In early June 1877 trains on the Sarnia and London and Port Stanley branches were very delayed by caterpillars on the rails, since when they were crushed, locomotive traction was substantially reduced. Crews began on August 10 to convert the old wooden trestle bridge on the Toronto branch across the old outlet of the Desjardins Canal into an embankment. It was hoped that the project would be completed before winter. Ballasting of the London, Huron, and Bruce line was proceeding very slowly due to a lack of labourers. A small fireproof building, thirty feet by twenty feet in size, was erected near the general offices in Hamilton for the storage of old books and other company records.
On October 1, 1877, the Michigan Central withdrew from all passenger agencies in eastern seaboard cities that were being operated in conjunction with the Great Western. The Great Western continued these agencies on its own. The Michigan Central continued its western agencies. Up to this time, the Michigan Central and Great Western contributions to joint agencies had been 55 and 45 percent, respectively.
In October 1877 the situation continued poorly for the company. Traffic was still poor and rates were low. The agreement with the Grand Trunk was presented to the shareholders. The mileage report noted a total of 866.22 miles of line, the Great Western proper having 590.07 miles and the four affiliated lines (Wellington, Grey, and Bruce; Galt and Guelph; London and Port Stanley; and London, Huron, and Bruce) having 276.15 miles. The embankment at the Desjardins Canal was not completed until January 15, 1878, using material obtained from the excavation for a quarter-mile loop line joining the Hamilton-to-Toronto division with the main line. A new wooden passenger depot, forty-seven feet by twenty feet in size, was erected at Welland Junction.
In 1878 the embankment of the Great Western at Jarvis was raised in order to allow an underpass for the Hamilton and North Western Railway. The Hamilton and North Western and Great Western Railways contributed $2,000 and £920 ($4,500), respectively, to pay for this improvement. The Detroit and Milwaukee defaulted on its interest payment and was placed in receivership. An agreement was reached between the Great Western and bondholders of the Detroit and Milwaukee, allowing it to be reorganized under the new title of the Detroit, Grand Haven, and Milwaukee Railway. From this time forward, the railway would be run as part of the Great Western system rather than as a semi-autonomous organization dealing at arm’s length with the parent company. Traffic arrangements with the Canada Southern, also recently reorganized, were completed on August 1, 1878.
On April 27, 1878, the new permanent drawbridge (as required by the Dominion government) over the newly enlarged Welland Canal on the loop line was ready for traffic, a mere six days before the canal would be opened for the navigation season. The draw girders of this bridge were those formerly used in the infamous 1858 Desjardins Canal bridge (the latter having been converted from a drawbridge to an embankment). New stations had also been completed at Nixon and East London. The double-track iron superstructure built across the Desjardins Canal and the double-tracking of the Hamilton-to-Toronto branch were opened for traffic on October 12, 1878. These did away with the need for day and night telegraphers and switchmen at the old junction, prevented delays, and removed all risk of collision. The quarter-mile loop line at Burlington Heights was opened on September 16, 1878, connecting the main line to the Hamilton-to-Toronto branch. Trains could now run between Toronto and stations west of Hamilton without having to enter Hamilton yard, saving three miles on their journeys. Also in 1878 the Brantford, Norfolk and Port Burwell branch was substantially improved, new sidings being installed and the line being extended to the Glencoe loop line (extension was opened on December 19, 1878).
July 1878 was a time of tension between the Credit Valley Railway and the Great Western in the environs of Woodstock. The Credit Valley had built west from Toronto to the north of the Great Western main line but, as it proceeded toward St. Thomas, a crossing of the two lines was planned one mile west of Woodstock. The Great Western objected to this plan since the crossing would be located on a rising grade on the Great Western, making it difficult for Great Western trains to proceed after having come to a complete stop at the crossing. The Great Western wished it to be relocated. However, the Credit Valley was seeking its bonuses/subsidies for completing construction and would brook no delay. On Saturday July 20, 1878, the Credit Valley attempted to lay track over the Great Western main line. Expecting this move, the engineer of Great Western freight train #36 was told to “hold the fort” and wait for reinforcements. Shortly afterward, a special train arrived with Mr. Domville (mechanical superintendent), Mr. McGuiness (roadmaster), and a number of men. The Great Western put locomotives from passing freight trains on the crossing to prevent use by the Credit Valley. Although a fight would eventually develop, the Great Western prevailed until the matter could be settled in Chancellery Court.
In November 1878 the Maidstone (Essex County) town clerk was instructed by county council to notify the Great Western that it must remove certain obstructions at the Great Western bridge over “Brown’s Creek,” and also that a culvert just west of the bridge needed to be repaired.
The year 1879 was to be a significant year in the history of the Great Western. The first serious discussion of amalgamation with the Grand Trunk would occur during this year. In May the annual shareholder meetings of both railways occurred simultaneously. Sir Henry Tyler of the Grand Trunk supported amalgamation while the Honourable Mr. Childers did not. Mr. Abbott (London, U.K.), on behalf of the Grand Trunk shareholders, put together a proposal for amalgamation of the two roads. The proposal included a proposition to place the two lines under one authority, in the form of a joint committee formed out of the two boards of directors. The proportions of revenue division would be settled by arbitration.
The Great Western board meeting in Manchester, U.K., on July 25 featured a large attendance and unanimous passage of a resolution in favour of amalgamation. A committee was appointed to safeguard the shareholders’ interests and to urge the board of directors to approve amalgamation.
The Great Western board agreed to refer conditions of amalgamation with the Grand Trunk to arbitration. Five chairmen of important railways were nominated as arbitrators. It should be noted that fusion of the capital of both companies was not being entertained.
The Honourable Mr. Childers had had enough by this time and resigned from the presidency. The Great Western published its answer to the proposition of Sir Henry Tyler to fuse the receipts of both roads. The Great Western preferred a division of traffic at competitive points only, rather than a plan for a joint purse arrangement. In response, the Grand Trunk stated that if the Great Western board adhered to this decision, the Grand Trunk board would appeal to the shareholders of both companies to whom they could guarantee up to £200,000 ($975,000) as an immediate advantage of fusion. The Grand Trunk also offered to seek the formal sanction of the Canadian government for a joint purse arrangement “so as to guarantee the Great Western company against the risk of capricious withdrawal.” The Grand Trunk was even prepared to place the two roads under one management based in Canada.
Tyler responded that the Great Western had only two courses: continue the disastrous policy adopted over so many years, or join the Grand Trunk, which was then acquiring an independent position in Chicago and elsewhere.
Lieutenant-Colonel Grey, on behalf of the Great Western board, welcomed a detailed fusion proposal, which would be carefully considered by the board and then submitted to a special meeting of the shareholders.
The Great Western board released a special report on the proposal to fuse with the Grand Trunk, which was to be given to shareholders at a special meeting on October 2, 1879. This report stated that the Great Western had always demonstrated a peaceful response to Grand Trunk aggression. The inability of the Great Western to pay dividends had been due to the Grand Trunk’s persistent competition. The board insisted on the division of all competitive traffic and maintained that Tyler’s amalgamation proposals were illegal, since no such arrangement would be binding without the approval of the Canadian government. The Great Western would enter into any arrangement that would put an end to competition, but not on the terms proposed by the Grand Trunk.
The Great Western stockholders meeting adopted a resolution approving the board of directors’ policy on the question of fusion of net receipts with the Grand Trunk.