Grand Trunk Pacific Railway Reporting mark: GTP
By the late 1800s, the once mighty Grand Trunk Railway (GTR) was running low on steam. The GTR, which had been the dominant railway in central Canada since the 1850s, was beating off stiff competition from the Canadian Pacific Railway (CPR). The situation grew even more heated with the arrival of the Canadian Northern Railway (CNoR) in the early 1900s. The GTR began to fight back in the form of Charles Melville Hays, the new company president and saviour, recruited from the Wabash Railroad in 1896.
Hays began with major infrastructure improvements followed by an elegant new head office in Montreal. The final two pieces were the construction of five luxurious hotels and expansion of the GTR into western Canada.
Thirty years earlier, the GTR had spurned an offer from the Macdonald government to build a transcontinental railway to BC. Ironically, Hays now saw the west as their only route to growth and salvation.
Hays' assessment was completely accurate. Like the CNoR in Manitoba, the GTR was concentrated in central Canada with no place to expand. Unfortunately his assessment came about 10 years too late. By the time Hays arrived on the scene, the CNoR was well entrenched in Manitoba and rapidly expanding westward.
The CPR was the dominant player in the west. Fiercely protectionist and anti-competitive, the railway had begun to infuriate Alberta farmers with high prices and excessive quality control. From the government's perspective, increased competition was the best way to break the CPR's stranglehold.
Aside from the west, Wilfrid Laurier's government was eager to expand rail service into northern Ontario and Quebec. They saw this as a means of opening up the northern lands for development and driving more shipping to Quebec City and the Maritimes, home to their primary political base.
The government began by trying to initiate an "arrangement" between the GTR and CNoR. As it turned out, the GTR wasn't interested in any joint ventures with the CNoR, whom they considered a thorn in their side and unworthy of their time and attention. After a buyout offer was rejected, an enraged Hays vowed to crush his smaller rival.
With no other options available, the GTR turned to the government. They wanted a railway in the west and the government wanted one in the east. A partnership seemed like the ideal solution. In 1903 the two parties struck a deal where the government would build the National Transcontinental Railway and the GTR, the Grand Trunk Pacific Railway (GTP).
The two railways were built to operate as one. The NTR was to operate from Moncton to Winnipeg where it would connect with the GTP which would operate as far as Prince Rupert, BC. The government would handle all financing with loan guarantees to be provided by the GTR. Included in the package were a number of sweeteners, comparable to what the CPR received 20 years earlier. Upon completion, the NTR was to be leased back to the GTR which would operate both railways. Leasing fees were to be based on a percentage of the construction costs.
A magnificent Beaux-Arts railway terminal was opened in Winnipeg in 1911. Although owned by the CNoR, the station was operated as a union terminal for use by the CNoR, NTR and GTP. It was conveniently located across the street from the future site of one of the GTR's new luxury hotels, the Fort Garry.
The GTP began as a disaster waiting to happen. For starters, the CNoR already had an extensive network in Manitoba and was rapidly expanding westward. Traffic in the west was simply not sufficient to justify the construction of a third trunk line.
The GTR's plan called for the GTP to begin at North Bay so as to connect with its eastern lines. However opposition leader Robert Borden had already raised concerns that the GTR would bypass the NTR and route all ocean bound shipping out of Canada and into Portland, Maine. Consequently the agreement required that export traffic be routed through the Maritime ports, which was of little benefit to the GTR.
Common railway construction practises dictated that speculative lines were to be built with cost efficiency in mind. Traditionally lower grades and lower quality materials were used for the initial construction with the view that they could be upgraded once traffic and condition warranted. These were sound principles that had been utilized in both the construction of the CPR and the CNoR. That wasn't good enough for Hays who insisted that both the NTR and GTP be built using the highest grade materials available.
By 1908, cost overruns on the NTR were 100 per cent in excess of the original estimate. Contractually the specifications required the approval of both parties with construction, supervision, and inspection, being jointly handled. Although both the GTR and the government were well aware of the excesses, nothing was done to curtail the costs. Tragically Hays, who had been promoted to President in 1910, was lost in the Titanic disaster of 1912.
By 1915 the original estimate of $34,000 per mile had skyrocketed to $88,500. An inquiry into the cost overruns issued a damning statement to the effect that "the Transcontinental Railway Commission, the Grand Trunk Pacific and those having charge of the construction of the railway did not consider it necessary or desirable to practise or encourage economy in the construction of the road."
To compound the situation, the GTP was poorly planned. Nestled between the CNoR and CPR lines, it was simply a trunk line with virtually no feeders or branches. Nor was there any natural connection between the GTP and the GTR's more profitable lines in the east.
Although the GTR later complained bitterly about expansion and competition from the CPR and CNoR, the reality was that both these railways had charter rights to expand and made no secret of their intentions to do so. Why the GTR entered into such an agreement without obtaining the necessary guarantees and safeguards will never be known.
Negotiations between the government and the GTR had not been going well. The GTR, which was being described in the Canadian press as "uncompromising," was solely motivated by trying to get out of its financial obligations while at the same time trying to forge a sweet deal for its shareholders, much sweeter than it had been able to provide.
On February 28, 1919, the government announced it would have to suspend the cash flow unless the bargaining situation improved. The GTP then unwisely tried to force the government's hand by announcing it would suspend operations on March 10.
The government had enough. On March 10, 1919 they pounced in and forced the railway into receivership. By then the GTP's debt had swelled to more than $216 million (roughly $4.2 billion today). Interest payments alone were in arrears by more than $2 million. It was the end of the line for the GTP. In 1923 it became part of the newly formed Canadian National Railway (CN).
The GTP only operated for a scant five years. During the entire period it was running on a lifeline from the federal government. Had it never been conceived or built, it probably wouldn't have been missed. Ironically it went on to forever alter Canada's railway history. Today large portions of the GTP still remain in use by CN.