Trains.com

Interstate Commerce Commission approval of Penn Central

6904 views
22 replies
1 rating 2 rating 3 rating 4 rating 5 rating
  • Member since
    May 2013
  • 3,231 posts
Posted by NorthWest on Monday, October 6, 2014 7:53 AM

Thanks for posting those articles, wanswheel. They were fascinating!

  • Member since
    April 2003
  • 305,206 posts
Posted by Anonymous on Monday, October 6, 2014 4:48 AM

The creation of SCL eliminated much competition in the Southeast despite the fact SOUTHERN served many of the same locations that the former ACL and SAL did.  Florida suffered the most.  Compare the map of SCL on M-Day to today's CSX in the Sunshine State.  So many communities have lost rail service and many could still have it, had there been new shortlines or regionals created to operate much of the track that SCL abandoned.  The Orange Belt tourist operation in the 70s is a prime example.  It could still be operating freight service across Central Florida to St. Petersburg, but SCL abandoned the line instead.

At the time the ACL and SAL were in merger talks, SOUTHERN demanded entrance to the Tampa Bay area as a condition of the approval of SCL.  At the same time, Frisco made a bid for the Central of Georgia.  SOUTHERN was denied the Tampa Bay demand but got the CG.  Had Frisco got CG competition in Georgia would have been guarenteed.  SOUTHERN lifted a lot of CG track instead with a lot of one railroad towns created and others loosing rail service altogether, like in Florida.

Out West, the GNP&BL was the name selected to use during the merger proceedings.  Great Northern Pacific would have worked quite well, though Burlington Northern wasn't a bad choice, since Burlington was well known across the Northern Plans from Chicago to Billings, Montana, as well as, St. Louis, Kansas City, and of course Colorado and Texas though subsidiaries Colorado & Southern and Ft. Worth & Denver. 

It is amazing that James J. Hill was permitted to acquire the Northern Pacific, since it paralled the Great Northern across the Northern Plains.  True, they served different communities but Hill still controlled the traffic flow eliminating competition.  Perhaps this accounted for the Milwaukee Road's decision build the Pacific Extention?  Had the CM&St.P acquired the NP instead of Hill, one can only contemplate what the outcome would have played on the railroads in the Northwest today as well.

All in all, interesting speculation just as is the Penn Central.  I agree that Pennsy and N&W would have been a sound merger in itself and no doubt, many secondary and branchlines would have been spun off to create new regional and shortline carriers all across the system. 

Should the BN/CN and ATSF/SP mergers been approved?  I always thought that a WABASH-MP-D&RGW-WP merger should have been created to compete with UP/SP, but that is another story too.  

I still think the ICC made more blunders than intelligent decisions.  Back up to WWI and the denial of the merger of the Harriman roads: Union Pacific and Southern Pacific.  Harriman also controlled Erie and IC if memory serves me well.  Moving ahead to the 1930s, the late John W. Barriger III mapped out a plan to create what he called super railroads when he was with the RFC.  It would be interesting to see a rail map of the US today, had both Harriman and Barriger's plans been fullfilled.

 

 

  • Member since
    September 2006
  • 770 posts
Posted by wabash2800 on Saturday, October 4, 2014 5:56 PM
Note the only way this would begin to work would be plant rationalization in disposing of duplication, pulling up track and cutting back on employees. But nothing like that (other than job protection) is ever mentioned to the press and right after a merger is consummated, typical corporate double talk is to say that "no changes are planned at the present time". Victor A. Baird www.erstwhilepublications.com
  • Member since
    November 2005
  • 4,190 posts
Posted by wanswheel on Saturday, October 4, 2014 2:56 PM

Article from NYC Headlight magazine, February 1968

http://www.canadasouthern.com/caso/headlight/images/headlight-0268

NYC-PRR Merger Gets Highball From U.S. Supreme Court

On Jan. 15 (just as this issue of the HEADLIGHT was going to press), the Supreme Court of the United States cleared the track for merger of New York Central and the Pennsylvania Railroad, six years after the two roads announced they had signed an agreement to seek merger. Following the high court's momentous decision, Stuart T. Saunders, Chairman of the Pennsylvania, and Alfred E. Perlman, President of Central, issued the following joint statement:

"We are, of course, gratified that the Supreme Court has cleared the way for merger of the Pennsylvania and the New York Central. We are preparing to put the Penn Central merger into effect at the earliest possible date consistent with the Court's order.

"Consummation of our merger will make it possible to extend early financial aid to the New Haven and to expedite its inclusion in the Penn Central System.

"We are happy to reach the end of the long, hard road which we have travelled for more than six years. Our merger sets the stage for completing the restructuring of the Eastern railroads into well balanced, competitive systems. Inclusion of the Erie Lackawanna, Delaware & Hudson, and Boston & Maine in the Norfolk & Western system is a part of this process.

"We will dedicate our efforts to the improvement of service in the 14 states and 2 provinces of Canada which the new system will serve. As savings from the merger are realized, we will be able to make greater commitments to the modernization of our system.

"The application of advanced marketing, technical and cybernetic research will enable us to provide better freight service, designed to satisfy the real needs of our customers. Better utilization of the combined freight car fleet with modern computers, and the elimination of time-consuming interchanges at common points are among the immediate advantages that will improve car supply to shippers.

"We are confident that we can create a new role for the Penn Central in mass high-speed transportation of passengers for intermediate distances in highly populated areas. We also will continue to work with federal, regional, state and local agencies to improve the commuter services that are indispensable to the New York and Philadelphia areas.

"The merger and the agreements we have made with labor will provide greater security and job opportunities for all our employees.

"Management of the Penn Central will be strengthened by combining the talents and experience of the officers of both railroads. In the past two years, we have developed a fine spirit of teamwork through frequent meetings between officials of the two companies. Their thorough and systematic planning will enable us to make a smooth transition to merged operations and expedite the realization of merger benefits to our patrons, our company and our stockholders."

  • Member since
    November 2005
  • 4,190 posts
Posted by wanswheel on Saturday, October 4, 2014 2:45 PM

Article from NYC Headlight magazine, May 1965

http://www.canadasouthern.com/caso/headlight/images/headlight-0565.pdf

Full Commission's Approval Required

ICC AIDES BACK PENN-CENTRAL MERGER

Two Interstate Commerce Commission examiners have recommended ICC approval of the proposed merger of the Pennsylvania and New York Central Railroad. The examiners swept aside arguments by the Justice Department that the proposed combine would violate antitrust laws. Consummation of the merger, however, must await approval by the full 11-member ICC.

In their report the examiners recommend that the merged road take over freight services of the New York, New Haven & Hartford Railroad, but it wouldn't be "burdened" with the New Haven's passenger service unless some "sound economic" plan could be devised to overcome the New Haven's mounting deficits from passenger operations.

Commenting on the report Alfred E. Perlman, President of Central and Stuart T. Saunders, Chairman of the Board, Pennsylvania Railroad, said:

"The report of the Interstate Commerce Commission examiners recommending approval of the Pennsylvania New York Central merger places the goal of three competitively balanced rail systems in the east only a step away from realization.

"So far as the examiners' specific conditions are concerned, they will require study. However, a first reading indicates that the conditions do not impose any insurmountable obstacle to consummation of the merger.

"This report confirms our belief that the merger is in the best interest of the public and will strengthen competition within the transportation industry.

"We are confident that the full Commission will give its approval after reviewing the examiners' recommendations. The Penn-Central merger is more urgent than ever because of the recent sanctioning of the formation of two strong eastern systems—The Chesapeake and Ohio's control over the Baltimore and Ohio, and the Norfolk and Western expansion by consolidation with the Nickel Plate and the Wabash.

"We will be prepared to implement operation of the merged system at the earliest date the Commission will permit us to do so. The agreement we have signed with the railroad labor unions not only assures continued employment for these employees, but also provides for an orderly and efficient merging of the work forces in a manner acceptable to labor.

"A policy adopted by the two companies also provides protection in the merged company for supervisors, managers, officers and other non-union employees. The policy extends to non-union employees the same attrition principle which is the basis of the labor agreement with the rail unions.

"These provisions satisfy the concern of the ICC for equitable treatment of employees on both railroads. It will permit the merged Pennsylvania-New York Central Transportation Company to begin realizing merger benefits quickly and to strengthen its financial position. This, in turn, will provide job security and improved job opportunities.

"We will have a much larger and more modern supply of operating equipment. As we realize the savings inherent in our merger, we will have greatly expanded resources for acquiring additional equipment and for developing newer types of cars. We will have funds to sponsor more technical and marketing research, and to promote industrial development in our combined area.

"In the interim between this report and the final decision of the Commission, we will proceed with joint planning which will expedite effective operation of the merged company. This will simplify the changeover and will assure shippers of a continuing high standard of service.

"We expect that, in reviewing the examiners' report, the Commission will recognize the mounting competitive pressures under which the Pennsylvania and the New York Central are now operating. These pressures are intensifying as time passes, and neither of our roads can regain separately the revenues or make the expensive improvements for withstanding the changed conditions of competition over a prolonged period.

"Our merger will complete the basic three-system arrangement around which Eastern and New England railroads can construct a viable pattern which will be the salvation of rail transportation in an area that has suffered from inadequate service."

The combined road would be the largest privately owned rail system in the world, a 19,631 mile system linking 14 states, the District of Columbia and portions of Canada. It would have assets of $5.2 billion.

The examiners' basic finding and subsidiary conclusions for this merger were drawn from a close analysis of a 40-volume hearing record containing more than 40,000 pages of testimony, statements and exhibits. Their recommendation stems from an evaluation of more than 500 separate legal and economic issues. Some 250 parties intervened in support or opposition, and more than 450 witnesses contributed to the record.

A formal application for ICC approval of the merger was filed March 9, 1962, and hearings began August 20. Development of the record required 129 days of hearings in 18 cities. The hearing record was closed October 2, 1963. The signing of the labor agreement of May 20, 1964, necessitated reopening of the hearing record and the scheduling of a one day hearing September 16, 1964.

 

I.C.C.'s Unanimous Decision: CENTRAL-PENNSY MERGER APPROVED

http://www.canadasouthern.com/caso/headlight/images/headlight-0666.pdf 

  • Member since
    November 2005
  • 4,190 posts
Posted by wanswheel on Saturday, October 4, 2014 2:23 PM

Article from NYC Headlight magazine, December 1962

http://www.canadasouthern.com/caso/headlight/images/headlight-1262.pdf

ICC Hearings Held on Merger Plan for NYC-Pennsy

Officials of both roads present details of consolidation proposal

On August 20, 1962, hearings on the joint merger application of the Pennsylvania Railroad and the New York Central Railroad began before the Interstate Commerce Commission at Washington, D.C.

The hearings are being conducted by Jerome K. Lyle, the Commission's chief hearing examiner and Henry C. Darmstadter, hearing examiner. Making their appearance on the first day were more than 40 intervenors who either support or oppose the application or are biding their time, as the hearings proceed, to determine where their interests lie.

Alfred E. Perlman, President of the New York Central, and James M. Symes, Chairman of the Board of the Pennsylvania, offered direct testimony in support of the merger and were cross examined extensively by a host of lawyers, including representatives of the New Haven Railroad, Railway Labor Executives' Association and the U.S. Department of Justice.

Merger Is Logical

In more than two hours of testimony, Mr. Symes detailed the merger plans of the two railroads. He said he had studied the subject of mergers for the past 30 years and is convinced that merger of the Pennsylvania and Central is a logical step in the East from the standpoint of all interests.

He testified merger of the two railroads would preserve and strengthen them in the public interest, arrest their physical deterioration and avert possible bankruptcy that could lead eventually to nationalization of all American railroads.

Best Interests of Employees

Mr. Symes told the Commission it was his considered opinion that a merger would be to the best interests of the employees of both railroads. He attributed the severe drop in employment on the Central and Pennsylvania during the past 10 years to "entirely too much plant for the volume of traffic available under prevailing conditions."

He attacked statements made publicly by labor that railroads are being forced into mergers by their bank connections in order to improve their earnings, dividends and return on investment at the expense of labor. "Over the years I have had close contact with many investment firms, and I can truthfully say that there has never been an attempt on the part of any of them to persuade me that railroad mergers should be undertaken for the reasons mentioned."

He said there are no two railroads in the country in a better position than the Central and Pennsylvania to consolidate their operations, substantially increase efficiency, and improve their service at lower cost.

He testified that the overall capacity of the merged railroad will not be reduced. On the contrary, he said, the road capacity of the new system, as the result of improved service and facilities will be greater than it is now, or was during World War II.

Three Party Plan

In his testimony, Mr. Symes sketched in broad outline how most eastern railroads could be aligned into a balanced "three party plan" of consolidation which could assure better service at a lower cost. He noted that three competitively balanced systems were taking shape in the East around the Chesapeake & Ohio-Baltimore & Ohio, Norfolk & Western-Nickel Plate-Wabash and the Pennsylvania-Central.

"There is no question in my mind but that they (the three systems) would be competitively balanced and that all of them would be able to provide better service at lower cost." He repeated his conviction that railroad mergers must be entered into voluntarily and "cannot be accomplished by governmental compulsion."

ICC Has Unique Opportunity

Mr. Perlman followed Mr. Symes to the stand and declared that the Commission now has the unique opportunity to approve a voluntary consolidation of eastern railroads into the best attainable, balanced competitive systems.

He said the ICC, when it considers the applications of the three major systems now pending, will be able to measure the competitive impact of each system upon the other two. Approval of the Central- Pennsylvania, C&O-B&O, and N&W-NKP-Wabash applications, he said, would permit eastern railroads to regain their financial and physical strength.

Genuinely In The Public Interest

Mr. Perlman stressed that a Central-Pennsylvania merger would be genuinely in the public interest since it would eliminate a tremendous amount of duplication and waste, assure better service to the public, permit genuine economies, and assure, for the time being, the preservation of competition among all forms of transportation.

"Of the 28 communities of over 50,000 population now served jointly by the Pennsylvania and Central, none will be reduced to single railroad service. In every case, the community will have the service of another carrier by rail."

He noted "this merger application seeks to preserve competition, its denial may well destroy competition."

Size Is Not Strength

Addressing critics of the proposed merger who have expressed concern at the sheer size of the merged company, Mr. Perlman said they are confusing size with strength since "a combined Central-Pennsylvania would be no larger than either railroad has been as a single company in the past. Measured in net income, the Pennsylvania-Central company would be far less strong or prepossessing than either the C&O or the N&W systems."

He pointed out the difficult traffic, service and financial problems which faced the Central during the last eight years and said the railroad had refused to relax and accept the inevitable. Instead, the Central applied new service techniques modernized its plant through capital investment and reduced its long term debt by a net of almost $200 million in the last five years.

"Had we not modernized and mechanized and automated to the extent we have, the question of Central's participation in these proceedings would be academic. We would be involved in bankruptcy, not merger, proceedings."

Highlights of Cross Examination

During the cross examination of Mr. Symes by Joseph V. Gallagher, attorney from the U.S. Department of Justice, he was asked if marginal lines, such as the Erie-Lackawanna, could continue to operate in the face of the competition which would come from the three major systems. Mr. Symes replied there is no doubt these marginal railroads are a problem. However, the three eastern systems should be approved and then the inclusion of other eastern railroads could be brought about in an orderly fashion.

Mr. Symes told the counsel for the New Haven Railroad that, rather than include the New Haven in the Pennsylvania-Central merger, it would be more advantageous for all parties concerned if the three trunk lines now forming in the East had equal access to a merged New England system that would include the New Haven. He regretted that the New Haven trustees have refused to participate in a merger study with the Boston & Albany and the Boston & Maine.

Mr. Perlman denied the contention of Albert D. Brandon, counsel for the Pennsylvania Federation of Labor, AFL-CIO, that the Central had been forced into resuming merger studies with the Pennsylvania because it feared the competition that might develop from the C&O and N&W systems. He said the reason for resuming the studies had been his realization that the point finally had been reached where balanced systems in the East were possible.

Under cross examination by William G. Mahoney, counsel for the Railway Labor Executives' Association, Mr. Perlman testified the proposed merger would enable the Pennsylvania and Central to regain freight traffic from private motor carriers. Asked how much traffic might be diverted from other railroads to the Penn-Central, Mr. Perlman replied, "Our principal objective is to increase the efficiency of all these railroads so we can take business away from other modes."

Hearing Recesses

On August 31, the first session of the hearings were recessed until October 15, 1962. Following completion of testimony by all of the Central and Pennsylvania witnesses, regional hearings were started in several cities on both railroads and will continue through next month.

  • Member since
    November 2005
  • 4,190 posts
Posted by wanswheel on Saturday, October 4, 2014 2:14 PM

Article from NYC Headlight magazine, December 1961

http://www.canadasouthern.com/caso/headlight/images/headlight-1261.pdf

NYC—Pennsy Re-open Merger Studies

Joint committees of two roads will pick up where earlier studies of merger possibilities halted three years ago. Situation seen still more critical now

Agreement to move forward as rapidly as possible toward a merger of the New York Central and Pennsylvania railroads was announced last month by Central's President, Alfred E. Perlman, and James M. Symes, Chairman of the Board of the Pennsylvania. The railroad leaders issued similar statements to this effect on Nov. 8, following separate meetings of the boards of directors of the two roads in New York and Philadelphia, their respective headquarters cities.

Application to be filed

A joint application will be filed promptly with the Interstate Commerce Commission as soon as a satisfactory basis for merger has been agreed upon.

Central and Pennsylvania conducted studies of a possible merger, starting in 1957. These initial studies were begun in November, 1957, and continued until Central's directors decided to discontinue them in January, 1959.

Announcing the new move, Mr. Perlman and Mr. Symes said, “The economic and competitive conditions which confronted the railroads when the original merger studies were initiated four years ago have worsened appreciably. A measure of relief from excessive taxation in some states, minor federal legislative help under the terms of the Transportation Act of 1958, and some cooperation from public agencies in support of money-losing commuter services have been gained, but the need to increase efficiency and reduce costs through operation of the two roads as one system is far greater now than in 1957, when the studies were begun.

Better service seen

"Time to assure maintenance of rail transportation as a private enterprise is running out," the statement continued, "and we have no choice but to try every means at hand to help our companies better their ability to compete more effectively in the transportation field, and to avoid government ownership. It is believed that better service to the public by the merged railroads will be one of the most beneficial results if a decision to proceed is reached and authority is given to effect a merger."

Mr. Perlman and Mr. Symes pointed out that both Central and Pennsylvania are operating with heavy deficits this year and indicated there is little or no likelihood or sufficient earnings in the last months of 1961 to give either railroad net income for the full year. Both roads will probably wind up the year in the red. The original studies indicated that merger might permit a number of steps to be taken to improve the earning prospects of both roads.

Committees at work

Joint committees of the two railroads, and experts in special fields from their staffs, at that time conducted research and discussions as to the extent to which a merger would bring about more efficient operation, with resulting benefits to shippers and passengers, employees, investors and the general public. The findings of the earlier study groups will be available to the new joint committees which will be set up to progress negotiations to an early conclusion. The new studies will bring the previous findings up to date, taking into account changes, such as equipment and facility improvements, expansion and reduction of money-losing passenger operations, which have occurred in the three years since the earlier talks ended.

In addition to changed economic conditions, the railroads are faced with a number of difficult problems beyond their own control. Among these are discriminatory excise taxes, excessive state and local taxes, unfair assessments for highway crossings and other artificial burdens placed on the one transportation agency that has proved beyond doubt its essentiality in both peace and war. Whether under existing and anticipated circumstances, consolidating New York Central and Pennsylvania would be effective in overcoming or offsetting these difficulties, will be determined by the studies now being made. If these studies indicate that consolidating the two roads is in the public interest and beneficial to the respective employees and shareowners, a merger proposal would be formulated and if finally approved, submitted to the appropriate regulatory authorities.

  • Member since
    November 2005
  • 4,190 posts
Posted by wanswheel on Saturday, October 4, 2014 2:09 PM

Article from NYC Headlight magazine, July 1961

http://www.canadasouthern.com/caso/headlight/images/headlight-0761.pdf

ICC Opens Vital Hearings on Merger Plans

On June 19, in an imposing walnut-paneled room in Washington, ICC Examiner John L. Bradford opened hearings on Chesapeake & Ohio Railway's application to gain control of Baltimore & Ohio Railroad through an exchange of stock and a counter-proposal by NYC.

In an atmosphere strongly reminiscent of a courtroom the hearings went on daily from 9:30 a.m. to 5 p.m., with time out only for lunch, as the participants played their roles in one of the most important and dramatic chapters of modern railroad history. The results of these hearings will have far-reaching effects on New York Central people in particular and on virtually all segments of the nation's economic life, for they will form the basis for what happens to New York Central and all eastern railroads in the future.

Witnesses appearing on behalf of each railroad during the hearings included the presidents of the three carriers, other top officers, outside economists, shippers and other interested parties.

High point of battle

The hearings are the high point thus far in a battle that began over a year ago when Chesapeake & Ohio made a unilateral offer for B&O stock during the course of three-way merger discussions between the Central, C&O and B&O. Following the C&O's stock exchange offer, which was made for 80 per cent of the B&O's outstanding stock, Central countered with an exchange offer of its own for 50 per cent of the B&O's stock. Central's offer was limited to half of the B&O's stock in order to continue the possibility of a three-way merger, which C&O has continually opposed.

Central and its affiliated interests now own in excess of 20 per cent of the B&O's stock, while C&O claims ownership of approximately the same amount and acceptances from their offer for an additional 40 per cent of B&O stock. The I.C.C. must issue its approval before such an exchange can be made and control granted to either of the competing carriers.

Central has contended that C&O's control of B&O would result in diversion of traffic from Central, thereby substantially reducing its revenues and threatening it with bankruptcy.

During the past year, Central has continued to urge a three-way merger of the three roads as the only effective system that could be established to compete with the ever-growing Pennsylvania Railroad empire being assembled in the East. Pennsylvania Railroad now controls, or seeks to control through merger, the Norfolk & Western, Nickel Plate and Wabash Railroads, which represent nearly one-half of the total rail mileage in the East.

The only combination possible to meet this gigantic system, the Central has said, would be a Central, B&O and C&O consolidation, which would produce the territorial coverage, competition and economic strength to match the Pennsylvania.

Central has termed C&O's activity for control of B&O as only a "financial maneuver, with no regard for the public interest in assuring a sound railroad system in the East."

The hearings continued through four weeks, then were recessed until Sept. 11. For the first three weeks, statements were heard from many C&O and B&O officials and other witnesses. NYC attorneys had an opportunity to cross-examine them and succeeded in pointing up glaring fallacies and inaccuracies in their testimony.

Then, during the fourth week, NYC witnesses were able to present directly the Central's case.

President Alfred E. Perlman led the NYC witnesses, followed in order by John W. Barriger, President of the Pittsburgh & Lake Erie; Arthur E. Baylis, Vice President-Marketing, Jesse J. Friedman, a Washington Economic Consultant; Wesley F. French, Assistant Comptroller; and Walter R. Grant, Vice President-Finance.

NYC testimony heard

In his testimony, Mr. Perlman asked that NYC and C&O be granted the right to have equal ownership of B&O stock and equal responsibility for its welfare. He suggested the stock be placed in independent trusteeships until the three-way merger can be worked out.

Emphasizing that a three-way merger is necessary to counterbalance the "gargantuan" system being assembled by the Pennsylvania Railroad, Mr. Perlman pointed out his proposed solution was an essential foundation from which the three roads must build their merged system if they are to meet the competitive influence of the Pennsylvania.

He stressed that the three railroads will meet "as partners, not as master, a slave and but one free man."

"If the C&O application is granted," he said, "New York Central will suffer far more, and decline far faster than would the B&O if the application is denied.”

Mr. Perlman stressed that if C&O, B&O and Central keep fighting among themselves, these railroads "will all go down the drain and only the Pennsylvania will remain."

Mr. Barriger warned in his testimony that "if the ICC should approve the C&O's application, without inclusion of the New York Central, and should fail to grant the Central's application, Central will undoubtedly become bankrupt from traffic malnutrition and fiscal anemia."

Traffic loss cited

Mr. Baylis testified that NYC participation in control of B&O is essential to Central's survival. Asserting that exclusive control of B&O by C&O would result in "strangulation" of Central, he cited specific examples of traffic losses suffered by Central following mergers of the Erie-Lackawanna and the Norfolk & Western-Virginia railroads.

"In my judgment," he added, "based on all available facts, more than 50 per cent of Central's freight traffic would be diverted to, or subjected to short-hauling by the two large systems (C&O-B&O and Pennsylvania-Nickel Plate-N&W) if created." Such a traffic loss, Mr. Baylis said, would "destroy" even a system as large as the New York Central.

Mr. Friedman, head of an economic consulting firm in Washington, D.C., testified that proposed railroad combinations in the east should be judged by their impact on the financial condition of the entire railroad network serving this region, and not merely in terms of the advantages to the combining carriers. He pointed out that traffic of eastern railroads in the past ten years has fallen sharply while the other railroads of the country have been able to expand their traffic.

Mr. French testified that Central could not independently survive in the face of the competition that would be presented by railroad systems being proposed by C&O and the Pennsylvania.

Mr. Grant testified that Central and its affiliated interests own 631,375 shares of B&O stock, or more than 20 per cent of B&O's outstanding shares. He said that if the ICC approves a proposal that B&O be controlled jointly by NYC and C&O, Central is ready to pay C&O approximately $25 million for whatever amount of C&O holdings in B&O is necessary to give NYC and C&O equal shares in B&O.

Testimony of additional witnesses for both sides will be heard when the hearings are resumed in September.

  • Member since
    November 2005
  • 4,190 posts
Posted by wanswheel on Saturday, October 4, 2014 1:58 PM

Article from NYC Headlight magazine, December 1957

http://www.canadasouthern.com/caso/headlight/images/headlight-1257.pdf

Merger Possibilty to Be Studied By NYC & Pennsylvania

Alfred E. Perlman, President of the New York Central, has issued the following statement in regard to the proposal for a study of a New York Central-Pennsylvania Railroad merger:

"The Central and the Pennsylvania have announced that they are going to study the possibility of merging the two railroads, and whether such a merger would be beneficial to their employees, shareowners and customers as well as to the public as a whole. Arrangements to make such studies will be set up by the two railroads.

"At this time, of course, answers can be given to very few of the questions that have come up, since it is the purpose of the studies to determine those answers. If, after the investigations are completed, it is decided to proceed with a merger, the plan would be submitted to the shareowners of the two railroads and to the Interstate Commerce Commission.

News release issued

Below is the text of the announcement of the study, released to the press on Nov. 1, 1957:

James M. Symes, President of the Pennsylvania Railroad, and Alfred E. Perlman, President of the New York Central, jointly announced that they have initiated studies looking toward a possible merger of these two railroads into one consolidated system. Preliminary studies and discussions that have been held indicate that substantial benefits to all concerned may result from such a merger.

The further studies, it was stated, have been undertaken to determine the extent to which such a merger would result in more economical operation of the two properties as one system; in what ways such consolidated operation would be beneficial to the shipping and traveling public and to the communities served by the two railroads; and how it might serve the best interests of the respective stockholders and employees.

Thorough inquiry to be made

The railroad executives hold economic and competitive conditions confronting railroads, particularly in the East, have so changed that a thorough inquiry should be made into the wisdom of consolidating, as against continuing competitive operations. The principal competition for railroads today, it is contended, is not so much other railroads but other forms of transportation which are subsidized to varying degrees.

In addition to changed economic conditions and subsidized competitive transportation agencies, it was stated, the railroads are faced with other difficulties beyond their own control which do not seem to be realized by the public in general or by legislative and regulatory agencies. For example: Long-delayed and inadequate rate increases needed to meet increased costs; refusal to permit abandoning of unprofitable and unpatronized trains and facilities; inadequate payment for carrying mail; discriminatory excise taxes; excessive state and local taxes; unfair assessments for highway crossings; and other artificial burdens imposed on the one mass transportation agency that has been demonstrated to be essential both in war and peace.

Whether under existing and anticipated circumstances, consolidating the Pennsylvania and the New York Central Railroads would be effective in overcoming or offsetting these difficulties would be determined by the studies now contemplated. If these studies indicate that consolidating the two railroads would be in the public interest and beneficial to the respective stockholders and employees, a merger proposal would be formulated and if finally approved, submitted to the appropriate regulatory authorities.

Survival may be at stake

Meanwhile, the chief executives of the two railroads will make an exhaustive inquiry into all aspects of the projects. For they believe that if railroads are to survive as free enterprise servants of the people, such forward-looking, dynamic action as this merger proposal should not only be contemplated, but thoroughly explored.

It will be recalled, the railroad executives pointed out, that when railroad consolidations were actively being proposed and discussed during the depression some twenty-five years ago, the idea generally advanced at that time was that there be two or four competing systems serving the north-east quarter of the United States.

  • Member since
    April 2003
  • From: US
  • 1,522 posts
Posted by AltonFan on Thursday, October 2, 2014 10:27 AM

They should have found a way to work "Quincy" into the merged line.  The letter "Q" does not appear often enough in railroad reporting marks...

Dan

  • Member since
    December 2009
  • 1,751 posts
Posted by dakotafred on Wednesday, October 1, 2014 8:09 PM

wabash2800
From my research, certain parties wanted the merger way back in the 50's, and at that time the idea was referred to as the "Pennsylvania Central".

A handle I remember from when the merger was OFFICIALLY  proposed is the clunky  "Pennsylvania New York Central Transportation Company." Sort of like the name they were going to hang on Burlington Northern at first: "Great Northern Pacific & Burlington Lines."

In the latter case, if I recall my DPM correctly, even tho the northern lines had always been the parents, it was decided to put the Burlington name up front, because more people resided in the territory of that line, hence wider name recognition for the BN moniker. 

  • Member since
    September 2006
  • 770 posts
Posted by wabash2800 on Wednesday, October 1, 2014 1:10 PM
Thanks for the correction. I checked out the book from the library when I read it and incorrectly remembered the author to be one and the same. I will go back and correct my post. Victor A. Baird www.erstwhilepublications.com
  • Member since
    April 2003
  • From: US
  • 1,522 posts
Posted by AltonFan on Wednesday, October 1, 2014 1:00 PM

I spent last summer reading two books on the collapse of the Penn Central. Stephen Salsbury was the author of No Way to Run a Railroad, but much of the information came from David Bevan, who was the CFO for PRR and PC.

The other book on the PC debacle was The Wreck of the Penn Central, which I believe was written by two reporters who covered the story for a Philadelphia newspaper. In addition to political grandstanding and a titillating photo of "Miss Chromium Crankshaft", it gives an account of an organization that was dominated by an inbred and cliquey element of the Philadelphia Main Line. (Philadelphia's moneyed upper crust.)

Dan

  • Member since
    September 2006
  • 770 posts
Posted by wabash2800 on Wednesday, October 1, 2014 11:46 AM
From my research, certain parties wanted the merger way back in the 50's, and at that time the idea was referred to as the "Pennsylvania Central". There is that old saying, "Be careful what you wish for" and I would say that applies to this merger. But I do agree that if the PC would have been able to "rationalize the plant" (abandon redundant trackage quicker) like Conrail and change billing practices like Deregulation also allowed Conrail to do, PC might still be around. But given that, probably not, based on the amount of money it took to turn things around and incompetency of upper management. I get the impression that Saunders was very inept and there was too much infighting. The list could go on and on. IMO, a better book to read about PC's problems than Mr. Loving's book would be "No Way to Run a Railroad" written by Stephen Salsbury who interviewed David Bevan, PRR and PC CFO, who was on the ground level and unfairly blamed for PC's insolvency. Bevan was finally able to clear his name. Incompetent CEOs often blame poor financials on competent financial people within the corporation that the CEOs won't listen to. (I've been there.) But though the Penn Central debacle was painful, the largest bankruptcy (at the time) in U.S. history brought to light the economic predicament eastern railroads were in and the problem with the ICC. IMO, the resulting Conrail split was the best outcome. Unfortunately, some trackage that is long gone could have been well utilized in today's capacity problems. But that was then and today is now. Victor A. Baird www.erstwhilepublications.com
  • Member since
    December 2009
  • 1,751 posts
Posted by dakotafred on Wednesday, September 24, 2014 8:33 PM

You're right, NorthWest. I think I had it backwards.

  • Member since
    May 2013
  • 3,231 posts
Posted by NorthWest on Tuesday, September 23, 2014 10:40 PM

dakotafred
I think a previous poster -- I'm not being mysterious, I just can't call him up as I try to write -- had it backwards about end-to-end being viewed as non-competitive. What was supposedly "non-competitive," at least carried to its logical conclusion, was mergers such as Penn Central.

That is true, now. At the time of the PC merger, though, parallel mergers were preferred by the ICC due to the large number of railroads. The thought was that it eliminated the redundancies, while end-to-end mergers retained the excess capacity and hurt smaller railroads that didn't merge. For example, look at SCL, ICG, PC, CNW+CGW, CNW+MSTL, and, to a lesser extent, BN. All parallel mergers. That had come to an end when there were fewer railroads, note the failure of the proposed SPSF.

While PC was awful, it was necessary. Otherwise, the condition of railroads would have become much worse, and the regulatory changes may have occurred later, or not at all. Nationalization would have been a real possibility.

  • Member since
    December 2009
  • 1,751 posts
Posted by dakotafred on Tuesday, September 23, 2014 8:41 PM

Two drowning men trying to save each other -- that was Penn Central.

I think a previous poster -- I'm not being mysterious, I just can't call him up as I try to write -- had it backwards about end-to-end being viewed as non-competitive. What was supposedly "non-competitive," at least carried to its logical conclusion, was mergers such as Penn Central.

That idea persists to this day, with self-interested shippers seeking special treatment because they have only one railroad -- when they also have trucks, sometimes barges, etc., etc.

Penn Central never had a prayer. Loving tells the tale in his "Men Who Loved Trains."

Fourteen years before the merger, Alfred Perlman learned his first day on the job that the NYC barely had enough money in the bank to meet the current week's payroll. Put that with management strife, the sweetheart deals with labor made by Stuart Saunders, incompatible computers, the regulatory roadblocks to elimination of redundancies cited by NorthWest -- and you have the train wreck.

  • Member since
    April 2003
  • From: US
  • 1,522 posts
Posted by AltonFan on Tuesday, September 23, 2014 4:30 PM

From my reading, neither the NYC or the PRR had much financial wiggle room, and both were only a crisis away from bankruptcy.  It also seemed that the Pennsy was especially dependent on income from real estate sales and dividends from subsidiaries to make ends meet.

And PC did not want the NYNH&H, but was compelled to include it as a condition of the NYC-PRR merger.

Dan

  • Member since
    June 2002
  • 18,144 posts
Posted by daveklepper on Tuesday, September 23, 2014 10:18 AM

UNDER THE CLIMATE OF REGULATION AT THE TIME, IF THEY HAD NOT MERGE, ALL THREE, THE CENTRAL, PRR, AND NEW HAVEN, WOULD HAVE BEEN BANKRUPT, WHICH INDEED THE NYNH&H WAS ALREADY.

  • Member since
    February 2002
  • From: Mpls/St.Paul
  • 12,407 posts
Posted by wjstix on Tuesday, September 23, 2014 8:45 AM

Government regulation is essentially there to stop companies from doing something illegal, not something stupid. If NYC and PRR wanted to merge, it really wasn't the ICC's place to say they couldn't as long as they met all the legal requirements.

Stix
  • Member since
    May 2013
  • 3,231 posts
Posted by NorthWest on Monday, September 22, 2014 8:57 AM

In this time period, the ICC favored parallel mergers, feeling that end-to-end mergers tended to create unfair competition, and parallel mergers would help eliminate excess capacity. The problem was, it was very difficult to abandon lines until the Conrail era, and so the intended efficiencies never happened for PC. The forced addition of the NH also played a major role in its failure.

  • Member since
    September 2011
  • 5,422 posts
Posted by MidlandMike on Sunday, September 21, 2014 11:01 PM

PC made sense to eliminate duplicate lines, which it was eventually allowed to do in the Conrail era.  But yes it would have been better if the ICC had allowed the earlier proposed NYC-C&O merger.  PRR pretty much already owned N&W.  This is basically what came to be after the Conrail brake-up.

  • Member since
    July 2006
  • From: Vicksburg, Michigan
  • 2,302 posts
Interstate Commerce Commission approval of Penn Central
Posted by Andrew Falconer on Sunday, September 21, 2014 8:40 PM

I have tried to like the Penn Central because it was a historic fact and the PC was a railroad in my immediate location. The Penn Central never made any sense though because they had too many close proximity, parallel tracks.

 

The Pennsylvania would have been able to merge with the Norfolk and Western quite easily.

 

The New York Central would have been able to merge with the Seaboard Coast Line and/or Louisville & Nashville easily.

 

The people who ran the Interstate Commerce Commission hated railroads to the extent that they would permit a railroad death mergers like this. They wanted the freight to be hauled all by trucks on the nation's highways. The ICC approval of the Penn Central was another act in a long pattern of destroying the quality of railroads.

Andrew

Watch my videos on-line at https://www.youtube.com/user/AndrewNeilFalconer

SUBSCRIBER & MEMBER LOGIN

Login, or register today to interact in our online community, comment on articles, receive our newsletter, manage your account online and more!

FREE NEWSLETTER SIGNUP

Get the Classic Trains twice-monthly newsletter