Penn Central Bankruptcy

[RoyPBower]

With the GM and Chrsyler bankruptcies, one sees in the news many references to the Penn Central bankruptcy. I have two questions: 1.) Who can recommend a good book detailing what went wrong to precipitate the PC bankruptcy and 2.) What do you guys opine regarding the causes if the bankruptcy?

 Thanks,

Roy

[garyla]

The Wreck of the Penn Central is highly recommended.  The book is well researched and covers both the hard business facts and the sometimes-colorful personalities involved.

The PC bankruptcy was ultimately the product of an impossible regulatory climate.  The burden of operating a legion of unprofitable passenger trains, lightly used branch lines, and duplicate facilities guaranteed the outcome.  The incompetence, infighting, and misguided behavior of some of PC's leaders only hastened the day of reckoning.

 

 EDIT:  The referenced book is still in print;  the authors are named Daughen and Binzen.

[henry6]

Remember it wasn't only the PC bankruptcy that went into CR, there were the EL, LV, CNJ, L&HR, RDG along with the three PC components of PRR, NYC, and NH.  CR was set up as a railroad owned by the Federal government...its shares were eventually sold to private investors via a public stock offering and was thus removed from government control.  CR eventually sold itself off to CSX and NS. I have noted this elsewhere and ask the question can GM and Chrysler eventually return to private sector the same way CR did?

[garyla]

Given the level of government meddling already taking place at GM and Chrysler, I'll be amazed if either one ever returns as a profitable member of the private sector.

The transportation services provided by PC were vital to a big part of the national economy, and it was very important that the operation return to some kind of stable footing.  

Regrettable though it may be, GM's and Chrysler's products can pretty easily be replaced by the offerings of their profitable, private-sector competitors.   As an old fan of MoPars and Chevrolets (AND Electro-Motive), I find it sad to watch but I'm afraid that it's true.

[daveklepper]

Rembember that for a while, Chrysler was actually owned by Diamler-Benz, makers of Mercedes-Benz among other items.  Now it will be owned by Fiat.  Fiat is a very innovating and risk-taking company, with most risks proving successful.   I see a good future for Fiat and Chrysler.

It will be interesting to see what comes of GM's "Volt" project.  If it is a success, then GM may return to success.

[K4sPRR]

Two books that I found to be well researched and objective in their presentation was 1) "To Hell In A Day Coach" a 1967 work by Peter Lyon.  He explains the beginnings of railroads and how over time situation that lead to the rails struggling to survive.  The second book is "No Way to Run A Railroad; The untold story of the Penn Central crises", by Stephen Salsbury.  This was written in 1982 after the dust and finger pointing about the Penn Central had settled.  Another book not directly associated with the Penn Central is one that picks up where the two aforementioned leave off, "The Men Who Loved Trains, The story of men who battled greed to save an ailing industry", by Rush Loving Jr.  This book starts explaining the Penn Central then goes on to Conrail and the changes that made it sucessful.

 I think that once you research the Penn Central topic you'll understand that a Penn Central was going to occure sometime, somewhere, the industry as a whole needed a drastic wake up call as did the government who's collar and leash needed to be relaxed.

 Earlier writings on the Penn Central had some bias and they were quick to get to press during those early years, thus some errors and premature opinions.

[CSSHEGEWISCH]

George W. Hilton skewered "To Hell In A Day Coach" pretty badly in an article in TRAINS in the late 1960's.  Lyon's work is heavy on the venom, is not very objective and pretty much laid down the basic party line for NARP.  He also ignores the role of over-regulation in the collapse of Penn Central and was also a firm believer that the railroads pushed the passengers off of their trains.

[Bob Keller]

I'm not sure that anyone had written THE complete story, but the aforementioned "Wreck of the Penn Central" tells one part of the story and Stephen Salsbury's "No Way to Run a Railroad" tells a bit more. While a great deal of the blame for the failure resides in the money men, an awful lot goes to the operations side of the house and the inability of the lines to integrate their traffic. I don't believe that the story of the failures (and successes) has yet to be told.

[wjstix]

Keep in mind EMD was spun-off from GM several years ago, so AFAIK they're still doing OK.

Re GM et al it's hard to say what should be done. Despite the wailings of some on the right, I see no evidence that Pres. Obama has an agenda to "socialize" America and take over industries just because he wants to. Many free-market countries have for years have public-private partnerships...like the building of the US railroads in the 19th century with massive government grants.

It seems like if the choice is letting GM go bankrupt or giving them government aid til they get back on their feet, it would seem the better choice would be to help them rather than have them (and their many employees) be thrown out with the trash.

But on the other side, an economist on TV the other day (I forget his name, but he was the only guy to go on TV in 2007-08 and correctly predict the coming crisis) said that in fact it would be better for the US car makers in trouble to fail and get out of the way, free up the money for newer companies with newer ideas.

Interesting by the way that Ford, because of their more careful investing strategies, isn't in trouble.

[al-in-chgo]

I found a used copy of THE WRECK OF THE PENN CENTRAL easily online, thru abebooks dot com.  I think amazon had it, too, and neither cost very much.  Perhaps your public library has a copy, too. 

WRECK sold better than yer average RR-oriented book because it is about fiscal finagling and malfeasance as well as PC's place in the RR industry.  People with a non-RR background can understand it.  (IIRC the author is or was a journalist.) .  In many ways, PC's fast-acting bankruptcy anticipated the collapse of ENRON thirtyish years later. 

As for the "fallout" triggered by the PC bankruptcy and the many, many lines that were eventually combined to form Conrail, I'd recommend MAIN LINES by Richard Saunders, Jr.  But I definitely think THE WRECK OF THE PENN CENTRAL is just what you're looking for now.  -  a.s.

PS:  Let us know what develops! 

[aricat]

Wreck of the Penn Central should be required reading for President Obama, all members of congress of BOTH PARTIES; and anyone who cares about how our tax dollars get spent. About the same time didn't we bail out Lockheed ! Those that do not learn from history are condemed to repeat it.It is almost 40 years since the collapse of the Penn Central, have we learned anything from it, Washington DC !

[wjstix]

I wonder if the gov't hadn't stepped in when all these bankruptcies occured, what the result would have been?? As it is, Conrail turned out to be a good operation in time. You could argue that what history taught us was that government intervention when necessary often creates positive results. 

[henry6]

wjstix

I wonder if the gov't hadn't stepped in when all these bankruptcies occured, what the result would have been?? As it is, Conrail turned out to be a good operation in time. You could argue that what history taught us was that government intervention when necessary often creates positive results. 

That's a big what if...and could lead to megabillions of bytes here with no difinitve answer or answers.  Or even sensible ones.  To wit:

DERECO could have emerged as the leader taking in whatever Mr. Fishwick of the N&W wanted it to have.  D&H and EL might have merged along with the B&M and maybe MEC. OR EL could have added the NH instead.  End to end merger mentality was not the rage, but parallel structures of which one or how many availible, could be elminated, so an EL/LV merger could have lead to only one track from the Hudson River to the Southern Tier of NY, but which one?   NW or CSX could have gobble up PC in whole or in part as has emerged.  Could there have been a bold move by Sante Fe, Union Pacific, and or Burlington Northern to move east at that time?  Or perhaps CP or CN saw an opportunity to move south; they both have expande that way since.  Could today's map be exactly the same as it is today by having happenstances been different?  I mean, where do you go with this question, from where do all the answers come?  There's not enough bourbon to sustain me through it all.  And I haven't even started on the political angles!!!!

[IRONROOSTER]

The government doesn't usually intervene for the benefit of the company.  It usually does so to protect employees and/or customers who depend on the company.  At least that's it stated goal. Bankruptcy is usually concerned with protecting the creditors of the company to the extent possible.  Witness the current problems in the auto industry where Congress is upset over the lost dealerships and jobs in the bankruptcy.

So in the case of Penn Central, how well did the employees and customers fare with government intervention versus what would have happened with a bankruptcy?

Paul

[henry6]

IRONROOSTER

The government doesn't usually intervene for the benefit of the company.  It usually does so to protect employees and/or customers who depend on the company.  At least that's it stated goal. Bankruptcy is usually concerned with protecting the creditors of the company to the extent possible.  Witness the current problems in the auto industry where Congress is upset over the lost dealerships and jobs in the bankruptcy.

So in the case of Penn Central, how well did the employees and customers fare with government intervention versus what would have happened with a bankruptcy?

Paul

But when it comes to public utilities like power, telephone, and transportation, the publics needs are a major concern even beyond stockholders and creditors.  The scenerio would be, if the pbulic woke up tomorrow morning and couldn't get to work or couldn't receive necessities; how much commerce, how many people, would be affected by the loss of this company's product or service.  In the case of PC there would have been virtual highway gridlock from autombiles and trucks which would have made matters worse for consumers, creditors,and stockholders.

[MP173]

I am not sure who would have jumped in at that time.  No one really wanted to go east of a line from Buffalo thru Harrisburg due to massive problems:

1.  High losses from commuters

2.  High real estate taxes

3.  High labor costs

4.  Often there was uncompensated short haul traffic, particularly coming from the south.

5.  A mass exodus of manufacturing from the Northeast.

6.  Enormous costs to rebuild not only the ROW but also a large % of cars and power units.

7.  Labor protection.

Remember, considerable legislation was specifically enacted due to the mess in the east.  Without it there would have been continued rate regulation, commuter losses, etc.

ed