(The following article by Christopher Steiner of Medill News Service was posted on the Chicago Daily Herald website on October 19.)
CHICAGO — Invading from the North, the Canadian National Railroad Co. took over names long synonymous with Midwestern commerce. It first swallowed up the venerable Illinois Central Railroad in 1999, then Wisconsin Central Railroad Co. in 2001.
By snatching the tracks of these two Midwest giants, CN made itself the fifth largest North American railroad and the only one with service to the East, West and Gulf Coasts. In the IC takeover, the company acquired a major locomotive repair facility in Homewood, an immense yard in Harvey and a future chief executive officer.
E. Hunter Harrison, former CEO of the IC, ascended to CEO of CN earlier this year. He had been CN’s executive vice president and chief operating officer.
Although Chicago, once the linchpin of the American railroad business, lost its last railroad company headquarters, the mergers are proving highly successful from an operational standpoint.
What could have been a cumbersome combination, like the 1998 merger of the Union Pacific and the Southern Pacific that created horrendous traffic snarls, emerged instead as a seamless integration of three rail giants, says Tom Burnett, an analyst at Merger Insight, a Wall Street firm that tracks the economics of mergers.
“We think that they managed the overall process well and completed it on a reasonable schedule,” Burnett said. “It’s a well-run outfit and they have lived up to what they said they were going to do as far as keeping their mergers efficient and smooth.”
The company’s rail network forms a roughly scrawled “Y” on the continent, the nexus of which rests squarely in Chicago. Jumping on a CN car could land an unwary train-hopper in varied surroundings, from the sweltering Louisiana bayou to the towering rainforests of British Columbia.
CN operates two of Metra’s suburban Chicago lines, one that passes through Wheeling and Buffalo Grove on its way north to Antioch, and another that heads south to Joliet through Tinley Park.
CN’s 17,821 miles of track ramble through eight provinces and 14 states.
The company’s story parallels trends in the railroad industry generally, with mergers swelling already large companies and reducing regional railroads to endangered status.
Though it will always be an inherently Canadian operation, CN employs more than 750 people in the Chicago area.
Company-wide, Montreal-based CN employs more than 23,000 people, and its annual revenues top $3.5 billion.
Earnings for the second quarter were $175 million or 91 cents per diluted share compared with $201 million or $1 per share in the year-earlier period. Revenue fell to $1.05 billion from $1.12 billion.
When CN bought out Illinois Central in 1999, the Illinois railroad was the most efficient big line in the industry. That has transferred to CN, which now boasts a 69.4 percent ratio of operating expenses to revenues, lowest among major railroads and 10 points lower than the big railroad average.
That’s an impressive figure for what was a government-owned business less than 10 years ago. It was privatized in 1995 in the largest initial public offering in Canadian history.