Canadian National Railway

Following CN's purchase of Illinois Central (IC) and a number of smaller US railways it also has extensive trackage in the central United States along the Mississippi River valley from the Great Lakes to the Gulf of Mexico. Today CN owns approximately 20,400 route miles (32,831 km) of track in 8 provinces (the only two not served by CN are Newfoundland & Labrador and Prince Edward Island), as well as a 70-mile (113 km) stretch of track into the Northwest Territories to Hay River on the southern shore of Great Slave Lake; it is the northernmost rail line anywhere within the North American Rail Network, as far north as Anchorage, Alaska. (although the Alaska Railroad goes further north than this, it is isolated from the rest of the rail network) The railway was referred to as the Canadian National Railways (CNR) between 1918 and 1960 and as Canadian National/Canadien National (CN) from 1960 to present.

The Canadian National Railway is a public company with 22,000 employees and market capitalization of 32 billion CAD in 2011. CN was government owned, having been a Canadian crown corporation. It was privatized in 1995.

History
The Canadian National Railways (CNR) was created in 1919 on June 6th, comprising several railways that had become bankrupt and fallen into federal government hands, along with some railways already owned by the government. In 1995, the federal government privatized CN. Over the next decade, the company expanded significantly in the United States, purchasing Illinois Central Railroad and Wisconsin Central Transportation, among others. Now primarily a freight railway, CN also operated passenger services until 1978, when they were assumed by Via Rail. The only passenger services run by CN after 1978 were several mixed trains (freight and passenger) in Newfoundland, and a couple of commuter trains on CN's electrified routes in the Montreal area. The Newfoundland mixed trains lasted until 1988, while the Montreal commuter trains are now operated by Montreal's AMT.

Creation of the company, 1918–1923
In response to public concerns fearing loss of key transportation links, the Government of Canada assumed majority ownership of the near bankrupt Canadian Northern Railway (CNoR) on September 6, 1918, and appointed a "Board of Management" to oversee the company. At the same time, CNoR was also directed to assume management of Canadian Government Railways (CGR), a system comprising the Intercolonial Railway of Canada (IRC), National Transcontinental Railway (NTR), and the Prince Edward Island Railway (PEIR), among others. On December 20, 1918, the federal government created the Canadian National Railways (CNR) - a title only with no corporate powers - through a Queen's Privy Council for Canada Order in Council as a means to simplify the funding and operation of the various railway companies. The absorption of the Intercolonial Railway would see CNR adopt that system's slogan The People's Railway.

Another Canadian railway, the Grand Trunk Pacific Railway (GTPR), encountered financial difficulty on March 7, 1919, when its parent company Grand Trunk Railway (GTR) defaulted on repayment of construction loans to the federal government. The federal government's Department of Railways and Canals took over operation of the GTPR until July 12, 1920, when it too was placed under the CNR. The Canadian National Railway was organized on October 10, 1922.

Finally, the bankrupt GTR itself was placed under the care of a federal government "Board of Management" on May 21, 1920, while GTR management and shareholders opposed to nationalization took legal action. After several years of arbitration, the GTR was absorbed into CNR on January 30, 1923. In subsequent years, several smaller independent railways would be added to the CNR as they went bankrupt, or it became politically expedient to do so, however the system was more or less finalized following the addition of the GTR.

Canadian National Railways was born out of both wartime and domestic urgency. Railways, until the rise of the personal automobile and creation of taxpayer-funded all-weather highways, were the only viable long-distance land transportation available in Canada for many years. As such, their operation consumed a great deal of public and political attention. Many countries regard railway networks as critical infrastructure (even to this day) and at the time of the creation of CNR during the continuing threat of the First World War, Canada was not the only country to engage in railway nationalization.

In the early 20th century, many governments were taking a more interventionist role in the economy, foreshadowing the influence of economists like John Maynard Keynes. This political trend, combined with broader geo-political events, made nationalization an appealing choice for Canada. The Winnipeg General Strike of 1919 and allied involvement in the Russian Revolution seemed to validate the continuing process. The need for a viable rail system was paramount in a time of civil unrest and foreign military intervention.

CNR Radio
In 1923 CNR's second president, Sir Henry Thornton who succeeded David Blyth Hanna (1919–1922), created the CNR Radio Department to provide passengers with entertainment radio reception and give the railway a competitive advantage over its rival, CP. This led to the creation of a network of CNR radio stations across the country, North America's first radio network. As anyone in the vicinity of a station could hear its broadcasts the network's audience extended far beyond train passengers to the public at large.

Claims of unfair competition from CP as well as pressure on the government to create a public broadcasting system similar to the British Broadcasting Corporation led the government of R.B. Bennett (who had been a corporate lawyer with Canadian Pacific as a client prior to entering politics) to pressure CNR into ending its on-train radio service in 1931 and then withdrawing from the radio business entirely in 1933. CNR's radio assets were sold for $50,000 to a new public broadcaster, the Canadian Radio Broadcasting Commission, which in turn became the Canadian Broadcasting Corporation in 1936.

Hotels
Canadian railways built and operated their own resort hotels, ostensibly to provide rail passengers traveling long distances a place to sleep overnight. These hotels became attractions in and of themselves - a place for a rail passenger to go for a holiday. As each railway company sought to be more attractive than its competitors, they made their hotels more attractive and luxurious.

Canadian National Hotels was the CNRs chain of hotels and was a combination of hotels inherited by the CNR when it acquired various railways and structures built by the CNR itself. The chain's principal rival was Canadian Pacific Hotels.

Pros and cons of nationalization
Regardless of the political and economic importance of railway transportation in Canada, there were many critics of the Canadian government's policies in maintaining CNR as a Crown corporation from its inception in 1918 until its privatization in 1995. Some of the most scathing criticism came from the railway industry itself&mdash;namely the commercially successful Canadian Pacific Railway (CPR), which argued that its taxes should not be used to fund a competitor. Some argue that the CPR could well afford to make this criticism, having been itself the child of government and recipient of wealth by virtue of land and resource grants, as well as its position as a monopoly from its completion in 1885 until the CNoR started operations on the Prairies at the turn of the century.

As a result of history and geography, the CPR served larger population centres in the southern Prairies, while the CNR's merged system served as a de-facto government colonization railway to serve remote and underdeveloped regions of Western Canada, northern Ontario and Quebec, and the Maritimes.

Also, CN was disadvantaged by being constituted from a hodge-podge of bankrupt rail systems that were not intrinsically viable, as they seldom had the shortest route between any major cities or industrial centres; to this day, CN has many division points far from significant industries or traffic sources. The only notable exception is the former Grand Trunk mainline between Montreal and Chicago.

The company also became a convenient instrument of federal government policy from the operation of ferries in Atlantic Canada, to assuming the operation of the narrow-gauge Newfoundland Railway following that province's entry into Confederation, and the partnership with CPR in purchasing and operating the Northern Alberta Railways.

CNR as a social and economic tool
It is generally accepted that government policy dictated CNR commercial decisions, whether such decisions were in the nation's interest, or in the political interest of the party in power. As such, CNR lost money for many years, except during the Second World War when its extensive network reaching into the resource hinterland proved beneficial, and during the late 1980s and early 1990s following deregulation of the Canadian railway industry. Where CNR failed to address costs was largely due to government interference, such as the requirement to purchase locomotives from all Canadian locomotive manufacturers, resulting in operational inefficiencies.

CNR was considered competitive with CPR in several areas, notably in Central Canada, prior to the age of the automobile and the dense highway network that grew in Ontario and Quebec. The former GTR's superior track network in the Montreal–Chicago corridor has always been a more direct route with higher capacity than CPR's. CNR was also considered a railway industry leader throughout its time as a Crown corporation in terms of research and development into railway safety systems, logistics management, and in terms of its relationship with labour unions.

Deregulation and recapitalization
Another problem that hobbled CNR was in the sheer number of low-volume branch railway lines, which did not produce sufficient traffic to pay for their operation. Without deregulation in the railway industry permitting abandonment or sale of a railway line, or even the ability to set prices to match those of trucks, both CNR and CPR paid dearly for owning these inefficient lines. One tactic that CNR perfected was to demarket a line by providing sufficiently poor service to its few customers, that those customers would turn to trucks for improved service and lower costs. Once customers ceased to exist on a small branch line, the federal government would permit the line's abandonment. Had deregulation been in place several decades earlier, it is conceivable that many Canadian branch lines would have been viable in the hands of short line operators, saving millions of dollars for taxpayers funding highways, since the railway lines had already been publicly funded in their construction.

From the creation of CNR in 1918 until its recapitalization in 1978, whenever the company posted a deficit, the federal government would assume those costs in the government budget. The result of various governments using CNR as a vehicle for various social and economic policies was a subsidization running into billions of dollars over successive decades. Following its 1978 recapitalization and changes in management, CN (name changed to Canadian National Railway, using the shortened acronym CN in 1960) started to operate much more efficiently, by assuming its own debt, improving accounting practices to allow depreciation of assets and to access financial markets for further capital. Now operating as a for-profit Crown corporation, CN reported a profit in 11 of the 15 years from 1978 to 1992, paying $371 million in cash dividends (profit) to the federal government during this time.

Cutbacks and refocusing
CN's rise to profitability was assisted when the company started to remove itself from non-core freight rail transportation starting in 1977 when subsidiary Air Canada (created in 1937 as Trans-Canada Air Lines) became a separate federal Crown corporation. That same year saw CN move its ferry operations into a separate Crown corporation named CN Marine, followed similarly by the grouping of passenger rail services (for marketing purposes) under the name Via-CN. The following year (1978), the federal government decided to create Via Rail as a separate Crown corporation to take over passenger services previously offered by both CN and CPR, including CN's flagship transcontinental train the Super Continental and its eastern counterpart the Ocean. CN Marine was renamed Marine Atlantic in 1986 to remove any references to its former parent organization. CN also grouped its money-losing Newfoundland operations into a separate subsidiary called Terra Transport so that federal subsidies for this service would be more visible in company statements.

CN also divested itself during the late 1970s and throughout the 1980s of several non-rail transportation activities such as trucking subsidiaries, a hotel chain (sold to CPR), real estate, and telecommunications companies. The biggest telecommunications property was a company co-owned by CN and CP (CNCP Telecommunications) that originated from a joint venture involving the railways' respective telegraph services. On its sale in the 1980s, it was successively renamed Unitel (United Telecommunications), AT&T Canada, and Allstream as it went through various owners and branding agreements. Another telecommunications property wholly owned and built by CN was the CN Tower in Toronto, which still keeps its original name but was divested by the railway company in the mid 1990s. All proceeds from such sales were used to pay down CN's accumulated debt. At the time of their divestitures, all of these subsidiaries required considerable subsidies, which partly explained CN's financial problems prior to recapitalization.

CN also was given free rein by the federal government following deregulation of the railway industry in the 1970s, as well as in 1987, when railway companies began to make tough business decisions by removing themselves from operating money-losing branch lines. In CN's case, some of these branch lines were those it had been forced to absorb through federal government policies and outright patronage, while others were from the heady expansion era of rural branchlines in the 1920s and early 1930s and were considered obsolete following the development of local road networks.

During the period starting in the late 1970s and throughout the 1980s and early 1990s, thousands of kilometres of railway lines were abandoned, including the complete track networks in Newfoundland (CN subsidiary Terra Transport, the former Newfoundland Railway ended railway freight operations and mixed freight-passenger trains in 1988. Mainline Passenger rail service in Newfoundland ended in 1969.) and Prince Edward Island (the former PEIR), as well as numerous branch lines in Nova Scotia, New Brunswick, Southern Ontario, throughout the Prairie provinces, in the British Columbia interior, and on Vancouver Island. Virtually every rural area served by CN in some form was affected, creating resentment for the company and the federal government. Many of these now-abandoned rights-of-way were divested by CN and the federal government and have since been converted into recreational trails by local municipalities and provincial governments.

CN's U.S. subsidiaries prior to privatization
CN's railway network in the late 1980s consisted of the company's Canadian trackage, along with the following U.S. subsidiary lines: Grand Trunk Western Railroad (GTW) operating in Michigan, Indiana, and Illinois;  Detroit, Toledo and Ironton Railroad (DTI) operating in Michigan and Ohio; Duluth, Winnipeg and Pacific Railway (DWP) operating in Minnesota; Central Vermont Railway (CV) operating down the Connecticut River valley from Quebec to Long Island Sound; and a former GT line to Portland, Maine, known informally as the Grand Trunk Eastern, sold to a short-line operator in 1989.

The US subsidiaries kept their identities due to their ownership. Legally, foreign governments were not allowed to own railroads in the US. However, a railroad owned by another railroad was allowed to operate, even if that "other railroad" was owned by a foreign government.

Privatization
In 1992 a new management team led by ex-federal government bureaucrats, Paul Tellier and Michael Sabia, started preparing CN for privatization by emphasizing increased productivity. This was achieved largely through aggressive cuts to the company's bloated and inefficient management structure, widescale layoffs in its workforce and continued abandonment or sale of its branch lines. In 1993 and 1994 the company experimented with a rebranding that saw the names CN, Grand Trunk Western, and Duluth, Winnipeg, and Pacific replaced under a collective CN North America moniker. During this time, CPR and CN entered into negotiations regarding a possible merger of the two companies. This was later rejected by the federal government, whereby CPR offered to purchase outright all of CN's lines from Ontario to Nova Scotia, while an unidentified U.S. railroad (rumoured to have been Burlington Northern Railroad) would purchase CN's lines in western Canada. This too was rejected. In 1995, the entire company including its U.S. subsidiaries reverted to using CN exclusively.

The CN Commercialization Act was enacted into law on July 13, 1995, and by November 28, 1995, the federal government had completed an initial public offering (IPO) and transferred all of its shares to private investors. Two key prohibitions in this legislation include, 1) that no individual or corporate shareholder may own more than 15% of CN, and 2) that the company's headquarters must remain in Montreal, thus maintaining CN as a Canadian corporation.

Retraction and expansion since privatization
Following the successful IPO, CN has recorded impressive gains in its stock price, largely through an aggressive network rationalization and purchase of newer more fuel-efficient locomotives. Numerous branch lines were shed during the late 1990s across Canada, resulting in dozens of independent short line railway companies being established to operate former CN track that had been considered marginal. This network rationalization resulted in a core east-west freight railway stretching from Halifax to Chicago and Toronto to Vancouver and Prince Rupert. The railway also operated trains from Winnipeg to Chicago using trackage rights for part of the route south of Duluth.

In addition to the retraction in Canada, the company also expanded in a strategic north-south direction in the central United States. In 1998, during an era of mergers in the U.S. railway industry, CN purchased the Illinois Central Railroad (IC), which connected the already existing lines from Vancouver, British Columbia to Halifax, Nova Scotia with a line running from Chicago, Illinois to New Orleans, Louisiana. This single purchase of IC transformed CN's entire corporate focus from being an east-west uniting presence within Canada (sometimes to the detriment of logical business models) into a north-south NAFTA railway (in reference to the North American Free Trade Agreement). CN is now feeding Canadian raw material exports into the U.S. heartland and beyond to Mexico through a strategic alliance with Kansas City Southern Railway (KCS).

In 1999, CN and BNSF, the second largest rail system in the U.S., announced their intent to merge, forming a new corporate entity North American Railways, headquartered in Montreal to conform to the CN Commercialization Act of 1995. The merger announcement by CN's Paul Tellier and BNSF's Robert Krebs was greeted with skepticism by the U.S. government's Surface Transportation Board (STB), and protested by other major North American rail companies, namely Canadian Pacific Railway (CPR) and Union Pacific Railroad (UP). Rail customers also denounced the proposed merger, following the confusion and poor service sustained in southeastern Texas in 1998 following UP's purchase of Southern Pacific Railroad (SP). In response to the rail industry, shippers, and political pressure, the STB placed a 15-month moratorium on all rail industry mergers, effectively scuttling CN-BNSF plans. Both companies dropped their merger applications and have never refiled. The roadblock dates back to the Carnegie era "robber barons" when the concept of "anti-trust" was born. Therefore, when it comes to railroad mergers, the federal government is more rigid than usual.

After the STB moratorium expired, CN purchased Wisconsin Central (WC) in 2001, which allowed the company's rail network to encircle Lake Michigan and Lake Superior, permitting more efficient connections from Chicago to western Canada. The deal also included Canadian WC subsidiary Algoma Central Railway (ACR), giving access to Sault Ste. Marie and Michigan's Upper Peninsula. The purchase of Wisconsin Central also made CN the owner of EWS, the principal freight train operator in the United Kingdom.

On May 13, 2003, the provincial government of British Columbia announced that the provincial Crown corporation, BC Rail (BCR), would be sold with the winning bidder receiving BCR's surface operating assets (locomotives, cars, and service facilities). The provincial government is retaining ownership of the tracks and right-of-way. On November 25, 2003, it was announced that CN's bid of $1 billion CAD would be accepted over those of CPR and several U.S. companies. The transaction was closed effective July 15, 2004. Many opponents – including CPR – accused the government and CN of rigging the bidding process, though this has been denied by the government. Documents relating to the case are under court seal, as they are connected to a parallel marijuana grow-op investigation connected with two senior government aides also involved in the sale of BC Rail.

Also contested was the economic stimulus package the government gave cities along the BC Rail route. Some saw it as a buy-off to get the municipalities to cooperate with the lease, though the government asserted that the package was intended to promote economic development along the corridor. Passenger service along the route had been ended by BC Rail a few years earlier due to ongoing losses resulting from deteriorating service. The canceled passenger service has recently been replaced by a blue-plate tourist service, the Rocky Mountaineer, with fares well over double what the BCR coach fares had been.

CN also announced in October 2003 an agreement to purchase Great Lakes Transportation (GLT), a holding company owned by Blackstone Group for $380 million USD. GLT was the owner of Bessemer & Lake Erie Railroad, Duluth, Missabe and Iron Range Railway, and the Pittsburgh & Conneaut Dock Company. The key instigator for the deal was the fact that since the Wisconsin Central purchase, CN was required to use Duluth, Missabe and Iron Range Railway trackage rights for a short 17 km (11 mi) "gap" that existed near Duluth, Minnesota on the route between Chicago and Winnipeg. To purchase this short section, CN was told by GLT that it would have to purchase the entire company. Also included in GLT's portfolio were 8 Great Lakes vessels for transporting bulk commodities such as coal and iron ore as well as various port facilities. Following Surface Transportation Board approval for the transaction, CN completed the purchase of GLT on May 10, 2004.



On December 24, 2008, the STB approved CN's purchase for $300 million of the principal lines of the Elgin, Joliet & Eastern Railway Company (EJ&E) (reporting mark EJE) from US Steel Corp originally announced on September 27, 2007. The STB's decision was to become effective on Jan. 23, 2009, with a closure of the transaction shortly thereafter. The EJ&E lines create a bypass around the western side of heavily congested Chicago-area rail hub and its conversion to use for mainline freight traffic is expected to alleviate substantial bottlenecks for both regional and intercontinental rail traffic subject to lengthy delays entering and exiting Chicago freight yards. The purchase of the lightly used EJ&E corridor was positioned by CN as a boon not only for its own business but for the efficiency of the entire US rail system.

On December 31, 2011, CN completed the merger of Duluth, Missabe and Iron Range Railway Company; Duluth, Winnipeg and Pacific Railway Company; and Wisconsin Central Ltd. into its Wisconsin Central Ltd. subsidiary.

CN today


Since the company operates in two countries, CN maintains some corporate distinction by having its U.S. lines incorporated under the Grand Trunk Corporation for legal purposes, however the entire company in both Canada and the U.S. operates under CN, as can be seen in its locomotive and rail car repainting programs.

Since the Illinois Central purchase in 1998 CN has been increasingly focused on running a "scheduled freight railroad/railway", meeting on-time performance with rail industry-leading consistency. This has resulted in improved shipper relations, as well as reduced the need for maintaining pools of surplus locomotives and freight cars. CN has also undertaken a rationalization of its existing track network by removing double track sections in some areas and extending passing sidings in other areas.

CN is also a rail industry leader in the employment of radio-control (R/C) for switching locomotives in yards, resulting in reductions to the number of yard workers required. CN has frequently been touted in recent years within North American rail industry circles as being the most-improved railroad in terms of productivity and the lowering of its operating ratio, acknowledging the fact that the company is becoming increasingly profitable. Due to the rising popularity of ethanol, shuttle trains, and mineral commodities, CN Rail Service is increasing in popularity.

Recent controversies
In December 1999 the Ultratrain, a petroleum products unit train linking the Levis (Quebec) Ultramar oil refinery with a petroleum depot in Montreal, exploded when it derailed and collided with a freight train travelling in the opposite direction between Sainte-Madeleine and Saint-Hilaire-Est, south of Montreal, killing the crew of the freight train. The train derailed at a broken rail caused by a defective weld; the report by the Transportation Safety Board of Canada called into question CN's quality assurance program for rail welds as well as the lack of detection equipment for defective wheels. In memory of the dead crewmen, two new stations on the line have been named after them (Davis and Thériault).

About 9:04 a.m. central standard time on February 9, 2003, northbound Canadian National freight train M33371 derailed 22 of its 108 cars in Tamaroa, Illinois. Four of the derailed cars released methanol, and the methanol from two of these four cars fueled a fire. Other derailed cars contained phosphoric acid, hydrochloric acid, formaldehyde, and vinyl chloride. Two cars containing hydrochloric acid, one car containing formaldehyde, and one car containing vinyl chloride released product but were not involved in the fire. About 850 residents were evacuated from the area within a 3 mi radius of the derailment, which included the entire village of Tamaroa. Improper placement of bond wire welds on the head of the rail just outside the joint bars, where untempered martensite associated with the welds led to fatigue and subsequent cracking that, because of increased stresses associated with known soft ballast conditions, rapidly progressed to rail failure.

On May 14, 2003, a trestle collapsed under the weight of a freight train near McBride, B.C., killing both crew members. Both men had been disciplined earlier for refusing to take another train on the same bridge, claiming it was unsafe. It was revealed that as far back as 1999, several bridge components had been reported as rotten, yet no repairs had been ordered by management. Eventually, the disciplinary records of both crewmen were amended posthumously.

Controversy arose again in Canadian political circles in 2003 following the company's decision to refer solely to its acronym "CN" and not "Canadian National", a move some interpret as being an attempt to distance the company from references to "Canada". Canada's Minister of Transport at the time called this policy move "obscene" after nationalists noted it could be argued the company is no longer Canadian, being primarily owned by American stockholders. The controversy is somewhat tempered by the fact that a majority of large corporations are being increasingly referred to by acronyms. Despite this, the company is still legally called the Canadian National Railway.

In March 2004 a strike by the Canadian Auto Workers union showed deep-rooted divisions between organized labour and the company's current management.



The residents of Wabamun Lake, in Alberta, staged a blockade of CN tracks in August 2005, when they were unsatisfied with CN's response to a derailment catastrophe that spilled over 700,000 Litres of tarry fuel oil and about 80,000 L of carcinogenic pole treatment oil into the lake. Reporters found pre-spill evidence, and CN executives admitted, that CN failed to provide public safety information to prevent public exposure to carcinogenic, toxic chemicals. The tar-like oil and chemicals killed well over 500 large migratory birds, many animals, fish and other aquatic life. It will take many years for the lake to recover.

On August 5, 2005, a CN train had nine cars derail on a bridge over the Cheakamus River, causing 41,000 litres (11,000 US gal) of caustic soda to spill into the river, killing thousands of fish by caustic burns and asphixiation. The CBC reported environmental experts say that it would take the river 50 years or more to recover from the toxic pollution. The Cheakamus River used to have a vibrant fishing tourism industry, which now faces an uncertain future. CN is facing accusations from local British Columbians over the rail line's supposed lack of response to this issue, touted as the worst chemical spill in British Columbia's history.

Transport Canada has restricted CN to trains not exceeding 80 car lengths because of the multiple derailments on the former BCR line north from Squamish. CN had been allegedly running trains in excess of 150 cars on this winding and mountainous section of track.

A further derailment at Moran, twenty miles (32 km) north of Lillooet, on June 30, 2006, has raised more questions about CN's safety policies. Two more derailments, days apart, near Lytton in August 2006 have continued criticism. In the first case, 20 coal cars of a CPR train using a CN bridge derailed, dumping 12 cars of coal into the Thompson River. In the second case half a dozen grain cars spilled on a CN train.

Two CN trains collided on August 4, 2007, on the banks of the Fraser River near Prince George, BC. Several cars carrying gasoline, diesel and lumber burst into flames. Water bombers were used to help put out the fires. Some fuel had seeped into the Fraser River.

On December 4, 2007, a CN train derailed near Edmonton in Strathcona County, Alberta, at 3:30 a.m Mountain Standard Time. Of the 28 cars derailed, most of them were empty or carrying non-hazardous materials such as lumber or pipes.

A "culture of fear"
In response to such high-profile derailments, the federal minister of transportation created an advisory panel to review the Railway Safety Act in February 2007. The panel's report in March 2008 identified a culture of fear and discipline at CN in particular that undermines the safety management system (SMS) that was introduced in 2001 to give rail companies more responsibility over safety.

"CN's strict adherence to a rules-based approach, focused largely on disciplinary actions when mistakes are made, has instilled a ‘culture of fear and discipline’ and is counter to an effective safety management system. CN needs to acknowledge this openly and take concrete steps to improve," stated the panel.

The goal of the safety management system was to move away from a compliance approach and toward a proactive approach in which companies assess and mitigate risks on their own initiative. The concept as applied to railways was born during the 1994 review of the Railway Safety Act and amendments to act were introduced in 1999 that added requirements for railway companies to develop and implement safety management systems.

"The key for railway companies was to become more proactive, to refine their abilities to identify hazards, and to assess and mitigate risks. The need for companies to build a safety consciousness into their day-to-day operations was of paramount importance. This represented a shift from the traditional reactive approach of considering what had happened in a post-accident environment", stated the panel's report.

The effectiveness of SMS depends on the safety culture within the organization. That's defined as a culture where safety is entrenched in the thinking of managers and employees alike, where open communication allows comparison and improvement of ongoing practices. It also depends on employee involvement, who can be "a company's prime source of information for the identification of hazards and assessment of mitigation strategies."

However, the panel heard "...from many railway employees who felt neither involved nor informed about their company's safety management system. Rather, employees often described their organizational culture in such a way that the Panel could not reconcile it with an effective safety culture."

The panel cited the example of passenger rail company Via Rail to illustrate a safety culture needed for SMS. Via's implementation of SMS is successful because the company makes safety management important to all employees. While there are certain cardinal rules that lead to disciplinary action if broken, Via also has processes to build openness and trust between managers and employees. "For instance, employees are observed at regular cycles, and corrective coaching takes place immediately when errors are observed," the panel report noted.

In contrast, CN manages safety through an "antecedent, behaviour and consequences" process, which the panel said is based on a traditional rule and discipline model. It quoted United Transportation Union leader Sylvia Leblanc's description of CN's attitude towards safety as one that "seems to be ‘blame and punish’ instead of ‘educate and correct.’ Frequently, employees involved in accidents… are simply blamed for errors without followup or root cause investigation. They are then punished without any other corrective action taken on the part of the railway to prevent reoccurrences."

A management culture that relies on discipline, or threat of discipline, to enforce rules has "a tendency to instil fear, and to stifle employee participation and reporting," the panel report stated. "A significant mistrust of management develops. People stop communicating — and that can have a detrimental impact on safety."

Members of the Board
David G. A. McLean, O.B.C., LL.D. Chairman of the Board Canadian National Railway Company Chairman of the Board and Chief Executive Officer The McLean Group Vancouver, BC Committees: 2, 3(C), 4, 6, 7, 8

Michael Ralph Armellino, CFA Retired Partner The Goldman Sachs Group, LP Fort Lee, New Jersey Committees: 2, 5, 6, 7(C), 8

A. Charles Baillie, O.C., LL.D. Former Chairman and CEO The Toronto-Dominion Bank Toronto, ON Committees: 2(C), 3, 6, 7, 8

Hugh J. Bolton, FCA Chairman of the Board EPCOR Utilities Inc. Edmonton, AB Committees: 1, 5, 6, 7, 8

Donald J. Carty, O.C., LL.D. Retired Vice-Chairman and Chief Financial Officer Dell, Inc. Dallas, TX Committees: 1, 2, 3, 7

Ambassador Gordon D. Giffin Senior Partner McKenna, Long & Aldridge Atlanta, GA Committees: 2, 4, 5, 7, 8

Edith E. Holiday Corporate Director and Trustee, Former General Counsel, United States Treasury Department and Secretary of the Cabinet The White House Washington, D.C. Committees: 2, 3, 6, 7, 8

V. Maureen Kempston Darkes, O.C., D. Comm., LL.D. Retired Group Vice-President General Motors Corporation and President GM Latin America, Africa and Middle East Miramar, FL Committees: 1, 5(C), 6, 7, 8

The Honourable Denis Losier, P.C., LL.D. President and Chief Executive Officer Assumption Life Moncton, NB Committees: 1(C), 4, 5, 6, 7

The Honourable Edward C. Lumley, P.C., LL.D. Vice-Chairman BMO Capital Markets South Lancaster, ON Committees: 2, 3, 6, 7, 8(C)

Claude Mongeau President and Chief Executive Officer Canadian National Railway Company Montreal, QC Committees: 4(C), 7

James E. O'Connor Former Chairman and CEO Republic Services, Inc. Fort Lauderdale, FL Committees: 1, 2, 5, 7

Robert Pace President and Chief Executive Officer The Pace Group Halifax, NS Committees: 1, 3, 6(C), 7, 8

Committees: 1.Audit 2.Finance 3.Corporate Governance and Nominating 4.Donations and Sponsorships 5.Environment, Safety and Security 6.Human Resources and Compensation 7.Strategic Planning 8.Investment Committee of CN's Pension Trust Funds (C) denotes chairman of the committee ..

Heads of CNR

 * Henry Thornton 1922-1932 as President
 * David G. A. McLean 1994–present as Chair

Passenger trains
When CNR was first created, it inherited a large number of routes from its constituent railways, but eventually pieced its passenger network into one coherent network. For example, on December 3, 1920, CNR inaugurated the Continental Limited, which operated over four of its predecessors, as well as the Temiskaming and Northern Ontario Railway. The 1920s saw growth in passenger travel, and CNR inaugurated several new routes and introduced new services, such as radio, on its trains.

The growth in passenger travel ended with the Great Depression, which lasted between 1929 and 1939, but picked up somewhat during World War II. By the end of World War II, many of CNR's passenger cars were old and worn down. Accidents at Dugald, Manitoba, in 1947 and Canoe River, British Columbia, in 1950, wherein extra passenger trains composed of older, wooden equipment collided with transcontinental passenger trains composed of newer, all-steel equipment, demonstrated the dangers inherent in the older cars. In 1953, CNR ordered 359 lightweight passenger cars, allowing them to re-equip their major routes.

On April 24, 1955, the same day that the CPR introduced its transcontinental train The Canadian, CNR introduced its own new transcontinental passenger train, the Super Continental, which used new streamlined rolling stock. However, the Super Continental was never considered as glamourous as the Canadian. For example, it did not include dome cars. Dome cars would be added in the early 1960s with the purchase of six former Milwaukee Road "Super Domes". They were used on the Super Continental during the summer tourist season.

Rail passenger traffic in Canada declined significantly between World War II and 1960 due to automobiles and airplanes. In the 1960s, CN's privately owned rival CPR reduced its passenger services significantly. However, the government-owned CN continued much of its passenger services and marketed new schemes, such as the "red, white and blue" fare structure, to bring passengers back to rail, and by branding express trains in the Ontario–Quebec corridor with the Rapido label.

In 1968, CN introduced a new high-speed train, the United Aircraft Turbo, which was powered by gas turbines instead of diesel engines. It made the trip between Toronto and Montreal in four hours, but was not entirely successful because it was somewhat uneconomical and not always reliable. The trainsets were retired in 1982 and later scrapped at Naporano Iron and Metal in New Jersey. In 1976, CN created an entity called Via-CN as a separate operating unit for its passenger services. Via evolved into a coordinated marketing effort with CP Rail for rail passenger services, and later into a separate Crown corporation responsible for inter-city passenger services in Canada. Via Rail took over CN's passenger services on April 1, 1978. CN continued to fund its commuter rail services in Montreal until 1982, when the Montreal Urban Community Transit Commission (MUCTC) assumed financial responsibility for them; operation was contracted out to CN, which eventually spun off a separate subsidiary, Montrain, for this purpose. When the Montreal–Deux-Montagnes line was completely rebuilt in 1994–1995, the new rolling stock came under the ownership of the MUCTC, until a separate government agency, the Agence métropolitaine de transport (AMT), was set up to consolidate all suburban transit administration around Montreal. Since then, suburban service has resumed to Saint-Hilaire.

On CN's narrow gauge lines in Newfoundland, CN also operated a main line passenger train that ran from St. John's to Port aux Basques called the Caribou. Nicknamed the Newfie Bullett, this train ran until June 1969. It was replaced by the CN Roadcruiser Buses. The CN Roadcruiser service was started in fall 1968 and was run in direct competition with the company's own passenger train. Travellers saw that the buses could travel between St. John's and Port aux Basques in 14 hours versus the train's 22 hours.

With the demise of the Caribou in June 1969, the only passenger train service run by CN on the island were the mixed (freight and passenger) trains that ran on the Bonavista, Carbonear and Argentia branch lines. The only passenger service surviving on the main line was between Bishop's Falls and Corner Brook. Terra Transport would continue to operate the mixed trains on the branch lines until 1984. The main line run between Corner Brook and Bishop's Falls made its last run on September 30, 1988.

Terra Transport/CN would run the Roadcruiser bus service until March 29, 1996. The Bus service was sold off to DRL Coachlines of Triton, Newfoundland.

Since acquiring the Algoma Central Railway in 2001, CN has operated passenger service between Sault Ste. Marie and Hearst, Ontario. As well, CN operates the Agawa Canyon Tour excursion, an excursion that runs from Sault Ste. Marie, Ontario, north to the Agawa Canyon. The canyon tour train consists of up to 28 passenger cars and 2 dining cars, the majority of which were built for CN by Canadian Car and Foundry in 1953–54. These cars were transferred to Via Rail in 1978 and bought by the Algoma Central Railway in the 1990s. A "Snow Train" tour is also offered during the fall and winter season.

Since CN acquired BC Rail in 2004, it has operated a railbus service between Seton Portage and Lillooet, British Columbia.

CN crews used to operate commuter trains on behalf of GO Transit in the City of Toronto and the surrounding vicinity. This changed in 2008 when a deal was reached with Bombardier Transportation that switched all CN crews for Bombardier crews.

Steam
The CNR acquired its first 4-8-4 Confederation locomotives in 1927. Over the next 20 years, it ordered over 200 for passenger and heavy freight service. The CNR also used several 4-8-2 Mountain locomotives, almost exclusively for passenger service. No. 6060, a streamlined 4-8-2, was the last CN steam locomotive, running in excursion service in the 1970s. CNR also used several 2-8-2 Mikado locomotives.

Electric
CN inherited from the Canadian Northern Railway several box-cabs electric used through the Mount Royal Tunnel. Those were built between 1914 and 1918 by General Electric in Schenectady, New-York. To operate the new Montreal Central Station, which opened in 1943 and was to be kept smoke-free, they were supplemented by nearly identical locomotives from the National Harbour Board; those engines were built in 1924 by Beyer-Garratt and English-Electric. In 1950, three General Electric center-cab electric locomotives were added to the fleet. In 1952 Electric Multiple Units (EMUs) were also added. The EMUs were built by the Canadian Car and Foundry Company in Montreal.

Electrification was restricted to Montreal, and went from Central Station to Saint-Lambert (south), Turcot (west), Montréal-Nord (east) and Saint-Eustache-sur-le-lac, later renamed Deux-Montagnes, (north). But as steam locomotives gave way to diesels, engine changeovers were no longer necessary, and catenary was eventually pulled from the west, east and from the south. However until the end of the original electrification, CN's electric locomotives pulled Via Rail's trains, including its diesel electric locomotives, to and from Central Station.

The last 2,400 V DC CN electric locomotive ran on June 6, 1995, the very same locomotive that pulled the inaugural train through the Mount Royal Tunnel back in 1918. Later in 1995 the AMT's Electric Multiple Units began operating under 25 kV AC electrification.

Diesel
In 1929, the CNR made its first experiment with diesel electric locomotives, acquiring two from Westinghouse, numbered 9000 and 9001. It was the first North American railway to use diesels in mainline service. These early units proved the feasibility of the diesel concept, but were not always reliable. No. 9000 served until 1939, and No. 9001 until 1947. The difficulties of the Great Depression precluded much further progress towards diesel locomotives. The CNR began its conversion to diesel locomotives after World War II, and had fully dieselized by 1960. Most of the CNR's first-generation diesel locomotives were made by General Motors Diesel (GMD) and Montreal Locomotive Works.

For its narrow-gauge lines in Newfoundland CN acquired from GMD the 900 series, Models NF110 (road numbers 900-908) and NF210 (road numbers 909-946). For use on the branch lines, CN purchased the EMD G8 (road numbers 800-805).

For passenger service the CNR acquired GMD FP9 diesels, as well as CLC CPA16-5, ALCO MLW FPA-2 and FPA-4 diesels. These locomotives made up most of the CNR's passenger fleet, although CN also owned some 60 RailLiners (Budd Rail Diesel Cars), some dual-purpose diesel freight locomotives (freight locomotives equipped with passenger train apparatus, such as steam generators) as well as the locomotives for the Turbo trainsets. Via acquired most of CN's passenger fleet when it took over CN passenger service in 1978.

The CN fleet consists of 1548 locomotives, most of which are products of either General Motors' Electro-Motive Division (EMD), or General Electric/GE Transportation Systems. Some locomotives more than 30 years old remain in service.

Much of the current roster is made up of EMD SD70I and EMD SD75I locomotives and GE C44-9W locomotives. Recently acquired are the new EMD SD70M-2 and GE ES44DC.

Beginning in the early summer months of 2010, CN purchased a small order of GE C40-8's and GE C40-8W's from Union Pacific and BNSF Railway, respectively. The intent was to use them as a cheaper power alternative. CN has stayed firmly committed to conventional direct-current traction motors, instead of the new alternating-current motors being used by many railways in heavy-haul service.

CN locomotives have long featured unique features, unlike the stock EMD and GE locomotives. CN introduced a wide-nosed four window Comfort Cab, the predecessor to the now standard North American Safety Cab, which is now standard on new North American freight locomotives.
 * Comfort cab

After a BC derailment, CN introduced ditch lights, lights mounted on or just below the anti-climbers on the front pilot of a locomotive. These are arranged in a "cross-eyed" configuration, to make trains more visible at grade-crossings, and to give better visibility around curves. Since then, ditch lights have become standard features on all North American locomotives.
 * Ditch lights

CN continued to use class lights on its locomotives for many years, up to as recently as the C40-8M and SD60F (which feature red, green and white class lights), and the first order C44-9WL locomotives which retained white class lights. More recently, CN has had red marker lights installed on their ES44DC and SD70M-2 locomotives, for use when the locomotives are in DPU service.
 * Class and Marker lights

CN's first few orders of ES44DC's, like their C44-9W's, feature "tear-drop" windshields, windshields with the outer lower corner dropped (like earlier SD70Is) as opposed to the standard rectangular GE windshield, to allow for better visibility.
 * Windshields

The first order of SD70M-2 locomotives had their headlights mounted on the cab, while the second order (8800 series) dropped the headlight to the nose, and also features added red marker lights mounted above the windshields on the cab.
 * Headlights

While many railroads have ordered new "desktop" controls, where the controls are arranged on a desk&mdash;CN returned earlier than most to the conventional control stand that most locomotive engineers prefer, which features a stand to the side of the engineer with controls that stick out horizontally. This arrangement makes reverse operation easier, and allows engineers to "put their feet up," without feeling stuck at a desk all day.
 * Control stands

CN's General Motors SD50F, SD60F, and General Electric C40-8M feature a full-width car body that is tapered to allow for better rear visibility. This is referred to as a "Draper taper" after its creator. The first order of the GE C44-9 (2500–2522) was also initially an order for 18 locomotives with the full-width Draper Taper car body. They were changed to a standard long hood with a CN-style 4-window cab and the order was increased to 23 locomotives at the same price.
 * Car body

Overseas intermodal containers

 * 20-foot (6.1 m) containers
 * 40-foot (12 m) containers
 * 45-foot (14 m) containers

North American intermodal containers

 * 48-foot (15 m) containers
 * 48-foot (15 m) heater/reefer containers
 * 50-foot (15 m) reefer/heater containers(modified 48)
 * 53-foot (16 m) containers
 * 53-foot (16 m) heater/reefer containers

Container chassis

 * Max Atlas # 40-foot (12 m) to 53-foot (16 m) extendable container chassis
 * Di-Mond 40-foot (12 m) to 53-foot (16 m) extendable container chassis

Major facilities
CN owns a large number of large yards and repair shops across their system, which are used for many operations ranging from intermodal terminals to classification yards. Below are some examples of these.

Active hump yards
Hump yards work by using a small hill, over which cars are pushed before being released down a slope and switched automatically into cuts of cars, ready to join into outbound trains. CN's active humps include:
 * Toronto, Ontario: MacMillan Yard
 * Winnipeg, Manitoba: Symington Yard
 * Memphis, Tennessee: Harrison Yard

Other major yards

 * Calgary, Alberta: Sarcee Yard
 * Champaign, Illinois: Champaign Yard
 * Chicago, Illinois: Glenn, Homewood, Kirk and Markham Yards
 * Dartmouth Nova Scotia: Dartmouth Yard
 * Saskatoon, Saskatchewan: Chappell Yard
 * Edmonton, Alberta: Walker Yard
 * Battle Creek, Michigan: Battle Creek Yard
 * Flat Rock, Michigan: Flat Rock Yard
 * Levis, Quebec: Joffre Yard
 * Moncton, New Brunswick: Gordon Yard
 * Halifax Nova Scotia: Rockingham Yard
 * Montreal, Quebec: Taschereau Yard
 * Fond du Lac, Wisconsin: Shops Yard
 * New Orleans, Louisiana: Mays Yard
 * Vancouver, British Columbia: Thornton Yard
 * Windsor, Ontario: Van de Water Yard

Intermodal terminals

 * Auburn, Maine: terminal serviced the St. Lawrence & Atlantic Railroad
 * Calgary, Alberta
 * Chicago, Illinois
 * Detroit, Michigan
 * Edmonton, Alberta
 * City of Halifax|Halifax, Nova Scotia
 * Gulfport, Mississippi
 * Jackson, Mississippi: terminal owned by the Kansas City Southern Railway
 * Memphis, Tennessee
 * Mobile, Alabama
 * Moncton, New Brunswick
 * Montreal, Quebec
 * New Orleans, Louisiana
 * Prince George, British Columbia
 * Prince Rupert, British Columbia
 * Saskatoon, Saskatchewan
 * Toronto, Ontario: main terminal is located at Brampton, Ontario, as well as a smaller ramp and Roadrailer service at MacMillan Yard
 * Vancouver, British Columbia
 * Winnipeg, Manitoba