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Anyone here ever read "The Wreck of the Penn Central"? (Still available at Amazon.) The merger was perhaps the greatest corporate management fiasco of all time, written up as a classic Harvard Business School case study. Where to start ...? Dare I start?! Because if I do, where do I stop? I'll give you a few "bullet points" and we can go from there. An apt phrase, "bullet points," for PC died of self-inflicted wounds. (Full disclosure: I joined New York Central as market analyst-chemicals in mid-1967; became a PC employee on that ill-fated day, Feb. 1, 1968; and resigned late in 1968, convinced that bankruptcy was unavoidable and coming soon.) 1. The labor unions insisted upon, and the companies agreed to, post-merger lifetime job guarantees that made realization of significant merger labor benefits almost nil. It literally took an act of Congress in the mid-1980's to undo those agreements and allow Conrail to become viable. (Some have irreverently referred to this strategic error as "Saunder's Sell-out," Saunders being the head of the Pennsylvania before merger. The compliant role of Al Perlman, head of NYC, will, I think, always remain a mystery.) 2. Saunders (and the mysteriously compliant Perlman) were determined that the operations of the two railroads would be meshed in 100 days. The two executives immediately barnstormed the Northeast, meeting with major customers such as U.S. Steel and GM and assuring them of great things to come. What came was the greatest service meltdown in railroad history. (UP's problems with SP have been miniscule in comparison.) The melt down came so rapidly and so completely that by mid-1968 PC's operating cashflow was negative. Yes, there was an economic recession in 1967, and yes, the two railroads were not pictures of great economic health, but the same factors affected the B&O, for example. The entire system seized up and expenses exploded. The stories you have heard are not apocryphal ... entire trains lost ... entire trains interchanged to the wrong railroad ... entire yards clogged in cities such as Buffalo (with a dozen yards), with yardmen walking the tracks, recording car numbers, pencil on paper, in an attempt to get cars identified for switching to irate customers. 3. An personal anecdote which illuminates the chaos and explains why I believe the failure was self-inflicted: Days after the merger I was on a business trip to the Kanawha Valley of West Virginia, NYC's "chemical coast," and I stopped by the (former) NYC Yard Office in Charleston. Shooting the breeze and thoroughly demonstrating my "greenhorn" status to the NYC veterans, I naively asked about the pile of computer terminals over in the corner. I was told, and visual inspection confirmed, that they were "Singer-Frieden" Univac system terminals of the type used on the Pennsylvania. They were to be installed very soon, and everyone in the yard office would be learning the former Pennsy computer system. But even more interesting was the information that, "Yep, we'll be shipping the NYC's IBM system terminals up north." Up north referred to an unspecified former Pennsylvania Railroad yard office. Upon my return to New York I explored this matter. I learned that no attempt had been made to preplan a computer management system for the merged railroad. Rather, some genius put a ruler on a map, drew a line from west to east that roughly divided the merged system into North and South, and decreed that all stations north of the line would use Pennsy's Univac system and all stations south of the line would use NYC's IBM system. The 1960's may seem like the dark ages of computer systems, but already the railroads were totally dependent upon them. So imagine the chaos that ensued when Saunder's "100 Day" edict met the reality that one-half of the new railroad, geographically spread throughout the system, was learning a new computer system. A depression, let alone a recession, couldn't have done as much economic damage.
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