other paints. When it is added that Mr, Van Home had sought
to stipulate that the eighteen months' notice of termination of the London Vv'indsor
lease should not preclude the building of an independent line during that period
if the Canadian Pacific desired to terminate it, we can scarcely resis*. the conviction-
taking all the circumstances as well as the lone of his correspondence into considera-
tion — that either he desired only to get the particular us^r of the Grand Trunk's line
to Detroit on as low terms as he possibly could, or had already determined to build
an independent line after going through the formality of prolonged discussion to which
38
■1'
he contemplated giving no serious eflect. In this way he hoped to mask the insidious
and aggressive nature of his tactics and to throw upon the Grand Trunk the odium
of not completing negotiations which he took care to render unacceptable, and there-
fore impracticable. Mr. Hickson seems only to have committed the fault of imagining
that he was treating with a negotiator in a like spirit of cood faith to himself, and his
able and candid letters, however strictly to the purpose of placing matters in their true
light, were thrown away upon such a litigant. Starting with a hard bargain, based
upon statistics v/hich have yet to be demonstrated, and, next, admitting every proposal
on the other side as a fair subject for discussion without contributing the slightest
practicable solution of the attendant difficulties, pleading haste on one point as
an excuse for not devotmg consideration to others, and finally shelving the whole
subject at the moment r,ost convenient to himself, Mr. Van Home seems to have
run over the entire gamut of disingenuous negotiation. It is an axiom of serious
business that no matters of importance can be hastily adjusted, which indeed too
often leads to the omission of momentous contingencies from adequate prevision
and settlement ; and hesitation on the part of a negotiator does not necessarily imply
his losing the game. As we have already sugt^ested, it remains to be seen whether
the projected line — if indeed ever made, as Mr. Hickson quietly says, within a
stone's throw of one of the best lines on the same ground— can be constructed for
$2,300,000 ; and, ne<t, whether the credit of the Canadian Pacific can survive to
raise that money even at the rate so exactly calculated of 4.3 per cent. Such would
not appear to be the view of that usually-disceining authority, the London Stock
Exchange, where the 8,ioo shares of the Canadian Pacific, after a steady and
prolonged decline, from 70 in January of last year to 57, less than a month ago,
dropped, on the intelligence of the present ill-fated policy being arrived at, to 52 —
the lowest point touched during 1887-88. In [the face of this pregnant fact it seems
idle for Mr. Van Home to enlarge, as he seems to have done at the Montreal
meeting, on the prosperity of the line, seeing, moreover, that he was constrained to
admit that from various causes the results of the year's working would fall short of
expectations, and that, in spite of an addition of 4 per cent, to its mileage — or 180
miles— the net receipts, over and above present fixed charges, would hardly exceed
those of last year. With such an experience it will be interesting to watch the
development of this latest stage of fatuity on the part of the CanadiiJii Pacific
executive, and to see to what greater lengths the possession of a three per cent,
terminable annuity from the Dominion Government seems likely to lead both the
railway and its backers in the shape of ultimate disaster.
A\
'f^'
'•■•»»,
i