A new management group responsible for the company's operations in the east, including the Delaware & Hudson Railway, will be headquartered in Montreal.

The new eastern unit will allow the railway to aggressively address the persistent losses it has sustained on its operations in the region.

The new unit will have autonomy to determine its own equipment requirements, network rationalization and labour relationships.The new wholly owned subsidiary was named the St. Lawrence & Hudson Railway Company Limited and became operational on October 1, 1996, taking control of all CPR assets from Quebec City to Chicago (CPR trackage and trackage rights), and from Montreal to Washington, D.C. (Delaware and Hudson Railway), thus the D&H became a StL&H subsidiary.

The StL&H was given a dedicated management team and the authorization to undertake radical measures to reverse financial losses.

Within one year the financial picture was reversed and CPR announced its intention to continue ownership of the SL&H assets.