MichaelSol wrote: ...And in that event, don't certain outcomes become increasingly "inevitable"?
...And in that event, don't certain outcomes become increasingly "inevitable"?
Are you toying with us? I'm not one to be trifled with , you know?
Murphy Siding wrote: al-in-chgo wrote: And on page 96, note well that the magazine Saturday Review chose Saunders as its "Businessman of the Year" for 1968! Also, that magazine reported that "[t]he PRR's consolidated earnings had tripled -- from $31 million to $90 million -- in Saunders' first three years in Philadelphia." The devil is in the details, and that word "Consolidated" alludes to the many profitable, non-railroad subsidiaries PRR had purchased under Saunders. He was more than a schmoozer or a Philadelphia socialite, although his personality embraced those traits, too. - a.s. You're right about the devil is in the details. Saunders wanted to run a big, multi-industry conglomerate. He bought into all kinds of non-railroad companies. Those were keeping the *consolidated* earnings picture looking rosy. All the while, he and Bevan neglected to point out, that their railroad empire was crumbling.
al-in-chgo wrote: And on page 96, note well that the magazine Saturday Review chose Saunders as its "Businessman of the Year" for 1968! Also, that magazine reported that "[t]he PRR's consolidated earnings had tripled -- from $31 million to $90 million -- in Saunders' first three years in Philadelphia." The devil is in the details, and that word "Consolidated" alludes to the many profitable, non-railroad subsidiaries PRR had purchased under Saunders. He was more than a schmoozer or a Philadelphia socialite, although his personality embraced those traits, too. - a.s.
And on page 96, note well that the magazine Saturday Review chose Saunders as its "Businessman of the Year" for 1968! Also, that magazine reported that "[t]he PRR's consolidated earnings had tripled -- from $31 million to $90 million -- in Saunders' first three years in Philadelphia."
The devil is in the details, and that word "Consolidated" alludes to the many profitable, non-railroad subsidiaries PRR had purchased under Saunders. He was more than a schmoozer or a Philadelphia socialite, although his personality embraced those traits, too. - a.s.
I recall that the Saturday Review itself went broke in 1972 or so. So much for judgment.
Key point here: details.
Suppose Saunders had decided to run a railroad.
Instead of a real estate company, an insurance company, a management company, etc. etc.
An ICC study in 1977 showed that railroad companies that were owned by holding companies -- that is, diversification efforts -- performed on the average a full point below non-diversified railroads in profit margins. Studies as a whole have shown that the "conglomerate" model so popular after Saunders time -- popularized by the Pennsylvania RR model -- and notwithstanding the Penn Central debacle, generally performed poorly primarily because of management overstretch -- one reason why mergers in general so frequently fail.
And how much time was taken away from "managing" the Pennsylvania Railroad, and devoted to "schmoozing" for political purposes? Can a far-flung enterprise like that prosper under what is essentially part-time management at the top?
And in that event, don't certain outcomes become increasingly "inevitable"?
al-in-chgo wrote:Murph, I said "something of a turnaround," not Joan of Arc. And on page 96, note well that the magazine Saturday Review chose Saunders as its "Businessman of the Year" for 1968! Also, that magazine reported that "[t]he PRR's consolidated earnings had tripled -- from $31 million to $90 million -- in Saunders' first three years in Philadelphia." The devil is in the details, and that word "Consolidated" alludes to the many profitable, non-railroad subsidiaries PRR had purchased under Saunders. He was more than a schmoozer or a Philadelphia socialite, although his personality embraced those traits, too. - a.s.
Thanks to Chris / CopCarSS for my avatar.
Murphy Siding wrote: al-in-chgo wrote: Stuart Saunders did indeed mastermind something of a turnaround when he went to Pennsy; he was there for four and-a-half years until the merger finally took place. But the long-term picture was bleak despite anyone's expressed optimism. I'm not sure I share your opinion of Stuart Saunders. Mastermind, and turnaround, don't seem to be words usually used to describe him. When he was at N&W, he was in a railroad that many said almost ran itself. At that time, it was a coal conveyer belt, moving black diamonds from the same mines to the same ports, over and over. The N&W is always portrayed as being quite conservative. This makes sense to me. If it ain't broke, don't fix it. That he got called up to PRR, to me at least, is a prime example of the "Peter Principal". You do a good job, you get promoted. This keeps happening until you are one step above what you are capable of handling. I haven't read that Suanders did much at PRR that any other railroad president would have done, in that position, and who would have gotten the same results. I feel that may have been more the situation,than the man. It appears that Stuart Saunders became captain of a sinking ship. Rather than admit that there wasn't a whole lot he could do to stop the ship from sinking, he seemed to keep right on proclaiming everything was just peachy. He did this right up until the time the ship hit the iceberg.
al-in-chgo wrote: Stuart Saunders did indeed mastermind something of a turnaround when he went to Pennsy; he was there for four and-a-half years until the merger finally took place. But the long-term picture was bleak despite anyone's expressed optimism.
Stuart Saunders did indeed mastermind something of a turnaround when he went to Pennsy; he was there for four and-a-half years until the merger finally took place. But the long-term picture was bleak despite anyone's expressed optimism.
I'm not sure I share your opinion of Stuart Saunders. Mastermind, and turnaround, don't seem to be words usually used to describe him. When he was at N&W, he was in a railroad that many said almost ran itself. At that time, it was a coal conveyer belt, moving black diamonds from the same mines to the same ports, over and over. The N&W is always portrayed as being quite conservative. This makes sense to me. If it ain't broke, don't fix it.
That he got called up to PRR, to me at least, is a prime example of the "Peter Principal". You do a good job, you get promoted. This keeps happening until you are one step above what you are capable of handling. I haven't read that Suanders did much at PRR that any other railroad president would have done, in that position, and who would have gotten the same results. I feel that may have been more the situation,than the man.
It appears that Stuart Saunders became captain of a sinking ship. Rather than admit that there wasn't a whole lot he could do to stop the ship from sinking, he seemed to keep right on proclaiming everything was just peachy. He did this right up until the time the ship hit the iceberg.
*************************************************************
Murph, I said "something of a turnaround," not Joan of Arc.
If you have a copy handy, take a look at page 66 of THE WHO LOVED TRAINS (Daughen and Binzen, authors, 1971). Saunders took office on October 1, 1963, the exact same day the Kennedy Administration released a paper against a PRR/Central merger. But Saunders hit the ground running. His overall success in winning support from politicians of both parties and labor unions was termed by the authors "little short of sensational. Due largely to his amazingly effective politicking among both Republicans and Democrats, opposition [to the merger] melted."
Murphy Siding wrote: I've come to believe that a PC crash/Conrail fix was somewhat inevitable in the northeast.
Based on any scenario I can envision, I agree with you. Being forced to include the New Haven in the merger may have accelerated the crash, but yes, I think it was inevitable.
Maybe if Congress had honored President Eisenhower's request in 1956 that the new Interstate Highways be toll roads, spanning the distance between city's edge and city's edge--well, I presume mass transit in cities would not have declined so precipitously. Maybe intercity travel by train would not have suffered as much, too, since one thing most passenger systems are good at is bringing the passenger right into the middle of the city -- inner cities that wouldn't have been hollowed out if the "free" Interstate Highways hadn't gone downtown. . . IF the ICC hadn't been around with its penchant for busy work coupled with an apparent inability to see the big picture--how the RR's as a national system were evolving. . . IF the Pullman Company didn't call the shots and do its best to ignore innovation like the NY Central's Slumbercoaches in the mid- to late-fifties (requiring only a ticket plus room charge; not a ticket-and-a-half for an arbitrary "first class" passage plus a pretty high room charge for the Pullman bed). Even so, I think it would have happened someway, somehow, despite all the maybe's and If's I can rack up.
The sad fact was that Pennsy and NYC had been running scared since the mid-fifties as they saw their passenger business (starting with business travelers) fall off, whole factories disappear, etc. As I mentioned in a post above, David Bevan was very blunt and very discouraging when he testified before the ICC regarding the proposed merger back in 1962. He basically said such a merger was infeasible because the PRR had a billion dollars' worth of debt coming due over the next twenty years. (He is quoted on page 62 of the book THE WRECK OF THE PENN CENTRAL.) Readers of THE MEN WHO LOVED TRAINS will recall that he was not so forthright when PC started floundering in its first massive doses of deficit, after (however nominal he was) boss Saunders ordered him to make things look better.
It recently struck me how two very different industries with very different histories nontheless give evidence of the same result: A shift of executive and administrative authority to the South and Sunbelt following some industrial in the Northeast.
The two largest RR companies in the N.E. United States weren't allowed to merge until they were both in very poor shape financially. Stuart Saunders did indeed mastermind something of a turnaround when he went to Pennsy; he was there for four and-a-half years until the merger finally took place. But the long-term picture was bleak despite anyone's expressed optimism. Let's not ignore as well the "shadow boxing" effect also, of two railroad corporation executives who had probably given each other overoptimistic interpretations and assumptions, each one hoping the other would be the their own company's savior. By the Eighties, there were three for-profit freight roads dominating the Eastern U.S. The new, merged NS, the similarly constituted CSX, and Conrail, which had gone private. It took until 1997 or around 30 years to elapse between the doomed marriage of PRR and NYCentral all the way to the 1997 carving-up of Conrail between NS and CSX.
About the same time in the early eighties as the first wave of mega-system railroads was jelling, court action forced the former AT&T monopoly to divest itself of most of its local operations, resulting in the spinoffs of the "Baby Bells." Somewhat along the lines of the Northeast's losing so much of its heavy industrial base from the Fifties through the Seventies recessions (and probably continuing) -- Western Electric, whose inventors gave us the transistor and that Fifties and Sixties staple, the rotary-dial Model no. 600--closed the factory on the edge of Chicago (the "Hawthorn Works") that had manufactured those phones. Why? Because the aspects of telephony where real money was going to be made no longer involved a phone on a cord into the wall. Also, people could for the first time choose what, and from whom, to purchase a telephone set.
By 1997 no Big Seven railroad had a headquarters in the Northeast or New England. Norfolk Southern and CSX are headquartered in the South; BNSF in Ft. Worth, Texas; CP and CN in Canada, of course; and the remaining two "legacy" systems have stayed in their home towns of Omaha (UP) and Kansas City (KCS). Over the past 25 years SBC of Dallas has been acquiring Ma Bell's former corporate "children" by purchase or merger. Of all the original Baby Bells, the only two survivors I can think of are Verizon and Qwest. I just find it ironic that two different industries started out diagnosed with opposite fundamental situations that needed correcting: too many railroad companies and too few telephone companies. Murph, I think some of that inevitability in their respective corporate histories springs in large part from the fact that these two industries mirror the nation's shift of so much corporate, logistic and electoral power away from the Northeast and Midwest to the South and Sunbelt. Not coincidentally, that's where more people have been moving to, and nobody sees that trend abating.
NOTE WELL, though: The financiers, capital, money markets and central political power are still mostly confined to the Washington D.C. - Manhattan corridor.
al-in-chgo wrote: I was being ironic. Sheesh.
I was being ironic. Sheesh.
al-in-chgo wrote: And this was the year before Saunders kicked himself upstairs from head of the N&W to CEO of PRR.
And this was the year before Saunders kicked himself upstairs from head of the N&W to CEO of PRR.
( I bet Saunders kicked himself when he figured out PRR and PC weren't a picnic like NW had been for him.)
Bevan may or may not have to eat his soup with a corkscrew, but he was noticeably prescient in a way Saunders or Perlman were not. Authors Joseph Daughen and Peter Binzen, in their book THE WRECK OF THE PENN CENTRAL (1971, Little, Brown & Co., Boston) speak of the Pennsy's "lone-wolf financial expert" and his less-than-optimistic view of the long-term effects of a merger. As a witness before the ICC, way back in 1962, "Bevan warned the ICC of the PRR's tremendous debt. More than $1 billion in debt would be due in 1982, he said. . . 'No other railroad has as much bonded debt coming due in the next fifteen years as we do,' Bevan testified. He displayed little optimism over immediate gains from the merger" (all quotations from p. 62 of the book).
MP173 wrote: I think the fix was in on PC when the ICC made them take the New Haven in as part of the merger. Before that, they would have been very lucky to have made it. Bevan certainly seemed "creative" with the accounting, he was extremely slick. Saunders had to have regretted the day he packed up his belongings and moved from NW to PRR. Rather than assign the most blame to anyone person, just look at the issues:1. Too much track with low revenues.2. Passenger service bleeding dollars.3. Labor costs out of control, even before the agreement Saunders hammered out to insure the passage of the merger.4. Low divisions of revenue on interchanged traffic.5. Declining industrial base in the region.6. Deferred maintainnece for at least a decade.7. Red/green team differences.It wasnt going to work.ed
I think the fix was in on PC when the ICC made them take the New Haven in as part of the merger. Before that, they would have been very lucky to have made it.
Bevan certainly seemed "creative" with the accounting, he was extremely slick. Saunders had to have regretted the day he packed up his belongings and moved from NW to PRR.
Rather than assign the most blame to anyone person, just look at the issues:
1. Too much track with low revenues.
2. Passenger service bleeding dollars.
3. Labor costs out of control, even before the agreement Saunders hammered out to insure the passage of the merger.
4. Low divisions of revenue on interchanged traffic.
5. Declining industrial base in the region.
6. Deferred maintainnece for at least a decade.
7. Red/green team differences.
It wasnt going to work.
ed
al-in-chgo wrote: I'll start the ball rolling with a going issue: IYO Who was the person most culpable for the Penn Central meltdown: David Bevan, Stuart Saunders, or perhaps somebody else . . . ? al
I'll start the ball rolling with a going issue: IYO Who was the person most culpable for the Penn Central meltdown: David Bevan, Stuart Saunders, or perhaps somebody else . . . ?
al
al-in-chgo wrote: This thread was inspired by a book review of Rush Loving's THE MEN WHO LOVED TRAINS and the last previous post was Feb. 19, 2007. A post that might be sparked by the book but not central to the book--Best Book About Conrail, for example--can stay as is or be moved to a specific post of its own, thread-founder's choice, if suitable. This is where to post what you have to say about THE MEN WHO LOVED TRAINS or the specific issues it raises. Note the slight name change: from REVIEW to DISCUSSION....but the original review is still available. I'll start the ball rolling with a going issue: IYO Who was the person most culpable for the Penn Central meltdown: David Bevan, Stuart Saunders, or perhaps somebody else . . . ? al
This thread was inspired by a book review of Rush Loving's THE MEN WHO LOVED TRAINS and the last previous post was Feb. 19, 2007.
A post that might be sparked by the book but not central to the book--Best Book About Conrail, for example--can stay as is or be moved to a specific post of its own, thread-founder's choice, if suitable.
This is where to post what you have to say about THE MEN WHO LOVED TRAINS or the specific issues it raises. Note the slight name change: from REVIEW to DISCUSSION....but the original review is still available.
The chapter on the birth of Amtrak was very enlightening, and shows how the fiction that Amtrak could make a profit got started, a story that persists to this day, and will vex true Ambelievers as long as Amtrak lasts!
Murphy:
I enjoyed the book for all of the reasons you indicated. It was well written, obviously well researched (sure enjoyed the fact there were no footnotes), the author had some great inside access to the main people involved. I enjoy reading business books such as this, that read like a novel.
A couple examples are Barbarians at the Gate which deals with the 1988 LBO of Phillip Morris by KKR. Another one that is not as well know but just as well written is 24 Days by Rebecca Smith and John Emshwiller. It is about the Enron collapse. The two authors were the Wall Street Journal reports which covered the collapse. They were the ones which broke the story and were on the front lines of the collapse.
My college Independent Study was entitled Can Conrail Survive. I wrote it in winter semester of 1977. I cant find it! I would love to go back and see what I had to say about it. I know that my findings were that Conrail could survive if certain things occured. I cant remember what I had to say.
MP173 wrote: al-in-chicago:Nice review. I am just about finished with it ... this is the second time I have read it and I am yearning for a more in depth history of Conrail. My personal favorite hero in the book is Stanley Crane. Was there ever a better man in a tougher spot in the railroad industry? If there is a book on him, please let me know. I agree with you that LeVan did a very good job in maximizing shareholder value down the stretch. It might be worth the side trip to visit his HD dealership and strike up a conversation with him if ever in the area.I didnt come away with much of a positive opinion of John Snow. ed
al-in-chicago:Nice review. I am just about finished with it ... this is the second time I have read it and I am yearning for a more in depth history of Conrail.
My personal favorite hero in the book is Stanley Crane. Was there ever a better man in a tougher spot in the railroad industry? If there is a book on him, please let me know. I agree with you that LeVan did a very good job in maximizing shareholder value down the stretch. It might be worth the side trip to visit his HD dealership and strike up a conversation with him if ever in the area.
I didnt come away with much of a positive opinion of John Snow.
Thanks for the kind words! I felt certain you will really like the book.
I agree with you--Crane is an exemplary man among exemplary men. W. Graham Claytor was a tough act to follow but Crane performed brilliantly. Alas, If I had had time to discuss everybody, though, I'd come up with a dissertation(!)
Thanks again,
For his first book Rush Loving, Jr., a journalist who specializes in business and transportation topics, has given us a truly engrossing, suspenseful, yet cautionary
"must-read." In the mid-1960s, Loving tells us early on, the modern merger movement was already underway following Norfolk & Western's acquisition of the
Wabash. The N&W brass then asked themselves where next to try a merger and the answer was obvious: The Pennsylvania Railroad. The two roads had a kindred
history of cross-ownership, complementary coal routes (Pennsy-anthracite / the Norfolk-bituminous), excess Midwestern lines crying for rationalization, nicely
meshing home regions (Imdustrialized Northeast / Upper South), similar "command" or top-down military-style departmental cultures, and even a history of shared
passenger livery ("Tuscan Red.") But the marriage that sounded so good in theory took more than thirty years to achieve. It wasn't until 1997 that Norfolk Southern
bought nearly sixty percent of Conrail, most of it ex-Pennsy routes. Meanwhile rival CSX needed the eastern half of the Central's old "water level route" so
desperately that, all told, it settlted for just over forty percent of Conrail, and what they did get resembled to a degree a good-sized chunk of the old New York
Central.
What happened in those interim thirty-plus years is the subject of THE MEN WHO LOVED TRAINS, and the results are as infuriating as they are informative. As
researched and told by Loving, we feel the railroads' pain but also understand the malarkey that underlay the malaise. The late Sixties brought forth absurd over-
regulation by the late and unlamented ICC, the formation of the Penn Central in 1968, and the new merged road's inevitable meltdown into bankruptcy in 1970. This
era saw big Northeastern carriers and regional lines like the Erie-Lackawanna or Reading get whammied by the more flexible long-distance trucks on the new toll-
free Interstate highways. The misery continued during the post-OPEC Seventies when a major recession hit hard the rustbelt Northeast, and the subsequent partial
"de-industrialization" took away many of the railroads' best and most familiar shippers. By mid-decade, a nation that had traditionally rejected socialism found itself
with local-government commuter rail agencies, federally subsidized long-distance passenger service (Amtrak), and Congress's distasteful but necessary bundling of
the many bankrupt Northeastern roads into an expensive new kind of animal: Conrail.
The Eighties held a combination of ironic developments and surprise. Since the government-controlled Conrail was still off-limits, big Southern-based carriers forced
themselves into bed with partially compatible routes and contrary corporate cultures. The Norfolk & Western's top-down executive structure that would have
meshed so well with the old PRR clashed badly with the more congenial and collegial Southern Railway after the two roads merged to create Norfolk Southern in
1982. A familiar pattern emerged: one megamerger would trigger more for defensive reasons if nothing else. According to Loving, that's mainly how the
predominately east-west C&O/B&O (or "Chessie System") got hitched to the "Family Lines," already an amalgam of coal roads like the L&N and Clinchfield under
the protective wing of the mostly route-incompatible, north-south Seaboard Coast Lines. But the real shock was Conrail under its innovative boss, David LeVan,
who with the help of the federal purse gradually, and painfully, shepherded that previous cobbled-together wreck into a leaner and profitable system -- so much so
that the corporation de-socialized itself and offered common stock to the pubic and the financiers. Loving's hands-on narration of LeVan's performance--the "how"
of Conrail as well as the "what"--is one of the many joys of a book with quite a few stories to tell.
Who were the losers? Marketing and railroad-ops specialists in Penn Central, most of them ex-NYC, the innovative train guys who got shoved aside by the bean-
counters. Lyndon Johnson, trying to play catch-up to the Japanese, who decreed that the new experimental Metroliner must attain 150 mph, when in fact the trainset
behaved not at all like a bullet train but very much like the souped-up M.U. it is at heart. Financial institutions and individual investors who relied on wildly bogus,
inflated financial data when they invested in Penn Central. The traveling public who suffered the rapid deterioration of long-distance service in the Sixties and on into
the underfunded Amtrak era. Commuters. A labor union that had to take a twelve percent pay cut or risk killing its employer. The American taxpayer, who had to
pay for rehabilitation of roads and services that never should have sunk so low in the first place. Last but not least, the remaining two American-headquartered mega
-survivors from the Southeast: Norfolk Southern and CSX, both of which ran up billions in debt after a preventable bidding war over Conrail.
It took Loving years to research and write this book, but the results are well worth it. THE MEN WHO LOVED TRAINS is populated with almost as many
colorful characters as a novel out of Elmore Leonard or Carl Hiaasen. A "blue-eyed Jew from Minnesota," Al Perlman, ran the New York Central from 1955 until
the Penn Central merger in 1968; he ranks high in Loving's esteem for his creativity and custom of forging consensus within the company. But Perlman and his fellow
ex-NYC "green hats" clashed in terms of corporate culture with the Pennsy's more buttoned-down "red hats," and those divisions were never really resolved. David
LeVan, after working near-wonders in rehabbing Conrail, made a midlife career switch and started selling Harley-Davidsons. The Claytor brothers, Graham and
Robert, loved railroading so much that they spent innumerable hours in diesel cabs or hunkering with workers on the ground; Robert even qualified to operate the
revered N&W Class J steam engine, no mean feat for an experienced engineer and almost inconceivable for a suit. A useful connective sinew in this history results
from following the career of Jim McClellan, a rising N&W exec with a Forrest Gump-like ability to be in the right place at the right time.
But what narrative is complete without a couple of villains? A big black hat goes to Stuart Saunders, an attorney from the charming small town of Bedford in Virginia.
Primarily a bean-counter, it was Saunders who rapidly dieselized the N&W in the late Fifties. It was Saunders who fired Al Perlman from Penn Central in 1969. And
it was Saunders who first diversified the PRR's money into anything but railroad maintenance in the mid-Sixties, temporary fixes that made the balance sheet look
good but disguised the deteriorating home road. The strategem worked: healthy-looking paper profits and undiminished dividends perpetuated the myth of the
invincible Pennsylvania Railroad enough to pacify the shareholders and keep the investigators at bay. Worst of all, mere financial imprudence turned pathological
during the two years Penn Central operated pre-bankruptcy. Saunders cooked the books so outrageously that it took Enron in the Nineties to equal it for sheer,
breathtaking, deliberate fraud and manipulation. His "creative accounting" techniques like making highly overoptimistic assumptions, milking shell financial subsidiaries
and eventually just plain fabricating eventually had to come to light. Just like Enron 25 years later, it all came crashing down in the smoking crater of the Penn Central
banktuptcy, when a generation of shareholders, financiers, politicians, and workers suddenly realized that they'd been had. About John Snow, who is usually at the
negotiating table in the last third of this book, I'll let the reader draw his own conclusions.
While any reader is likely to enjoy THE MEN WHO LOVED TRAINS, among us I consider it a "must." On-line discounts are widely available. Thanks to our
friends at TRAINS, the book contains nifty color-coded maps of the principal Northeast rail lines pre- and post-Conrail. THE MEN WHO LOVED TRAINS is
going to be an important book for some time to come. - a.s.
THE MEN WHO LOVED TRAINS by Rush Loving, Jr. (Indiana U. Press, 2006), $27.95, 360 pp.
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