Not for sale: CP to keep St. Lawrence & Hudson (January 1998)


What a difference a couple of years can make.

Citing "substantial financial improvement" and new opportunities in the U.S. Northeast, Canadian Pacific Railway officials say the railroad now plans to hang on to the St. Lawrence & Hudson Railway (StL&H), a road long-rumored to be on the sale block.

CP established Montreal-based StL&H as a separate company in 1995 as a means to "give a strong dedicated management team freedom to deal with the highly competitive eastern market" in Canada — and to give CP options if the StL&H didn't return to profitability, CP officials had said.

The railroad appears to be well on its way. In 1995, StL&H posted a loss of $45 million, prompting CP to consider selling or breaking up the railway. In 1997, StL&H — which operates CP's Montreal-Toronto-Chicago corridor and in the northeastern United States — should post operating income of about $70 million, says Terry Liston, director of corporate services at StL&H, which generates nearly one-fifth of CP's annual revenue.

The turnaround started with the transfer of underperforming feeder lines to short-line operators, a process that's paying off, Liston says.

StL&H also has "completely remapped" its network operational structure and developed new revenue sources, Liston says. Among them: introducing commuter rail service in the Montreal area and implementing Iron Highway technology. A joint marketing effort between CP and CSX Intermodal, Iron Highway technology is designed for short hauls and targets shippers now served by truck: a 1,200-foot deck of end-to-end loading spaces that can handle any combination of trailer length.

But StL&H employees played the most significant role in the railway's turnaround, Liston says.

"It's almost like 'Hogan's Heroes' — people in a situation where they thought they'd be sold off, but in a position where there's a certain freedom of action to do something," he says. "Drive, team spirit — anything you want to call it, that's the main element."

More opportunities may be on the way. In October, CP struck an access agreement with NS and CSX, should the two Class Is acquire Contrail.

Under traffic interchange and joint line marketing agreements, the Delaware & Hudson Railway (D&H) — and StL&H subsidiary — would have access to shippers in New Jersey, the Buffalo/Niagara Frontier area, the greater Philadelphia regions and other areas in the Northeast. D&H also would have access to shippers in New York City and Long Island. In return, CP would provide CSX with similar access to the Montreal market.

In another recent deal, StL&H agreed to move CSX's Sarnia, Ontario, traffic on StL&H lines between Chatham, Windsor and Niagara, Ontario, where it connects with CSX. The agreement gives CP its first-ever access to shippers in Sarnia, home to petrochemical processing and manufacturing facilities shippers.

StL&H remains on the self-examination path. It plans to develop a Network Management Center in Montreal, which could involve the transfer of up to 70 executive and unionized positions. StL&H also plans to partner with short lines to allow rolling stock to be maintained at reorganized shops in Montreal.

— Pat Foran, Managing Editor

Source: The January 1988 issue of Progressive Railroading