Did UP+C&NW cause BN+ATSF?

[YoHo1975]

To be fair, I'm not much of a partisan for any of the routes, I'm playing devil's advocate and I generally assume management makes mistakes...see Milwaukee, Penn Central, etc.

I don't think anyone is arguing that advantages of the SP&S aren't there, but Cascade Tunnel poses a significant capacity restriction through the Cascades. A restriction that Snoqualmie with it's lowered tunnels does not have. Likewise, Stampede while needing tunnel work does not have the length of tunnel and attendant issues. Having said that, being able to judge the needs of Intermodal in the 70s and before is unreasonable, but the fact remains that Cascade tunnel in the year 2010 represents a capacity problem.

  I was not personally advocating for any of the routes east of the cascades as I'm less familiar with them.

[sandiego]

From Mark Meyer's message:

"Ruling grades, helper districts, and route mileage were the primary considerations in selecting the primary transcontinental route between St. Paul and Spokane.  The same criteria applied in determining the route over the Cascade Mountain Range in Washington State.  The consolidated company's route was recommended by the Wyer Report and was largely implemented."

Right on, right on, right on!

Back on page four of this topic are two lengthy messages I submitted that quote Robert W. Downing extensively on route selection for the merged railroads. He neatly summarized what Mark's very through analysis shows with the comment that the best parts of both railroads (GN and NP) were chosen, and the primary route ended up composed of about 75% GN and 25% NP trackage.

Judging by the lack of reaction or comment, it seemed that no one read those two messages, as the battle has raged between the GN, NP, and MILW partisans for four more pages without resolution.

Mark's detailed comparisons should certainly convince anyone that the best route was actually chosen!

Thanks again, Mark!

Kurt Hayek

PS:  When I worked for the BN on the Twin Cities-Twin Ports-Fargo-Willmar portion of the railroad I ran over both ex-GN and ex-NP lines; generally the ex-GN lines were better engineered with more favorable grades and less restrictive curvature.

[VerMontanan]

Murphy Siding

If fans of NP, or Milwaukee Road, or  Anti-fans(?) of GN want to believe that "They did it wrong",  I guess I'm OK with that.  I just haven't seen anything that would convince me of that.  So, back to my opinion- I just don't buy it.

 

Murphy,

 

You're not alone. 

 

With regard to whether the GN or NP route was the correct route to keep when/if the railroad became Burlington Northern, it's interesting that people question that decision now, when in years past, there really wasn't any doubt (and there isn't really any now, amongst those who operate the railroad, just on such forums, I suppose).  I think all that's really going on here is that challenging history in this manner shows how emotional people can get over "their" railroad when it was downgraded or abandoned.  But that still doesn't mean the right decisions weren't made or that the operating people didn't know which routes were superior to others all along.

 

For those that may have these books, or could find them, I have two that pretty much explain the constant that was the superiority of the GN route.  The book, "The Burlington Northern Railroad in 1993" by Robert Del Grosso and Patrick Dorin (published in 1994 by Great Northern Pacific Productions) has a rather lengthy article about the 1957 "Wyer Report" which was a study about a GN-NP-CB&Q merger commissioned by John Budd, president of the Great Northern, and Robert Macfarlane, president of NP.  An excerpt from the article is "Ruling grades, helper districts, and route mileage were the primary considerations in selecting the primary transcontinental route between St. Paul and Spokane.  The same criteria applied in determining the route over the Cascade Mountain Range in Washington State.  The consolidated company's route was recommended by the Wyer Report and was largely implemented."

 

The only major difference in the primary route structure actually implemented by BN was that the ex-NP route was kept between Spokane and Pasco, rather than the SP&S route, which Wyer suggested.  While I would guess that as far back as James J. Hill himself there was consideration to such a route consolidation, the Wyer Report definitively outlined the most efficient routes 53 years ago, and 13 years prior to actual merger.

 

"James J. Hill's Legacy to Railway Operations" is a self-published book by Earl Currie, who was once a very high-ranking officer on GN and later BN.  This book goes into detail about the operating characteristics of most of BN's routes (not just the transcontinental route, and not just comparing the GN with the NP, but also the other carriers).  He comes to the same conclusion.  And while there might be an inclination to suggest that a GN official would favor his own line, he also writes on the knowledge gained as Superintendent of BN's Rocky Mountain Division, headquarted in Missoula, squarely in ex-NP territory.

 

As for the statement about the greater population along the NP route, I would remind everyone that things are relative.  Clearly, Missoula and Billings are much larger than Whitefish and Havre, but really, there are no big cities in Montana or North Dakota.  Montana is nearly as large as California, but as of the 2009 Census estimate, has yet to reach a population of 1 million (California is about to hit 37 million).  Therefore, the best freight route across Montana is one that can move the freight from the Pacific Northwest to the Upper Midwest most efficiently, regardless of how it crosses Montana.  Being a Montana native, I have always wondered how Montanans can complain about the BN being a "monopoly" in their state.  Such claims were made at BN merger time, and again after the Milwaukee Road bowed out in 1980.  It's interesting that cities like Las Vegas, San Diego, and Albuquerque, or all of Southern Idaho or most of Florida outside of Jacksonville and West Palm Beach-to-Miami only have one railroad (and in some cases have always only had one railroad), and are as populous or much more populous than Montana, but their railroad monopoly doesn't seem to be an issue.

 

By far, the primary reason that the ex-GN route was chosen most of the way was grade.  The GN route did not exceed .65 percent either way between the Twin Cities and Havre, Montana (midway across the state).  Crossing the Continental Divide in Montana, the GN route was 1 percent westbound (with a very short 1.3 percent at Bison), and 1.8 percent eastbound.  Crossing the Cascades in Washington was 2.2 percent each way.

 

The NP route has numerous 1 percent climbs each way from about 50 miles west of Fargo, ND to Glendive, Montana.  Bozeman Pass in Montana is 1.8 percent westbound and 1.9 percent eastbound.  Winston Hill near Townsend is 1 percent in each direction, and crossing the Continental Divide in Montana is 2.2 percent westbound and 1.4 percent eastbound.  In Washington, westbound trains faced a 1.2 percent climb leaving Spokane, and 2.2 percent was the grade both ways over the Cascades.

 

The difference in cost between the two routes is dramatic even today.  For instance, a standard unit grain train consisting of 110 cars and 16,000 tons needs 5 road crews and no helper crews between Fargo/Dilworth and Spokane/Hauser when routed via the ex-GN route.  Via the ex-NP route between the same points, the same train needs 7 road crews and 2 helper crews, and consumes about 2,000 gallons more fuel.  (To cross the Cascades, most of these trains operate via Wishram on the ex-SP&S water level route rather than over the mountains.)  Where helper crews are used on the ex-NP route (Bozeman Pass and Mullan Pass), there is the additional cost of stationing helper power at all times, and delay cutting helper power in and out, and the potential cost of delay waiting for helper power to become available if the number of helper trains overtaxes availability.  In other words, the same helper power can only be used a certain number of times in any given day.  When train count exceeds that, more helper power must be created, or trains must sit waiting for what's available; regardless, it's an expensive proposition. 

BNSF routes coal trains from the Powder River Basin to the Pacific Northwest both via MRL (ex-NP) and via Great Falls and Whitefish (ex-GN).  The 125-car trains are powered with 4 AC locomotives in 2-by-2 configuration (2 on the head end and 2 on the rear).  The trains via Great Falls make the entire trip without any power modifications whatsoever; the trains via MRL receive a 3 unit helper (SD70ACs) at Livingston (which are cut out at Bozeman) and a 5 unit helper (again SD70ACs) at Helena (which are cut out at Elliston) along with the same 4-unit road power.  The Great Falls routing is about 95 miles more, but this shows that even with longer mileage, not requiring additional power en route can make it very cost effective compared to the shorter route.  With regard to the "tranncontinental" routing, the GN route had the mileage and grade advantage both.

 

Earl Currie's book offers this insight in the operations on the GN and NP: "Bob Downing, Executive Vice President of the Great Northern at the time of merger, recalls how Great northern officers would have the Operator at the interlocking plant at Casselton (ND) where the Great Northern and the NP crossed at grade (the Operators at "Cass Tower" were Great Northern employees since it was the "junior" road) report the time No. 603 (the NP hotshot freight train) passed Casselton.  Even with running a small, highly-powered No. 603, it took the NP four hours longer to make the run to Seattle..  As long as No. 97 (the corresponding GN hotshot freight, previously called First 401) would leave Casselton not more than four hours after No. 603 passed, the Great Northern would not be in danger of arriving in Seattle later than the NP.  These comments are not intended to downplay the capabilities of the NP management, its operating plan or its ability to run an on-time railway.  The difference lay in the difficulty the NP had in trying to compete with a railway having a shorter route with lower grades and less curvature that was severe enough to require speed restrictions."

 

The Milwaukee was in a similar disadvantage to the Great Northern.  Like the NP, which encountered its first 1 percent grade west of the Twin Cities in Eastern North Dakota, the Milwaukee's first such hill - and it was and still is a long one - in Eastern South Dakota at Summit (compared to west of Havre on the GN).  Within Montana, the MILW route was slightly better than NP westbound (1.4 percent at Loweth vs. 1.8 pecent at Bozeman Pass, and 2.0 percent at Pipestone Pass vs. 2.2 percent at Mullan Pass), but the Milwaukee's huge disadvantage was climbing the Bitterroot Mountains.  NP went from Missoula to Spokane and GN went from Whitefish to Spokane in both directions at a grade never exceeding 1 percent.  But the Milwaukee had a grueling 1.7 climb - both ways - over St. Paul Pass (on the Montana/Idaho border) that had, in addition, loads of curvature and slow running. 

 

In 1960, the Milwaukee Road's Olympian Hiawatha was scheduled to depart Missoula at 620 PM; NP's North Coast Limited was scheduled out at 621 PM, 1 minute later.  The NP route, since it went around the mountains and not through them was 20 miles further than the MILW from Missoula to Spokane, yet it was 1 hour and 22 minutes faster!  In Washington State, often touted is the Milwaukee's gentle (.7 percent) westward crossing of the Cascades (versus 2.2 percent on GN and NP).  But often overlooked is that the MILW had a westward grade of its own - 2.2 percent - leaving the Columbia River valley at Beverly, and two significant hills eastbound - 1.74 percent in the Cascades and 1.6 percent east of Kittitas.  Also often overlooked is that GN and NP both had a water level route through the Cascades in their subsidiary SP&S which allowed them the option to move heavy trains with minimal power on this route, which of course is how BNSF chooses to run most much heavier trains today.  The SP&S route was, of course, meant to be the GN and NP link to Portland, which in addition to being a major city in it own right, was the gateway to California via Southern Pacific (even though GN had its own route to California, and interchange with WP and ATSF).  The Milwaukee didn't serve Portland until 1970 as a condition of the BN merger, and when they did, they simply got trackage rights from the Kelso/Longview area to the north into Portland.  This meant, for instance, that while BN traffic to/from Portland going or coming from the east arrived via the water level SP&S route, the MILW had to haul it over its major grades on the mainline (2.2 percent westbound, and 1.74 and 1.6 percent eastbound), but westbound, also had the additional ridiculous grade of 3.0 percent departing Tacoma.

 

An example of the MILW handicap is this: By the 1970s, most wheat from Montana was shipped to the Vancouver, WA/Portland, OR area for export, as is the case today (though nearby Kalama, WA is another popular destination).  A car of wheat from Great Falls to Portland would traverse 869 miles on an all-BN routing, but 1219, or 350 more, on an all-MILW route.  The MILW train handling would encounter a steeper grade just between Great Falls and Lewistown (1.5 percent), than the BN train would for its entire trip.  Such was the disadvantage of the MILW's entrance into Portland.  (In reality, such grain from the MILW would be handed off to UP at Marengo, WA to use UP's water level crossing of the Cascades, and a route only 150 miles longer than BN).  In any event, it's almost impossible to envision a railroad with the profile of the Milwaukee in Montana and without a water-level route through the Cascades handling the very heavy trains of today.   Another good reason it's not with us.

 

In the case of the BN transcontinental route chose after merger, debating whether the merger was a success or not is kind of moot, since so much of it was the ex-GN route.  In other words, the GN route would have been the low cost routing regardless; it was then and is now, and those wishing to revise history really can't change that.

 

 

[CNSF]

I'm not saying the railroads feel that way today, in fact I'm quite certain they don't.  But back in 1970 I'm sure they did.  The rail environment then was at least as bad as the air travel environment today, if not worse.

[YoHo1975]

In the case of the airlines, remaining independent likely means at least one if not both of them will fail. At least in the current airtravel environment. Certainly the railroads may feel the same way.

[CNSF]

Good point, YoHo1975.  It's not just in the railroad world that mergers are routinely overhyped.  There probably isn't an industry out there where someone hasn't claimed that putting two so-so companies together will somehow create a world-beater.  In reality, most mergers (at least those in mature industries) are more defensive and reactionary than visionary.  As one poster explained quite well early on in this thread, size matters, and no one wants to be left out and wind up becoming the next Studebaker. 

No one expects Delta - Northwest or United - Continental to result in great airlines.  Yet at the same time, I doubt that, thirty years from now, anyone with a basic understanding of the business will be arguing that they would have been better off remaining independent.  Debating the fine points of how they realigned their combined routes and hub structures, or which computer system they kept, maybe.    

[YoHo1975]

On Merger skepticism, I'd argue that the world at large generally mimics Dilbert for it's opinion on Mergers. And as anyone who reads that comic knows, Dilbert is about poking fun of how, to put it bluntly, stupid the corporate world is.

And I mention that merely to point out that it is odd to hear people assume a merger is a good thing.

I'm no railroad man, I'm the fan, but in any other aspect of my life involving corporate intelligence and mergers, the popular sentiment is bumbling and mistakes. Why this isn't true in this thread is confusing to me. 

 

Also, please don't conflate my posts with ICLand's. It felt as if people might be putting my words in his mouth and I wouldn't consider that fair as I'm less articulate on the subject and certainly less nuanced. 

Interesting that GN dominated the merger team. That alone should make one question the neutrality of the group. 

 

To reiterate something I said last week. When discussing BN, through the lens of modern BNSF, you can't also forget the Frisco Merger which affected the way they are now both positively and negatively....popular sentiment suggests more negatively. 

[CNSF]

ICLand

 

Usually the best information came from competing railroads, which usually lined up to bury the proposed merger. It was a distinctly adversarial proceeding, which usually brought out the full story. Too, and as I have mentioned, these are SEC regulated transactions; make a "material misrepresentation" of fact that would have misrepresented the effect of a merger on the investing public, and bang, investigation, fines and possible jail time.

Saying "what a stakeholder" wants to hear can be a quick ticket to federal prison. To that extent, care had to be given to what was represented.

Absolutely, great care has to be taken, by both sides, not to lie in making their cases.   And yet... it remains, as you say, a distinctly adversarial process, and in such a climate, truth is often inflated, as you can see in any courtroom any day of the year.

All the mergers I was involved in were essentially end-to-end combinations designed to achieve economies of scale, extended reach and service offerings, etc.   The objectives were pretty straightforward and clearly laid out without much in the way of hidden agendas.  But still, if you study the details in the arguments justifying both sides' positions, you'll see it's entirely possible for management to somewhat overstate how good or bad they believe the near-term impacts will likely be, without going anywhere near a material misrepresentation of fact. 

For example, look at the Conrail carve-up.  Was it a material misrepresentation of fact to say that billions of dollars of new business could be diverted within a few years from the highways to new north-south intermodal services made possible by the proposed combinations?  I would say no, it wasn't a misrepresentation of fact; if everything had gone incredibly smoothly with the operation it's conceivable that management might even have tried to go after some of that.  But with hindsight we can see that not only did it not occur within a few years, but that at some level management probably knew from the outset it would likely take far longer to ever achieve than the application stated. 

Take CN-WC for another example.  Within a relatively short time, CN was running trains on its own rails between western Canada and Chicago, without a meltdown.  That was simply a strategic necessity for CN, particularly after they bought IC.  Therefore, the merger was successful.  Case closed.  It's picking nits to ask whether all the detailed benefits, financial targets, new services, etc. projected in the application were achieved as specifically as stated within the projected timelines. 

For the record, my bias is based on my surviving all those mergers plus the failed attempt.  CN-BNSF was rather hilarious.  On one side, a case for all sorts of wonderful benefits was strenously made by a management team that, below the very top level,  was... well let's just say less than enthused with the prospect.  On the other, a case against the merger that basically said "if you let them merge, then we'll have to merge again, and do you really want a repeat of our last merger?"

[ICLand]

Murphy Siding

 

ICLand:

Usually the best information came from competing railroads, which usually lined up to bury the proposed merger. It was a distinctly adversarial proceeding, which usually brought out the full story.

  Wouldn't competing roads have the very same inclination

I could have phrased that better. "Competing roads" in the context of a given merger proceeding are those railroads that file formal objections based upon the alleged impact that the proposed merger will have on their railroad company. Generally, these objections are filed as follows 1) the formal objection, 2) exhibits which are generally in the form of traffic studies showing traffic diversions, 3) request for relief.

In the Union Pacific/Rock Island merger proceeding, for instance, 15 or so railroads filed objections in opposition to the proposed merger. In general, of course, what they object to is the creation of a new competitor that enjoys a size advantage, able to offer greater marketing benefits (single line haul, better equipment utilization, consolidation of markets, etc). So, their incentive is to provide as much negative information as they reasonably can attempting to 1) defeat the merger entirely, or 2) elicit traffic concessions from the Newco.

Since the competitor roads probably know just about as much about your business as you do, it's pretty hard to gild the lily in any kind of effort to bamboozle the Hearing Examiner or the ICC, because EVERYTHING is subject to cross-examination by those competitor railroads, as well as by the DOJ, SEC, state attorneys general, shippers, cities and town, public interest groups, and stray dogs.

 

[Murphy Siding]

ICLand

CNSF:

 

 

Having been on the inside of a few mergers myself (BN+SF, CN+BNSF, CN-IC, CN-WC) I'm not sure I could say that even the applications to merge and supporting exhibits can in every case be trusted as a pure, unfiltered picture of why the applicants sought to merge and what they really expected in the way of results.  Remember that the applicants are primarily concerned with gaining support for the idea from a variety of stakeholders (legislators, regulators, shippers, communities) and have an incentive to say what they think those stakeholders want to hear.   Not that there were any major anti-public or anti-shipper objectives lurking behind the scenes in any of the aforementioned merger applications!  I'm just sayin'...

Usually the best information came from competing railroads, which usually lined up to bury the proposed merger. It was a distinctly adversarial proceeding, which usually brought out the full story. Too, and as I have mentioned, these are SEC regulated transactions; make a "material misrepresentation" of fact that would have misrepresented the effect of a merger on the investing public, and bang, investigation, fines and possible jail time.

Saying "what a stakeholder" wants to hear can be a quick ticket to federal prison. To that extent, care had to be given to what was represented.

  Wouldn't competing roads have the very same inclination

[BaltACD]

The major perception that gets disseminated about mergers from those that experienced them comes from a very simple reality....did they survive the merger still being employed by the surviving entity?  Those that didn't survive generally don't address the merger in glowing terms.

[ICLand]

Deleted duplicate post.

[ICLand]

CNSF

 

 

Having been on the inside of a few mergers myself (BN+SF, CN+BNSF, CN-IC, CN-WC) I'm not sure I could say that even the applications to merge and supporting exhibits can in every case be trusted as a pure, unfiltered picture of why the applicants sought to merge and what they really expected in the way of results.  Remember that the applicants are primarily concerned with gaining support for the idea from a variety of stakeholders (legislators, regulators, shippers, communities) and have an incentive to say what they think those stakeholders want to hear.   Not that there were any major anti-public or anti-shipper objectives lurking behind the scenes in any of the aforementioned merger applications!  I'm just sayin'...

Usually the best information came from competing railroads, which usually lined up to bury the proposed merger. It was a distinctly adversarial proceeding, which usually brought out the full story. Too, and as I have mentioned, these are SEC regulated transactions; make a "material misrepresentation" of fact that would have misrepresented the effect of a merger on the investing public, and bang, investigation, fines and possible jail time.

Saying "what a stakeholder" wants to hear can be a quick ticket to federal prison. To that extent, care had to be given to what was represented.

[CNSF]

ICLand

Murphy Siding:

     Could you recommend a book, or magazine article, or web article that would back up the idea that the BN folks got it wrong when they merged?

 

As I have mentioned, a useful place to start with the BN merger, or any other merger, is with the organic documents. Then line up the actual economic and operating results with the prospectus. The UP/CNW merger documents are more revealing, and UP/SP is really a ride.

BN just happens to be interesting because 1) the organizational side of it went very, very well, but 2) the operating results side of things really flopped along. What makes it distinctive is that difference: with most "failed" mergers, the failure is easy to blame on the organizational calamity that ensues. It makes it an easy explanation. BN is distinctive in that regard and therefore an outstanding case study, because it was different from the "usual" and what "went wrong" can't be blamed on any organizational overall gone haywire.

No, these aren't in a book, a magazine article, or a web article.

They are in the applications to merge, the hearing examiner's reports, the exhibits to testimony, the recorded testimony, and are often summarized in the Opinions authorizing any particular merger and  certainly in the annual reports.

These are far better sources than any book, magazine article or web article.

Why? Because the information is unfiltered by anyone's opinion, bias or, as often happens, the writer's lack of economic, financial, railroading or business background.

Having been on the inside of a few mergers myself (BN+SF, CN+BNSF, CN-IC, CN-WC) I'm not sure I could say that even the applications to merge and supporting exhibits can in every case be trusted as a pure, unfiltered picture of why the applicants sought to merge and what they really expected in the way of results.  Remember that the applicants are primarily concerned with gaining support for the idea from a variety of stakeholders (legislators, regulators, shippers, communities) and have an incentive to say what they think those stakeholders want to hear.   Not that there were any major anti-public or anti-shipper objectives lurking behind the scenes in any of the aforementioned merger applications!  I'm just sayin'...

[Paul_D_North_Jr]

     Good one ! 

Considering the source is a 'blog', that cover is dated Sept. 10th -16th, 1994, it's in an upload of March 28, 2010, and another apparent date of "2007/08" in the URL, perhaps you'll forgive me if I'm a little suspicious that it was 'Photo-shopped' or similar.  But even so, it's still pretty funny - and should have been an original - and better yet if it really was.  It deserves broader circulation, too - like in every proxy statement soliciting votes for a merger . . .   . . . and at least to the "Not Very Improved Humor" thread here. 

Thanks for sharing that !

- Paul North.  

[ICLand]

bobwilcox

I did three mergers-CNW+MSTL, SP+DRGW and  UP+SP. The Economist summed it all up nicely in one cover photo: http://blog.titaniumdreads.com/wp-content/uploads/2007/08/economist_the_trouble_with_mergers.jpg

Well that was good for a belly laugh.

I think the perception regarding mergers in general is just about diametrically opposite between people who have experienced them, who have one set of opinions,  and people who think that just because they are done, they must be "good."

Experience goes a long way.

Now, that image is going to stay with me all day.

[bobwilcox]

I did three mergers-CNW+MSTL, SP+DRGW and  UP+SP. The Economist summed it all up nicley in one cover photo: http://blog.titaniumdreads.com/wp-content/uploads/2007/08/economist_the_trouble_with_mergers.jpg

[Paul_D_North_Jr]

Link to "In Memoriam" for Robert Downing -died August 2, 2010 - from Progressive Railroading's website, dated 08/06/2010:

http://www.progressiverailroading.com/news/article.asp?id=24033 

[Murphy Siding]

ICLand

Murphy Siding:

     That sounds very interesting.  In fact,  it's so interesting, that I'd like to read more about that premise that the BN meger was a failure, and the railroad folks that lined it up didn't know what they were doing, and got it wrong.   I'd really be looking for something more indepth than just messageboard forum chat between two railfans like you and me.  Something written by an author with some railroad background and business experience would be best..  Could you recommend a book, or magazine article, or web article that would back up the idea that the BN folks got it wrong when they merged?

 

..................BN just happens to be interesting because 1) the organizational side of it went very, very well, but 2) the operating results side of things really flopped along. What makes it distinctive is that difference: with most "failed" mergers, the failure is easy to blame on the organizational calamity that ensuses. It makes it an easy explanation. BN is distinctive in that regard and therefore an outstanding case study, because it was different from the "usual" and what "went wrong" can't be blamed on any organizational overall gone haywire........................

No, these aren't in a book, a magazine article, or a web article.

  OK   Thanks.

[ICLand]

Paul_D_North_Jr

Sadly, Robert Downing died recently - in or around August 2010, if I'm not mistaken. 

Oh my gosh. That's a real loss. I spoke with him last Christmas and he seemed to be doing pretty well.

[Paul_D_North_Jr]

Sadly, Robert Downing died recently - in or around August 2010, if I'm not mistaken. 

[ICLand]

Paul_D_North_Jr

ICLand:

  [snip]  Only two of the four principal architects of the BN merger are still alive and they are pretty well up there in age. I know their views well on the matter. 

  In the mid-1990's, just before the BN+SF merger (as I recall), there was an article in Trains that consisted of interviews with 4 former presidents of BN about the 1970 merger and subsequent events - at least Lou Menk and Robert Downing, and 2 of these 3 - Norman Lorentzen, Gerald Grinstein, Richard Bressler - as best as I can recall.

John Budd, Lou Menk, Bob Downing and Worth Smith were the driving forces on the merger; Dowing and Smith on the merger committee itself. Downing was replaced by Smith in 1968 when the go-ahead was finally given by the ICC to merge and Smith chaired the committee through "M" Day in March, 1970. I think Jerry Grinstein was at Western Airlines or some such place during the pre-Frisco days at BN. Last I heard he was living at Sun City, Arizona. Bressler came on later. Lorentzen was an NP hand; a very good railroad man.

In any event, Downing and Smith are still alive.

I knew Menk, and he wasn't doing well. Indeed, for the railfan who thinks someone would have written a book about it all if it were true, the following:

"By 1977, Menk, in the midst of another merger, this time with the Frisco, began to shed full responsibilities of leadership. Aged 59 in that year, he persuaded to Board to appoint Norman Lorentzen, age 60, another career railroad man and trusted colleague, to the position of president and CEO while Menk remained as chairman. A man of exceptional physical and emotional energy and personal charisma, Menk had nevertheless become worn down by the death of his wife, and, no doubt, by the apparent failure of the strategy of the 70s to yield acceptable financial results."

-- Gordon Donaldson, "Corporate Restructuring: Managing the Change Process from Within," Harvard Press, 1994.

As Donaldson notes: "only the most die-hard and introverted railroader could ignore the facts" regarding the BN merger during the 1970s. P. 47.  I would guess that Donaldson hadn't met some of the folks here!

[Victrola1]

If Perkins of the C. B. & Q. had gotten control of the A. T. S. & F. as he wanted, would James Hill have wanted that combination? Would we be having this conversation?

[Paul_D_North_Jr]

ICLand

  [snip]  Only two of the four principal architects of the BN merger are still alive and they are pretty well up there in age. I know their views well on the matter. 

 

In the mid-1990's, just before the BN+SF merger (as I recall), there was an article in Trains that consisted of interviews with 4 former presidents of BN about the 1970 merger and subsequent events - at least Lou Menk and Robert Downing, and 2 of these 3 - Norman Lorentzen, Gerald Grinstein, Richard Bressler - as best as I can recall.  I skimmed through it over the weekend - I was looking for something else - but I did note that one of them remarked that the CB&Q line to Guernsey [sp ?] was not in near as good a condition as was expected.  Nothing jumped out at me as any of them saying that the merger was a failure or disaster, or had unexpecetd challenges to overcome, etc. - but then, what would you expect them to say for attribution in an industry-wide publication ?  Nevertheless, that article might be worth re-reading to see if there are some subtle clues that - at a simplistic, summary level -  corroborate or refute what ICLand seems to be saying here. 

But as he has noted, the best evidence would be to get and study the primary sources, and then do a detailed study, comparison, and narrative summarizing the trends and results.  As he also said, that's at least a Master's and perhaps a Ph.D. level project.  Perhaps when I retire in 15 or 20 years, if no one else has done it by then and if I have nothing better to do with my time . . . .

- Paul North.

[ICLand]

BaltACD

The one thing those with the ego's involved to pull off mergers and regime changes overlook about the overtaken property in the merger is that one size doesn't fit all....at least not without a lot of work being undertaken.

 

 

And I think this is the realistic view that diverges significantly from what is, I guess, represented on this Thread as the railfan's view.

These organizations are not a perfect synthesis of highly educated, fully functional executives with plenary experience and infinite knowledge. There are competing ideas, different and often conflicting experiences, sometimes the ego wins over the experience, and sometimes "vision" sinks practical experience. The "turf wars" can be debilitating, older executives sometimes don't appreciate the new ideas about networking and node management, and sometimes it just gets back to what was referenced earlier about misunderstanding the role and purpose of IRR.

And of course that's the whole point of reviewing these actions, to see what went right and what went wrong. It is beyond my experience and education to presume, ipso facto, that "because they did it, it must have been right" which appears to be the prevailing rail fan opinion I am guessing from the comments posted.

Of course, even if there is a fully useful review of success and failure, then the problem is that the next generation of "merger gurus" have lost the institutional memory of the last round, and which is why the same problems seem to crop up over and over with merger efforts and I think you probably hit the nail on the head: there is an ego involved with creation of something bigger than what existed before. Oh, and bigger salaries too. And the golden parachute if it all falls apart. Well, oops, this is bringing out the cynic in me, and that  serves little purpose, so, good day on an interesting point raised.

[Paul_D_North_Jr]

BaltACD's lengthy post above echoes Railway Man's recent remark in another thread here that "All railroading is local".

- Paul North.

[ICLand]

Murphy Siding

     That sounds very interesting.  In fact,  it's so interesting, that I'd like to read more about that premise that the BN meger was a failure, and the railroad folks that lined it up didn't know what they were doing, and got it wrong.   I'd really be looking for something more indepth than just messageboard forum chat between two railfans like you and me.  Something written by an author with some railroad background and business experience would be best..  Could you recommend a book, or magazine article, or web article that would back up the idea that the BN folks got it wrong when they merged?

Well, there's more than a little "word putting in mouth" here.  And I'm glad to join the ranks of railfans I guess, but if you ever catch me out watching trains for the h*** of it, good luck. I've never done it. I "think" I understand it -- maybe not the self-assured attitudes that railfans sometimes absorb, somehow -- but it just doesn't tilt  my boat to stand there and do it.

As I have mentioned, a useful place to start with the BN merger, or any other merger, is with the organic documents. Then line up the actual economic and operating results with the prospectus. The UP/CNW merger documents are more revealing, and UP/SP is really a ride.

BN just happens to be interesting because 1) the organizational side of it went very, very well, but 2) the operating results side of things really flopped along. What makes it distinctive is that difference: with most "failed" mergers, the failure is easy to blame on the organizational calamity that ensues. It makes it an easy explanation. BN is distinctive in that regard and therefore an outstanding case study, because it was different from the "usual" and what "went wrong" can't be blamed on any organizational overall gone haywire.

No, these aren't in a book, a magazine article, or a web article.

They are in the applications to merge, the hearing examiner's reports, the exhibits to testimony, the recorded testimony, and are often summarized in the Opinions authorizing any particular merger and  certainly in the annual reports.

These are far better sources than any book, magazine article or web article.

Why? Because the information is unfiltered by anyone's opinion, bias or, as often happens, the writer's lack of economic, financial, railroading or business background.

I would hesitate to suggest that I had an opinion, pro or con, that was uninformed by reference to that detailed factual record.

And that's just an exercise of caution insofar as credibility of offering opinions on complex economic topics because I don't see the point in having an opinion just because everyone can have one.

Only two of the four principal architects of the BN merger are still alive and they are pretty well up there in age. I know their views well on the matter.

[BaltACD]

The one thing those with the ego's involved to pull off mergers and regime changes overlook about the overtaken property in the merger is that one size doesn't fit all....at least not without a lot of work being undertaken.

Railroad operations evolve out of the physical constraints of the physical plant, the traffic base and labor history of the areas involved.  The operations that exist TODAY are the best efforts that that carrier could muster with the tools and finances that it has possessed up to today.

When the 'top dog' leadership does not take into account what transpired to get the 'bottom dog' partner in it's current position it generally dooms itself to short term failure.

After a merger/acquisition a management team implemented a operating plan of 'fewer bigger trains' as that plan had worked well on the property they were familiar with.  What that plan overlooked was that the part of the property they were not familiar with did not have the terminals that could handle the larger trains, either receiving them or dispatching them, as a result trains were held from getting into terminals account the terminals were full of traffic that was waiting outbound movement because the plans train size minimums had yet to be met...in very short order the entire system collapsed.  The wrong plan for the wrong property.  The operation of major terminals on any carrier is all about juggling the space available in the terminal with the movement of traffic through the terminal.  A 50 foot car, will ALWAYS occupy 50 feet of track space....a 5000 foot train, will occupy 5000 feet of track space in the terminal, no matter if the train is assembled or not...it can be 5000 feet in the receiving yard, 5000 feet in the departure yard or 5000 feet distributed through the bowl tracks during the switching process.....but it will ALWAYS occupy 5000 feet of track space.

When you try to operate 9000 foot trains in & out of terminals designed for 5000 foot trains you will pay the consequence in requiring more than one track to initially yard the train and more than one track to ultimately depart the train.  The way many terminals are physically configured, switching cannot take place while trains are being yarded or dispatched account the inbound/outbound trains fouling the leads as they perform their multi track moves.

To be effective the operating plan MUST be tailored to the physical facilities that are being used to implement it.  If the 'new' management doesn't feel that the facility is efficient enough....the facility must be changed so that it can handle the 'efficient model'.  If you want to run 9000 foot trains....configure the receiving and departure yards to handle those size trains without fouling out the switching leads.

If you want to 'Run the Plan' you must have facilities that can facilitate running the plan.

ICLand

 

It did not go smoothly.

If someone does a book on the subject some day, it would be interesting to read a developed history and context of why BN and its successors generally managed the organizational aspects of mergers quite well, and why Union Pacific generally didn't.

[Murphy Siding]

ICLand

Murphy Siding:

     If fans of NP, or Milwaukee Road, or  Anti-fans(?) of GN want to believe that "They did it wrong",  I guess I'm OK with that.  I just haven't seen anything that would convince me of that.  So, back to my opinion- I just don't buy it.

 

I'm not sure how the "railfans" all of a sudden got drug into this.

It's not really a railfan issue and I sure wouldn't make my opinions based on what your select group "wants to believe." These are fact issues and while I don't see much use of them in discussion like this, they are still the key to any analysis. In the case of railroad mergers, there are well developed records of expectations that preclude just making up a personal judgment. An opinion without a reference to those well-developed records is well short of useful.

Generally, the record of "business mergers" is also quite well developed. There are books all over the place on the topic. Generally, they fail to meet their goals. A reasonable first opinion, then, on any given merger would be to take a skeptical attitude, simply because that reflects the informed and experienced judgment of history on the topic.

   well. OK.  But I guess if you put words in my mouth, you kind of miss what I'm trying to say.  Let me try again.

     You are saying that the BN merger, in particular was a failure.  You say that the proof of that, is that the numbers going into the merger point out that it was going to be a failure.  You say that none of the numbers after the merger lived up to those put forth before the merger, and therefore, by definition, it was a failure.  Have I portrayed your thoughts correctly?

     That sounds very interesting.  In fact,  it's so interesting, that I'd like to read more about that premise that the BN meger was a failure, and the railroad folks that lined it up didn't know what they were doing, and got it wrong.   I'd really be looking for something more indepth than just messageboard forum chat between two railfans like you and me.  Something written by an author with some railroad background and business experience would be best..  Could you recommend a book, or magazine article, or web article that would back up the idea that the BN folks got it wrong when they merged?

-Thanks