(The following article by Andy Riga appeared on the Montreal Gazette’s website on June 3.)
MONTREAL — Canadian National Railway Co. walked away from negotiations to buy ONRail yesterday, saying the Ontario government demanded last-minute “public-sector-like job guarantees” for workers before it would agree to privatize the railway.
But Ontario’s northern development minister, Jim Wilson, says CN’s contention the province sprang the issue at the 11th hour is “not true.”
“It’s kind of unfair of them to spin it and say we changed our mind and we’re all over the board,” Wilson said in an interview. He said Ontario premier Ernie Eves made clear more than a year ago he wanted long-term job guarantees.
Montreal’s CN had been in exclusive talks to buy provincially owned ONRail since October.
CN’s offer price was not disclosed, but the railway had said it would spend $30 million to upgrade ONRail, which runs freight and passenger services over an 1,100-kilometre network in northeastern Ontario and a small portion of western Quebec.
OnRail, with about $50 million in annual revenue, is subsidized by Ontario taxpayers.
Last year, it lost $19.7 million. The railway is tiny compared with CN, which had sales of $6.1 billion in 2002.
“Late in the game, unfortunately, the government demanded job guarantees,” said CN spokesperson Mark Hallman.
Ontario wanted CN to keep a “specific employee count by riding for seven years,” meaning CN would maintain the same number of workers in each provincial riding where ONRail operates until 2010, he said.
“That would limit our ability to manage the enterprise,” Hallman added.
“We can’t predict where the economy’s going to be two, three, four, five, six years down the road. Certainly, not seven,”
ONRail has 800 employees, including engineers, conductors, track-repair workers and clerks.
CN had promised not to “do any immediate layoffs,” Hallman said, but he wouldn’t specify how long that commitment would last.
CN also said it would keep ONRail’s main repair shop in North Bay, Ont., open for the long term.
“We were going to commit to bring new work to that facility,” Hallman said.
CN initially negotiated with the Ontario Northland Transportation Commission, the provincial agency that runs ONRail.
Later, the “political masters” in the Ontario government took over the talks.
“It was at that stage, at the government level, that the job-guarantee issue was thrust on the table,” Hallman said.
Ontario Premier Ernie Eves is expected to call an election in the coming months.
But Wilson said the job issue is not related to the election, explaining Eves made it clear in April 2002 any company buying ONRail “would have to move work from other parts of Canada or the U.S. into our shops to make sure our people were working until such time as they naturally retired.”
CN initially offered two-year job guarantees, then last week upped that to three years, Wilson added.
“That’s hardly what the premier meant when he talked about job guarantees.”
The ONRail experience hasn’t soured CN Rail’s appetite for provincially owned railways. The company still plans to make a bid to operate B.C. Rail Ltd., owned by the B.C. government, Hallman said.
Unions in that province last week released a leaked B.C. Rail document suggesting if CN takes over, the company would slash almost 70 per cent of the railway’s work force and eliminate most head office functions.
CN stock jumped $1.26, to close at $70.20 on the TSX yesterday.