32 years ago Conrail was created in reinvigorate the rail sector in the Eastern United States...as some will recall...most eastern carriers were bankrupt or on the verge of bankruptcy, with Penn Central being the largest bankruptcy in history up to that time.
Maybe a similar solution can work for the automotive sector..(or any other sector for that matter)...Instead of looking at a bailout package...let them go bankrupt and then reorganize with government assistance if necessary.
Given the dire condition of eastern railroads in the 60s and early 70s compared to what we have today...Conrail was certainly a success.
What would have been the outcome had Penn Central, Erie Lackawanna, Lehigh Valley, Jersey Central, Philadelphia and Reading been offered bailouts instead of allowing bankruptcy and subsequent reorganization through Conrail?
the main reason and possably the only reason why conrail made it as well as the rail industry as a whole had alot to do with the The Staggers Rail Act of 1980...which deregulated the industry makeing it easier to abandon and or spin off branch lines that wherent turning a profit and where large red ink spots on the overall books.....just to name one benifit of the act for the carriers...
i personaly think that if not for the government wishing to save some of the rail industry in the 70s after the collapse of PC and other north eastern roads that where folded into conrail... and then finding out how hard it was for railroads to do biz and make money with the regulations that the ICC places on the carriers.. the stagger act would have never been writen and the rail industry as a whole would be in a very differnt place today...if it even exsisted at all...
so to awnser your question about what if they government just cut bail out checks to the PC as well as other roads.. the results would have been that they would have used the money..still lost money..and came back to the government with there hat in there hand asking for more money yet agin.. the government can shovel all the money it could print to the PC as well as the others..but until the regulations that where putting the carriers into the finantal poor house where changed it wouldnt have made a differnce.... which happend in 1980 after the govenment got into the frieght rail biz by forming conrail..and seeing first hand by haveing a stake in a major carrier how the current reguations where strangling the rail industry...
as far as the auto industry..since i dont know what type of regulations other then saftey mandates and gas mileage mandates they have to follow.. i dont know what to tell you there...
csx engineer
Hopefully Uncle Sugar finds a better way.
Conrail was not as successfull as it has been made out to be. CR's public relations hucksters apparently got folks to buy an empty premise. CSX and NS are now struggling with some of the skeletons in CR's closet.
csxengineer98 the main reason and possably the only reason why conrail made it as well as the rail industry as a whole had alot to do with the The Staggers Rail Act of 1980...which deregulated the industry makeing it easier to abandon and or spin off branch lines that wherent turning a profit and where large red ink spots on the overall books.....just to name one benifit of the act for the carriers... i personaly think that if not for the government wishing to save some of the rail industry in the 70s after the collapse of PC and other north eastern roads that where folded into conrail... and then finding out how hard it was for railroads to do biz and make money with the regulations that the ICC places on the carriers.. the stagger act would have never been writen and the rail industry as a whole would be in a very differnt place today...if it even exsisted at all... so to awnser your question about what if they government just cut bail out checks to the PC as well as other roads.. the results would have been that they would have used the money..still lost money..and came back to the government with there hat in there hand asking for more money yet agin.. the government can shovel all the money it could print to the PC as well as the others..but until the regulations that where putting the carriers into the finantal poor house where changed it wouldnt have made a differnce.... which happend in 1980 after the govenment got into the frieght rail biz by forming conrail..and seeing first hand by haveing a stake in a major carrier how the current reguations where strangling the rail industry... as far as the auto industry..since i dont know what type of regulations other then saftey mandates and gas mileage mandates they have to follow.. i dont know what to tell you there... csx engineer
I agree completely. The Staggers Act was the huge difference between the railroad bankruptcy situation of the 1970's and the auto industry problems of today. I don't see sufficating governmental regulation as being a major part of the auto industry's problems today. Their problems are rooted (I believe) in a lack of innovation in the manufacturing process - it's extremely difficult for an assembly line to shift to producing different models. Plus, as I understand it, the unions also play a part in restricting the car manufacturers' ability to change their manufacturing processes to produce different (i.e. more fuel efficient) models. Earlier in my career I worked developing software for manufacturing and inventory control systems for Caterpillar. If there was ANY kind of innovation being discussed that could even theoretically affect a single union job description, there was a howl raised as if the whole plant was being impacted (I was in Joliet installing some software and I made the mistake of changing-out a light bulb in an alarm beacon for cell control system platform, and the union steward insisted I attend the 7:10 AM shift meeting to discuss their grievance - I said I had an appointment with my hotel bed at 7:10 AM instead and the CAT project lead apparently cut a check to the union electrician).
mudchicken Hopefully Uncle Sugar finds a better way. Conrail was not as successfull as it has been made out to be. CR's public relations hucksters apparently got folks to buy an empty premise. CSX and NS are now struggling with some of the skeletons in CR's closet.
Please, do tell; I would love to hear about the skeletons.
This is a great post, as I was thinking about this the other day. I often wonder what would have happened if we had just allowed the bankruptcy to run its course. I would love to hear learned opinions as to this. But, I suspect that much of the track would still be there and operational today.
Gabe
I have some sympathy for the U.S. auto industry and think those who denounce it for its flaws are somewhat short sighted and lacking in understanding.
The legacy of U.S. car companies in terms of pensions and contracts is just an absolute albatros around their neck. NPR reported that GM starts out $1500 in the hole for every car it builds for pension benefits as compared to Toyota. That is one heck of a disadvantage. Throw in the more-difficult to deal with union issues, I find it hard to criticize.
One wonders what would happen to these disadvantages in a bankruptcy.
I have less sympathy for the auto industry given that these generous labor agreements came about through negotiations...at $73.00 an hour plus bennies it sure looks as if management gave away the store. I don't blame the unions..their job is to get the best deal they can get for their membership. It is up to managment to look out for the company and shareholder interests. They didn't do that, and they have been behind the eight ball on marketing and building products that are in tune with consumer demand. In a nutshell, they are failing now because of weak managment at the top. Should we bail them out...i.e. should Fred the sawmill worker or Jane the cashier who make $15.00 an hour pay for this? I don't think so. Other avenues need to be explored.
Now..to Conrail. I agree it was a different time...a different industry..and different circumstances. However,the magnitude of the problem these eastern railroads faced back 30+ years ago is on par with what the auto sector is facing today. So we may have a "template" on how to go about resolving the current automotive debacle by considering a "Conrail-like" solution. It may be worth looking at it...throwing money at the automotive sector may not help and may indeed simply prolong its inevitable demise. However creditor protection through bankruptcy, some infusion of capital along with management expertise from outside may save the day as it did for the eastern railroads some 30 years ago.
If the ConRail solution is:
1) Dump a zillion dollars in tax money down a hole
2)Pitch out as much of the non-productive elements as you can
3)Sell the business to a bunch of investors at way below what you have into it.
4) Let the investors sell the property to someone in the business for a handsome profit
5) Have the new owners spend years fixing all that was still messed up.
Maybe we should seriously consider skipping steps 1,2,3 and 4?
ConRail makes an interesting story to read. I'm not sure if it's a good plan to copy.
Thanks to Chris / CopCarSS for my avatar.
I know, lets make the oil companys bail them out (auto makers)
chad thomasI know, lets make the oil companys bail them out (auto makers
Might as well....They're the one's that bagged much of our money and ran with it......
Quentin
I can't help but noticing that no one in the auto industry (management, labor, unions, corporate officers) offers any ideas about how to fix their industry, nor is anyone talking about giving some concessions to try to save themselves. If the ship you're on is sinking, it's in everyone's best interest to grab a bucket and start bailing; if that doesn't work, it's time to jump, lest you be dragged down along with the ship.
zardoz I can't help but noticing that no one in the auto industry (management, labor, unions, corporate officers) offers any ideas about how to fix their industry, nor is anyone talking about giving some concessions to try to save themselves. If the ship you're on is sinking, it's in everyone's best interest to grab a bucket and start bailing; if that doesn't work, it's time to jump, lest you be dragged down along with the ship.
That sounds about right...except they want you, me, and every other taxpayer to do the bailing.
Management is at fault and should not be given money without change in management. I propose something different. Government should by the state0of-the-art General Motors Proving Ground and Ford's similar but smaller facility. The usuable modern Ford testing equipment should then be combined with GM's, and the present GM facility should become a national research and testing facility for use by all USA automakers, with the Ford physical plant either sold or used for military-defence-security purposes. Management of the GM facility should be under one of the better engineering universities, possibly a Michigan University.
In 1999, the GM stockholders report stated that they had determned how to get people to spend more time in cars, and that was to "make the car the rival of the home as a communications and entertainment center/" Apparently nobody thought of the impact of such an idea on highway safety. Then as mitigation, "Audio Pilot" was tryed on some Cadillac models as an option. Radio and stereo sound varied as with noise level. The stupid idea was to put the noise sensing microphones outside the car, avoiding feedback and complications with the program meterial. But there is very little correlation between exterior and interior automobile noise because of opening and closing windows, engine vibration noise, and tire-road contact vibration noise. Volvo did it right with the sensing microphones inside.
zardoz I can't help but noticing that no one in the auto industry (management, labor, unions, corporate officers) offers any ideas about how to fix their industry, nor is anyone talking about giving some concessions to try to save themselves. If the ship you're on is sinking, it's in everyone's best interest to grab a bucket and start bailing ...
I can't help but noticing that no one in the auto industry (management, labor, unions, corporate officers) offers any ideas about how to fix their industry, nor is anyone talking about giving some concessions to try to save themselves. If the ship you're on is sinking, it's in everyone's best interest to grab a bucket and start bailing ...
I agree wholeheartedly with that.
However, I'm not convinced that the auto makers and Penn Central/Conrail are at all comparable cases. In the railroad case you had a unique asset, a specific physical plant, that could not be replicated if it disappeared. On the other hand, the auto makers are anything but unique as the healthy portion of the US auto industry demonstrates on a continuing basis.
Yes..many important differences...however the Conrail solution may provide some guidance i.e. serve as a template...maybe an alternative to a bailout. Let them go bankrupt and then reorganize with government assistence if necessary. A simple bailout without bankruptcy protection from creditors who are themselves struggling sounds like a recipe for failure to me. Bankruptcy protection will give them time to restructure and may also buy some time to explore alternatives.
Sad to say, but a more applicable template might be that of a railroad in receivership.
The news media, about half the population, and the entire pop culture hate the U.S. auto companies almost as much as they hate cigarette companies. So it is intriguing that government is even entertaining the idea of a bailout. It is like watching somebody giving a drowning person a lecture about the danger of deep water before tossing a life preserver. But there is an innocent hostage in this standoff, and that is the pension plans of retired workers as well as the fate of the workers who would lose their jobs if the auto companies go under. So there will be a bailout in some fashion. It is politically irresistible.
It is also irresistible to seize the opportunity to put the government into the car making business and make the cars that they sneer at the car companies for not making. Previously, there was no way to force the car companies to make cars that consumers did not want other than to define those cars in terms of mandated fuel consumption rates.
But with government in the driver’s seat, the automotive vision will quickly morph into the image of smart cars. And if people don’t want to buy them, laws can be passed. If anybody ought to be worried about a “bailout” or whatever it is, it should be the foreign car manufacturers who have a U.S. market. They won’t be able to compete with a nationalized U.S. auto industry having exclusive rights to the U.S. market, which is where this is headed.
For as much downside as there is to bankruptcy, I think it is the best option by far. Otherwise, the transformation that will come with a government bailout will be far worse for all of us. It will be like the fox bailing out the chicken coop.
Bucyrus The news media, about half the population, and the entire pop culture hate the U.S. auto companies almost as much as they hate cigarette companies. So it is intriguing that government is even entertaining the idea of a bailout. It is like watching somebody giving a drowning person a lecture about the danger of deep water before tossing a life preserver. But there is an innocent hostage in this standoff, and that is the pension plans of retired workers as well as the fate of the workers who would lose their jobs if the auto companies go under. So there will be a bailout in some fashion. It is politically irresistible.
I am not sure everyone feels that way; in fact, I am sure that everyone does not feel that way. The salaries and benefits of some of these workers truly make me stop and wonder why the heck I went to law school. There are some websites around that allege GM employees make $74 per hour--these websites are misleading, as they neglect to say that is on double time. Nonetheless, their salaries are fairly enviable. The most consistent number I have heard is $80,000 per year, plus great benefits with an average work week of 46 hours. Throw in the pensions that cost GM $1500 a car and one begins to see the impediments to innovation.
I think there are a lot of people looking at the UAW and are saying what did you expect would happen?
I am not sure I have an opinion on all of this--other than it is hardly clear that the workers at issue are innocent hostages and many people question exactly who is the hostage and who is the hostage taker. I guess the only thing I clearly like about this is the fact that I am glad that, after all of this is over, professional athletes will no longer be the only ones receiving a salary that would otherwise be economically impossible were it not for the public dole.
Does anyone know if the salaries of Penn Central workers were substantially at issue during the Penn Central bankruptcy?
I'm not sure if salaries were really an issue with Penn Central; however, I recall reading that labor costs were considered high due to the number of people required on trains etc. Back in the 60's and early 70s the railroads were still trying to rationalize their labor requirements in keeping with dieselization and other technological advances.
gabe Bucyrus The news media, about half the population, and the entire pop culture hate the U.S. auto companies almost as much as they hate cigarette companies. So it is intriguing that government is even entertaining the idea of a bailout. It is like watching somebody giving a drowning person a lecture about the danger of deep water before tossing a life preserver. But there is an innocent hostage in this standoff, and that is the pension plans of retired workers as well as the fate of the workers who would lose their jobs if the auto companies go under. So there will be a bailout in some fashion. It is politically irresistible. I am not sure everyone feels that way; in fact, I am sure that everyone does not feel that way. The salaries and benefits of some of these workers truly make me stop and wonder why the heck I went to law school. There are some websites around that allege GM employees make $74 per hour--these websites are misleading, as they neglect to say that is on double time. Nonetheless, their salaries are fairly enviable. The most consistent number I have heard is $80,000 per year, plus great benefits with an average work week of 46 hours. Throw in the pensions that cost GM $1500 a car and one begins to see the impediments to innovation. I think there are a lot of people looking at the UAW and are saying what did you expect would happen? I am not sure I have an opinion on all of this--other than it is hardly clear that the workers at issue are innocent hostages and many people question exactly who is the hostage and who is the hostage taker. I guess the only thing I clearly like about this is the fact that I am glad that, after all of this is over, professional athletes will no longer be the only ones receiving a salary that would otherwise be economically impossible were it not for the public dole. Does anyone know if the salaries of Penn Central workers were substantially at issue during the Penn Central bankruptcy? Gabe
PC made big concessions to a number of unions to ensure their support for the PRR/NYC merger. That lead to a considerable over-staffing of crews - there were often times more personnel than were actually needed to operate the trains, but who had to nevertheless receive their 8 hrs worth of pay while never having to actually work.
gabe ......Nonetheless, their salaries are fairly enviable. The most consistent number I have heard is $80,000 per year, plus great benefits with an average work week of 46 hours. Throw in the pensions that cost GM $1500 a car and one begins to see the impediments to innovation. I think there are a lot of people looking at the UAW and are saying what did you expect would happen?
A buddy of mine works at Chrysler engine plant here in Kenosha, and he makes $25/hr straight time.
While we discuss the wages of the grunts who do the actual labor, how about we consider the outrageous salaries of the executives; you know--those persons whose decisions helped lead these corporations into the mess they are currently struggling with.
I am going to agree with Zardoz while I believe the union contracts are very generous most of the down the line suppliers employees make a whole lot less on the hour. Now I don't have a problem with executives making more than me but how much is enough.
The following example still makes me think there is more blame than just the "unions".
A high official making say $2million a year divided by 52 weeks divided by 40 hours still makes just over $960 per hour not counting insurance. and stock options or bonuses. I don't see that in the same paragraph as workers wages.
Just my 2 cents,
Bob
Modeling in N scale: Rock Island freight and passenger, with a touch of the following; Wabash Cannon Ball, CB&Q passenger, and ATSF freight and passenger. I played in Peoria (Heights).
This comparison is very weak.
Conrail had no competitors. GMFORDCHRYSLER have plenty of healty ones.
Conrail had been burdened by years of neglect. GFC's infrastructure is healty
Conrail's product was vital to the region. We really need more cars on the road?
We have plenty of car manufacturers, plenty of cars and not enough railroads! Let's not pretend that the GFC bailout is anything but an effort to throw more of your money at incredibly rich people.
petitnj This comparison is very weak. Conrail had no competitors. GMFORDCHRYSLER have plenty of healty ones. Conrail had been burdened by years of neglect. GFC's infrastructure is healty Conrail's product was vital to the region. We really need more cars on the road? We have plenty of car manufacturers, plenty of cars and not enough railroads! Let's not pretend that the GFC bailout is anything but an effort to throw more of your money at incredibly rich people.
1) Conrail had no competitors? Sure it did...the trucking industry...(and to a lessor extent other modes)..
2) Conrail's product was vital to the region? Apparently many shippers thought otherwise as they shifted to truck in droves..The advent of trucking and the interstate highway system had alot to do with the decline of the rail sector in the Northeast.
We really don't need more cars on the road...but the economy and workforce apparently need GM/Ford/Crysler or else why the talk of a bailout?
Sounds like China may buy GM and Chrysler.
One thing I've often noticed is that what people say they want and what they actually buy are not always the same thing. Americans complained that the Big 3 didn't offer any hybrids, electrics, etc. while they negotiated at the dealer for the best price on a gas-guzzling SUV with all the bells and whistles. What Americans seem to want is that big luxurious SUV that gets 35+ MPG and they complain that Detroit doesn't offer such an item.
Bucyrus The news media, about half the population, and the entire pop culture hate the U.S. auto companies almost as much as they hate cigarette companies. So it is intriguing that government is even entertaining the idea of a bailout. It is like watching somebody giving a drowning person a lecture about the danger of deep water before tossing a life preserver. But there is an innocent hostage in this standoff, and that is the pension plans of retired workers as well as the fate of the workers who would lose their jobs if the auto companies go under. So there will be a bailout in some fashion. It is politically irresistible. It is also irresistible to seize the opportunity to put the government into the car making business and make the cars that they sneer at the car companies for not making. Previously, there was no way to force the car companies to make cars that consumers did not want other than to define those cars in terms of mandated fuel consumption rates. But with government in the driver’s seat, the automotive vision will quickly morph into the image of smart cars. And if people don’t want to buy them, laws can be passed. If anybody ought to be worried about a “bailout” or whatever it is, it should be the foreign car manufacturers who have a U.S. market. They won’t be able to compete with a nationalized U.S. auto industry having exclusive rights to the U.S. market, which is where this is headed. For as much downside as there is to bankruptcy, I think it is the best option by far. Otherwise, the transformation that will come with a government bailout will be far worse for all of us. It will be like the fox bailing out the chicken coop.
The government(particularly the Dems.) is considering a bailout because if any of the big 3 goes into bankruptcy the union contracts would be affected.
My biggest problem with all this is that both GM and Ford compete succesfully with the Japanese and European builders in many markets internationally. So it is NOT a matter of them not having designs in production to compete in the economy car market which has obv. picked up in the US since energy prices skyrocketed. One almost gets the impression that the intentionally tried to put off switching production over in the hope that they would be able to get money out of "Uncle Sucker" to do so....
"I Often Dream of Trains"-From the Album of the Same Name by Robyn Hitchcock
Ulrichpetitnj This comparison is very weak. Conrail had no competitors. GMFORDCHRYSLER have plenty of healty ones. Conrail had been burdened by years of neglect. GFC's infrastructure is healty Conrail's product was vital to the region. We really need more cars on the road? We have plenty of car manufacturers, plenty of cars and not enough railroads! Let's not pretend that the GFC bailout is anything but an effort to throw more of your money at incredibly rich people. 1) Conrail had no competitors? Sure it did...the trucking industry...(and to a lessor extent other modes).. 2) Conrail's product was vital to the region? Apparently many shippers thought otherwise as they shifted to truck in droves..The advent of trucking and the interstate highway system had alot to do with the decline of the rail sector in the Northeast. We really don't need more cars on the road...but the economy and workforce apparently need GM/Ford/Crysler or else why the talk of a bailout?
zardoz gabe ......Nonetheless, their salaries are fairly enviable. The most consistent number I have heard is $80,000 per year, plus great benefits with an average work week of 46 hours. Throw in the pensions that cost GM $1500 a car and one begins to see the impediments to innovation. I think there are a lot of people looking at the UAW and are saying what did you expect would happen? A buddy of mine works at Chrysler engine plant here in Kenosha, and he makes $25/hr straight time. While we discuss the wages of the grunts who do the actual labor, how about we consider the outrageous salaries of the executives; you know--those persons whose decisions helped lead these corporations into the mess they are currently struggling with.
They need to sale their corporate jets and cut the perks on the senior executive levels.
petitnjUlrich petitnj This comparison is very weak. Conrail had no competitors. GMFORDCHRYSLER have plenty of healty ones. Conrail had been burdened by years of neglect. GFC's infrastructure is healty Conrail's product was vital to the region. We really need more cars on the road? We have plenty of car manufacturers, plenty of cars and not enough railroads! Let's not pretend that the GFC bailout is anything but an effort to throw more of your money at incredibly rich people. 1) Conrail had no competitors? Sure it did...the trucking industry...(and to a lessor extent other modes).. 2) Conrail's product was vital to the region? Apparently many shippers thought otherwise as they shifted to truck in droves..The advent of trucking and the interstate highway system had alot to do with the decline of the rail sector in the Northeast. We really don't need more cars on the road...but the economy and workforce apparently need GM/Ford/Crysler or else why the talk of a bailout? Some clarification: By no competitors, I meant that there were no other railroads. Certainly there were trucks, but it would be impractical to truck coal from Buffalo to Boston (just an alliteration). So Conrail stood alone as the one provider of bulk transportation. Shippers shifted to trucks but the railroad was still needed. That the economy needs GFC is debatable. There are 4 to 10 million unemployed in the U.S. today. Did we need the product they produced? It is not government's job to pick the winners in a free market system. That they might have to pick the winners where monopolies are obvious ( eg. utilities). But the strength of the free market system is that the winners win with good products, efficiently made. The losers lose and stop drawing valuable resources from the system. We are better off with the better product made with fewer resources. I have to hop in our corporate jet and go beg congress for more funds.
Ulrich petitnj This comparison is very weak. Conrail had no competitors. GMFORDCHRYSLER have plenty of healty ones. Conrail had been burdened by years of neglect. GFC's infrastructure is healty Conrail's product was vital to the region. We really need more cars on the road? We have plenty of car manufacturers, plenty of cars and not enough railroads! Let's not pretend that the GFC bailout is anything but an effort to throw more of your money at incredibly rich people. 1) Conrail had no competitors? Sure it did...the trucking industry...(and to a lessor extent other modes).. 2) Conrail's product was vital to the region? Apparently many shippers thought otherwise as they shifted to truck in droves..The advent of trucking and the interstate highway system had alot to do with the decline of the rail sector in the Northeast. We really don't need more cars on the road...but the economy and workforce apparently need GM/Ford/Crysler or else why the talk of a bailout?
Agreed...however manufactured goods moving fairly short distances account for a large chunk of freight moving in the Northeast, and it is a well documented fact that these railroads suffered due to the loss of this traffic to trucks. Further, I agree that coal from Buffalo to Boston would work best on rail...but I don't think there's alot of coal moving in that lane. Nevertheless, the Big Three automakers should be allowed to fail..to go bankrupt..Once they are bankrupt and somewhat protected from hungry creditors they can rebuild or die with or without help from the government.
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