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Persistant little D&RG

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Posted by Railway Man on Thursday, June 12, 2008 7:40 PM
 Murphy Siding wrote:

     I just re-read a brief history of the Rio Grande Railroad.  I'm always baffled by that railroad.  It seemed to be almost a hodge-podge of lines, sort of patched together.  It's not clear to me, if there was ever any kind of grand(e) plan about it's development.  Most development looks like it was just an effort to extend the line over the next big hill, and then expand from there.

     How did this railroad stick around so long, utilizing what had to be the toughest route from A to B ?

The history can be captured in seven distinct periods:

Stage 1, 1870-1890:  Development railroad built opportunistically at very low cost to capture very high-rated traffic, with virtually no effort at permanence.  Management, clear-eyed about the potential of the road, refrain from wasting the money on fool's errands like building to the Pacific.  Real-estate and land development/mineral development programs run in parallel reward the developers richly.

Stage 2, 1890-1910:  Very high positive cash flow, particularly from coal, enables a second set of owners to finance ventures such as WP, many of which were indistinguishable from bear runs on the stock value of established competitors.  D&SL built in parallel with no apparent rationale other than a bear run both on Rio Grande and the UP.

Stage 3, 1910-1940:  Original traffic sources other than coal in severe decline.  Regulation creates a rate umbrella enabling participation in transcontinental traffic flows if the plant can be rebuilt to accommodate it.  Enormous cash infusions from its own profits and the MP's profits reconstruct almost from scratch the entire main line from virtual junk into a reasonably good trunk line considering the terrain.  The expenditure bankrupts both the D&RGW and the MP.  The D&SL's bear run ultimately pans out for its owners, in no small part due to government regulatory ideals, and D&RGW has to buy it at a greatly inflated value.

Stage 4, 1940-1960:  Slow decline of physical plant after WWII traffic boom ends, due to loss of traffic to truck competition, conversion of domestic heating from coal to gas, poor transit times relative to transcon competitors, and general rise in costs.

Stage 5, 1960-1980:  Re-emergence of coal traffic as demand takes off for electricity and low-sulfur, high BTU coal.  The railroad completely rebuilds its track for the second time, constructs some long-sought alignment improvements, and re-equips its entire coal fleet, both cars and power, with all-new, high-capacity, rugged equipment paid for in cash.

Stage 6, 1980-2000.  De-regulation whacks the rate prop out from D&RGW's ability to compete for transcon traffic.  Western steel industry, the railroad's single largest customer, simultaneously collapses almost overnight. Coal continues to prosper wonderfully until 1983, when finally the PRB is able to build enough capacity to overhaul Rocky Mountain coal in midwest and south-central markets, and Australia and South Africa put political and labor problems to rest and capture Asian markets.  Stupendous cash position is somehow invisible to Wall Street, enabling a private buyer to purchase the railroad essentially for nothing.  Combination with SP enables railroad to make another bear run on a competitor, cannibalizing itself in order to slash its rates, resulting in the competitor buying it out at a substantial premium. 

Stage 7, 2000-?  Merger with UP brings an abrupt end to D&RGW as a transcon route.  Devolution to coal-generating branch lines occurs rapidly. 

Some points to consider:

1.  Had the U.S. never regulated railroads, most of the D&RGW would have been abandoned during the Great Depression.  It would never have been rebuilt by the MoPac in the 1920s, and that rebuild breathed life into a corpse.

2.  The market might be rational in the long run but in the short run it can be phenomenally ignorant.  The failure to recognized the cash position of the D&RGW or the future value of railroad combinations allowed a few smart people to make a killing.

3.  That so much of the railroad's sprawling branch line and secondary main line network survived so late was not surprising -- it took awhile to build the highways necessary to support the trucks to take the traffic, and there was a lot of investment in mineral extraction industry that took a while to exhaust.

4.  The key to the D&RGW's purpose and need was and is coal.  Without coal, there would have been no D&RGW beyond 1900; without coal it would not have survived the depression; without coal it would not have been rebuilt in the 1960s and 70s; without coal it would not be here today post SP-UP merger.  Coal was always its raison d'etre.

RWM

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Posted by Murphy Siding on Thursday, June 12, 2008 6:52 AM
 mudchicken wrote:

(1) Good people ... loyal to a fault.

(2) This railroad could adapt & change where others could not. It handled adversity well.

(3) Hodge-podge - NO..Survivor -YES.

     What was there, that made their people loyal, when so many weren't?  Today, most consider DRG as something of an underdog.  Did the railroad feel that way?

Thanks to Chris / CopCarSS for my avatar.

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Posted by Murphy Siding on Thursday, June 12, 2008 6:46 AM
 tomikawaTT wrote:

When traffic patterns changed, it changed to conform.  That included merging with the D&SL and completing the Lucin Cutoff to finally make a short route through the Rockies.

Chuck

Lucin Cutoff?  I thought that was built over the Great Salt Lake, by SP?  Maybe the Dotsero Cutoff?

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Posted by tomikawaTT on Thursday, June 12, 2008 12:20 AM

It went where the traffic was, and did whatever was needed to get there.

When a traffic source dried up, it backed away.  No futile attempts to rescue dead horses.

When traffic patterns changed, it changed to conform.  That included merging with the D&SL and completing the Lucin Cutoff to finally make a short route through the Rockies.

Over its lifetime, the Grande went from being a feeder connecting mining camps to the outside world to being a bridge route - quite a transition, if you think about it.

Chuck

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Posted by mudchicken on Wednesday, June 11, 2008 11:34 PM

(1) Good people ... loyal to a fault.

(2) This railroad could adapt & change where others could not. It handled adversity well.

(3) Hodge-podge - NO..Survivor -YES.

Mudchicken Nothing is worth taking the risk of losing a life over. Come home tonight in the same condition that you left home this morning in. Safety begins with ME.... cinscocom-west
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Persistant little D&RG
Posted by Murphy Siding on Wednesday, June 11, 2008 10:39 PM

     I just re-read a brief history of the Rio Grande Railroad.  I'm always baffled by that railroad.  It seemed to be almost a hodge-podge of lines, sort of patched together.  It's not clear to me, if there was ever any kind of grand(e) plan about it's development.  Most development looks like it was just an effort to extend the line over the next big hill, and then expand from there.

     How did this railroad stick around so long, utilizing what had to be the toughest route from A to B ?

Thanks to Chris / CopCarSS for my avatar.

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