MONTREAL — Canada’s two national freight railways are negotiating a merger of their money-losing eastern operations and aim to seek government permission next month, the chief executive of Canadian National said.

The plan, which would be implemented in January 1996, would pool the railways’ operations east of Winnipeg and as far south as Chicago. It is not yet clear how much of the railroads’ U.S. assets would be included.

Government-owned Canadian National and Canadian Pacific Ltd.’s CP Rail System have been losing money for years, all of it from their eastern operations. The companies blame the eastern losses on too much capacity and too little freight.

Their businesses in the West have been profitable carrying heavy commodities such as grain, coal and sulphur.

“This is a realistic scenario,” Canadian National chief executive Paul Tellier told The Canadian Press news service in a year-end interview.

“I’m quite confident (that) in January CN and CP will reach some kind of tentative conclusion and shortly after be discussing with the government,” Tellier said. The government first would have to decide if it’s in the national interest to allow a merger, he said.

A spokesman for CP Rail said several options are under consideration, but that no decision has been made.

“We’re looking at every business option we can as two competitors,” said Tim Humphreys, CP Rail spokesman. “Whether a merger of the two is what results remains to be seen.”

Canadian National announced Wednesday that it expects a loss of 80 million Canadian dollars, or $60 million, for 1993. In 1992, the railway lost 1 billion Canadian dollars, or $750.4 million at current exchange rates, mostly to cover the costs of cutting 10,000 jobs over three years.

Tellier said the program is on target, with 3,000 jobs cut in 1993 from CN’s Canadian operations and another 200 in the United States. About half were management positions.

Tellier said the talks with CP, which started about a year ago, have moved rapidly. He said there are good relations between the historic rivals.

“It’s not the first time in history these two giants have held talks, but I don’t think they have ever gone as far.”