Hon. Lionel Chevrier (Minister of Transport):

Mr. Speaker, in my statement to the

house on Friday last, February 17, concerning the reduction in passenger train service on the Canadian National Railways, I made reference to a memorandum which had been given to me by Mr. Donald Gordon, president and chairman of the Canadian National Railways, as well as a letter of explanation given to me by Mr. Vaughan, the former president of the railway. In view of the comment that has appeared in a certain portion of the press I think I should read these documents to the house.

The memorandum prepared by Mr. Gordon reads as follows:

The significant events surrounding the development of a shortage of coal which forced the emergency reductions in passenger train service in the Canadian National Railway system are as follows:

1. The program for coal stocks approved by the board of directors at its meeting in October 1948 contemplated an objective of 2,365,000 tons as of December 31, 1949, about four and one-half months' supply. In actual fact, the stock position at December 31, 1949, was only 1,043,000 tons, which, taken in conjunction with a serious interruption of supplies arising out of labour disputes in United States mines, meant a condition of emergency with only twenty-four to twenty-six days' stockpile in the heavy traffic region.

2. If the stockpile objective as approved by the board of directors had been attained, a reduction in train service would not have been necessary unless there had been a complete interruption of supplies covering, say, a three or four months' period.

3. On June 9, 1949, Mr. R. C. Vaughan, as president, took responsibility for directing the purchasing department that the coal stockpile objective should not exceed approximately three months' supply, in the belief that, under normal conditions, such a supply would be ample.

Mr. Vaughan's judgment in making this amendment in the coal stockpile objective was based upon:

(a) a desire to reduce the financial cost of maintaining a large inventory, which already stood at $72 million, and to avoid the possibility of having to make further borrowings for working capital purposes;

(b) a belief that serious labour disputes in the United States mines would be avoided and that coal supplies were likely to be ample with prices likely to soften;

(c) the desirability of reducing expenditures in United States dollars as requested by government;

(d) the fact that traffic was showing a declining trend.

4. In the event, as is well known, there have been a series of work interruptions in U.S. mines as follows:

June 13, 1949: five-day work stoppage.

June 25, 1949: two weeks' vacation period.

July 11, 1949: three-day-a-week work program.

September 19, 1949: strike, fifty-one days.

December 1, 1949: walkout. Modified by resumption of a three-day-a-week program December 5.

January 3, 1950: wildcat strikes throughout

United States coal1 fields.

As well, unprecedented bad weather conditions resulting in floods and slides in the open pit mines seriously reduced production.

5. While orders for the purchasing of United States coal had been held to a minimum in accordance with government policy for the conservation of United States dollar expenditures, the actual orders placed for Canadian and United States coal jointly would have been sufficient to meet requirements if regular deliveries had been maintained from the United States mines. However, as a consequence of these work interruptions current shipments on orders to meet consumption could not be maintained, and the C.N.R. stockpile, which by December 28, 1949, had fallen to only 1,043,000 tons spread over the entire system, was not sufficient to take the risk of an extended interruption of coal deliveries.

6. The reduction in passenger train service put into effect totalled 89,000 miles, as follows:

Atlantic region 13,700

Central region 45,800

Western region 26,300

U.S. lines 3,200

-bringing about an estimated reduction in coal consumption of 1,010 tons per day. The number of train service employees affected by this reduction is estimated at 500.

7. In summary it seems clear that the work interruptions in the U.S. mines form the basic reason as to why the Canadian National Railways were unable to maintain coal supplies. Canadian coal is used on all Canadian regions, but the supply of usable Canadian coal available to the C.N.R. falls far short of meeting the over-all needs of the system, particularly in the central region. The development of the labour disputes in the U.S. mines and the interruption of coal deliveries found the C.N.R. in an inadequate stockpile position, and action had to be taken to conserve system stockpiles and use them to the best advantage so as to reduce public inconvenience to a minimum. While the stockpile at the end of the year still showed about fifty days' supply over the whole system, it was, of course, not spread evenly, and a critical area of shortage had developed in the heavy traffic central region; consequently, in order to prevent more drastic reduction in passenger service later on, Mr. R. C. Vaughan and the operating and the purchasing officers of the railway deemed it necessary as a precautionary measure to put the temporary twenty-five per cent passenger train reduction into effect, and it was considered only

84 HOUSE OF

Canadian National Railways

fair that all sections of Canada should be treated in the same way so far as that reduction was concerned.

That is the end of the memorandum prepared by Mr. Gordon.

Mr. Isnor:

What was the date of the memorandum?

Mr. Chevrier:

February 6. Now I shall read the letter from Mr. Vaughan to myself dated February 13, 1950:

Dear Mr. Chevrier:

On the eve of the opening of parliament I thought I would drop you a line to indicate the basic reasons which brought about the twenty-five per cent curtailment of passenger services on the Canadian National Railways as announced on December 28, 1949, just before the expiry of my term as chairman and president of the Canadian National Railways.

I have no doubt that the coal problem on the Canadiari National has given you considerable concern, and I am only too glad to take this opportunity of bringing to your attention that early in the month of June, 1949, instructions were given by me to the vice-president of purchases and stores to keep the coal stocks of the Canadian National Railways at approximately a three months' supply. That reserve I considered ample to meet any emergency such as work stoppages in the mines in the U.S. Over a period of thirty years three months' stock has been sufficient, and as a large part of the coal we use in Ontario comes from the U.S., we wanted to do our part in assisting to save the expenditure of United States dollars.

There is no need for me to bring to your attention the fact that there were many work stoppages, strikes, and diminishing hours of work in the coal industry in the U.S. during 1949. At no time in the history of this industry has such a situation occurred as prevailed during this last year. I would like to state that the one and only reason for the present coal situation as it affects the Canadian National was the inability to get delivery of the coal it contracted for early in the season of 1949 due to strikes and work stoppages in the mines in the United States in 1949.

It was unfortunate that stories carried the sugges-' tion that the management of the Canadian National was reducing passenger train services in order to bring about financial economies. I have noted the strong denials of Mr. Donald Gordon and yourself in the press on this matter, and I wish to add that this was furthermost from my mind when the management decided to curtail passenger services. All we were interested in was to conserve our fast dwindling coal stocks, and to prevent, if possible, a subsequent greater reduction in train service.

I regret that you were not advised, until after the notice was issued, of the reduction in train service. This was something that had to be dealt with quickly. We operate a substantial mileage in the United States. We knew that the situation there was desperate and that drastic action was to be taken by the interstate commerce commission of the U.S. to reduce train service. We were still getting a substantial tonnage of coal from the U.S., but not in anything like sufficient quantity to replenish our diminishing coalpiles, and we were fearful that if we did not take some action our coal deliveries would be interfered with because the U.S. railways had so much less coal on hand than we had. As you know the reduction in train service put into effect in the U.S. had greatly exceeded the cut made by us in Canada. We, of course, have had to follow the U.S. railroads on i

the lines we operate in the U.S., because that was brought about by an order of the interstate commerce commission. We were daily expecting, as were all the U.S. railroads, that the miners in the U.S. would be ordered back to work.

Sincerely yours,

R. C. Vaughan

Those documents speak for themselves, and I have nothing to add.

While I am on my feet, perhaps I might deal with two of the matters which came up at that time. The senior member for Halifax (Mr. Isnor) asked a question as to the proportion of United States and Canadian coal contained in the amount of 2,365,000 tons. The Canadian National Railway inform me that they have not that information, because it cannot be broken down in a satisfactory manner. I believe the information I have here, however, will satisfy my hon. friend, and will answer the question of the hon. member for Peel (Mr. Graydon).

The only information which the Canadian National has is as to the receipt of Canadian and United States bituminous coal. I have a break-down of those figures for five years. It is quite lengthy, but perhaps the house will allow me to give it for a year or two and table the remainder. If the house wishes, I can give the whole table.

In 1949 the total amount of the receipts of Canadian and United States bituminous coal was 5,100,000 tons. Of that, 2,000,000 tons was Canadian coal; 2,600,000 tons was United States coal for Canadian lines; and 500,000 tons was United States coal for United States lines. In 1948 the total was 7,500,109 tons. Of that total, 2,123,641 tons was Canadian coal; 4,584,594 tons was from United States mines for Canadian lines, and 791,874 tons was from United States mines for United States lines.

I could continue with the table, but I think that is sufficient.

Mr. Cold well: Will the minister put the rest of the figures on Hansard? The minister said he was going to table them.

Mr. Chevrier:

Yes; the remainder of the table deals with the years from 1945 to 1947, and if the house will allow I shall put it on Hansard.

Mr. Speaker:

Will the house permit the minister to put on Hansard the table to which he has referred?

Agreed.

Mr. Chevrier:

The table is as follows:

U.S. for u.s.

Canadian Can. for U.S.

coal lines lines Total 1949 (est.) .. 2,000,000 2,600,000 500,000 5,100,0001948

2,123,641 4,584,594 791,874 7,500,1091947

1,733,255 5,197,702 994,532 7,925,4891946

2,270,548 3,909,514 896,490 7,076,5521945

2,116,780 4,010,193 891,184 7,018,157

Mr. Graydon:

We are getting more from the United States than from our own mines?

Mr. Chevrier:

Yes. In the war years a large proportion of the coal for Canadian National Railways use came from the United States mines. It went as far east as Moncton, and as far west as Winnipeg.

Mr. Graydon:

Has it never occurred to the government that a Canadian-owned institution such as the Canadian National Railways could surely adopt some policy to utilize coal from Canadian mines, which would give employment to Canadian workers?

Mr. Chevrier:

It is and always has been the policy of the government to utilize Canadian coal to the fullest extent.

Mr. Graydon:

It has not worked out, though.

Mr. Chevrier:

I said during the war years it was impossible to get Canadian coal, and the house knows it; because even in certain parts of the maritime provinces it was necessary to haul United States coal. At the moment, and last year and the year before, the Canadian National Railways are purchasing as much coal as they can get from mines at both extremities of Canada.

Mr. Graydon:

Is the minister sure about that?

Oh, oh.

Mr. Graydon:

That is not my information.

Mr. Carroll:

I wish to ask one question of the Minister of Transport. Is he aware of the fact that in June and July of 1949 the railway attempted to cancel, and did cancel, a contract for 65,000 tons of coal-that is, a contract with them by the coal mining industry of the province of Nova Scotia; and the result was that it was necessary for the coal industry of that province to get the intervention of the Minister of Transport to have the contract renewed and fulfilled?

Mr. Graydon:

That is letting the cat out of the bag.