The following link is to a Conrail document suggesting the sale of a number of lines to P&LE. It's dated 1985, which is before NS decided to withdrawl it's takeover bid. But the description of this sale doesn't mention NS or Guilford, per NS's plans to sale off the ex-W&LE to the P&LE should it get CR. I have never seen or heard anything about the sale of these lines to P&LE. Obviously it didn't happen, but does anyone have any more info on this possible sale of rail lines?
http://www.multimodalways.org/docs/railroads/companies/P%26LE/CR-P%26LE%20Proposal%20c.1985.pdf
Any information would be greatly appreciated. It seems like a number of these lines would have made the Little Giant a tidy profit and probably kept it from going bankrupt and being folded into CSX. But then again, a number of the lines seem like they would be a drain on the rest of the system. Any thoughts on this expanded Pittsburgh & Lake Erie?
GTW4914 wrote:Well from what i remember RRFoose, to have some compatition to a NS+CR the Guilford lines B&M, MEC, and the D&H at that time, P&LE, GTW, were going to merge and change the name to PRORAIL. if that merger would have happened, boy things would have been alot different wouldn't thay.
I had never heard of this before! Didn't CN have control of GTW by this time? That would have made things complex..
In response to the NS takeover of CR, I have always seen that GRS would have gotten the ex-NKP from Buffalo to Cleveland, then assorted ex-NS and CR lines to reach Chicago and St. Louis. P&LE would have recieved what is today W&LE. Didn't think GTW was to get anything from the deal.
The document I have linked above, although dated 1985 (NS didn't call it quits on the takeover attempt until 1986 if I remember correctly), doesn't state anything about NS, GRS, or GTW being involved. In fact, it states that the expanded P&LE was to be created to create competition with a privatized CR - which DID happen! So this proposal must have been tossed around after realizing NS wasn't going to buy CR. That's why I'm curious as to why this divestiture never happen - CR privatized and this appeared to be the plan if that occured.
Carl
Railroader Emeritus (practiced railroading for 46 years--and in 2010 I finally got it right!)
CAACSCOCOM--I don't want to behave improperly, so I just won't behave at all. (SM)
About "the Little Giant." Its assets included then: 1) access to the Monongahela Railway, which meant COAL TRAFFIC--Good $tuff; 2) access to steel mills in Youngstown, OH Jones & Laughlin Steel, later LTV); Aliquippa, PA (J&L/LTV); Pittsburgh, PA (J&L/LTV again); and Monessen, PA (Wheeling-Pittsburgh Steel); 3) a water level route between a connection at Connellsville, PA (CR and WM (later B&O, thence Chessie, later still CSX) and Youngstown, OH (B&O, CR).
Lets talk about each in turn. Access to the Monongahela Railway: money in the bank. Alas, the Monongahela also connected with Conrail (ex-PRR), so it's coal has another outlet to the consuming world. What about access to all those steel mills--trainloads of coal, coke, iron ore, plus finished steel products -- wow! how can we go wrong here? Well, both steelmakers went into Chapter 11 somewhere around 1985-86. Future: pretty dim. But wait: what about all them US Steel mills in the Mon Valley--didn;t P&LE serve them? Nope. That honor fell to the US Steel-owned Union Railroad, and "the Corporation" was not about to shortchange its own subsidiary for the sake of "the Little Giant." Prognosis: not much future in the steel business, which had sutained P@LE for lo so many years. That leaves the connection between Youngstown and Connellsville, which Chessie (read B&O) could link on its own rails--except that it had to climb a westbound 2.2 percent grade (meaning helpers) up out of the Allegheny/Ohio River Valley to Eidenau, PA, thence downhill to Youngstown. P&LE connected the dots with less circuity, and with an almost water-level route (hey! it WAS once owned by the NYC!), and virtually no grade.
Soooo, what we have here is a carrier with some coal-hauling potential (but not to Conrail-served destinations, because nasty evil monopolistic ole Conrail can surcharge shipments routed MonongahelaRR-PLE-Conrail, and thereby drive that traffic to a Monongahela_Conrail routing); with mo more on-line steel business because in the 1979-85 purging of the non-competitive industries in the Rust Belt, that traffic dried up for P≤ and a straight shot for Chessie traffic moving between Connellsville and Youngstown.
Noow, if you were a banker (lender), and you looked carefully at P&LE, and you asked how it would fund the purchase of all these lines--GTW, and who knows what else--what business base would you pin the future of the proposed conglobulation on? I sure sure don't know! I ain't no banker--but---where's the beef? More to the point, where's the traffic?
And that, boys and girls, I submit, is why nothing more ever happened with P&LE. No, wait, that's not quite fair: P&LE made a perfect match for Chessie (now CSX) to run trains down the Monongahela and Ohio River Valleys, and up the Beaver River Valley (to Youngstown), without having to surmount big-league grades, and that made it a perfect fit for Chessie...but little more.
billio wrote:Noow, if you were a banker (lender), and you looked carefully at P&LE, and you asked how it would fund the purchase of all these lines--GTW, and who knows what else--what business base would you pin the future of the proposed conglobulation on? I sure sure don't know! I ain't no banker--but---where's the beef? More to the point, where's the traffic?
Interesting overview billio. I won't argue that in the end, P&LE's best use was as a through route for CSX. I do believe though, that the proposal to sell these lines was based on the fact that both P&LE and Conrail knew that if the Little Giant didn't expand, and gain a wider traffic base, it was going under. The report shows the number of carloads to be gained from each section of divested line. Although CR wasn't going to sell their busiest routes, P&LE still would have been able to make a living with what it would buy. Plus as part of the deal, P&LE would have a greater stake in MGA - meaning Conrail wouldn't be able to purchase it as it did in 1993. Heck, with no steel traffic, PLE could have still sold their original line to CSX, obtained trackage rights on it to haul coal, and focused their operations on the Ohio and Indiana lines. And maybe with their growing expertise (sp?) at running a regional/conglomerate of short-lines, P&LE would have boughten up other short lines and became the new G&W/RA!
billio wrote:Thanks for the reply, rrfoose. There's only one problem with a scenario that involves "the Little Giant" obtaining more lines over which to operate. I touched on that (incompetently, in all candor) in my earlier post: P&LE, by the time this scenario was put forth, had suffered an enormous diminution of its traffic base, and such was its financial condition that it could barely afford the supplies to keep itself in business. Absent the ability to demonstrate conclusively that it could gain/attract sufficient traffic to justify such a purchase, the question of buying more lines to expand its network would have been moot: no self-respecting lender/banker would advance them the cash in the first place. Overnight, the Little Giant, once the financial cash generator for the whole blooming New York Central System, the asset pledged by the Central to secure its equipment trusts, had become a pigmy, in its traffic base and, alas, financially.
Point made - I see where you're coming from now. That explains why it couldn't have happened in clear terms! Guess I didn't quite pick up on that the first time through. Would it be safe to assume then that this proposal was a brain child of Conrail in an attempt to divest a number of lines they didn't want all at one time, while making it look like they cared about the future survival of another competitor? Sounds like a business deal to me, ha!
P&LE --More.
It's been a few years, so forgive me if things are a tad cloudy. Back in the days of regulation, which foamers love and intelligent consumers should despise, P&LE participated in (among others) two routes between western and eastern points in Official Territory (roughly, rail lines east of the Mississippi and North of the Ohio Rivers --looky; I've already dated myself!). One was called the "Central States Dispatch Route" and the other was the "Alphabet Route." Each route had in common a) participation by a whole bunch of carriers, most of whose main lines (and VERY few branches) have been swallowed up first into Chessie/CSX and Conrail/CSX or Conrail/NS (think Reading, WM, B&O, I think CNJ, etc). The other: P&LE formed in each chain a link that could not be broken.
Herewith an aside: under ICC regulation, interchanges were meant to promote maximum flexibility for shippers in the routing of their traffic. And shippers (today as weel as back then) select the route for their goods. This effectively forced the carriers to join up with routes (and divisions--the apportionment of revenue between carriers on interline routes) that many carriers disliked because the existing division was non-compensatory. Following de-reg, the enormous array of routes open to shippers was circimscribed enormously--carriers, for example, could surcharge traffic moving by routes that didn't pay, thereby forcing onto routes they preferred--or off the rails entirely (but then, one could argue, they shouldn't have been made to carry the freight in the first place). The first (regulated) option clearly transferred wealth to shippers; the second option was far more wealth-friendly to the carriers.
After de-reg, both the routes mentioned above were closed off. Chessie/CSX, which joined P&LE both at the east and west ends of its (geographically) puny system, had no incentive to share a route --and revenue--with P&LE when it could garner 100 percent of the reveune itself. Ditto, Conrail. So they exercised powers given them by the Staggers Act, surcharging traiif via P&LE, and quickly dried up that route.
When P&LE ran hat in hand asking for federal funds to underwrite the purchase of other lines, it used as justification the argument that the nasty, evil, monopolistic monolith Conrail (it didn't mention CSX), has closed off the tap on a lucrative stream of interchange traffic (the aforementionned two routes).
Alas, a careful search of P&LE's traffic base showed that the decline in its fortunes was directly tied to the decline in Pittsburgh District steel production (think coal, coke iron ore, and iron and steel articles), and not to a decline in overhead service (wherein P&LE participates in the route, but neither originates nor terminates the freight).
And all of that is why P&LE never became part of some ill-founded, rickety half-trunk line (cynics may point out that by being folded into CSX, P&LE suffered the same fate, but we'll let that ride).
The concept of having an expanded P&LE serve as competition to an expanded NS in '85 made as much sense as an expanded D&H serving as competition to Contrail a decade earlier. Had Guilford gotten truly involved with the P&LE expansion, U-boats in Guilford gray. Nah, would never happen.
Billio:Great analysis.
What was the "Central States Dispatch Route"? I have heard of the Alphabet Route, but not the CSDR.
thanks,
ed
I have also seen (per the linke below), that P&LE made one last-ditch effort to expand in 1991. They apparently signed an agreement to buy Conrail's Meadville line. Has anyone else heard of this, and/or know any further details about it?
http://www.rrdc.com/spch_p&le_2002.htm
I doubt this expansion would have saved the Little Giant either, but CR and now NS have kept this portion of ex-EL trackage, so it must be making some money.
Chase
It's been some 35 years when I was a marketing trainee and forced to read for a living the plethora of tarriffs. division sheets and routing guides that regulation spawned and that I then concluded were suitable for mental defectives. I cannot remember either the Central States Dispatch Route or the Alphabet Route. Sorry. I will attempt to ROUGHLY re-create them from memory in spirit if not in exactitude. A shipment routed from, say, St. Louis or Chicago to Northern New Jersey might go B&O-Youngstown, OH-P&LE-Connellsville, PA-WM-Lurgan-some other junction-CNJ. Another junction was Cherry Run-WV. It's been a while, and my memory here is admittedly fuzzy, but I think this example conveys the general idea.
In theory, such a route seems terrific--a whole bunch of roads, cooperating to move the goods expeditiously from here to there across the expanse of Official Territory. In practice, a slightly different story. Instead of calling up one railroad to trace their shipment, shippers had to call one of four or five -- pain in the butt. Another problem was revenue, or shortage thereof: if, say, PRR or NYC could haul the shipment the whole distance and pocket 100 percent of the revenue, then that same 100 percent revenue had to be divvied up four or five ways. Result: nobody gets rich from participating in these routes. In fact, railway cost analysis back then was primitive that many, if not most, roads never knew whether they made money or not! And for, say, a P&LE, it's highly likely that their division was non-compensatory. So why not charge more to make the participating carriers financially happy? Well, why should a shipper, price-sensitive and price-savvy in the exterme, pay one group of carriers more for the same service, when the same shipper can be swayed by a penny a hundredweight reduction for his output? Nope, won't happen.
Finally, as with everything else in life, there are costs incurred, and here this means a cost to billing and interchanging, one that each participant in a multi-carrier route must incur -- call it anteing up to play the game. An NYC or PRR pays once: settlement cost with the shipper, and not at all for interchange. Each participant in one of these multi-carrier routes must pay for one to two interchanges, plus settlement costs. The carrier who collects shipping charges pays off other participants in the route. What if it goofs, and undercharges one at the expense of others? Then it's up to the underpaids to go back to the settler, and demand to be made whole -- and I know about these because where I worked, we had a squardon of rate clerks who haggled with other roads, small, medium and monsters, over inaccurately apportioned revenue.
This is why shippers generally prefer routing via one carrier over routing by two or more.
Our community is FREE to join. To participate you must either login or register for an account.