MONTREAL — Company and government officials rushed to pour cold water on a report Monday that Canadian National Railways is in financial difficulty.
In Ottawa, Transport Minister Don Mazankowski told the House of Commons that a Toronto Globe and Mail story, which quoted an unnamed Canadian National director as saying the railway is "teetering on insolvency," was grossly inaccurate, potentially damaging and alarmist.
In Montreal, where the Canadian National board was holding a regular meeting, Chairman Maurice LeClair called the report "singularly inaccurate in many of its alleged facts."
Reduction in Debt Projected
"CN is not insolvent," LeClair said in a statement. "Indeed, our five-year plan presented to the government in November projects a reduction in corporate debt to the point of self-sufficiency by the end of the planning cycle."
LeClair flatly denied an assertion in the report that he told Treasury Board President Robert de Cotret that Canadian National is bankrupt.
Canadian National's debt stood at about $3.3 billion (Canadian) at Dec. 31. The company's debt-equity ratio, 44.7% debt at the end of 1984, has risen to about 50%.
"The corporation's current financial health is such that all present and future financial obligations are being and will continue to be met," the chairman said.
The Globe and Mail said Canadian National was seeking approval from the federal government for drastic cutbacks, including the closing of all rail operations in Newfoundland, because the government wants it to meet its investment goals--including promised track expansion in Western Canada--through further borrowing.
"When you show a profit of $100 million, politicians get the idea you're making money," a member of the railway's board was quoted as saying. "But if they looked at our cash flow, they would see that Canadian National is teetering on insolvency."
"The fact is, we can't service our current debt on existing resources," the director told the newspaper. "So we certainly can't finance major expansion out of debt unless the government wants us to become a full-debt operation."
LeClair said company officials have been warning publicly for months of the need for severe cost-cutting measures--not because the company is in imminent danger, but because of pressure from changing market factors that will increase competition.
In this respect, he said, Canadian National is no different from other North American railways that are streamlining operations to remain competitive with each other and with the trucking industry.
One company source said that the Globe report could kill Canadian National's efforts to dispose of its money-losing trucking operation, CN Route. Canadian National is trying to sell it or merge with another firm, principally to save the jobs involved. But if those efforts fail, CN Route will be closed and the assets written off.