EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, May 31, 1995

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[English]

The Chairman: Good afternoon, colleagues. The committee will resume consideration of Bill C-89, an act to provide for the continuance of the Canadian National Railway Company under the Canada Business Corporations Act and for the issuance and sale of shares of the company to the public, also known as the CN Commercialization Act.

Joining us today from Transport 2000, we have a couple of familiar faces, Mr. Harry Gow, the Vice-President; and Bob Evans, Immediate Past President. I guess Mr. Glastonbury won't be with you today.

Welcome, Mr. Gow and Mr. Evans. I suppose you have a report. We're looking for a statement from you gentlemen, then we'll go to some questions from the members.

[Translation]

Mr. Harry Gow (Vice-President, Transport 2000 Canada): We decided to make our presentation in English, but you will find the highlights in a short summary of our brief in French.

Thank you for the opportunity to present the views of Transport 2000 Canada.

Transport 2000 Canada does not think that the privatization of CN - taken in isolation - is a deciding factor in the health of the Canadian transportation industry. We have already mentioned to the Nault Committee that the major issue is not whether CN's property is owned by Canadians or Americans. It is much more important for Canada and for Canadians that the government take action to change the preconceptions imposed by governments that are detrimental to the rail industry, and ensure that the interests of shippers, travellers and taxpayers are fulfilled.

[English]

Mr. Bob Evans (Immediate Past President, Transport 2000): Thanks, Harry.

Thank you for the opportunity to present the views of Transport 2000.

I will start by saying that Transport 2000 does not believe that the privatization of CN by itself is all that important for the Canadian transportation climate. As we said some months ago before the Nault committee, whether CN is owned by the government, individuals, Americans, or little green gnomes, that is not our primary concern.

We suggest what is far more important to Canada and Canadians is whether the government will act now to take steps to correct the current government-induced biases against the rail industry while also ensuring that shipper and taxpayer interests are respected.

I believe we must tell you frankly that we at Transport 2000 are rather bemused by all the attention being directed to the question of CN's future ownership while the truly important decisions about the rules and procedures that CN and all other railways will have to play by are seemingly being confirmed in secret. In our view, what really counts is what the government is going to do to the National Transportation Act.

With your indulgence, I propose to say little about CN in isolation. Rather, I want to address the future climate in which all Canadian railroads will have to function. Before doing that, I'd like to make some observations on why this latter issue is of such great concern to our association.

You may have wondered why I came in with a yardstick. Geographically, Canada is a very unique country. Populated Canada is 8,000 kilometres long and only about 300 kilometres wide. If I take a yardstick and hold it roughly that way, that is the relative dimension of the country in which 99% of us live. It's a very strange layout, geographically.

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For years, in order to keep this country intact, successive Canadian governments have felt it essential to act against the natural pull of that friendly giant immediately to the south of us in order to help keep this country intact. At Transport 2000, we are worried about the present government still believes in the stimulation of east-west links.

Also, in a number of developed countries - Germany and Japan particularly come to mind - transportation systems are regarded as key underpinnings of the free enterprise economy that warrant continuing significant government intervention and support. In Canada, we fear that we're moving toward a position such that our transportation resources are seen as just another part of the free enterprise system to be allowed to stand or fall on the judgment of those involved in private profit.

At Transport 2000, we fear that the new National Transportation Act could move this country to a laissez-faire approach to rail policy. In turn, we fear that laissez-faire policy will ultimately and inexorably lead to such results as: the abandonment of both CN and CP lines across northwestern Ontario in favour of freight movements via Chicago; serious declines in the viability of our east and west coast ports - we're aware, when we raise some of these concerns, that we're obviously not alone; an increasing dependence on a foreign country even for moving goods between different parts of Canada; declining transportation choices and quality within Canada; and increasing costs on taxpayers as the movement of goods and people becomes further dependent on publicly-funded roads.

With all that, we fear negative impacts on our very sense of nationhood. I'll come back to this and the rather strange country that we are.

There will be, and that's fine, situations in which rail line abandonment is in the best interests of all concerned. We at Transport 2000 have no objection to improving efficiency whereby rail lines that are no longer relevant are discontinued, provided the public interest is not compromised. Moreover, we welcome a simplification of the process to establish short-line railroads. But there has to be more to the new transportation act than just offering a simple way for our rail carriers to get out of business.

I will now talk about some solutions we hope to see. I will address the three elements that Transport 2000 views as essential if our railroads are going to optimize their contribution to Canada's economic, environmental and social objectives.

First, I will comment on the need to level the competitive playing field by recognizing the full costs of the various modes and by attacking the current situation whereby governments - the plural is deliberate - tax railroads and subsidize trucking.

I will then talk about the need to ensure that any new business freedoms allowed to the railroads will come with conditions to guarantee that the fundamental interests of shippers, communities, regions and the general public are not unfairly overridden.

Finally - you may have heard a little less on this, but I don't know - I will make some reference to the protection we feel may be required to guarantee the fair treatment of VIA Rail in the changing climate.

In the view of Transport 2000, the first requirement is for the federal government to encourage a climate that allows the railroads to realize their full potential in ways that effectively contribute to the prosperity of this country.

To ensure a climate that offers more to the rail industry than just the prospect of simplified line abandonments, we will be looking at the new transportation act with great interest to see what it offers in the terms of the correction of the unfair taxing of railroads - we're thinking especially of fuel and property taxes - and the correction of the current subsidization of trucking services.

Much of Transport 2000's thinking on the subject is influenced by the knowledge of actions in certain European countries in which charges have been levied to have shippers, rather than taxpayers, pay the respective environmental, accident and congestion costs incurred by road and rail operations.

I presume you will not be surprised when I add that these external costs are considerably higher for road services.

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Transport 2000 member Darrell Richards, whom a number of you know, is a transport consultant. His company has produced a highly documented report on the recognition and employment of the relative external costs of the road and rail modes. We will be very pleased to make a copy of this report available to the committee. I have a copy with me.

Another avenue to a fairer treatment, possibly, of rail relative to road, might lie in the creation, as has happened in several other developed countries, of a government-owned rail infrastructure company that would lease operating rights to private railroads.

It's certainly an interesting concept. To start with, we would then have both rail and trucking routes in the public domain.

Let me comment now on the second requirement, as we see it, for the kind of rail transportation climate Canadians should expect. Frankly, we would like the government's forthcoming changes to the National Transportation Act to be so positive in their implications for the rail industry that the industry will have a substantially diminished need for rail line abandonments.

However, to the extent that the closure of some rail lines remains an essential element for the industry's health, we have, as I've already indicated, no objection to this being carried out in a businesslike manner. That's provided - with a capital ``P'' if you like - there are mechanisms in place to ensure that such abandonment actions do not do unacceptable harm to the public interest.

We will look to the new national transportation act to provide for some kind of notice of rail line abandonment intent, some sort of opportunity for complainants to come forward, and some sort of process for the public airing of their concerns and government intervention, if needed.

What might be in the public interest? We suggest that rail line abandonment hearings should be mandatory if the scheduled train passenger service would be affected, and if there are demonstrably serious concerns about harm to the environment, an important shipper or to regional development.

Finally, this is our third point. We will expect the government to act to protect VIA's interests in the forthcoming environment of a totally privatized rail industry operating under new rules. We have already suggested that all line abandonments affecting scheduled passenger train services be subject to public hearings. We are aware that a number of VIA trains operate on lines which may be - these are all CN lines, with one exception, which is CP - prime candidates for abandonment under a liberalized regulatory structure.

We can cite, for example, the routes serving Gaspé, Lévis, Churchill, and Vancouver Island.

Additionally, we believe it's very important for VIA to not be totally abandoned to the mercy of the privatized rail freight industry. We believe the federal government must take steps to ensure that VIA is fairly treated in terms of the costs it pays for the use of freight railroad lines and facilities.

Also, there needs to be some assurance of the quality of service those railroads provide to VIA in terms of train speeds and in terms of on-time performance, etc. We would also expect the federal government to take steps to allow VIA to operate, where it may be appropriate, over short-line railroads.

In conclusion, let me simply state that, in today's context, we have to assume that there may be a temptation for the government to simply wash its hands of all responsibility and cast CN and the other railroads free to do more or less whatever they want. But we suggest that the rail industry deserves more than that; it needs your help to address the unbalanced playing field.

We believe that shippers and travellers deserve more than that. They want an adequate rail system. We think that taxpayers deserve more than that. They do not want to see federal policy simply translating into higher provincial and municipal taxes to deal with increased road and environmental damage.

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The Chairman: Mr. Evans, thank you very much for your submission from Transport 2000.

Just as a comment, from the outset, Transport 2000 had a concern about what will happen with the burdensome regulations associated with rail transportation in the country and, in particular, the amendments that will be put by the government. Just to rest your mind and that of Transport 2000, you know there will be the opportunity for Canadians and organizations, such as Transport 2000, to reappear before us when those amendments come forward and that there will be a process that will be followed.

[Translation]

Mr. Guimond (Beauport - Montmorency - Orléans): Mr. Gow, Mr. Evans, thank you for your presentation. I would first like to say that I would like to have a copy of Mr. Richards' report. I don't know whether my colleagues also want a copy of it. If you do not send it to us through our clerk, I would certainly appreciate your sending it directly to me.

As our Chairman said, most of your brief is on the amendments to the National Transportation Act. So I will take this opportunity to ask you a question. On May 15, Mrs. Greene, from Transport Canada, tabled the document entitled Proposals for Rail Renewal and Transportation Regulatory Reform. Are you familiar with that discussion paper, and did anyone ask for your advice?

Mr. Evans: We saw the Nault Committee's report.

Mr. Guimond: That's not what I am asking about.

Mr. Gow: No, no one asked for our views on that particular document.

Mr. Guimond: Have you seen Transport Canada's proposals for rail renewal?

Mr. Gow: Only in memo form.

Mr. Guimond: So no one from Transport Canada asked for your advice.

Mr. Gow: Very early on in the process, there were requests for information and participation. To be very honest with you, I do not recall getting very involved, but I do know there were various requests for participation, for example, on the safety regulations.

There were other requests afterwards, but it was a long time ago and I could not tell you exactly what we said.

Mr. Guimond: I'm not sure that I fully understand your brief. You say it does not really matter whether CN is owned by Americans, Canadians or little green gnomes. Is Bill C-89 a good bill? Is the government wise to go ahead with it? Will everything be protected, Canadian controlled, etc.? What do you think of Bill C-89?

I don't want to insult you, but it would appear you think the answer would be regulations, amendments to the National Transportation Act.

Mr. Evans: Absolutely. The first Canadian railway extending from one ocean to the other was private. It was Canadian Pacific. However, there were some government regulations. Governments had a lot of say in the company's operations.

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You have to accept the fact that the global trend right now is toward privatizing national airlines and railways.

The most important thing is for the government to maintain sufficient control over those services on behalf of Canadian citizens. One way to do so is to have a nationalized company. Another way would be to have privatized companies while at the same time imposing stringent enough regulations to respond to people's needs. When a private company can do something that is not in the public's interest, the government can intervene.

So, the important factor is not whether CN is privatized or remains a Crown corporation. What is important is that Canadian regulations on transportation services reflect the needs of the Canadian public.

Mr. Guimond: Again, Mr. Evans, I am not disputing what you are saying. I have a great deal of respect for Transport 2000, because you play a pivotal role. Even if the global trend is toward privatization, that does not necessarily mean it is good for Canada and Canadians. The rest of the world may be more right-winged, but that is not necessarily good for society. It fosters intolerance of immigrants, etc.

I am asking you a very specific question. Does Transport 2000 support Bill C-89 and the privatization of CN?

Mr. Evans: Transport 2000 is quite supportive of this bill. We do not object to it. We were not necessarily in favour of privatizing CN, but we are not vehemently opposed to it. We accept it.

We probably would not have come here to recommend its privatization, but since it is inevitable, given the government's fiscal situation and what is happening in the rest of the world, Transport 2000 is willing to accept that development on condition the government maintains some control on behalf of Canadians.

Mr. Guimond: You played a leading role in Canada, especially in areas pertaining to VIA Rail's passenger service. We know VIA Rail was created after CN and CP stopped transporting passenger. Is there any guarantee that the new Canadian National, that will not necessarily have the same raison d'être, will be as flexible as VIA Rail?

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Mr. Evans: It is a very good question. In the United States, Amtrak works only with private companies. Apart from Amtrak, railway companies in the United States are private but Amtrak can count on a certain legislative protection, for example in terms of the fees for the use of tracks, etc.

You are probably aware of the position Transport 2000 has held for some time on the necessity for legislation on VIA Rail Canada since currently there is none. That kind of protection does not exist and it is lacking. We have included that in our remarks on VIA.

[English]

The Chairman: Mr. Evans, does Transport 2000 believe there's room in this country for two competitive railway companies?

Mr. Evans: I would say yes at this stage. We don't necessarily place ourselves as the expert, but we would say we're not convinced there isn't room yet. Let me put it that way. I'm sorry to skate a little bit.

Mr. Gouk (Kootenay West - Revelstoke): I have just a few comments, gentlemen. You mentioned, I would presume somewhat facetiously, that you don't care if it's the government, Canadians, Americans, or little green gnomes. I have a concern that it not remain in government hands. That's simply because some of the inequities we're concerned about upon the sale of it, such that it doesn't compete unfairly with other companies and thus distort the market, are already happening now. It has been bailed out four times in its history. This would likely continue because it isn't acting on market forces.

On the second page, you mention your concern about the abandonment of lines through northwestern Ontario by both CN and CP . Are you suggesting a different route that they would take by going through the States, whether it goes through Sarnia or whatever the crossing point is, and then back up into the prairies later on?

Mr. Evans: That's right. They already exist.

There are some potential problems in terms of volume. Basically, you're talking about a lot of traffic moving through Chicago. Chicago rail yards are like O'Hare Airport: they're crowded. However, things change.

First, both railways have routes already there. CN, in conjunction with Soo Line, can take traffic out of eastern Canada, through Windsor-Detroit, all the way across the prairies, into the United States and back into Canada, if they want to send it back into Canada, near Moose Jaw. CN has running rights on Burlington Northern between Chicago and Duluth. Of course, they own the Duluth-Winnipeg Pacific Railway between Duluth and Winnipeg. CN has its own track from Sarnia through to Chicago. So CN has a through line already, and a lot of traffic is moving that way.

Say I'm an investor in this railway and they're free to send the traffic any way they want in an environment in which the depreciation rules, the taxation situation, etc. are much more attractive in the United States so they cost the shipping through the United States. Say the laws of the land don't prohibit me from sending all my traffic that way. Say I can deal with the Chicago traffic problem, and so on and so forth. Let's allow for the next recession, for example. There has to be a great temptation to not keep those lines through northwestern Ontario.

Mr. Gouk: I can see where there's some concern there, but I think that's the kind of thing we're going to have to address by simply removing the impediments that are already in the way of rail that you alluded to throughout your briefing, rather than through legislation requiring rail companies to -

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Mr. Evans: That's fine if we can have a strong rail industry because of positive things, provided it's strong and acting in the public interest.

Mr. Gouk: I think these are things we're going to have to look at. That, in itself, is a bit beyond C-89. Obviously, there's an interconnection. That's why I questioned why you said you were surprised about the fuss over the privatization of CN. I think it's very important, and it's something I've been pushing for a long time.

Hopefully, the other part won't be conducted in secret. Groups like yours will be consulted. In keeping with that and with what my colleague from the Bloc said, I also would like a copy of the book. I suspect that all those in the committee would appreciate receiving that for their perusal.

The only other thing I wanted to ask you about was your comment on diminishing the needs and the pressure for rail line abandonment. Are you suggesting just the devolution of the main companies from the operation of these lines?

I think there's probably a great need for rail line abandonment. What we have to work on are the impediments to short-line operations that could very profitably take those over, which would make the whole industry viable.

Mr. Evans: In my terminology, transferring a line to a short line is not an abandonment.

Mr. Gouk: I know it has already been asked, but do you have any specific objections to C-89? Is there anything specifically in that legislation that you have a problem with? You said you didn't endorse it, but you weren't going to storm the gates on it.

Mr. Evans: I'm not sure I'm answering your question directly, but I'd come back to the concerns about VIA. If you have a privatized CN, will they be tempted to say - this is because it will be a monopoly situation, that you must pay their price or you can't ride on their tracks? Unless that's addressed someway or another -

Mr. Gouk: Perhaps there could be something like a running rights kind of thing under the regulation that will be examined afterward with the NTA.

Mr. Evans: Let me give you a tangible example. There are essentially two rail lines between Montreal and Toronto. There's a CN double-track line and a CP single-track line. What if the two privatized railways decide to get together and say that they can run all their freight on just the CN line? Good idea. But there's small problem maybe: there would be no room left for VIA. Perhaps part of the deal would be to abandon the CP line, or they would say that VIA can run on the CP single-track line. Now way. VIA trains are going to take six hours again instead of four.

Mr. Gouk: Should one of the two private rail companies subsidize VIA?

Mr. Evans: My alternative is for us to recognize the total costs, including the road damage, the environment, and all the relevant costs of the all the modes, and establish VIA's logical position on that basis, not on a bookkeeping basis.

Mr. Gouk: So we're back with the running rights.

Mrs. Wayne (Saint John): It's nice to see you again. What is Transport 2000's position in regard to the privatization of CN? With CP already being a private company, how do you see this affecting our ports throughout Canada? Do you think CN will focus on U.S. ports, such as New York, rather than on promoting the ports in eastern Canada? I'm specifically looking at Saint John, Halifax and the eastern ports.

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Mr. Evans: Our concern is that unless the privatization of CN is offset with assurances in the regulation of the transport industry in Canada, which is the central point of our paper, and if we get into a sort of laissez-faire environment, with the tendency to send traffic into the United States, it would be very natural to see an increased use of the ports of San Francisco and Seattle on the west coast, and Philadelphia on the east coast, and so on.

[Translation]

Mr. Guimond: I do not want to get into a constitutional debate. I am trying to stay away from that. Did you read subsection 16.(1) of the bill? It reads as follows:

16. (1) The railway and other transportation works (in Canada) of CN - are hereby declared to be works for the general advantage of Canada -

You know that right now, the short lines come under provincial jurisdiction. Does this clause as worded - you are not necessarily lawyers; I believe Mr. Gow teaches criminology - mean that even short lines could come under federal jurisdiction even if they are located entirely within a provincial territory if they are declared to be for the general advantage of Canada? Do you see a problem with this? Had you seen this? Had you thought about it?

Mr. Gow: We are not sure. It is difficult to interpret. Right now, if a short line receives a VIA train, it could become a work for the general advantage of Canada and could thus be subject to the Canada Labour Code. This could cause problems. It was one of the problems encountered with the sale of Canadian Atlantic Railway.

This problem seems to endure and we think that the committee should examine ways of preventing short lines receiving a VIA train from becoming automatically subject to the Canada Labour Code.

Mr. Guimond: With this clause, does a short line that does not have passengers, such as the Murray Bay in my riding, become -

Mr. Gow: It could possibly present a problem. We believe that it would be in the committee's interest to obtain independent legal advice about this. I read the clause and I wondered about the same thing, but not being a lawyer, I was not able to answer this adequately. You are not the first to ask me this question.

Mr. Guimond: Thank you.

[English]

The Chairman: Gentlemen, thank you very much for your submission and for answering our questions. We appreciate it.

We welcome representatives of the Canadian Auto Workers to the table. Abe Rosner is the national staff representative of the rail division of the Canadian Auto Workers. Mr. Rosner, maybe you can introduce the individuals you brought with you today.

Mr. Abe Rosner (National Staff Representative, Rail Division, Canadian Auto Workers): It will be my pleasure. Dennis Wray from Winnipeg is the regional vice-president of Local 100 of the CAW. John Moore-Gough is the president of Local 100 of the CAW. Jo-Ann Hannah is a national staff representative from the research department of our Toronto office.

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I should explain that Local 100 is one of the locals representing our CN membership. It's the biggest, and it basically represents the shopcraft population that works in the repair shops.

The Chairman: Do you have a submission you'd like to read us before we ask some questions?

Mr. Rosner: Yes. I will just begin on page 1, which is a quotation:

Without a doubt, Canada requires a first-rate transportation system that is able to service every region. The federal government must play a role in maintaining and developing that network. Yet, it remains to be seen whether the damage wrought by the Conservatives' policies of massive deregulation of the transportation sector can be completely undone. Their continued tolerance of rail line abandonments and consideration of proposals for the privatization of CN Rail have done nothing to improve the situation.

It will be up to a Liberal government to clean up this mess. Simply stated, we recognize that rail service in Canada has been part of our past and it should be part of our future.

That's an excerpt from a letter by the current Prime Minister, the then leader of the opposition, to Moncton MP George Rideout on the eve of the last federal election. It might not literally have been on that evening; it may have been about two or three days before. I don't recall the exact date. I understand it was five days before the election.

The National Automobile, Aerospace, Transportation and General Workers' Union of Canada represents 205,000 workers across Canada. At Canadian National, we represent 12,500 shopcraft and office workers. We appreciate the opportunity to speak to the standing committee on Bill C-89 and the privatization of CN.

The next section is entitled ``CAW-Canada opposes the privatization of CN'' but perhaps, after I've read the brief, I'll put that statement, and what follows, in some context or perspective for you.

In our December 1994 presentation to the task force on the commercialization of CN, we opposed the privatization of Canadian National. In our view, CN has an important public policy role to play, which can best be fulfilled as a publicly owned corporation.

CN should facilitate economic development in various Canadian regions, but as a private corporation, CN will act in the interests of shareholders rather than the interests of Canadian communities.

Canada is in a critical period today as regions struggle to recover from the recession and adjust to free trade. The privatization process will create instability at a time when a reliable transportation system is needed.

We are not even convinced that the government's decision to proceed with the privatization will meet the current goals for deficit reduction, which apparently is the driving force behind all of the policies of our government today.

If CN is sold at less than book value, there could be a one-time deficit charge of a billion dollars or more. There's also the question of whether or not the government will forgive some or all of CN's debt.

On the one hand, a privatized CN must be financially viable to ensure long-term growth. However, in a time of fiscal restraint, when government is telling Canadian taxpayers to accept cuts in social services, it is difficult to justify federal spending to enhance the value of shares for private shareholders.

There's another cost to consider in the privatization of CN. Some workers will lose their jobs in the privatization process. In addition to the cost of severance packages, there will be costs to the government for unemployment insurance and retraining programs.

Bill C-89 directs CN to draft a plan for the continuance of CN under privatization. Some specific directives are that: CN's headquarters remain in Montreal; individual share ownership be limited to 15%; and that the corporation should maintain its bilingual policy.

We are concerned about the rights of CN workers in this process. The privatization process will most likely involve the selling off of CN lines prior to the issuance of shares for the remaining core of CN. Our members have concerns about working under a privatized CN. But the more immediate and pressing issue is the conveyance of lines.

I will, Mr. Chairman and members, also put into some context that our concern about short lines is broader than just what the term ``short line'' itself might indicate. That will be explained here. Perhaps we'll have a chance to discuss that.

Our members have had two particularly bitter experiences with privatization at CN: Route Canada and AMF. In both cases, there was disregard for the rights of workers, which must not be repeated.

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CN Express was sold off to Route Canada at a fraction of its market value. The new owners stripped the company of its assets, made a profit on the sale of lands and closed up shop, putting 2,300 employees out of work.

On August 27, 1993, CN quietly obtained an Order in Council allowing the spin-off of the AMF repair shops in Montreal, which were formerly known as the Pointe Saint-Charles repair shops, as a wholly owned subsidiary. This was the first step in selling off the largest industrial workplace in Montreal, and that really means in the city of Montreal as opposed to the Montreal urban community.

Five days later, CN established the new corporation without notice to the employees or their unions. CN then transferred the enterprise to provincial jurisdiction and stripped almost 1,200 employees represented by the CAW of all vested rights as CN employees. Overnight the employees lost their union and collective bargaining rights and even their rights to recall to CN positions.

It has taken over one and a half years of legal proceedings for workers to regain their status as CN employees and restore collective bargaining rights. The latter took place just last month.

With these two experiences in mind, our members are very anxious about the upcoming CN privatization. Many of our members are asking questions about the status of the CN pension plan in a possible sale. They want some assurance that their pension with CN, to which they have contributed for many years, will be protected in such a sale.

We're also looking at the U.S. to see how workers could be affected in the sale of class one lines to short line operators. Deregulation was introduced under the Staggers Act of 1980. During the 1978 to 1987 period, the U.S. class one railways sold off over 11% of their track to short line operators and abandoned an additional 16% of lines.

The U.S. has legislation to protect employees' economic interests in the collective bargaining agreements in the case of the sale of a railway. However, in 1984, the Interstate Commerce Commission, which oversees the sale of railways, exempted sales to a short line from the labour-protective legislation. The selling railway no longer had to compensate employees for job loss and the short line did not have to provide jobs for the displaced employees.

Short lines operate with a reduced workforce. It's estimated that up to 70% of class one rail employees lose their jobs in a sale to a short line operator. Since 1980 the class one carriers have cut 26% of track, but they've reduced employment by 50%.

Despite claims that a focused marketing strategy makes short lines cost-efficient, the prime objective in a short line operation is to reduce costs through cheap labour. Those workers fortunate enough to get a job with the short line operators see a 15% to 20% wage cut or more, inferior pensions and benefits and major concessions in their work rules.

The Minister of Transport has made several statements to the effect that Canadian rail workers have excessively rich collective agreements and that they need to take concessions. He has even advocated non-unionized short lines as a direction for Canada's rail system. Aside from the fact that the minister has failed in his responsibility to represent the interests of working Canadians, his comments are simply wrong.

When Commissioner H. Allan Hope carefully reviewed the collective agreements of railway workers, he concluded that the agreements were not beyond industry standards. In his report of February 22, 1995 he states:

Rail workers have been projected in some quarters as enjoying extravagant benefits which are vastly superior to the benefit levels enjoyed generally by unionized employees in the industrial sector across the country. Based on the facts developed in the Commission proceedings, that characterization is mischievous and unfair.

We want to see legislation in place to protect workers' rights in the sale of CN's operations. Our members, who have given years of service to CN and, contrary to the minister's remarks, have accepted economic restraints, deserve to be treated with respect.

We will summarize our brief with some specific recommendations. In making some of these comments, we recognize that some may have difficulty relating some of the concerns we express here to the actual provisions of Bill C-89. It's just that there's a lot of railway-related things going on. There's legislation coming and there's legislation your House was asked to adopt just a couple of months ago.

We appreciate the opportunity to express our general concerns in all the forums, even though the relationship may seem to be a bit indirect.

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We turn to the situation that will affect the majority of our members, those who remain with the newly privatized CN. There has been a good deal of talk about opportunities for employee participation in the privatization of CN. If participation means buying our jobs through employee share ownership plans, we oppose such a scheme.

The U.S. airline industry is probably the best example of employees buying shares in the company to save their jobs. They lost their jobs and their shares were worthless. Particularly disturbing is the way wages and working conditions deteriorated for all workers in the U.S. airline industry. After buying shares in the airline, the employees then had to accept cuts in wages and benefits to secure their original investment. Other airlines demanded concessions from their employees.

Here in Canada, our members at Canadian Airlines did agree to buy shares through payroll deductions. Although the value of their shares fell on the market, the employer demanded that employees increase payroll deductions. Canadian Airlines stock is now worth about 50% of its value at the time employees bought in, and the company is again demanding further concessions from workers.

Share purchase schemes seldom if ever offer financial gains to workers. In most cases workers are buying shares that investors won't buy. Nor do we accept the notion that share ownership or a seat on the board of directors provides workers with any meaningful voice in the operation of the company. In fact our union refused to sit on the Canadian Airlines board of directors.

We do not see how an employee share purchase scheme would help CN financially. Even if employees were to take a 10% wage concession - something we would not advocate - in return for shares, CN would raise less than 6% of their current equity. We're not suggesting that this has been suggested by anyone; this is merely for the purpose of illustration.

In our view, employee share ownership schemes are a tool to co-opt workers into taking concessions. The privatization of CN should not involve employees taking wage concessions in return for shares.

We have focused our discussion on the rights of workers in the privatization process. Our members also want Canada to maintain a viable rail service that will serve the national goals of social and economic development and provide jobs for workers.

There are several issues that are important to maintaining a national rail infrastructure.

For most communities wanting to maintain rail service, a short line may seem to be a good alternative to abandonment, but given the high rate of short line bankruptcies in the U.S., the short line solution could be a short-term one.

Many of the U.S. operations are heavily leveraged buy-outs with high interest payments and poor cash flow. An estimated 15% to 25% of short lines fold each year in the U.S. Of the 138 short lines created in 1986, 21% failed within one year. Given the high value of the equipment and assets, this is a significant failure rate.

Under-capitalization also poses a safety problem. Short lines are often leveraged buy-outs where the equipment is collateral for the loan and the debt-to-equity ratio creates high interest payments. Operating margins are tight and there is little investment in upgrading equipment. The operator is ill prepared for the cost of a major accident or a natural disaster.

New entrants to the railway lines, in addition to meeting rail safety standards, should also meet economic viability standards. The community should have some assurance that rail service will be maintained and workers are not going to be thrown out of work. Furthermore, the community must have some assurance that the short line will not cut corners on safety to reduce costs.

That brings us to some safety issues.

In Canada most short lines are under provincial jurisdiction, so the federal Railway Safety Act does not apply to them. The provinces at best have outdated rail safety legislation and are poorly prepared to oversee rail operations. To add to the problem, short line operators take pride in having employees who can repair tracks one day and file purchase orders the next. The safety implications, we submit, are horrendous.

Regardless of the conveyance of lines, the current class one railway system should be declared as works for the general advantage of Canada and should remain within federal jurisdiction. Safety legislation and inspections for short lines should remain under federal jurisdiction.

To interrupt myself, we will have some more comments to make on the specific wording of clause 16. We're not lawyers any more than the Transport 2000 Canada representatives were, but we think it's important that, whatever that clause is supposed to mean, it should be clearly worded so that we don't have to go through more years of litigation, as we are now. I'll explain that a bit later.

Although not a specific recommendation, the Nault Task Force report of January 1995 supported having new short lines and regional lines remain under federal jurisdiction. I won't read the quote from the Nault Task Force report in that regard; I'll just carry on.

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The government has not set limits on foreign ownership. We are concerned that a privatized CN will not act in the interests of Canadian communities. A CN controlled by foreign investors is even less likely to operate in the interests of the Canadian people.

The airlines have a 25% foreign ownership limit. We fail to understand why rail service, which is probably even more important to Canada's economic development than the airlines, should be wide open to foreign control.

The provincial ministers have had meetings in the past to establish the terms for a core rail network for Canada. With the impending privatization of CN, now is a critical time to complete the establishment of a core network for class one carriers. The core network may be beyond the scope of Bill C-89, but it is nevertheless a related issue.

Class one railway infrastructure could go the way of U.S. railways, which, under deregulation, sold off or abandoned over 26% of railway lines. We are concerned about the potential fragmentation of our rail infrastructure if safeguards are not in place.

Not only is freight service at stake, so is passenger service. VIA contracts various lines from CN for passenger routes. The government must act responsibly and put safeguards in place to ensure the continued operation of essential rail lines for freight and passenger service. The rail infrastructure is too important to be left entirely to the decisions of market forces.

The Nault Task Force report recommended that the Minister of Transport appoint a management team to assist CN with the commercialization process. Our union supports this recommendation and believes the appointees should be from outside the CN corporation, have railway experience in commercial issues and, if possible, have a good track record on labour issues.

The government should direct CN to ensure that workers' rights are protected in the process of privatization. Workers are at risk of losing jobs in downsizing as well as the sale of operations. Where parts of CN are sold off as short line operations, there should be specific conditions for the sale agreement.

First, the unions should maintain successor rights to bargain a collective agreement with the new employer.

Second, CN employees should have first right of hire with the new employer.

Third, provisions should be in place to protect employees' pension entitlements in the current CN pension plan.

Fourth, the government, the employer and the unions should jointly develop severance packages, job retraining programs and relocation programs for workers who are displaced in the downsizing and/or sale of operations.

CAW Canada wants CN to maintain a safe and viable operation to serve Canada's economic development and provide jobs for Canadians. We make the following recommendations for maintaining a safe and viable railway infrastructure.

Fifth, newly formed short lines should remain under federal jurisdiction to ensure adequate rail safety legislation and inspection procedures.

Sixth, short line operators should meet a test for economic fitness and safety operations before they can be considered as buyers for CN lines.

Seventh, foreign ownership of CN should be restricted to 25% of shares.

Eighth, the federal government should develop a core network of railway lines to ensure a railway infrastructure for coast-to-coast freight and passenger service.

Ninth, the Minister of Transport should establish an outside transitional management organization to oversee the privatization of CN.

Thank you.

The Chairman: Thanks very much, Mr. Rosner, for your submission to the committee. We'll go to questions.

[Translation]

Mr. Guimond: I welcome the representatives of the Canadian Auto Workers. Since my party is the only one in the House of Commons... I do not want to insult my New Democrat colleague, but during the last rail strike in Canada, the Bloc québécois was the only party who defended the right to strike. We sat for a whole weekend about that and we are very proud of being the only party that represents the interests of Canadian workers.

I found your brief interesting. Do you feel that CN is an instrument of economic development, exactly like an airport or a seaport? Therefore it should be considered as such; we should not be looking at whether the operation of this enterprise is profitable or not. In any event, in the next few years CN's operations will be profitable. Mr. Tellier told us that represented profits in the order of $240 million. We may have gone through a slack period, but the future is promising for CN.

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Mr. Rosner: The near future.

Mr. Guimond: Yes. In reference to certain remarks, you said Le ministre des Transports a affirmé à plusieurs reprises que les travailleurs du secteur ferroviaire canadien ont des conventions collectives en or. I am sure that you are referring to the statement made by Minister Young to WESTAC in Winnipeg on October 5th, when he said on ne peut pas blâmer des travailleurs du secteur ferroviaire ayant une huitième ou une neuvième année d'avoir négocié des conventions collectives excessives. Perhaps you were referring to that sort of statement?

Mr. Rosner: Not necessarily. That may have been the least of what he said.

Mr. Guimond: The least?

Mr. Rosner: Yes, because in that statement, he found something for which he could not blame the workers. In that case, he did not blame us. We are not here to discuss the statements or the views of the minister about workers' collective agreements. That is one issue. Not only are we very well prepared, we did our homework to defend ourselves in this issue, we have also appreciated the contribution of all those who supported the rights of the workers in general, regardless of their political stripes. We greatly appreciated that. Yes, we were referring to that kind of statement. In saying that, we just wanted to point out that we have concerns. When a minister shares a certain point of view which is not that of the entire railway management but only part thereof, he is siding with the extreme viewpoint; this worries us when the very same minister is responsible for the privatization of CN. We want to ensure that CN, regardless of whether or not it is privatized, but it will be privatized... We agree with the fact that it should go ahead because clearly, we cannot prevent this. We just wanted to refer to certain concerns, certain warnings, and also repeat the reasons why, historically, we opposed the privatization of CN up until now. But given the situation, we are being realistic. We want the rights of the workers, the communities and the general public to be protected.

Mr. Guimond: In other words, you are against privatization, but you know that the government will go ahead.

Mr. Rosner: We are against it in the sense that if a way could be found to prevent privatization while ensuring that the company does not become a financial basket case, we would advocate much more strongly a fight against Bill C-89, etc. That is not what we are saying here. We are being realistic. Privatization will go ahead. We want it to go ahead on the logical and intelligent commercial basis and not be done in such a way that workers and even the company itself will suffer. It has to be done on an intelligent basis from a commercial standpoint and there has to be some protection for the workers. And that is why without mentioning it specifically, we refer to clause 16 of the bill among others, since it is of great interest to us.

Mr. Guimond: When you talk about management during the transition period, you say that the transition team will have to have good business experience in the transport sector, a good reputation in labour relations and in addition, it should come from outside CN. Therefore, I think it is clear that you do not see someone like Mr. Tellier, with his interest-free loan of $345,000, who is lining his pockets while telling workers to tighten their belts, or someone from internal management as part of this transition team.

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Mr. Rosner: But I did not analyze the situation to determine whether or not Mr. Tellier satisfied the criteria.

Mr. Guimond: Should it not be someone from outside CN?

Mr. Rosner: But Mr. Tellier comes from outside CN.

Mr. Guimond: Excuse me?

Mr. Rosner: He has only been there three years.

Mr. Guimond: I do not think so.

Mr. Rosner: I have nothing against the fact that he comes from Ottawa and the public sector, that does not bother me.

What we meant here was just a general warning that in preparing the privatization at the management level, once a decision is made to go ahead, the policy net that necessarily exists in a Crown Corporation should be eliminated and avoided as soon as possible. Once a decision has been made to do that, it should be done on a professional basis and if that means replacing, or not advocating replacing CN management overnight; if it takes a board of directors to advise or to be part of that process, we are not sure... We simply wanted to say that we share the very general view that was expressed by the Nault working group.

Mr. Guimond: Do I have any more time left?

[English]

The Chairman: Sure, go ahead.

[Translation]

Mr. Guimond: What kind of protection should be provided? Let me come back to your third recommendation: «Provisions should be in place to protect employees' pension entitlements in the current CN Pension Plan». Do you have any measures to suggest and should they be part of Bill C-89?

Mr. Rosner: Not necessarily. Our concerns about the pensions are not directly related to the privatization of CN as such, but rather to the separation of certain elements within CN.

I do not know whether this should be part of this bill. It is one of the concerns we raised; it is a burning concern for instance in the case of AMF, a Montreal company employing 1,200 people. It depends what is and what is not an integral part of the privatized CN.

With regard to the parts that will be separated, before or after, we have a great concern about the pension plan because some rights may be lost. We have just gone through arbitration. We are expecting the ruling of the Commission, from Judge Adams. We do not know which benefits he will cut, and which will stay, but there is no doubt that one of the most important benefits for all railway employees is participation in the CN Pension Plan and I cannot tell you whether that should be part of this bill.

Mr. Guimond: What is your union's position about the corporate headquarters being maintained in Montreal Urban Community and the application of the Official Languages Act?

Mr. Rosner: We agree with both.

Mr. Guimond: With regard to your fifth recommendation on page 8 of your brief, you say that the short lines should remain under federal jurisdiction. Do you realize that that is quite contrary to the existing situation? Because there are short lines in Nova Scotia, in Quebec and in Alberta and they come under provincial jurisdiction pursuant to the Constitutional Act of 1867 because they are not related to interprovincial trade.

You now want the new short lines under federal jurisdiction? Is that the meaning of: Que les nouvelles lignes courtes restent sous juridiction fédérale?

Mr. Rosner: Yes.

Mr. Guimond: That is what you are asking for?

Mr. Rosner: We are asking that clauses 16(1) and 16(2) of the bill be made clear. I am not a lawyer, I read this, and it is about the same in French and in English: ``The railway and other transportation works in Canada... are hereby declared to be works for the general advantage of Canada''. What are the railway and other transportation works?

Regardless of whether or not they are interprovincial, according to what I know, and correct me if I am wrong, the Parliament of Canada has the right to declare any kind of works to the general advantage of Canada, regardless of whether or not it is an interprovincial railway.

Mr. Guimond: When it is interprovincial, the question does not even arise.

Mr. Rosner: Yes.

Mr. Guimond: But the question is, when is it intraprovincial?

Mr. Rosner: Exactly.

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Mr. Guimond: When it's interprovincial, the question doesn't arise. The question does arise when it's intraprovincial. That's why my party will table an amendment to clarify clause 16 to ensure that the short lines that operate only within a province be under provincial jurisdiction. Our view is diametrically opposed to yours. Your recommendation requests the opposite. That's no problem; we have the right to disagree.

Mr. Rosner: That's how it is in a civilized society. We completely disagree with your amendment. There's something I must point out in this regard. Clause 16 doesn't refer only to short lines. Our bad experience is not with the short lines when you're talking about employees represented by the Canadian Auto Workers, but with AMF, which is not a short line but rather a shop.

There is another shop in Winnipeg called Transcona Shops in the riding of my colleague Mr. Blaikie. We've been paying lawyers hundreds of thousands of dollars for a year and a half now. It's not the worst case, but there are employees who remain in the shadows, in the grey zone. They don't know. Are they under federal or provincial jurisdiction? Do they still have the right to negotiate?

Last month, after a year and a half of protests, some things started to get settled. The Quebec Superior Court ruled that that shop was under provincial jurisdiction. Maybe it is, and maybe it isn't. Not a single judge nor anyone else there was concerned with the rights of the employees. All of a sudden, they lost all their rights: their union, their negotiating rights, their belonging to CN, without anyone being notified or consulted. We didn't know. This was done behind closed doors a year and a half ago and it's not over yet. We don't want a situation like that to be repeated. If this clause or an equivalent clause in the Railway Act isn't clarified, where's the statement ``for the advantage of Canada'' concerning CN?

We want it to be clear that transportation works includes AMF or any future AMF or Transcona Shops. When you look at clause 16.(2), there are clear exceptions listed. There's the exception to the effect that subclause (1) does not apply to the purchase, sale, leasing or servicing of motor vehicles - motor vehicles are excluded! Do we exclude the locomotives, the diesels, the freight cars that are integral part of any railway in the world? AMF does repairs, maintenance and ``remanufacturing''. The same is true of Transcona Shops. That's what they do. My colleague Mr. Wray is responsible for Transcona Shops. He works there. There are 1,200 workers there.

If this bill is to be passed, this has to be clear. I understand your concerns and your intentions concerning the short lines. We may disagree, but it seems to me that we cannot have a disagreement with regard to a shop that repairs locomotives and freight cars used throughout Canada by all railways: CN, CP and VIA Rail.

Mr. Guimond: I wasn't referring to locomotive shops. I'm talking about

[English]

newly formed short lines. You say ``newly formed short lines should remain under federal jurisdiction''.

[Translation]

Mr. Rosner: What I mean by that is that the words ``short lines'' in our brief have to be taken in the broader sense. It refers to every part of the railway operation that will be separated or is separate.

[English]

Mr. Guimond: ``Short lines'' includes shops?

Mr. Rosner: Yes.

Mr. Gouk: Gentlemen, first I'd just comment on your opening remarks regarding the letter written by the former leader of the opposition. It must be frustrating when they say one thing before the election and something different after. With Reform, we may not have said what you wanted to hear, but at least you know where we stand.

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Secondly, with regard to short lines and your attitude on whether they should be federal or provincial, one of the big areas where there's a lot of potential for rail line abandonment, which theoretically at least could lead to short lines, is in Ontario. Ontario has successor rights legislation.

If new companies were to be under federal jurisdiction rather than provincial jurisdiction, that successor rights legislation of the Province of Ontario wouldn't apply. Would you have any safeguards similar to that under federal legislation?

Mr. Rosner: You're right; it wouldn't apply, because it would be redundant. It would fall under section 44 of the Canada Labour Code, so you would have successor rights under the federal code itself.

Mr. Gouk: So you would get an automatic sunset clause, the same as you now have under provincial regulation.

Mr. Rosner: It would be under provincial regulation as it is now in Ontario or as it is in B.C. I can't remember if it is in Saskatchewan or not. I think it is. The point is yes, the successor rights would be there.

We're trying to attack two problems by saying that. One is we think the rail network - which was built by Canadians, not only with government involvement but under government direction in the case of CN anyway, and certainly in the case of CP in the good old days - is for the general advantage of Canada. Regional development has something to do with the general advantage of Canada. It's not just a regional issue.

Secondly, we're very interested in successor rights. The CAW is not interested in successor rights because we're afraid of losing the union dues of the workers who may or may not be working there or because we think we would have difficulty signing our members up again if some of them were caught in a short line sale and then lost their union because there were no successor rights. That's not our concern.

Our concern is if you take all eleven jurisdictions in Canada together - the federal and the ten provinces - every one of them, to my knowledge - and I stand to be corrected - has successor rights legislation for any transactions within that jurisdiction. It makes sense. Everyone has always recognized that workers' rights to bargain collectively and to maintain the fruits of their collective bargaining in the past should not be sloughed off to the side just because there's a commercial transaction where you change owners.

There's a void in the law, and that void must apply to less than 1% of all actual commercial transactions that take place in Canada. Those are the ones where somehow there's a commercial transaction whereby a federally regulated industry becomes provincially regulated precisely because of a split, as happened in AMF and as happens in a short line situation.

We're saying that eleven jurisdictions have recognized that shouldn't happen, but seven of the eleven, for various reasons, haven't yet and may never pass legislation to ensure that federal to provincial gap is bridged. So we're saying it should be bridged by Parliament, especially when you're talking about CN lines.

If you're going to privatize CN, go ahead and do it well; do it in a way that is going to make CN viable and is not going to turn CN bonds into junk bonds and endanger everybody's interests. At the same time, at least in the case of CN operations, which belong to us until your House says differently, make sure that workers don't get any special rights, but that the rights they fought for are maintained.

If it's a question of bargaining with a new short line operator, workers will bargain with a new short line operator, as they've done in the past.

Mr. Gouk: So you're saying successor rights are there in federal jurisdiction.

Mr. Rosner: I think they would be there by virtue of the operation of the Canada Labour Code.

Mr. Gouk: I would ask, then, where your concern is in recommendation 1, where you're asking for successor rights to be maintained. Are they not, according to your own testimony, already there?

Mr. Rosner: No, no. Of course they're not there now. If you sell a short line in Quebec to a private -

Mr. Gouk: I'm talking about the sale of CN.

Mr. Rosner: Oh, I'm not talking about the sale of CN.

Mr. Gouk: I am.

Mr. Rosner: Oh, yes, absolutely.

Recommendation 1 does not pertain to the sale of CN as an integral whole. The Constitution of Canada says that CN is a federal enterprise. That's not going to change by the privatization. You're just changing owners.

With respect to what I said at the beginning, this is one of the places that applies. We have a number of preoccupations and we try to raise them in related forms, even though it may not directly be a problem. We're not asking you to recommend or to bring about any amendments to Bill C-89 that would guarantee that we have successor rights under a privatized CN. We have those.

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We're worried about the split-up of CN. That's where we don't have successor rights. That's where workers maintain their right to belong to a union, but they have to start from scratch and they lose everything they've bargained for in the past.

There are two ways to approach that. One way is for the provinces to adopt bridging legislation. Two or three of them have; the rest haven't. The other way is to have these lines and operations, which are transport operations, clearly identified in clause 16 as being for the general advantage of Canada. We definitely recommend you do that.

Mr. Gouk: That clarifies it for me. Thank you.

Mr. Fontana (London East): Thank you very much for your presentation, but I too have a problem with your recommendations, because they dealt not at all with the sale of CN. All these recommendations are conditional on something else happening, such as the creation of short lines, which in most cases are under provincial jurisdiction.

Hence, if the Province of Ontario decides - as it has - that it wants that kind of successor rights legislation, that government can do whatever it wants to protect the workers as it sees fit. I'm happy that you recognize that within this bill - and that's all we're talking about now....

Some of your submission talks about what kind of railroad network and what kinds of safety rules and regulations we should have. All that, of course, is for another day, namely in the NTA amendments that will be coming down the pipe awfully soon.

It would seem to me that the employees of CN, now and in a new, privatized CN, will be protected by virtue of the collective agreements that have already been negotiated. Those will remain in place and CN will continue to be under federal jurisdiction, as you've indicated.

I think it's clear that those are not being conditioned away and are not being compromised. The workers are in fact protected in the present legislation.

Mr. Rosner: Absolutely. On the question of the collective agreements, they're there. It has nothing to do with this act. You're quite right.

But with the greatest of respect, I think you were partly right on the first point when you said it's up to Alberta whether they pass that law or not. I think Canada has a role to play. Unless I'm very wrong, you could solve that problem in two seconds flat if you just make it clear in clause 16, irrespective of what the Alberta legislature decides.

Mr. Fontana: Yes, but we're also very respectful of the Constitution and of provincial jurisdictions. Clause 16 deals with exactly what you're talking about.

You talked about CN having to be the vehicle for public policy. That's the problem. A lot of people saw CN as the railroad vehicle by which to put forward public policy. It is a railroad, and I think our government is determined to have it become a railroad. The public policy issues you speak of, which are very important, ought not to be done by a railroad company, but by the Parliament of Canada and so on. That's why the privatization of CN is absolutely important.

Your union represents Canadian Pacific, doesn't it? It's a private corporation. You have a collective agreement with them. They're under federal jurisdiction. How is that any different?

Mr. Rosner: There are some differences, but they're not important enough to talk about here.

You're right; it's the government and Parliament that are going to decide transportation policy in Canada. You're right that, unfortunately, the government hasn't done that for many years in respect to railways, or it has done so in a very lethargic and sort of passive way.

You're also right that whether CN is sold off now or not - and we want it to be sold off successfully if it's going to be sold off - CN has had a commercial mandate for seventeen years now. It hasn't acted as an instrument of public policy in that sense for a long time.

We just want to make sure a mess isn't made of this, so that whenever the government does get around to determining some national policy on these matters - which we would welcome as long as the policy is a sensible one that helps Canadians - it still has viable railways to police, if that's the right verb coming from ``policy''. That's our concern right now.

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You're quite right. I'm a CP rail employee. That's where I come from. There's no gulf between the two railways in terms of collective agreements or anything else.

This railway belongs to Canadians. If it's going to be privatized, it should be done in a way that respects what Canadians have done for it and that ensures it's not just wound up and made a mess of.

Mr. Fontana: I think you're right. I think that's what this bill is all about.

One of your colleagues, Mr. Nault, who happens to be a member of Parliament for us of course - and you referred to his task force - has questioned Mr. Tellier on the important matter of pensions, which you just brought up. I'm sure it's going to come up again a little later with regard to ensuring employees' pensions are protected.

Mr. Tellier indicated there is no question that the pensions of your members are protected. Nothing will change. I'm sure you know that's not necessarily the place where you would want to have legislative changes, because you and those pensions are protected under another piece of legislation called the Pension Benefits Standards Act.

Don't you think that's sufficient protection? What specifically are you talking about?

Mr. Rosner: Actually, Mr. Tellier told us the same thing this morning. We understand the legislative protection that's there. As I said, some of things you read here you have to read in other contexts. Well, you don't have to, but that's the way we intend them.

We have a big concern about the CN pension plan rights of people who have contributed to the CN pension plan for their entire working lives, or for 10, 15, 20, 30 or 35 years, and may find themselves without any rights to a CN pension the day after tomorrow.

Mr. Fontana: We would be concerned about that too.

Mr. Rosner: We recognize that's probably not something that can be cured or addressed in Bill C-89.

Mr. Fontana: That's why the question was asked by Mr. Nault of Mr. Tellier, the CEO of CN, about pensions under the existing corporation and perhaps under a new corporation. We wanted it on the record.

We would agree with you that obviously it remains a question. It's not a concern of ours, because we're satisfied that in fact those pensions are protected through other pieces of legislation.

Mr. Rosner: Except we have 1,200 members at AMF who are there now and working. They've worked for CN all their lives. In fact, a decision of the Canada Labour Relations Board last month said they're still CN employees, and yet within a month or two they may not have rights in the CN pension plan.

The only rights they may have are the rights of any employees whose company is sold from under them, even though it hasn't been sold. It still belongs to CN, 100%, but we don't know if they're going to be members of the CN pension plan.

We think clause 16, if it's properly clarified and worded, could help us on that, if there's a desire on the part of Parliament to do that.

Mr. Fontana: I don't want to get into the middle of a court action, but I think to suggest that the AMF and the CN situations are alike is not correct. They're entirely different. Let's not get into a debate at this point in time as to whether or not they're one and the same, because in fact there is still a judgment to be made.

I have two or three questions, and your input is absolutely essential. You view your experience of employee share participation in a very negative context, maybe because of past experience or perhaps because you have a philosophical problem with employees purchasing shares in a company.

Don't you believe there is an advantage and a positive view to employees purchasing shares in the company in which they work? Don't you believe that's cooperation and partnership? Isn't there a positive to this, rather than the negative you seem to believe exists?

Mr. Rosner: I can give you only my personal opinion. This is not a question of philosophical opposition. In the case of the CAW, it's a question of looking at some experiences where there seemed to be ulterior motives in the share purchase offers and it didn't work out too well for employees.

If a member of our union came to me thinking I knew anything about investment, which I don't, and said he had some extra money around that he would like to invest in the stock market and asked where to do so, I'd advise him to talk to somebody competent, like a broker, and find out where there's a good return.

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Why would they want to invest in their own particular company because they happen to be working for that employer? I find it hard to make the connection between working for and getting paid by your company and investing in it.

Mr. Fontana: In some cases where employees have bought companies outright, that's obviously been a very positive experience. I'm sure the CAW has billions of dollars in their pension funds, which you invest in real estate and all kinds of other matters. Maybe you should start investing in your own members. Why don't you take a slice of CN and sit on the board and be part of building a great railroad?

Mr. Rosner: How good a break on the share price do you think CN would be prepared to give us?

Mr. Fontana: I've asked you whether you would even entertain such a philosophical notion as participating in the ownership of CN.

Ms Jo-Ann Hannah (National Representative, Pensions and Benefits, Canadian Auto Workers): We invest our strike fund in local union offices and in our education centre in Port Elgin. In fact a good portion of it is invested in our education centre.

Mr. Fontana: All of your billions are invested in those holdings?

Ms Hannah: We don't have billions, and we do not control the pension funds for which we represent our members.

Mr. Fontana: I'm talking about the whole CAW.

Ms Hannah: We don't have billions.

Mr. Fontana: Okay.

With respect to your concern about foreign ownership, let me point out the case of CP. It's a privatized company that doesn't have any controls over foreign ownership, and yet if you look at the share make-up of CP, you will find that in fact it's not controlled by foreigners. It has broad participation.

You seem to be very concerned about the fact there isn't a foreign ownership cap on it. Why does that frighten you so much?

Mr. Rosner: I don't recall saying we were very concerned or frightened.

We made a recommendation that there should be a limit on foreign ownership. We think it's eminently sensible and reasonable that if Canadian National is not going to be controlled by the government, at least it should be controlled by Canadians. That's all we have to say about that.

You're right; if you count up all the shares of CP, I'm sure it's owned in Canada. If it's done so without the benefit of having a foreign ownership restriction put on it, that's fine.

The more important question in our minds is why did the drafters of this legislation decide there should be no cap on foreign ownership? That's a little bit non-traditional. We haven't really heard the explanations for that, so we thought by recommending a particular cap, we might start getting some of the answers.

We understand that if you want to privatize a company, especially a company whose shares you might have some trouble selling and where you have a lot of money involved in the total value of the assets you're trying to sell shares of, it might be hard to find enough Canadians to purchase it. Maybe there are other ways to address it. Maybe you could offer it in Canada first and then offer it somewhere else to make up the deficit.

Mr. Fontana: I think you answered your own question. I think you would want to ensure that the Canadian taxpayer gets the best value.

The investment community members who were here yesterday explained why it was offered broadly. The reason for not putting restrictions on it was to ensure CN could get the best value, and hence there could be three winners in this: the Canadian taxpayers, CN as a company and the client base of CN.

Mr. Jordan (Leeds - Grenville): Thanks for coming. I appreciate the concerns you have. I think it would be normal to expect that you would have those concerns.

You seem to make the suggestion, though, that you'd prefer it if things were just left alone and CN weren't privatized. I sense that would be your choice. Is that true?

Mr. Rosner: We don't think CN should be left alone. I said earlier, in reply to the first set of questions, that if we could propose a way to make CN work well without privatizing it, we would be setting that project out for you with bar charts, graphs and all the rest of it.

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We're not experts in that field. We know CN is having problems such that it can't be left alone. We don't see whether or not it should be privatized as being a black and white question. We want it to be viable and we don't want a mess made of it. We don't want it split into 100 pieces. We want a railway industry in Canada. By the way, we definitely see room for two freight railways in this country coast to coast, even though CP isn't coast to coast any more.

Mr. Jordan: But there seems to be some suggestion that there's comfort and security if you're working for the government. I'm suggesting to you there shouldn't be too much comfort taken working for a government that's half a trillion dollars in debt. If there's any insecurity in reference to your job, I'd say leave it alone and keep working for that guy, because he hasn't been able to do much to make railroads a paying proposition since time began.

If you're concerned about short-line operation, I'd say the quickest and surest way to have short lines closed would be to leave the government operate them, and they will be closed. If there's any chance at all of short lines making it, they had better get it out of the hands of government, because until now they haven't been able to make a success of it. I think they and your people who are working for CN may have a chance for employment there if you gave it to somebody else to operate. You will not get it from the government operating it - at least from my observations.

I think this is very true. The current goal for deficit reduction is apparently the driving force behind all our government's policies, or darn near all of them, because for very practical reasons we can't just continue to go the way we're going when we're $500 million and sinking.

So something had to be done. I don't think if I were working for a government with that record I would take much comfort. I would rather have somebody else as my employer who I thought might have a chance of making it viable and perhaps even profitable. I think that would be a better future for employees than staying with a sinking ship.

Mr. Rosner: Just to clarify one thing in reply, we didn't mean to suggest - and I don't think we did - that short lines should be owned or operated by the government. In the context of a privatized CN, the only thing we suggested is that the CN part of the railway network as a whole should be declared as works for the general advantage of Canada. The transportation works part of clause 16 should be clarified so that we don't have to go to court and litigate over whether a major repair facility that keeps the railway running - not just one federal interprovincial but several of them - is federal or provincial.

But we didn't suggest it should be owned by government; that's another matter. Whoever wants to buy it can buy it.

Mr. Jordan: Okay. I'm just saying the idea that working for the government gives you all kinds of security may have been in another era, but I don't think it's practical to think of it as that way today. It just doesn't appear to me to be a very secure place to be. You're not the only ones who are seeing that. I think anybody who works for the government today realizes he or she is on pretty thin ice as far as permanence goes and the things we used to enjoy, rightly or wrongly. But that's the case.

Mr. Guimond: I just want to add a little comment about your last comment, Mr. Fontana. The problem is with the definition of best value for Canadian taxpayers. What is the definition of ``best value''?

Mr. Fontana: It's the best price, the share price.

Mr. Guimond: Yes, but ``best'' is subjective. If you remember, I made some comments about subjective terms. Something can be best for me but not for you.

[Translation]

As regards AMF, I obtained from the CEO of CN, Mr. Tellier, confirmation that GEC Alsthom showed some interest in purchasing AMF. Has your union been approached by GEC Alsthom? What is the situation as regards AMF? I would also like to know what is happening in the case of Transcona Shops.

.1715

Mr. Rosner: I'll begin by talking about best value in the privatization of CN. We insist that the government should provide the best value for the property CN transfers to it, such as real estate.

[English]

The Chairman: Market value is the term they're using.

Mr. Rosner: I'm using the term ``best value''.

The Chairman: When we're talking about taking the non-core assets from CN, we're talking about market value for those assets, not best value.

Mr. Rosner: That's right. That's why we're suggesting that the value should be a proper value, because market value has a tendency to have ups and downs. We wouldn't want to see the downside of the market value being given back to CN.

[Translation]

The Chairman: I see. And now let's talk about AMF.

Mr. Rosner: That is interesting. On our way to here, we discussed whether we should meet GEC Alshtom or not. We have not yet met them as a union, but we are in intensive negotiations. Over the past two weeks, Mr. Moore-Gough and I have met the AMF negotiators every day. The latter include a lawyer who attends as an observer and represents GEC Alshtom.

We are trying to negotiate a first collective agreement in accordance with Quebec legislation. We have just reregistered all union members following the transfer from the federal to the provincial level. We were recently accredited and we are trying to negotiate a new agreement.

We are speeding up the process, but there are major problems which have to be resolved. The result of these negotiations may have enormous influence on the decision of GEC Alshtom to follow through on its purchase plan. We expect that decision to be announced in the next few days. We learned that today.

In the case of Transcona Shops, the problem is that AMF and Transcona Shops are almost identical in every respect, such as organization, operations, workshops, the work that used to be done and is being done at present.

The Superior Court of Quebec decided that AMF came under provincial jurisdiction. The decision has been appealed, but it will take four or five years before the case can be argued in the Quebec Court of Appeal, if this is the procedure followed. It appears that it is provincial because of the type of work done in the facility.

Mr. Guimond: But my question...

Mr. Rosner: That is what worries us.

Mr. Guimond: Are Transcona Shops going to be closed or sold? Has GEC Alshtom shown any interest in buying them?

Mr. Rosner: No.

Mr. Guimond: What is the situation?

Mr. Rosner: We asked Mr. Tellier that question today. Do you intend to sell Transcona Shops, to shut the facility down, to contract-out all the work done there, or to transfer it from the federal government to the provincial government of Manitoba? As was the case with AMF, once again all collective agreements will be cancelled and we will lose all negotiated benefits and rights, as well as the union. Apart from that, we don't know.

All this uncertainty about Transcona Shops is what worries us. In Montreal this morning Mr. Tellier said in answer to us that he did not see how a railway can do without a main shop. That is the term used in this area of work. The main shop is where major repairs and maintenance are carried out on the fleet as a whole: locomotives, engines, freight cars, etc.

Therefore, we welcomed that statement. It was some relief for us to learn that they did not intend to close down Transcona Shops or sell the facility. However, that is neither clear nor certain.

Therefore, there are various problems on the horizon which worry us. For example, whether the company will come under federal or provincial jurisdiction. Just one decision by the Superior Court of Manitoba could change everything. Such a decision could be handed down before, at the same time or after CN is privatized, whoever the owner may be.

.1720

[English]

Mrs. Terrana (Vancouver East): I want to make a comment on foreign ownership. I heard the minister say that at the end of the day it doesn't matter who invests. We don't know who are the investors in most of these companies as long as the whole thing works and it's sold at the right price.

On page three you make a comment about members being concerned about working under a privatized CN. Do you want to elaborate a little on this? Is it because of what you say underneath, or is there more?

It's the first line of page three.

Mr. Rosner: If you read the whole sentence you'll see that.... Our members have concerns about working under a privatized CN, but in many cases those concerns come from not really understanding what privatization means. If privatization simply means a change of ownership, different people, instead of Her Majesty in Right of Canada owning the one, single share, or whoever it is, the Minister of Finance.... I don't know who holds it. Somebody up there holds it.

The Chairman: The taxpayers.

Mr. Rosner: Yes - tell me about it. No - it's not the taxpayers, it's citizens, whether they pay taxes or not. Am I right? They don't have to pay taxes to enjoy the benefit of CN.

Mrs. Terrana: It's like changing a job. If you go to another job, you have another owner and you have another boss.

Mr. Rosner: Yes, you're right. The point we wanted to make is that our members have concerns, but it's clear from a lot of the things we've raised here - I hope it is - that even if they're not directly connected with the privatization itself, the concerns have to be addressed. There's a lot of lack of understanding not just on the part of our members but also on the part of people who are supposed to be more expert and devoted to these questions as to what privatization will mean.

We read newspaper reports, which are supposed to be expert to a certain extent, and it's not clear whether some assets are going to be sold or some assets are going to be kept, or whether or not they'll be part of a privatized CN. It's not clear how the privatization of CN is going to fit in with what's going to be done to the NTA in June, or whenever the minister decides to table the amendments to the National Transportation Act.

So we have concerns. One of the concerns we have, quite frankly, is foreign ownership. This belongs to us, and why shouldn't it continue to belong to Canadians, at least in the immediate future, if it can? If there's a compelling reason why it can't belong to Canadians, even if they're Canadian business people and investors rather than Canadian citizens as a whole, then that case should be made before simply eliminating the foreign ownership restriction.

Mrs. Terrana: If you do that, then the moment you cannot sell in Canada you open it to foreign ownership. Do you think foreign owners are interested in buying? It's a big question.

So you just state the -

Mr. Rosner: My answer to that is yes. The foreigners will be interested in buying, whether it's 5%, 10% or 30%, as long as they can get a return. We're concerned that anybody who buys shares should pay a decent price and get a return on their investment, and the basis of that is that you should have a viable railway.

Mrs. Terrana: Well, of course, but that's exactly why it's being sold, because we cannot support it any more. You know how many times it's been ``decapitalized''. It's time to do something about it.

At any rate, I was on the Nault task force. When we started there was a concern about the workers' participation, but while we were going out of the room my colleagues and I were often approached by the members saying that they were interested in participating in this exercise.

When you make this comment, is this a comment you make with your members' approval?

Mr. Rosner: Pardon me; which comment was that?

Mrs. Terrana: About the workers' participation. You seem to be against suggestions that the workers participate, and you seem to be against workers' participation. When we started in Vancouver, this was very strong; this idea of getting the workers to participate got a ``no'' on the part of every union. While we were moving across the country it became more and more possible, and especially because I was personally approached by your members who told me they wanted to participate in the sale of shares of CN.

I want to know if you have the support of the members.

Mr. Rosner: First of all, we have the support of the members on virtually everything we do, because we're gone if we don't. We're in a peculiar position, where the people we claim to speak on behalf of can get rid of us if they don't like what we say or do. We're susceptible to that all the time on a regular basis. There's a safeguard there.

.1725

No, we did not send to our membership, of whom there are many, our draft submission to this standing committee prior to bringing it here. Like other professional organizations, we have a division of labour and we do various things. We have policy decisions that come from our conventions where our members are like delegates and participate in formulating that. We say various things without asking all our members, as Parliament does without asking the people who elected them or the people who pay taxes. That's natural.

However, I can refer you back to my earlier answer in which I told you what I would advise a member. Say there's a share offer that involves employees. We can't take any action to force or to prevent or to prohibit one of our members from buying shares. We simply don't have that power, and we don't seek that power. But at the time that happens, if it happens, and depending on how, we may have some comments to make about it.

All we've said here are two things. One, we didn't say that employees should not buy shares in their companies. I hope we didn't say that. We said we've had negative experiences with that, and so has the U.S. airline industry.

Two, we don't think the purchase of shares of your employer is a very good substitute for making sure you have a decent wage level inscribed in your collective agreement.

Those are the two points we tried to make. It's not a philosophical question so much as a warning.

Mrs. Terrana: You say you are not sure what is going to happen. We are not either. We are all going through this together. Is it a fair conclusion to say that you are prepared to cooperate with the government on this, but you have your concerns?

Mr. Rosner: We are prepared to monitor what the government is doing and we hope all other Canadians do, to make sure that if this process is going to go ahead it is done properly. According to what we heard today from people who should know, that's questionable based on what happens in the economy and what happens with all sorts of other related political factors.

So we will play our role of watchdogs, and if our opinions are needed at any time we'll be happy to give them.

The Chairman: Bill Blaikie has joined us.

We have time for one more question, Bill.

Mr. Blaikie (Winnipeg Transcona): I would like to welcome the delegation to Ottawa, and in particular Mr. Wray, vice-president of Local 100. He and I worked together at CN some 22 or 23 years ago, he as a young carman apprentice and I as a labourer who used to sweep up after him in the car shop.

I agree with everything that has been said by the CAW delegation, with one exception - the question of the guarantee of the headquarters remaining in Montreal. I have to say in all honesty that is one of the things I criticized about the legislation. I don't see why the preservation of the headquarters in Montreal should be any more special than preservation of the main shop in Transcona, or the preservation of anything else that has been an historic part of the CNR. As far as I'm concerned, Transcona is every bit as much a part of the history of the back shop, or main shop, whatever you want to call it, of the CNR as the headquarters is in Montreal. So if we're going to start protecting things why would we protect one thing and not another? That's my objection to that particular part of the legislation.

Given the political situation in Quebec and the possibility - not the probability now, but still, it's a possibility - that it could be another country, or be sovereignly associated with us in some due course, if my colleague down the way gets his way, why on earth would we want to guarantee that the headquarters of this new, privatized CNR be located in Montreal?

Mr. Rosner: You're not suggesting Transcona should be moved to Montreal and the headquarters to Winnipeg.

Mr. Blaikie: I wouldn't mind moving the headquarters to Winnipeg, but that's another matter. That's where most of the traffic is, in western Canada.

.1730

Mr. Rosner: Let me give you my own answer to that. I want to tread on careful ground here. The main reason I think the headquarters should stay in Montreal is that we have a lot of members working in that headquarters, and to get at least one little guarantee that people are not going to have to uproot themselves, their lives and families and move somewhere else is not bad.

I know you know, Mr. Blaikie, that one of the biggest problems we had in this round of bargaining and in mediation/arbitration was the question of our employment security. Probably the central factor in that for the CAW was whether people will have jobs, and if so, do they have to move all over the country to keep those jobs?

Mr. Blaikie: Wouldn't it have been better to have had other guarantees, though?

Mr. Rosner: Absolutely. This is just a building block.

Mr. Blaikie: I'm glad you added that.

Mr. Rosner: All right; so we put in Transcona and then we...absolutely. There's nothing special about the headquarters there. It's just that we do have a fair number of members working there.

The Chairman: I just can't let go of one particular item that was brought up in your response, Mr. Rosner, to Mr. Guimond on at least one question. Your answer was, ``Take the politics out of it''.

But I think we know that politics is just about part of everything, including your own brief, in which you start with a quote from the leader of the opposition.

Mr. Rosner: We were just trying to be respectful there.

The Chairman: All I can add is that frankly, I consider myself fortunate to be part of a team that's led by a Prime Minister who is flexible enough to recognize that the world is changing, that the market-driven economy is very different today than it was even when he made this statement, and that we're looking at a more cost-effective, highly competitive, international environment.

Thank you very much for appearing.

Mr. Rosner: As long as it's not an election-driven economy.

The Chairman: We have two years to go before any kind of an election.

I now welcome our last witnesses, from the United Transportation Union, Ron Bennett and Robert Michaud.

I can't help but notice, gentlemen, that your submission looks very lengthy. You are going to make an executive summary of this, are you, in about 10 to 15 minutes so that we can ask questions?

Mr. Ron Bennett (Canadian Legislative Director, United Transportation Union): No, I thought I'd read the whole thing into the record, Mr. Chairman -

The Chairman: Well, Ron -

Mr. Bennett: - but I know better.

The Chairman: Yes. You can submit this as read, but we would like a summary so that we can ask questions.

Mr. Bennett: Certainly.

.1735

First of all, thank you for the opportunity to be here. It's certainly a pleasure, as always, to appear before this committee, although it's unfortunate that it's been bumped so often we no longer get the Railway Committee room.

The Chairman: That's because it is now used for televised committees.

Mr. Bennett: With you as a chairman, and your background, I thought we'd be there for sure.

The Chairman: Oh, how flattering - but the gun control bill has more weight these days.

Mr. Bennett: Yes, for some reason gun control is more important to a number of Canadians than the whole foundation of our country, which is the railways. In our opinion, CN plays an important part. So certainly we're not excited about that fact.

In any case, Mr. Chairman, I will summarize. I have with me today my confrère from Quebec, Robert Michaud, who has done a lot of work for me in the area of transportation in the province of Quebec.

My brief is just that - very brief. The submissions I've appended to it are more for the enlightenment, if I may use that term, of the committee and their staff. I think you may find interesting the submission to the arbitrator, George Adams, because it talks about the productivity issues and how well the railways are actually doing in comparison with class-1 railways in the U.S.

The second one is an economic report submitted to Mr. Nault's task force. It also clearly points out how well CN is doing vis-à-vis a few years ago and how well they will do in the future, given certain changes.

I don't intend to read my submission into the record. Certainly I would hope that it be attached as part of the record. I will briefly skip through it and tell you that unfortunately, because we are, on the face of this legislation, opposed to the privatization of CN, the first part of our brief is negative. I regret that, because I don't like to come before this committee in a negative manner.

However, I think it's important that we state for the record that we have polled our membership, we have talked to our people, and the large majority are concerned about the privatization of CN under the basis put forward in this legislation and also on the fact that...with the minister's statements before your committee in that other legislation with respect to regulations will be coming forward very quickly that will make CN more attractive to the people who may be interested in purchasing this railway.

One of our concerns here is that we feel that the government has the proverbial cart before the horse. If they're really interested in making CN an attractive railway company to investors then they should get all of the enabling legislation in place before they do this. I know the minister had an answer for that; however, I'm concerned that it's still premature.

We think it's important...and I won't go into any detail; however, I hope we have a chance to answer some questions on it, certainly not related to Bill C-89, but it is to our premise that CN would do just fine if it was continued as a crown corporation. That is because of the productivity gains that had been made over the years and the donations we have made already toward the welfare of both CN and CP at the contract table.

As a union, we know the United Transportation Union has done their part to make CN a more viable company. Our real premise here is that we don't necessarily believe the real question is whether CN should be privatized. Rather, it's whether changes should be made in respect to fuel tax and other regulatory burdens that will make it easier for the railway to lower their costs that the American railroads don't seem to be burdened with.

.1740

I guess the other concern we have, which seems to come up at your committee quite often - certainly we've heard both the minister and the railway officers speak to it - is the fact that there's a need for abandonment of track and for more short lines.

The official position of the UTU is that we are not opposed to short lines. However, we believe short lines should be internal short lines keeping within the framework of Canadian National or Canadian Pacific, however that sits. That's because of the protections that go along with the fact that it remains a federal entity. The protections are not just the contract protections but also the protections of the health and safety regulations and so forth.

We think it's important - and I think Mr. Nault's task force even recognized it in their deliberations - that the safeguards with respect to health and safety be maintained no matter what happens with respect to provincial short lines.

We do not share the opinion of some that short lines should be provincial. We feel that the regulations and the protections for the working people are there under the Canadian federal umbrella, and we prefer what we just did in the province of Quebec, that is, negotiate an internal short-line agreement with Canadian National. That's worked for us. We think it will work well into the future. Our economist has looked at it. He's looked at the numbers and has said it's going to be beneficial to Canadian National at the bottom line. So we think that's the way to go.

With respect to the provinces where they have successor rights, we've heard that waved around by all parties as an impediment against short lines in Ontario. It's not quite factual. We have the Wisconsin Central railway, which was set up at Sault Ste. Marie under that legislation. We negotiated a new collective agreement with Wisconsin Central.

We have also had a number of meetings with potential short line operators in the province, and we recognize that it's just the protections that we're trying to keep there so that no railway can use the abandonment procedure.

We'll talk more about that the next, and I suppose last, time I appear before you, which will be on the deregulation issues that will come up this fall.

We don't want that used as a way to de-unionize the Canadian railways. That's the way it appears to our members, that somebody wants to set up a procedure to short-line the railways. They can downsize their workforce and do away with their collective agreements and dump them off on some other party. That's a concern to us and it's a concern to our members.

We believe there are some safeguards that need to be included in Bill C-89. Unlike my friend before you, from the CAW.... I'm sure after I appear here today you're going to storm the minister's office and have this bill withdrawn. We'd like to see that. We don't think this is a good bill. However, we're realists, too, and we know it's going to go forward. We know the government has reasons for doing that, whether they're legitimate.... In our minds, they certainly are, and in the minds of both CN and the government. We certainly accept that it's going to go forward.

Having said that, we just have some concerns that maybe should be addressed. They're very brief. We're concerned about the 15% ownership provision. We're not sure what that means. We understand the principle, which is to spread the wealth, not to have one group that controls the railway, but our question is, what happens if the government doesn't sell enough shares and ends up still holding over 50%? How is the Minister of Transport going to act as the major shareholder? Who is he going to appoint? What role is he going to play?

Certainly we hope there would be some resolution to that. Maybe it's a question that can't even be addressed, but it's something that is of concern to us. What happens? How long is this process going to take? Is it going to be sold? How quickly?

.1745

Another concern is the concern that's held by the employees and the pensioners of CN - the CN pension plan. You certainly had some discussion on that already. We heard the minister's comments, and Mr. Tellier's comments, about the pension plan and the fact that - if I understood them - the status quo would remain in effect.

We would like to think that because of the size of CN, and the size of the pension plan and the pension trust, and the fact that there have been special provisions made for the Official Languages Act, there have been provisions made for the headquarters to remain in Montreal, you could also make a provision to ensure there would be no changes to the way in which the Canadian National Railway pension trust fund is administered and funded, and a clause to protect the status quo. I think for the railway workers, or the 50,000 pensioners of CN, that's an important issue.

The government - and certainly the Nault task force - believes employee participation is important. I believe it's important too. I believe it's important whether it's a private company or a crown corporation. Certainly we support more involvement in the operation of the corporation; however, we see nothing in the legislation that speaks to employee participation. Maybe I've missed it. It's not very thick paper, and sometimes I skim over sections I should have read. But we don't see the vehicle there. We don't see how the employees are going to participate more in this company.

Many of our members are shareholders at CP Rail. That doesn't mean they participate in a meaningful way with the running and the corporate decisions of CP Rail. We believe consideration should be given to including some guaranteed seats on the board for employee representatives. We think we have a role to play there.

I just returned from Sault Ste. Marie, where I talked to our members at Algoma Steel Corporation. The change in attitude toward their method of operation has a lot to say about employee participation.

I guess our last major concern has to do with what happens after CN is privatized. What guarantees are there that it will not be broken up, i.e., the CP Rail bid to buy the eastern operation? The government didn't think that was a good idea last year. They will have no control over a privatized company that could then turn around and sell off its eastern operation or any part of its operation - and I use that only as an example. In the view of the government, when they were the majority shareholder, or the only shareholder, they felt it was important for the country to have CN remain whole and not broken up, as per the CP offer.

.1750

The other point that we've heard much talk on, and we certainly share some concerns on, is in respect to the debt. We don't know for sure what the true and final debt will be at the end of the 1995 fiscal year. We know CN, with their various write-downs, are going to be in a lot better position than what they are now vis-à-vis the bottom line.

We believe, however, you can't put CN out of the marketplace with a high debt level that will make it impossible to find investors, or make it unattractive to them.

So we support doing everything possible to get that debt down to a reasonable level. Don't anybody ask what that is. I guess zero is good, but some debt is normal.

Those are my comments. I'd be more than happy to answer any questions to the best of my ability.

The Chairman: Thank you very much, Ron, for your submission, and for all the background material you've provided along with that.

I know you've had some concern about the pension. You heard via the last witness that the pension fund at CN today is governed by the Pension Benefits Standards Act, 1985, which contains specific rules on the continuance of benefits in the case of sale of a business. Would you agree that these would protect the interests of the CN employees in this case?

Mr. Bennett: We understand what the Pension Benefits Standards Act does for us for the pensioners. It has those guarantees there. Our concern is that we wouldn't want to see some new owners come in and as one of their first acts try to get into a money grab situation where they wind down the current plan. Mr. Tellier clearly told us it's the status quo. Things aren't going to change. The pension board is going to remain the same, etc.

We don't see the real problem, in spite of the Pension Benefits Standards Act, 1985, with including that in the legislation. The government may.

The Chairman: No, we don't.

Mr. Bennett: Our concern is we don't know who's going to buy the company and what their operation's going to be like.

The Chairman: To put your mind at ease, we don't believe there would be a problem; this particular act would protect the interests of the CN employees and the pensioners.

[Translation]

Mr. Guimond: Regarding the question our Chairman just asked about the guarantees, if I understand well, with regards to the pension fund, you would like to have in the bill, and you want it clearly spelled out, provisions which would stipulate that CN headquarters would remain in Montreal and that the Official Languages Act continue to apply to the corporation after its privatization. Is that right?

Mr. Bennett: That's right.

Mr. Guimond: Could we include other guarantees? Is there something else we could include as a guarantee regarding your pension fund to ensure a better protection of your workers?

Mr. Robert Michaud (Chairman, Quebec Legislation Committee, United Transportation Union): We could add what we talked about earlier. When the committee will be sold in various chunks, the pension funds of many CN employees won't follow them. An actuarial scheme will follow them, and x amount, but as such, the real volume of the CN thrust fund won't be there. So you also might have to protect that aspect.

.1755

An x amount will certainly follow them. But afterwards, if we begin to regionalize, to make a lot of changes, and to sell part of the operation or all of it, at one point in time, we will be in a situation where we will end up only with a main corridor within Sarnia and Quebec.

Who will manage the CN pension fund? You will be left with four billion dollars and 2,800 employees. That is a nice kitty. So, globally, you are able to protect the CN assets, that is to say the eight billion dollars. To begin with, everybody agrees to say that we will not touch it, there will be nothing in the act to provide for these two problems.

Mr. Guimond: I hear you. You heard the presentation made the Canadian Auto Workers of Canada (TCA). I see that they did not stay to hear yours. I do not want to launch a fight between unions. I do not know how you will cooperate. But what do you think generally of the presentation made by TCA?

[English]

Mr. Bennett: You'd have to be more specific. Certainly there are some parts of it I agree with but there are other parts I do not agree with at all.

The Chairman: Michel, we could be here for an hour if you asked them to go through their whole brief. Is it any particular item?

Mr. Guimond: Yes. If they agree with the presentation....

Mr. Bennett: Let me be clear. We have a different view, and this already came out with respect to the short lines. They did not participate in negotiating the internal short line in Quebec. We felt that was the way to go, not to let it go to a private investor with no union people there. We saved jobs, and our job is to represent our members. So we take an exactly opposite path in that area.

We also take a different path with respect to employee participation. We think there are some benefits to having employee representatives on the board of directors, even if they are not the majority. One of our members suggested that we should have veto rights. Well, we're not even suggesting that. If we want veto rights, we're going to have to buy 50% of the company.

But we have a place, we have input, and if we are there, we have some controls or at least some participation. That's the name of the game. Certainly we're interested in that.

[Translation]

Mr. Guimond: You say, on page 3 of your brief, that Bill C-89 contains a provision indicating that the headquarters must remain in Montreal and another stipulating that the Official Languages Act will continue to apply to the new corporation. What does your union think of these provisions?

[English]

Mr. Bennett: We don't have any problem one way or the other. We wonder sometimes at the government insisting that they be in there when they talk about making this more competitive by privatization, a more competitive company, and therefore they'll be more competitive with CP Rail or the U.S. carriers, neither of which are governed by those two provisions. However, as a union, we don't have a great problem with the inclusion of Montreal or the Official Languages Act. We all see the need but we don't see the problem.

Mr. Guimond: I have two last questions, Mr. Chairman.

[Translation]

You are saying, on the second line of page three of your brief

[English]

``It is our firm belief that this legislation is premature.''

[Translation]

What should the government have done? Do you think it is premature? Should we have held public hearings before going ahead? It had been announced still. I do not want you to think that I agree that it is not premature, but the government still announced clearly its intentions with Mr. Martin's budget, last February.

[English]

Mr. Bennett: Well, my concern is that they announced their intentions long before that.

I don't think should have been any question that Mr. Tellier went to see him with the mission. He has done a lot to fulfil that mission. Mr. Young, the Minister of Transport, has stated a number of times that's where we're headed with this, and that's over the past year and a half.

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What I mean by ``premature'' is that I don't know if CN is really ready yet, given the fact that although we may not be happy with Mr. Tellier's actions, they have made the company leaner, and some of those benefits that will kick in will do so in another year or two.

The fact that none of those things I listed on page 3.... We have no idea how many shares, or what the price will be, what type of shares, all that type of thing. We don't know about employee participation. We know none of that.

The Chairman: Just as a supplementary, if I might, what would CN have to do to be ready? You say it's not ready.

Mr. Bennett: First of all, you need to go a little bit further down the line with the changes that have been made in the last year to make sure they are going to work.

The Chairman: Such as what, Ron?

Mr. Bennett: The cuts in staff, the changes in the collective agreements we just negotiated, all of those things.

But the real problem and the real solution isn't the privatization as much as it's the fact of the change to the regulations. We have to get these provinces on line to lower the fuel tax, and that's next to impossible in this fiscal environment where everybody is getting cut. But we have to do that, and we have to get those regulations changed. We recognize that.

We find it a little bit strange that the railways haven't even attempted to abandon near the number of tracks they are allowed to abandon under the current NTA, but I know one of the proposals is to speed up that process. We recognize maybe this has to be faced.

Mr. Guimond: I have a last question from your page 5, concerning the internal short line by the parent company.

[Translation]

In fact, it is a new concept. But I understand that it is the one that was developped in the Abitibi and Lac-Saint-Jean area in the province of Quebec.

Mr. Michaud: You are right.

Mr. Guimond: Good. We know that...

[English]

Mr. Bennett: The first one we did was from British Columbia. That was not necessarily with a formal-type agreement and negotiations involving all the unions, as the one in the province of Quebec, but it was a position that we took as unions. Four of the unions got together. We said that CN was going to sell their northern lines, 850 miles of track in Quebec, and we didn't want to see that happen - it wasn't good for our membership - so let's come up with a novel idea of how to do that. That's what we came up with; we negotiated this internal short-line agreement, which everybody says is to the benefit of everybody - the members and the railway.

Mr. Guimond: We must have a section in the law to give this possibility or to impose, because this is a problem. When CN or CP decide to go out, is it better to have a short line or just an abandonment of the line? This is a problem.

I realize that with those short lines one main objective is to cut your labour contracts. I received a confirmation from Sam Elkas, the former Liberal transportation minister, when they announced the first short line in the province of Quebec, in Murray Bay, in my riding, that he wanted the short lines to cut half of the number of employees and half of the salaries. But the problem is that if the new companies decide they don't want to have an internal short line and they sell or close the line, what will be our choice?

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Mr. Bennett: You may not even be able to legislate that. I think it's in the best interests of the railway to do it, and I think we convinced them of that. When we come back in the fall - I don't think you're going to take the minister's advice and work this summer - to deal with those regulations, at that time we may want to discuss that further.

The Chairman: Yes, that will be a question for the regulatory changes -

Mr. Bennett: I don't think you can do it in this regulation. As much as we'd like to see a lot of safeguards in Bill C-89, I'm not sure that's -

The Chairman: You're right, this is more the visionary enabling legislation, and the details in the NTA regs -

Mr. Bennett: ``Visionary'' is your word, Mr. Chairman.

Mr. Guimond: It's well received.

Mr. Gouk: Mr. Bennett, there is one thing I wanted to get into, and that's the short line.

A number of issues you've raised here I feel are issues too. Tomorrow we go to clause-by-clause examination of this and then it moves back to the House at report stage. I have a number of amendments and other strategies to be done at committee and/or report stage. Some of those will coincide with your desires.

With regard to internal short lines, maybe you can clear up something for me. There's something about this that troubles me. I believe there will be a lot of short-line operations in the future unless something changes. I've had a concern that internal short lines in some respects might not be in the best interests of the union. I'm curious about hearing your approach.

My concern is that when you have a short line, even an internal short line, it means renegotiating benefits, working conditions and so on. It's more the way a short line would operate except that you would still stay under the wing of the original parent company.

To be really Machiavellian, and looking at it from a company's point of view, it could then say it's going to close this, it's going to close that, it's going to close all these other things, and then come to you and say that it's prepared to keep them under internal short lines to cut down the contract.

I always thought we would want to do the opposite, to say if the company wants to get rid of its lines, short lines may be an alternative, but there should be some type of legislation that says they cannot own those short lines or have a major participation in them so that they don't end up taking profitable short lines and simply pull this off in order to reduce the benefits.

If it's not in their best interests to keep it, then let them sell it. If it is in their best interests to keep it, let them operate it as a company and negotiate from an overall company's point of view.

What you said was quite different. I would appreciate your comments on that.

Mr. Bennett: I think I follow where you're coming from on that. I guess what we see is that in negotiating this contract in the Quebec northland, we reduce the number of positions that normally would be needed to man that under the CN collective agreement.

But that didn't cause lay-offs of people. All we did was negotiate some early retirement packages, and the rest were given the opportunity to bid into other terminals where they wished to move, and then went through relocation and so forth.

So we protected everybody's interests there as best we could. We kept -

Mr. Gouk: Could I interject there? Would that be, then, a situation where the junior employees would end up being employees of that line?

Mr. Bennett: No, as a matter of fact. We thought it very easily could. In fact, I believe for one of the unions they may be the end result, but for our people, we protected the wage levels. The contract may be different. The work rules are different, because that's one of the things that works on the main line but doesn't necessarily work on a short line. We don't see a downside to doing it that way.

One of the things we have to be able to do is to prove to the company that we can come within 90% - I could be wrong about that figure - of the value they get out of selling that line. So we have to make the savings there.

Mr. Gouk: I wanted to clear that up, because that offered some confusion. I would like very much to talk to you later about that issue.

Mr. Bennett: Certainly.

Mrs. Terrana: It's nice to see you again, Ron. I just want you to clarify something. When you said that you want CN to remain a crown corporation because actually it's profitable, did you take into consideration the fact that the WGTA subsidy is no longer going to be there?

I keep hearing the recurring, ``Oh, yes, we're doing really well'', but if you start taking away.... The most profitable part of CN is west of Winnipeg, and that is mainly the WGTA.

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Mr. Bennett: I'll tell you how we look at the WGTA. We won't get into the fact that we don't think the government needs to do it and so forth, nor will we go into the history of it. The whole thing is that CN and CP didn't raise loud objections to that.

So although we have a lot of problems - we have problems with the way the money is being dished out by the Minister of Agriculture and so forth - we don't see them as major. It's still better to ship by rail than it is by truck. It will be a long time before trucks will ever get into that.

So we don't see that as hurting the profitability - not enough to matter.

Mr. Fontana: Just to add to that, Mr. Bennett, I think you indicated - and I think Mr. Tellier posed something to the same effect - that it was only going to have about a $50-million effect on the bottom line of CN with regard to the WGTA. So I think both of your assessments are pretty good.

First, I want to congratulate you on your presentation. Even though it's negative in the sense that you're against what we're trying to do, I want to tell you that you have been most positive and constructive in outlining where you're coming from as opposed to your previous colleagues, who.... Well, I won't get into that. At any rate, I've always found that you've been most cooperative, and I appreciate that.

In relation to your concern around foreign ownership, I don't know if you've read some of the dialogue we've had on why there is no restriction to foreign ownership and why the 15%. In fact, the 15% was an offset to foreign ownership, because the investment experts indicated that putting a cap, even a perceived cap, on foreign ownership would obviously have a detrimental effect, one, on value, and two, access into the marketplace, which we definitely need.

By putting the 15% cap on individual ownership, it in actual fact would ensure a broad-based representation of shareholders with no one group really being able to take firm control.

I think that was the opposite. I think that should be considered in your deliberation of this notion of making sure that we don't want it owned by foreigners. I think that was the balance we tried to achieve; maximum value at the same time ensuring it would remain Canadian, owned by Canadians.

If you look at the CP model, in actual fact there is no restriction. No single shareholder has more than 10% or 15%, or even 20%, to ensure that broad participation. So to a certain extent, I think we've looked after that particular thing.

With respect to the pension, I know that's a very big concern of yours. It has come up a couple of times. One, we have to look at that existing legislation, obviously, to ensure that's where that pension is protected. We've been given the assurance that's essentially where it needs to be.

As to whether or not you can put it in this particular bill, let me just tell you that from a precedence standpoint, I think every other union, every other pension group in the country then would start demanding that every single piece of legislation or collective agreement or whatever would ensure that their pension plan be protected. Obviously, that would be absolutely unbelievable to monitor.

We have to ensure that the legislation we have protects your employees as well as your pensioners, and also on the goodwill of a new corporation that in fact will have to have the trust and the fiduciary responsibility to ensure its employees and pensioners are looked after in the way the law prescribes.

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Mr. Bennett: Certainly, Joe, when I listen to you, I think of my good friend, the senator from London East, and certainly how concerned he must be, spinning down there about what's going on now.

We appreciate what's in the Pension Benefits Standards Act, and we do appreciate also what I've heard. I'm glad you brought it up. We haven't seen any of the Minutes of Proceedings and Evidence from these hearings, and that's unfortunate. In the past we've been able to get them fairly quickly.

The Chairman: There's been a change in our procedure. The technology is there; we're just trying to plug it in so it works more quickly.

Mr. Bennett: We're not really comfortable with the explanation we've heard. I'm not sure that the legislation...and I'm sure you've all thought about this. When you start talking about who's a group and who's an association and how many other 15% you can add together for control, I don't know what that all means. I have some concerns there, but I'm not even close to figuring out how you prevent it. It's there, and I hope with no problem. Certainly I understand the 50% spreading it out.

The Chairman: Thanks, Mr. Bennett and Mr. Michaud for your submission and for answering our questions today. We appreciate the time you've given us.

Colleagues, we resume tomorrow morning at 9 a.m. We have three witnesses. They are three short presentations. Then we will go into clause by clause.

We adjourn.