Pre-Merger Time Period: NORFOLK AND WESTERN and SOUTHERN

[MichaelSol]

My initial point was that it seemed a bit unfounded to assert that the Milwaukee Road had a particularly bad year in comparision to the Great Northern due to excessive snow, when the Milwaukee Road was largely located in the same geographic area as the Great Northern.

You countered my point by pointing out that the Great Northern had significant lines in Illinois and Iowa--appearing to suggest that these lines in other states that were not hit by the snow quite as hard explained the difference.

The most recent point above was to note that the Milwaukee Road--as you recognize above--had significant lines in Iowa and also had lines in states that were not affected by the snow--Indiana and Missouri.

Gabe

You've got this pretty well mangled.

Great Northern was a railroad located primarily between Duluth and Everett, Washington. It's transcontinental route passes through country that generally has low annual precipitation. I am not aware of any lines in Iowa.

The vast bulk of Milwaukee Road's railway mileage -- 6,096 miles in Illinois, Indiana, Iowa, Missouri, South Dakota and Wisconsin -- are in states in which there was little, if any, GN railroad. Large railway mileage where there was plenty of snow; far more than GN ever got in Eastern Washington, Eastern Montana or North Dakota. Milwaukee's transcontinental mileage was located substantially to the south of the GN, and in country that in general had higher annual precipitation. Including snow.

In the twenty plus years that I was familiar with the day-to-day operations of the Company, the Avery Rotary did far more actual hard work in Iowa and South Dakota than it ever did out of Avery.

 

 

[MP173]

Interesting point about the comparisons of the GN and MILW's tonnages and average miles hauled.  I noticed that yesterday when going thru the data and decided not to comment on it at the time.

It appears that GN, while possessing a very long route structure was more of a local carrier, as was MILW.  The average miles of hauls were a bit confusing to me.  MILW, I could see as there was no doubt considerable traffic moving from Chicago to Milwaukee or the Twin Cities, mileages of 90 and 450 miles.  No doubt the Chicago - Milwaukee traffic heavily tilted the mileage average downward.

But what about GN's?  What was their traffic flows?   Today we know there is considerable long haul of containers to Seattle.  We also know there is considerable grain moving west for long hauls?  But what about in the late 60's?  Looking at there map, would it be safe to assume there was considerable grain moving from ND to St. Paul for processing?  Taconite was mentioned earlier, which must have been short haul.  Unfortunately, my 1972 Moodys doesnt break down traffic for the GN, NP, Q etc.

Also, still waiting for what my agenda is.

Any ideas yet on the spike in the OR's in 67?

ed

[MichaelSol]

Any ideas yet on the spike in the OR's in 67?

It was something of a recession year.

"U.S. business lagged during the first half of the year, and hindsight bestowed the label of mini-recession. For the first time since 1961, the economy missed its clockwork quarterly advance. During the first three months of the year, the nation's real output of goods and services declined. ...

"To a dominant degree, the '67 slowdown resulted from cutbacks in business buying for inventory, which had soared to unsustainable heights late in 1966. It was a troublesome legacy, even through the April-June quarter when businessmen liquidated their stocks of appliances, hardware and other durable goods at a $600 million-a-year pace. One persistent casualty of the sell-off was industrial production, which not only failed to gain but this summer slipped to 2% below its level of a year earlier. Since spring of last year, the nation's factories have reduced their operations from 91% to 84% of capacity."

Time Magazine, December 29, 1967.

The kind of things that hurt railroads in particular.

 

[MP173]

There was in fact a slowdown in 1967 in which ton miles dropped 2.5% from 1966.  What is interesting is that the other modes of transportation didnt see a drop.  Motor carriers, inland waterways, pipelines and airfreight saw increases in ton miles.

Between 1960 and 1966 railways handled between 42.9% and 43.6% of total tonmiles.  With the recession of 1967 their share dropped from 43.35% in 1966 to 41.43% in 1967.  That began the exit off of the rails.  By 1970 it was down to 39.83%.  The 1971 estimated number was worse at 38.62%. Of course by that time the Penn Central fiasco was in full throttle.

It appears the recession of 67 caused a real downturn in volume for the rails.  What is interesting is that the recovery did not see much of a return of business. 

Something did happen in 67...probably more than the recession, there was a movement away from railroads after a few years of market share stability and real growth based on economic gains.

ed

[MichaelSol]

Between 1960 and 1966 railways handled between 42.9% and 43.6% of total tonmiles.  With the recession of 1967 their share dropped from 43.35% in 1966 to 41.43% in 1967.  That began the exit off of the rails.  By 1970 it was down to 39.83%.  The 1971 estimated number was worse at 38.62%. Of course by that time the Penn Central fiasco was in full throttle.

It appears the recession of 67 caused a real downturn in volume for the rails.  What is interesting is that the recovery did not see much of a return of business. 

Careful. A decline in market share isn't necessarily the same thing as an absolute loss in traffic. Depends on whether the market as a whole was growing and by how much. Not offering an opinion either way on what happened -- all my records are in storage as of this week -- but you are slipping between two different metrics here.

 

[MP173]

Then allow me to attempt again.  The railroads saw their percentage of tonmiles remain steady during the period from 1960 thru 1966.  The economy grew during that time.  Total tonmiles for all forms of transportation grew from 1326.449 billion ton miles to 1731.847 billion ton miles.

Rail's share grew from 579.13 billion tonmiles in 1960 (43.66%) to 750.7 billion tonmiles in 1966 (43.35%).  Their market share remained steady and they grew with the economy.

However, in 1967 while total tonmiles increased from 1731.847 tonmiles to 1764.749 tonmiles, the railroads total tonmiles slipped from 750.762 tonmiles to 731.216, or the 2.5% reduction I previously stated. 

The alarming number is that by 1971 the railroad's handled 744 tonmiles (estimated) while the economy churned out 1926.5 tonmiles.

So, on an absolute basis, between 1966 and 1971 the railroads lost ground, from 750.762 to 744.  On market share basis, the bloodbath was in full affect as market share had dropped from 43.35% to 38.62%.

Like I have said several times, something happened in 1967 which caused the downward spiral.

Any comments from anyone as to why market share dropped so severely?  Why the financials for the railroads so suddenly took a turn for the worse?  I am open to suggestions and discussions.  No hidden agenda, this is it.

ed

[Andrew Falconer]

Since you mentioned the Milwaukee Road and the Great Northern.

Why did the New York Central not get included in the CB&Q, NP, GN merger to make an immediately successful railroad?

Milwaukee Road could have gone to CN subsidiary Grand Trunk Western. Then about 2 decades later the post Milwaukee Road-Soo Line merger spin off the Wisconsin Central was taken over by CN anyway. Was the Milwaukee Road route better or worse than the Wisconsin Central?

Andrew